AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ,1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TEXAS PETROCHEMICALS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 2869
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
74-1778313
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
8707 KATY FREEWAY, SUITE 300
HOUSTON, TEXAS 77024
(713) 461-3322
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
CLAUDE E. MANNING
8707 KATY FREEWAY, SUITE 300
HOUSTON, TEXAS 77024
(713) 461-3322
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S
AGENT FOR SERVICE OF PROCESS)
------------------------
COPY TO:
GARY W. ORLOFF
BRACEWELL & PATTERSON, L.L.P.
SOUTH TOWER PENNZOIL PLACE, SUITE 2900
711 LOUISIANA STREET
HOUSTON, TEXAS 77002-2781
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company or there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/8% Senior Subordinated
Notes due 2006.................... $175,000,000 100% $175,000,000 $60,345.00
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
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.
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TEXAS PETROCHEMICALS CORPORATION
CROSS-REFERENCE SHEET BETWEEN ITEMS OF FORM S-4 AND THE LOCATION IN THE
PROSPECTUS
PURSUANT TO RULE 404(A) UNDER THE SECURITIES ACT OF 1933 AND ITEM 501(B) OF
REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------- ---------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................. Facing Page; Cross Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front and Outside Back Cover Pages of
Prospectus; Additional Information
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information........................ Front Cover Page of Prospectus; Prospectus Summary;
Risk Factors; Pro Forma Combined Financial
Information; Selected Historical Financial Data
4. Terms of the Transaction............. Prospectus Summary; The Exchange Offer; Description
of the Notes; Certain Federal Income Tax
Considerations
5. Pro Forma Financial Information...... Prospectus Summary; Pro Forma Combined Financial
Information
6. Material Contracts with the Company
Being Acquired..................... Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to Be Underwriters.......... Not Applicable
8. Interests of Named Experts and
Counsel............................ Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ Not Applicable
10. Information with Respect to S-3
Registrants........................ Not Applicable
11. Incorporation of Certain Information
by Reference Not Applicable
12. Information with Respect to S-2 or
S-3 Registrants.................... Not Applicable
13. Incorporation of Certain Information
by Reference....................... Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants........................ Prospectus Summary; Selected Historical Financial
Data; Pro Forma Combined Financial Information;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Description of the Notes; Combined Financial
Statements
15. Information with Respect to S-3
Companies.......................... Not Applicable
16. Information with Respect to S-2 or
S-3 Companies...................... Not Applicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies.... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be
Solicited.......................... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange
Offer.............................. The Exchange Offer; Management; Related
Transactions; Beneficial Ownership of Holdings'
Common Stock
</TABLE>
<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 SEPTEMBER 5, 1996
TEXAS PETROCHEMICALS CORPORATION
OFFER TO EXCHANGE ITS
11 1/8% EXCHANGE SENIOR SUBORDINATED NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OUTSTANDING
11 1/8% SENIOR SUBORDINATED NOTES DUE 2006
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 1996,
UNLESS EXTENDED BY TEXAS PETROCHEMICALS CORPORATION IN ITS SOLE DISCRETION
(THE "EXPIRATION DATE"). ALTHOUGH TEXAS PETROCHEMICALS CORPORATION HAS NO
PRESENT INTENTION TO CONDUCT ITS EXCHANGE OFFER LONGER THAN 30 DAYS, IT
RESERVES THE RIGHT TO EXTEND THE EXCHANGE OFFER.
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Texas Petrochemicals Corporation, a Texas corporation (the "Company" or
"TPC"), hereby offers, upon the terms and subject to the conditions set forth in
the Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal" and, together with the Prospectus, the "Exchange
Offer"), to exchange $1,000 principal amount of its 11 1/8% Exchange Senior
Subordinated Notes due 2006 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 11 1/8% Senior Subordinated Notes due 2006
(the "Original Notes"), of which an aggregate of $175,000,000 principal amount
is outstanding.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer pursuant to the Securities Act, and (ii) holders of
the Exchange Notes generally will not be entitled to the rights of holders of
the Original Notes under the Registration Rights Agreement (as defined under
"Prospectus Summary -- The Exchange Offer") following the consummation of the
Exchange Offer. See "The Exchange Offer -- Registration Rights," "--
Consequences of Failure to Exchange" and "-- Resale of the Exchange Notes; Plan
of Distribution." The Exchange Notes will evidence the same debt as the Original
Notes (which they replace) and will be issued under, and be entitled to the
benefits of, the indenture governing the Exchange Notes.
The Company will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to the Expiration Date. Tenders of Original
Notes may be withdrawn at any time prior to the Expiration Date. The Exchange
Offer is subject to certain customary conditions. See "The Exchange Offer." The
Original Notes may be tendered only in integral multiples of $1,000 principal
amount.
(PROSPECTUS COVER CONTINUED ON FOLLOWING PAGE)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE 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 , 1996.
<PAGE>
The Original Notes and the Exchange Notes are referred to herein
collectively as the "Notes."
Interest on the Notes is payable semiannually on January 1 and July 1 of
each year, commencing January 1, 1997. Except as described below, the Notes are
not redeemable at the option of the Company prior to February 15, 1999.
Thereafter, the Notes will be redeemable, in whole or in part, at the option of
the Company, at the redemption prices set forth herein, together with accrued
and unpaid interest, if any, to the date of redemption. Up to 35% of the
original principal amount of the Notes will be redeemable at any time and from
time to time prior to July 1, 1999, at the option of the Company, with the
proceeds of any Public Equity Offerings (as defined under "Description of the
Notes -- Certain Definitions") following which there is a Public Market (as
defined under "Description of the Notes -- Certain Definitions") at a redemption
price equal to 110% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of redemption; provided, however, that at
least $113.75 million aggregate principal amount of the Notes must remain
outstanding after each such redemption. Upon a Change in Control (as defined
under "Description of the Notes -- Change of Control"), each holder of Notes may
require the Company to purchase all or a portion of such holder's Notes at 101%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of purchase. The Notes are unsecured senior subordinated
obligations of the Company and will rank subordinate in right of payment to all
existing and future Senior Indebtedness (as defined under "Description of the
Notes -- Certain Definitions") of the Company. For a more complete description
of the Notes, see "Description of the Notes."
Based on a interpretation by the staff of the Securities and Exchange
Commission (the "Commission" or the "SEC") set forth in no-action letters issued
to third parties, the Company believes, except as otherwise described herein,
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Original Notes may be offered for resale, resold and otherwise transferred by
any holder thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 of the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder does not intend to participate and there
is no arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Notes where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Issuer has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Exchange Offer -- Resale of the Exchange Notes; Plan of
Distribution."
Prior to this offering, there has been no public market for the Notes. The
Notes are not, and are not expected to be, listed on any securities exchange or
authorized for trading on NASDAQ. The Company does not expect that an active
market for the Notes will develop. The Original Notes have been eligible for
trading in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) Market of The Nasdaq Stock Market, Inc., but the Exchange Notes will
not be so eligible. To the extent that an active market for Notes does develop,
the market value thereof will depend on many factors, including among other
things, prevailing interest rates, general economic conditions, the Company's
financial condition and results of operations, the volatility of the market for
non-investment grade debt and other factors. Such conditions might cause the
Notes, to the extent that they are traded, to trade at a discount. See "Risk
Factors -- Lack of Public Market for the Notes."
2
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall encompass any and all amendments thereto) on Form S-4 (the
"Registration Statement") under the Securities Act, with respect to, among other
things, the Exchange 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 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 Room 1024, 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 Indenture (as defined under "Description of the Notes --
General"), so long as any of the Notes are outstanding, whether or not the
Company 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"), the
Company is obligated to send to the Commission the annual reports, quarterly
reports and other documents that the Company would have been required to file
with the Commission pursuant to Section 13(a) or 15(d) if the Company were
subject to such reporting requirements; PROVIDED, HOWEVER, that if Holdings (as
defined) shall have become a Guarantor (as defined under "Description of the
Notes -- Certain Definitions") with respect to all obligations relating to the
Notes, the reports, information and other documents required to be filed and
provided as described hereunder may, at the Company's option, be filed by and be
those of Holdings rather than the Company; PROVIDED FURTHER, HOWEVER, that in
the event Holdings conducts, directly or indirectly, any business or holds,
directly or indirectly, any significant assets other than the capital stock of
TPC Holding (as defined) or the Company at the time of filing and providing any
such report, information or other document containing financial statements of
Holdings, Holdings shall include in such report, information or other document
summarized financial information (as defined in Rule 1-02(bb) of Regulation S-X
promulgated by the Commission) with respect to the Company. The Company is also
obligated to provide to all holders of the Notes, and file with the Trustee (as
defined under "Description of the Notes"), copies of such annual reports,
quarterly reports and other documents and, if filing such documents by the
Company with the Commission is not permitted under the Exchange Act, promptly
upon written request supply copies of such documents to any prospective
purchaser of the Notes and to securities analysts and broker-dealers upon their
request.
3
PRODUCT OVERVIEW
<TABLE>
<CAPTION>
TWELVE MONTHS
NORTH TWELVE MONTHS ENDED MAY 31,
AMERICAN ENDED 1996
MARKET MAY 31, 1996 SALES
PRODUCT POSITION(1) REVENUES VOLUME(2) COMMENTS
- ------------------------------------- ---------- ------------- ------------- ---------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
BUTADIENE 1 $ 112.6 623 Only significant North American
producer whose core business is
the production of butadiene. Only
domestic producer with
"on-purpose" capability.
MTBE 2 $ 187.4 14,335 MTBE, produced by reacting
Bbls./day(3) methanol and isobutylene, is the
preferred oxygenate and a major
component of reformulated
gasoline in the U.S.
N-BUTYLENES $ 48.2
Butene-1 1 229 The Company has the ability to
produce butene-1 from two
different production processes.
Butene-2(4) 1 55 The Company either recycles or
upgrades by-product streams into
butene-2, which is sold at higher
margins.
SPECIALTY ISOBUTYLENES $ 74.5
Isobutylene
Concentrate 1 256 Sole U.S. producer.
High Purity
Isobutylene(5) 1 74 Of three U.S. producers, the
Company is the largest merchant
supplier to the chemical market.
Diisobutylene 1 38 Sole U.S. producer.
</TABLE>
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(1) The Company's (as defined) North American market share position, in terms of
annual rated production capacity. Rated capacities reflect production levels
achievable if plant operations are dedicated to maximizing output of that
particular product, which exceeds actual capacities available under typical
multi-product configurations.
(2) In millions of pounds per year, unless expressed in barrels per day.
Relevant conversion ratios for the Company's products are as follows:
POUNDS PER GALLON POUNDS PER BARREL
----------------- -----------------
MTBE 6.22 261.11
Butene-1, high purity isobutylene,
isobutylene concentrate 5.01 210.21
Butene-2 5.10 213.99
Diisobutylene 6.00 252.00
(3) Refers to sales of MTBE to third parties and excludes MTBE production
volumes used to produce high purity isobutylene.
(4) High purity butene-2 sold by the Company for use in chemical applications.
(5) High purity isobutylene sold by the Company for use in chemical
applications.
4
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. 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 TRANSACTIONS, AND TO TPC AND
ITS SUBSIDIARIES FOLLOWING THE CONSUMMATION OF THE TRANSACTIONS. 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
second 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 twelve months ended May 31, 1996,
butadiene represented 25% of the Company's total revenues, MTBE represented 41%,
n-butylenes 11%, specialty isobutylenes 16% and other revenues the remaining 7%.
On a pro forma basis after giving effect to the Transactions, the Company's
revenues for the twelve months ended May 31, 1996 and the one month ended June
30, 1996 would have been $454.2 million and $41.2 million, respectively, and
EBITDA (as defined) for the twelve months ended May 31, 1996 and the one month
ended June 30, 1996 would have been $74.2 million and $4.3 million,
respectively.
The Company seeks to reduce its exposure to the cyclical nature of the
petrochemical industry through long-term, fixed profit contracts and to increase
its profitability by maximizing its production flexibility and increasing sales
of high margin n-butylenes and specialty isobutylenes. For the twelve months
ended May 31, 1996 and the one month ended June 30, 1996, approximately 43% and
45% of the Company's total revenues were derived from products sold on a fixed
profit basis or whose selling prices were linked, directly or indirectly, to raw
material costs. The Company believes that the combination of its fixed profit
contracts, competitive cost position and specialty product sales provides
stability to its cash flows and helps to offset the effects of cyclical
downturns.
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
5
with the Company, which, in aggregate, accounted for 92% and 88% of its
butadiene sales in the twelve months ended May 31, 1996 and the one month ended
June 30, 1996, respectively.
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. For the twelve months ended May 31, 1996 and the one month
ended June 30, 1996, fixed profit supply contracts for crude butadiene accounted
for approximately 92% and 72%, respectively, of the Company's butadiene sales
volume.
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 25% 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. In the twelve months ended
May 31, 1996 and the one month ended June 30, 1996, sales of n-butylenes and
specialty isobutylenes represented 27% and 21%, respectively, of the Company's
revenues as compared to 19% in fiscal 1993.
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 the twelve months ended May 31, 1996 and the one month ended June 30,
1996, approximately 18% and 11%, respectively, of the Company's isobutylene was
used in the production of specialty isobutylenes with the remainder being used
for MTBE production. In addition, the Company maintains the production
flexibility to upgrade n-butylenes contained
6
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 8707 Katy Freeway,
Suite 300, Houston, Texas 77024. The Company's telephone number is (713)
461-3322.
THE TRANSACTIONS
Texas Petrochemical Holdings, Inc., a Delaware corporation ("Holdings"),
TPC Holding Corp., a Delaware corporation ("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 the Closing
Date (as defined), Holdings issued and sold $43.8 million of its common stock
("Common Stock"), issued $6.2 million of its Common Stock for the shares
contributed by the Rollover Investors (as defined), sold a sufficient amount of
13.5% Senior Discount Notes Due 2007 (the "Discount Notes") and Common Stock, as
an investment unit to raise $30 million, and contributed the 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 of the
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.
TOC and Finance Co. then merged into TPC.
As a result of the foregoing, TPC is the primary obligor on the 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. The sale of the Original Notes,
the execution of and initial borrowings under the Bank Credit Agreement, the
placement of the Common Stock and the sale of the Discount Notes are hereinafter
referred to as the "Financings." The Financings, the Acquisition, the
establishment of the ESOP, the payment of certain fees and expenses, and other
related transactions are collectively referred to herein as "The Transactions."
See "The Transactions."
Prior to the Acquisition, TPC established a Cash Bonus Plan (as defined)
providing generally for $35 million for certain present employees of the Company
and certain present employees of its independent contractors, of which 10% was
paid within 45 days of Closing (as defined) and the remainder will be paid in
sixteen quarterly installments after Closing. See "Management -- Cash Bonus
Plan."
7
The following charts depict (i) the organizational structure of Holdings
and its subsidiaries (the acquiring companies), and TOC and its subsidiaries
(the companies that were acquired) prior to the Transactions and (ii) the
organizational structure upon consummation of the Transactions.
PRIOR TO THE TRANSACTIONS
Acquiring Companies Companies to be Acquired
Texas Petrochemical Texas Olefins Company Other
Holdings, Inc. ("TOC") Stockholders
("Holdings")
Issuer of Common Stock
and Discount Notes 81% 19%
100% Texas Petrochemicals
Corporation
TPC Holding Corp. ("TPC")
("TPC Holding")
100%
TPC Finance Corp.
("Finance Co.")
Initial borrower under the
Bank Credit Agreement
and issuer of the Notes
Following the Transactions
Texas Petrochemical
Holdings, Inc. Discount Notes
Common Stock ("Holdings") and Common Stock
$50 million Issuer of Common Stock $30 million
and Discount Notes
100%
TPC Holding Corp.
("TPC Holding")
100%
Bank Credit
Agreement Texas Petrochemicals
$140.6 million Corporation
("TPC")
Successor obligor on loans
under the Bank Credit
Agreement
Notes and the Notes
$175 million
8
SOURCES AND USES OF FUNDS. Pursuant to the Stock Purchase Agreement, the
Acquisition was effected for $363.3 in cash and $6.2 million represented by the
shares contributed by the Rollover Investors. The following table sets forth the
sources and uses of funds used to effect the Acquisition.
AMOUNT
-------------
(IN MILLIONS)
SOURCES OF FUNDS:
Bank Credit Agreement(1)........... $ 140.0
Original Notes(2).................. 175.0
Discount Notes and Common Stock.... 30.0
Common Stock Placement............. 43.8
-------------
Total......................... $ 388.8
=============
USES OF FUNDS:
Acquisition........................ $ 363.3
Company ESOP Loan(3)............... 10.0
Fees and expenses(4)............... 15.5
-------------
Total......................... $ 388.8
=============
- ------------
(1) Consists of $85.0 million under the Tranche A Term Loan (as defined) and
$45.0 million under the Tranche B Term Loan (as defined) and $10.0 million
under the ESOP Term Loan (as defined). The Company has available borrowings
under the Revolving Credit Facility (as defined) of up to $40.0 million,
subject to borrowing base limitations. See "Description of the Bank Credit
Agreement."
(2) Represents the proceeds of the sale of the Original Notes before the
discount to the Initial Purchasers (as defined).
(3) For a description of the Company ESOP Loan, see "Management -- Employee
Stock Ownership Plan."
(4) Represents fees and expenses, including (i) the discount payable by Finance
Co. to the Initial Purchasers in connection with the sale of the Original
Notes, (ii) legal, accounting and other professional fees payable in
connection with the Transactions, and (iii) certain other expenses.
9
THE EXCHANGE OFFER
Registration Rights Agreement........... To fund a portion of the
Acquisition, the Company sold $175
million in aggregate principal
amount of Original Notes to
qualified institutional buyers as
defined in Rule 144A under the
Securities Act or to institutional
accredited investors within the
meaning of Rule 501 under the
Securities Act, through CS First
Boston Corporation and Merrill
Lynch, Pierce, Fenner & Smith
Incorporated, as initial purchasers
(the "Initial Purchasers"). The
Company and the Initial Purchasers
entered into a Registration Rights
Agreement dated as of July 1, 1996
(the "Registration Rights
Agreement"), which grants the
holders of the Original Notes
certain exchange and registration
rights. The Exchange Offer made
hereby is intended to satisfy such
exchange rights.
The Exchange Offer...................... $1,000 principal amount of Exchange
Notes in exchange for each $1,000
principal amount of Original Notes.
As of the date hereof, $175 million
aggregate principal amount of the
Original Notes are out- standing.
The Company will issue the Exchange
Notes to holders on the earliest
practicable date following the
Expiration Date.
Resales of the Exchange Notes........... Based on an interpretation by the
staff of the Commission set forth in
no-action letters issued to third
parties, the Company believes that,
except as described below, the
Exchange Notes issued pursuant to
the Exchange Offer may be offered
for resale, resold and otherwise
transferred by a holder thereof
(other than any such holder that is
an "affiliate" of the Company within
the meaning of Rule 405 under the
Securities Act) without compliance
with the registration and pro-
spectus delivery provisions of the
Securities Act, provided that such
Exchange Notes are acquired in the
ordinary course of such holder's
business and that such holder has no
arrangement or understanding with
any person to participate in the
distribution of such Exchange Notes.
Each broker-dealer that receives
Exchange Notes pursuant to the
Exchange Offer in exchange for
Original Notes that such
broker-dealer acquired for its own
account as a result of market-making
activities or other trading
activities (other than Original
Notes acquired directly from the
Company or its affiliates) must
acknowledge that it will deliver a
prospectus in connection with any
resale of such Exchange Notes. The
Letter of Transmittal states that by
so acknowledging and by delivering a
prospectus, a broker-dealer will not
be deemed to admit that it is an
"underwriter" within the meaning of
the Securities Act. If the Company
receives certain notices in the
Letter of Transmittal, this
Prospectus, as it may be amended or
supplemented from time to time, may
be used for the period described
below by a broker-dealer in
connection with resales of Exchange
Notes received in exchange for
Original Notes where such Original
Notes were acquired by such
broker-dealer as a result of
market-making activities or other
trading activities and not acquired
directly from the Company. The
Company has agreed that, if it
receives certain notices in the
Letter of Transmittal, for a period
of 180 days after the date on which
the Registration Statement becomes
effective, it will make this
Prospectus available to any such
broker-dealer for use in connection
with any such resale. The Letter of
Transmittal requires broker-dealers
tendering Original Notes in the
Exchange Offer to indicate whether
such broker-dealer acquired such
Original Notes for its own account
as a result of market-making
activities or other trading
activities (other than Original
Notes acquired directly from the
Company or any of its affiliates),
and if no broker-dealer indicates
that such Original Notes were so
acquired, the Company has no
obligation under the Registration
Rights Agreement to
10
maintain the effectiveness of the
Registration Statement past the
consummation of the Exchange Offer
or to allow the use of this
Prospectus for such resales. See
"The Exchange Offer -- Purpose and
Effect of the Exchange Offer"; " --
Registration Rights" and " -- Resale
of the Exchange Notes; Plan of
Distribution."
Expiration Date......................... The Exchange Offer expires at 5:00
p.m., New York City time, on , 1996,
unless such Exchange Offer is
extended by the Company in its sole
discretion, in which case the term
"Expiration Date" means the latest
date and time to which such Exchange
Offer is extended.
Conditions to the Exchange Offer........ The Exchange Offer is subject to
certain conditions, which may be
waived by the Company. See "The
Exchange Offer -- Conditions to the
Exchange Offer."
Procedures for Tendering the Original
Notes.................................. Each holder of Original Notes
wishing to accept the Exchange Offer
must complete, sign and date the
accompanying Letter of Transmittal
in accordance with the instructions
contained herein and therein, and
mail or otherwise deliver such
Letter of Transmittal together with
the Original Notes and any other
required documentation to the
Exchange Agent (as defined below
under "Exchange Agent") at the
address set forth herein. By
executing the Letter of Transmittal,
a holder will make certain
representations to the Company. See
"The Exchange Offer -- Registration
Rights" and " -- Procedures for
Tendering Original Notes."
Special Procedures for Beneficial
Owners................................. Any beneficial owner whose Original
Notes are registered in the name of
a broker, dealer, commercial bank,
trust company or other nominee and
who wishes to tender should contact
such registered holder promptly and
instruct such registered holder to
tender on such beneficial owner's
behalf. See "The Exchange Offer --
Procedures for Tendering Original
Notes."
Guaranteed Delivery Procedures.......... Holders of Original Notes who wish
to tender their Original Notes when
those securities are not immediately
available or who cannot deliver
their Original Notes, the Letter of
Transmittal or any other documents
required by such Letter of
Transmittal to the Exchange Agent
prior to the Expiration Date, must
tender their Original Notes
according to the guaranteed delivery
procedures set forth in "The
Exchange Offer -- Procedures for
Tendering Original Notes --
GUARANTEED DELIVERY."
Withdrawal Rights....................... Tenders of Original Notes pursuant
to the Exchange Offer may be
withdrawn at any time prior to the
Expiration Date.
Acceptance of Original Notes and
Delivery of Exchange Notes............. The Company will accept for exchange
any and all Original Notes that are
properly tendered in the Exchange
Offer, and not withdrawn, prior to
the Expiration Date. The Exchange
Notes issued pursuant to the
Exchange Offer will be issued on the
earliest practicable date following
the acceptance for exchange of
Original Notes by the Company. See
"The Exchange Offer -- Terms of the
Exchange Offer."
Exchange Agent.......................... Fleet National Bank is serving as
exchange agent (the "Exchange
Agent") in connection with the
Exchange Offer.
Federal Income Tax Considerations....... The exchange of Original Notes for
Exchange Notes pursuant to the
Exchange Offer should not be treated
as a taxable exchange for federal
income tax purposes. See "Certain
Federal Income Tax Considerations."
12
THE NOTES
Maturity Date........................ July 1, 2006.
Interest Payment Dates............... January 1 and July 1 of each year,
commencing January 1, 1997.
Optional Redemption.................. The Notes may be redeemed at the option
of TPC, in whole or in part, at any time
on or after July 1, 2001 at the
redemption prices set forth herein plus
accrued interest to the date of
redemption. Up to an aggregate of 35% of
the principal amount of the Notes may be
redeemed from time to time prior to July
1, 1999 at the option of TPC at the
redemption price set forth herein plus
accrued interest to the date of
redemption, with the net proceeds
received after the issuance of the Notes
of one or more Public Equity Offerings
following which there is a Public Market
if at least $113.75 million principal
amount of the Notes remains outstanding
after each such redemption. See
"Description of the Notes -- Optional
Redemption."
Change of Control.................... Upon a Change of Control, TPC will be
required to make an offer to repurchase
all outstanding Notes at 101% of the
principal amount thereof plus accrued
interest to the date of repurchase. See
"Description of the Notes -- Change of
Control."
Ranking.............................. The Notes are unsecured senior
subordinated obligations of TPC and, as
such, are subordinated in right of
payment to all existing and future
Senior Indebtedness of TPC. The Notes
rank PARI PASSU in right of payment with
all senior subordinated indebtedness of
TPC, if any, and rank senior to any
subordinated indebtedness of TPC. As of
June 30, 1996, after giving pro forma
effect to the Transactions as if they
had occurred on such date, the aggregate
amount of Senior Indebtedness of TPC
would have been approximately $130.5
million. See "Description of the Notes
-- Ranking."
Restrictive Covenants................ The indenture under which the Notes were
issued and the Exchange Notes will be
issued (the "Indenture") contains
certain covenants that, among other
things, limit the ability of TPC 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 Indenture also
limits the ability of TPC's Restricted
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,
TPC is obligated, under certain
circumstances, to offer to repurchase
Notes at a purchase price equal to 100%
of the principal amount thereof, plus
accrued and unpaid interest, X if any,
to the date of repurchase, with the net
cash proceeds of certain sales or other
dispositions of assets. However, all of
these limitations and prohibitions are
subject to a number of important
qualifications. See "Description of the
Notes -- Certain Covenants."
RISK FACTORS
Prospective purchasers of the 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 Notes.
12
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL AND OTHER INFORMATION
The summary combined historical financial information set forth below has
been derived from the combined financial statements of TOC, its subsidiaries and
Clarkston which appear elsewhere in this Prospectus and from combined financial
statements of TOC, its subsidiaries and Clarkston for prior fiscal years, and
should be read in conjunction with, and is qualified in its entirety by
reference to, such combined financial statements and their accompanying notes.
Such financial information is combined to reflect the assumption by the Company
of a raw material supply contract. The Company has changed its fiscal year to
end June 30, 1996. 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
audited by Coopers & Lybrand L.L.P., independent auditors for such entities. The
combined financial information set forth below for the year ended May 31, 1992
has been derived from unaudited combined financial statements of TOC, its
subsidiaries and Clarkston, which, in the opinion of management, have been
prepared on a basis consistent with the audited combined financial statements of
such entities and contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for these periods.
The unaudited combined financial information for the year ended May 31, 1992 has
been prepared from audited financial statements of TOC and its subsidiaries and
unaudited financial statements of Clarkston. The results of the one month period
is not necessarily indicative of the results of the entire year or any other
period. The pro forma combined income statement and cash flow statement data of
TOC, its subsidiaries and Clarkston presented below has been derived from the
unaudited pro forma combined financial statements of TOC, its subsidiaries and
Clarkston included elsewhere herein, and give effect to the Transactions
(including the Acquisition, the Financings, the sale of certain assets and the
new employee compensation arrangements) as if they had occurred on June 1, 1995.
The pro forma combined balance sheet data of TOC, its subsidiaries and Clarkston
at June 30, 1996 presented below has been derived from the unaudited pro forma
combined financial statements of such entities included elsewhere herein, and
give effect to the Transactions as if they had occurred on June 30, 1996. The
summary pro forma combined financial information does not necessarily represent
what such entities' financial position and results of operations would have been
if the Transactions had actually been completed as of the dates indicated and
are not intended to project such entities' financial position or results of
operations for any future period or as of any date. The information presented
below should be read in conjunction with the combined financial statements of
TOC, its subsidiaries and Clarkston and the related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Pro Forma Combined Financial Information and the related notes thereto
included elsewhere herein.
13
<TABLE>
<CAPTION>
PRO PRO
FORMA FORMA
TWELVE ONE TWELVE ONE
MONTHS MONTH MONTHS MONTH
ENDED ENDED ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30, MAY 31, JUNE 30,
------------------------------------------ ------- -------- ------- --------
1992 1993 1994 1995 1996 1996 1996 1996
--------- --------- --------- --------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 416.1 $ 410.7 $ 352.4 $ 474.7 $455.6 $ 41.4 $454.2 $ 41.2
Cost of goods sold(1)................ 318.3 340.8 268.8 396.3 379.5 36.0 367.3 35.4
Depreciation and amortization........ 12.0 12.6 13.6 14.3 15.0 1.3 36.3 3.1
--------- --------- --------- --------- ------- -------- ------- --------
Gross profit......................... 85.8 57.3 70.0 64.1 61.1 4.1 50.6 2.7
Selling, general and administrative
expenses(1)........................ 15.4 14.4 16.7 16.6 19.1 1.7 12.7 1.5
--------- --------- --------- --------- ------- -------- ------- --------
Income from operations............... 70.4 42.9 53.3 47.5 42.0 2.4 37.9 1.2
Interest income (expense), net....... (0.6) (0.6) (0.2) 0.7 (1.6 ) (.1) (31.9 ) (2.6)
Other income (expense)(2)............ (6.3) (1.2) (0.8) 1.1 (15.9 ) (.3) (15.6 ) (0.2)
--------- --------- --------- --------- ------- -------- ------- --------
Income before income taxes and
minority interest.................. 63.5 41.1 52.3 49.3 24.5 2.0 (9.6 ) (1.6)
Provision for income taxes........... 24.3 13.0 18.4 16.9 7.9 0.8 -- --
Minority interest in net loss of
consolidated subsidiary............ -- -- 0.0 0.1 0.1 0.0 -- --
--------- --------- --------- --------- ------- -------- ------- --------
Net income........................... 39.2 28.1 33.9 32.5 16.7 1.2 (9.6 ) (1.6)
OPERATING DATA:
Revenues by product:
Butadiene(3)..................... $ 64.9 $ 81.3 $ 68.7 $ 106.2 $112.6 $ 10.2 $112.6 $ 10.2
MTBE............................. 252.0 211.0 175.2 199.1 187.4 21.0 187.4 21.0
n-Butylenes...................... 29.2 21.7 28.1 42.7 48.2 3.2 48.2 3.2
Specialty Isobutylenes........... 38.2 54.8 59.9 75.5 74.5 5.5 74.5 5.5
Other(4)......................... 31.8 41.9 20.5 51.2 32.9 1.5 31.5 1.3
Sales volumes (in million of pounds):
Butadiene........................ 559.1 556.2 484.4 580.8 622.6 64.6 622.6 64.6
MTBE(5).......................... 254.4 225.1 194.8 211.1 219.8 26.6 219.8 26.6
n-Butylenes...................... 158.7 114.7 150.8 245.9 284.6 17.1 284.6 17.1
Specialty Isobutylenes........... 240.4 309.0 312.2 398.0 368.2 23.0 368.2 23.0
</TABLE>
JUNE 30, 1996
-------------------
AS
ACTUAL ADJUSTED
------- --------
(IN MILLIONS)
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................... $ 25.3 $ 20.8
Property, plant and equipment, net... 81.8 260.5
Total assets......................... 167.9 540.6
Long-term debt (including current
portion)........................... 13.0 315.0
Total stockholders' equity........... 92.5 66.2
(FOOTNOTES ON FOLLOWING PAGE)
14
<TABLE>
<CAPTION>
PRO PRO
FORMA FORMA
TWELVE ONE TWELVE ONE
MONTHS MONTH MONTHS MONTH
ENDED ENDED ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30, MAY 31, JUNE 30,
------------------------------------------ ------- -------- ------- --------
1992 1993 1994 1995 1996 1996 1996 1996
--------- --------- --------- --------- ------- -------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(6)............................ $ 82.4 $ 55.5 $ 66.9 $ 61.8 $57.6 $3.7 $74.2 $ 4.3
Employee profit sharing and
bonuses(1)......................... 22.5 18.6 23.6 20.9 23.5 1.0 8.3 .5
Capital expenditures................. 7.1 12.0 12.5 8.7 5.5 2.0 5.5 2.0
Pro forma ratio of EBITDA to interest
expense, net....................... 2.3x 1.7x
Pro forma ratio of long-term debt to
EBITDA(7).......................... 4.2x 6.1x
Pro forma ratio of earnings to fixed
charges(8)......................... -- --
</TABLE>
- ------------
(1) Historically, the Company has allocated employee profit sharing and bonuses
to cost of goods sold and 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, 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 from operations before taking into consideration
depreciation and amortization. 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 considered by an investor as an alternative to
income from operations, as an indicator of the operating performance of the
Company or as an alternative to cash flows as a measure of liquidity.
(7) For the purposes of calculating the pro forma ratio of long-term debt to
EBITDA for the one month ended June 30, 1996, EBITDA has been calculated on
an annualized basis.
(8) 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 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 $(9.6)
million and $(1.6) million, respectively.. 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.
15
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PURCHASERS OF THE
NOTES OFFERED HEREBY SHOULD CONSIDER CAREFULLY THE RISK FACTORS SET FORTH BELOW.
SUBSTANTIAL LEVERAGE
In connection with the Transactions, the Company incurred a significant
amount of indebtedness and has significant debt service requirements. As of June
30, 1996, on a pro forma basis after giving effect to the Transactions as if the
Transactions had occurred on such date, the Company would have had outstanding
indebtedness of approximately $315.0 million, including the Notes, and
stockholders' equity of $66.2 million. See "Capitalization" and "Pro Forma
Combined Financial Information." In addition, the Indenture permits the Company
to incur or guarantee additional indebtedness, including indebtedness under the
Bank Credit Agreement, subject to certain limitations. The Company 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 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 the Company's borrowings,
including certain borrowings under the Bank Credit Agreement, are at variable
rates of interest, which will 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 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 Notes."
The Company will be required to make scheduled principal payments under the
Bank Credit Agreement commencing on September 30, 1996. See "Description of the
Bank Credit Agreement." The Company's ability to make scheduled payments or to
refinance its obligations with respect to its indebtedness, including the 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 the Company
will maintain a level of cash flow from operations sufficient to permit it to
pay the principal, premium, if any, and interest on its indebtedness (including
the 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 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 and the
Indenture will restrict the Company's ability to sell assets and use the
proceeds therefrom. See "Description of the Bank Credit Agreement" and
"Description of the 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.
16
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 (including covenants in the Indenture
and the Bank Credit Agreement), the Company could be in default under the terms
of the agreements governing such indebtedness, including the 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 Notes and on the market value of the Notes. See
"Description of the 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 the
Notes or amend the 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. 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. See
"Description of the Bank Credit Agreement." The Indenture also contains a number
of restrictive covenants. See "Description of the Notes -- Certain Covenants."
The Company's ability to comply with the covenants and restrictions
contained in the Bank Credit Agreement and the Indenture may be affected by
events beyond its control, including prevailing economic, financial and industry
conditions. The breach of any such covenants or restrictions could result in a
default under the Bank Credit Agreement or the Indenture which would permit the
lenders under the Bank Credit Agreement or the holders of the 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 Notes. See
"Description of the 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 Notes.
SUBORDINATION OF THE NOTES; UNSECURED STATUS OF THE NOTES
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the Notes is subordinated in right of payment to
the prior payment in full of all existing and future Senior Indebtedness of TPC,
including all amounts owing under the Bank Credit Agreement. As of June 30,
1996, on a pro forma basis after giving effect to the Transactions as if they
had occurred on such date, the aggregate principal amount of such Senior
Indebtedness of TPC would have been $140.0 million. Therefore, in the event of a
bankruptcy, liquidation, dissolution, reorganization or similar proceeding with
respect to TPC, the assets of TPC will be available to pay obligations on the
Notes only after all Senior Indebtedness of TPC has been paid in full, and there
can be no assurance that there will be sufficient assets remaining to pay
amounts due on all or any of the Notes. In addition, TPC may not pay principal
of, premium, if any, or interest on the Notes, or purchase, redeem or otherwise
retire the Notes, if any principal, premium, if any, or interest on any
Designated Senior Indebtedness (as defined under "Description of the
17
Notes -- Certain Definitions") is not paid when due (whether at final maturity,
upon scheduled redemption or installment, acceleration or otherwise) unless such
default has been cured or waived or such indebtedness has been repaid in full.
In addition, under certain circumstances, if any nonpayment default exists with
respect to Designated Senior Indebtedness, TPC may not make any payments on the
Notes for a specified period of time, unless such default is cured or waived or
such Designated Senior Indebtedness has been repaid in full. See "Description of
the Notes -- Ranking."
The Indenture permits the Company to incur certain secured indebtedness,
including indebtedness under the Bank Credit Agreement, which is secured by a
lien on substantially all of the assets of Holdings, TPC Holding and the
Company, including pledges of all of the capital stock of TPC and TPC Holding.
The Notes are unsecured and therefore do not have the benefit of such
collateral. Accordingly, if an event of default occurs under the Bank Credit
Agreement, the lenders under the Bank Credit Agreement will have a prior right
to the assets of the Company, and may foreclose upon such collateral, to the
exclusion of the holders of the Notes. In either such event, such assets would
first be used to repay in full amounts outstanding under the Bank Credit
Agreement, resulting in all or a portion of the Company's assets being
unavailable to satisfy the claims of the holders of Notes and other unsecured
indebtedness.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined under "Description
of the Notes -- Certain Definitions"), TPC is required to offer to purchase all
of the outstanding 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 constitute a default under the Bank Credit Agreement. In
addition, the Bank Credit Agreement prohibits the purchase of the Notes by TPC
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. TPC's failure to
purchase the Notes in such instance would result in a default under each of the
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 Indenture, which could have materially adverse consequences
to the Company and to the holders of the 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 Notes.
See "Description of the 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
18
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. 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 of particular products. In the twelve months
ended May 31, 1996 and the one month ended June 30, 1996, over 84% and 71%,
respectively, of the Company's butadiene and MTBE sales were made to its five
largest customers for each product. In addition, in the twelve-month period
ended May 31, 1996 and the one-month period ended June 30, 1996, approximately
16.1% and 14.1%, respectively, of the Company's total revenues were derived from
a single butadiene 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.
19
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. In March 1996, the
Occupational Safety and Health Administration proposed to lower substantially
the employee permissible exposure limit for butadiene. Although the Company
believes that it will be able to comply with the proposed limit 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."
FRAUDULENT TRANSFER CONSIDERATIONS
In connection with the Transactions, TPC incurred substantial indebtedness,
including through its incurrence of indebtedness under the Bank Credit Agreement
and the Notes. If, under relevant federal and state fraudulent transfer and
conveyance statues, in a bankruptcy, reorganization or rehabilitation case or
similar preceding or a lawsuit by or on behalf of unpaid creditors of TPC, a
court were to find that, at the time the Notes were issued by TPC, (a) TPC
issued the Notes with the intent of hindering, delaying or defrauding current or
future creditors or (b) (i) TPC received less than reasonably equivalent value
or fair consideration for issuing the Notes and (ii) TPC (A) was insolvent or
was rendered insolvent by reason of any of the Transactions, including the
incurrence of the indebtedness to fund the Transactions, (B) was engaged, or
about to engage, in a business or transaction for which its assets constituted
unreasonably small capital to carry on its business, or (C) intended to incur,
or believed or reasonably should have believed that it would incur, debts beyond
its ability to pay as such debts matured or became due (as all of the foregoing
terms are defined in or interpreted under the relevant fraudulent transfer or
conveyance statutes), such court could avoid the obligations under the Notes or
subordinate the Notes to presently existing and future indebtedness of TPC or
take other action detrimental to the holders of the Notes, including, under
certain
20
circumstances, invalidating the Notes. In that event, there can be no assurance
that any repayment on the Notes would ever be recovered by holders of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, TPC would be considered insolvent if, at
the time it incurred the indebtedness constituting the Notes, either (i) the sum
of its debts (including contingent liabilities) was greater than its assets, at
a fair valuation, or (ii) the present fair saleable value of its assets is less
than the amount required to pay the probable liability on its total existing
debts and liabilities (including contingent liabilities) as they become absolute
and matured. There can be no assurance as to what standards a court would use to
determine whether TPC was solvent at the relevant time, or whether, whatever
standard was used, the Notes would not be avoided on another of the grounds set
forth above.
LACK OF PUBLIC MARKET FOR THE NOTES
The Original Notes have not been registered under the Securities Act, and
may not be resold by purchasers thereof unless the Original Notes are
subsequently registered or an exemption from the registration requirements of
the Securities Act is available. While the Original Notes are at present
eligible for trading in the PORTAL market of the Nasdaq Stock Market, Inc., the
Exchange Notes will not be so eligible, and there can be no assurance, even
following registration or exchange of the Original Notes for Exchange Notes,
that an active trading market for the Original Notes or the Exchange Notes will
exist. At the time of the private placement of the Original Notes, the Initial
Purchasers advised the Company that they intended to make a market in the
Original Notes and, if issued, the Exchange Notes. However, the Initial
Purchasers are not obliged to make a market in the Original Notes or the
Exchange Notes, and any such market-making may be discontinued at any time at
the sole discretion of the Initial Purchasers. No assurance can be given as to
the liquidity of or trading market for the Original Notes or the Exchange Notes.
CONSEQUENCES TO NON-TENDERED HOLDERS OF ORIGINAL NOTES
CONSEQUENCES OF FAILURE TO EXCHANGE. To the extent that Original Notes are
tendered and accepted for exchange pursuant to the Exchange Offer, the trading
market for Original Notes that remain outstanding may be significantly more
limited, which might adversely affect the liquidity of the Original Notes not
tendered for exchange. The extent of the market therefor and the availability of
price quotations would depend upon a number of factors, including the number of
holders of Original Notes remaining at such time and the interest in maintaining
a market in such Original Notes on the part of securities firms. An issue of
securities with a smaller outstanding market value available for trading (the
"float") may command a lower price than would a comparable issue of securities
with a greater float. Therefore, the market price for Original Notes that are
not exchanged in the Exchange Offer may be affected adversely to the extent that
the amount of Original Notes exchanged pursuant to the Exchange Offer reduces
the float. The reduced float also may tend to make the trading price of the
Original Notes that are not exchanged more volatile.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER. Issuance of the Exchange Notes
in exchange for the Original Notes pursuant to the Exchange Offer will be made
following the prior satisfaction, or waiver, of the conditions set forth in "The
Exchange Offer -- Conditions to the Exchange Offer" and only after timely
receipt by the Exchange Agent of such Original Notes, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of Original Notes desiring to tender such Original Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery of all
required documentation. Neither the Exchange Agent, the Company or any other
person is under any duty to give notification of defects or irregularities with
respect to the tenders of Original Notes for exchange. Original Notes that may
be tendered in the Exchange Offer but which are not validly tendered will,
following the consummation of the Exchange Offer, remain outstanding and will
continue to be subject to the same transfer restrictions currently applicable to
such Original Notes.
21
THE TRANSACTIONS
Holdings, its wholly-owned subsidiary, TPC Holding, and TPC Holding's
wholly-owned subsidiary, Finance Co., were organized to effect the Acquisition.
Prior to the Acquisition, TOC was owned by various individuals, foundations and
trusts, including approximately 5% by certain members of management of TPC. TOC
owned approximately 81% of the outstanding capital stock of TPC, which was its
principal operating subsidiary. Approximately 19% of the outstanding capital
stock of TPC was owned by certain individuals and trusts, including
approximately 3% by certain members of management of TPC.
TPC Holding, Holdings, the shareholders of TOC, the shareholders of TPC
(other than TOC) and Mr. Dave C. Swalm, as representative of certain of such
shareholders, entered into the Stock Purchase Agreement pursuant to which TPC
Holding acquired 3,830,000 shares (95.75%) of the outstanding capital stock of
TOC and 734,962 shares (18.55%) of the outstanding capital stock of TPC for a
total consideration of $361.8 million in cash. This total consideration was
based on a per share purchase price for TOC and TPC shares of $77.076 and
$90.626, respectively. Fifty thousand shares (1.25%) of capital stock of TOC and
the remaining 26,038 shares (0.66%) of capital stock of TPC (not held by TOC)
were contributed by certain shareholders of TOC and TPC (the "Rollover
Investors") to Holdings in exchange for $6.2 million of Holdings' Common Stock
at the closing (the "Closing") of the Acquisition.
CASH BONUS PLAN. Prior to the Closing, TPC established the Cash Bonus Plan
providing generally for $35 million for certain present employees of the Company
and certain present employees of its independent contractors. Within 45 days
after Closing, 10% of this amount was paid to eligible participants and the
remaining payments will be made in sixteen quarterly installments of
approximately 5.63% each, plus an interest factor, payable within 15 days of
each of the sixteen quarterly installment dates. See "Management -- Cash Bonus
Plan."
ASSET SALES. On the closing date (the "Closing Date") of the Acquisition,
prior to the Closing, TOC sold to Mr. Swalm for $7.8 million in cash a ranch of
approximately 1,900 acres and the livestock and personalty thereon
(collectively, the "Ranch") and the 80% of the outstanding capital stock of The
Texas Falls Corporation owned by TOC.
On the Closing Date, prior to the Closing, Holdings (i) issued
approximately $50 million in common equity comprised of (a) approximately $43.8
million of Common Stock to an investor group (the "Investor Group") led by
Gordon A. Cain and The Sterling Group, Inc. ("Sterling"), the ESOP, certain
directors and officers of Holdings and the Company, and certain employees of the
Company (the "Common Stock Placement"), and (b) approximately $6.2 million of
Common Stock to the Rollover Investors in exchange for their contribution to
Holdings of 1.25% of the outstanding capital stock of TOC and 0.66% of the
outstanding capital stock of TPC, representing the aggregate fair value of such
shares; and (ii) raised $30 million in cash by the issue of the Discount Notes
and Common Stock of Holdings, as an investment unit. After Holdings had been so
capitalized, Holdings contributed to TPC Holding, its wholly-owned subsidiary,
the cash received from the issuance of its Common Stock, the Discount Notes and
the capital stock of TOC and TPC contributed to Holdings by the Rollover
Investors.
In connection with the Acquisition, Finance Co. borrowed approximately
$140.0 million under the Bank Credit Agreement and received approximately $169
million in net proceeds from the consummation of the sale of the Original Notes.
TPC Holding then borrowed all of such funds from Finance Co. pursuant to an
intercompany promissory note.
THE CLOSING. Pursuant to the Stock Purchase Agreement, TPC Holding
purchased 3,830,000 shares of TOC common stock (95.75% of the total outstanding
capital stock of TOC) for $295.2 million in cash of which $13.3 million ($3.473
per share of TOC common stock) was deposited in a post-closing indemnity escrow
(the "Indemnity Escrow"). An additional $0.173 million was deposited in the
Indemnity Escrow by a Rollover Investor who has contributed 50,000 shares of TOC
common stock to Holdings.
Pursuant to the Stock Purchase Agreement, TPC Holding also purchased
734,962 shares of TPC common stock (18.55% of the total outstanding capital
stock of TPC) for $66.6 million in cash of which $3 million ($4.084 per share of
TPC common stock) was deposited in the Indemnity Escrow. An additional
22
$0.11 million was deposited in the Indemnity Escrow by the Rollover Investors
who contributed 26,038 shares of TPC common stock to Holdings.
On the Closing Date, 120,000 shares of TOC common stock (3% of the
outstanding capital stock of TOC) was deposited in a subsequent closing escrow
(the "Subsequent Escrow") and TPC Holding deposited into the Subsequent Escrow
$9.2 million ($76.94 per share), representing the estimated purchase price for
such shares. On or about September 16, 1996, $0.4 million of the cash deposited
into the Subsequent Escrow will be funded into the Indemnity Escrow, the
escrowed shares will be distributed to TPC Holding, and $8.8 million will be
distributed to former holders of the escrowed shares. An additional $16,320
($0.136 per share) will be paid to such former holders by TPC Holding,
representing the difference between the final purchase price and the estimated
purchase price initially deposited in the Subsequent Escrow.
As a result of these transactions, on the Closing Date immediately after
the Closing, TOC was a 97.0% owned subsidiary of TPC Holding, and TPC was owned
80.79% by TOC and 19.21% by TPC Holding (including shares contributed by the
Rollover Investors). Following the Mergers (as defined) and the delivery to TPC
Holding on or about September 16, 1996 of the shares held in the Subsequent
Escrow, TPC will be a wholly-owned subsidiary of TPC Holding.
MERGERS. On the Closing Date immediately after the Closing, TOC merged with
and into TPC, with TPC as the surviving corporation (the "Initial Merger"). In
the Initial Merger, each outstanding share of TOC was converted into .85 of a
share of TPC and, except for the shares of TPC held by TOC which were canceled,
the outstanding shares of TPC remained unchanged. On the Closing Date,
immediately after the Initial Merger, Finance Co. merged with and into TPC, with
TPC as the surviving corporation (the "Second Merger" and, together with the
Initial Merger, the "Mergers"). In the Second Merger, each outstanding share of
Finance Co. was converted into one share of common stock of TPC. As a result of
the Mergers, TPC holds the promissory note payable by TPC Holding to Finance
Co., and TPC is a 97.5% owned subsidiary of TPC Holding, which in turn is a
wholly-owned subsidiary of Holdings. In addition, TPC is the primary obligor
with respect to borrowings under the Bank Credit Agreement and the primary
obligor on the Notes. On or about September 16, 1996, the shares of capital
stock formerly representing shares of TOC, and at that time representing shares
of common stock of TPC, held in the Subsequent Escrow will be delivered to TPC
Holding, and TPC will thereupon be a wholly-owned subsidiary of TPC Holding.
INDEMNITY ESCROW. Pursuant to the Stock Purchase Agreement, the Company
will indemnify the present and former officers and directors of TOC and TPC for
certain matters arising prior to the Closing. In addition, the Company will have
the right to recover from the Indemnity Escrow losses and liabilities arising
from or in connection with certain matters, including but not limited to, the
following: (i) breach of any covenant, representation or warranty in the Stock
Purchase Agreement by any TOC or TPC shareholder; (ii) failure by TOC, TPC or
any subsidiary to perform any obligation in the Stock Purchase Agreement, and
the inaccuracy of certain statements of fact regarding TOC, TPC and their
subsidiary in the Stock Purchase Agreement; (iii) losses arising from claims in
connection with the sale, purchase or issuance of common stock of TOC or TPC;
(iv) any taxes payable by TOC, TPC or any subsidiary attributable to periods
prior to March 31, 1996 to the extent not accrued on the consolidated balance
sheet of TOC as of March 31, 1996; (v) losses or claims paid to any present or
former director, officer, employee or agent of the Company pursuant to the
contractual right described in the preceding sentence arising prior to the
Closing; and (vi) losses arising from certain acts, omissions, events,
circumstances or conditions, including environmental matters, occurring or
existing prior to the Closing Date and not disclosed to TPC Holding. All claims
to recover such losses and liabilities from the Indemnity Escrow must be brought
within one year from the Closing Date, with the exception of losses and
liabilities arising from environmental matters and taxes, which must be brought
within eighteen months from the Closing Date. The Company has the right to
indemnification from the selling shareholders for the breach of any covenant,
representation or warranty made severally by them in the Stock Purchase
Agreement (generally relating to title to the shares being sold and authority to
perform their obligations under the Stock Purchase Agreement). Beyond that, in
the
23
absence of fraud, the Company's rights to recovery for breach of the Stock
Purchase Agreement or for losses arising from pre-closing matters are limited to
recovery against the Indemnity Escrow.
COMMON STOCK PLACEMENT. Substantially concurrently with the consummation
of the Acquisition, Holdings completed the Common Stock Placement of
approximately 438,000 shares of its Common Stock to the ESOP, certain directors
and officers of Holdings and the Company, certain employees of the Company, and
the Investor Group. See "Common Stock Placement," "Related Transactions" and
"Beneficial Ownership of Holdings' Common Stock."
DISCOUNT NOTES. The Discount Notes are senior unsecured obligations of
Holdings ranking PARI PASSU with other senior unsecured indebtedness of
Holdings. The purchaser of the Discount Notes purchased the Discount Notes and
shares of Common Stock as an investment unit. The Discount Notes are limited to
approximately $57.7 million aggregate principal amount at final maturity
(providing $30.0 million of proceeds) and will mature on July 1, 2007. No
interest will accrue on the Discount Notes prior to July 1, 2001. From and after
July 1, 2001, interest on the Discount Notes will be payable semiannually at the
rate of 13.5% per annum.
THE BANK CREDIT AGREEMENT. The Bank Credit Agreement provides for, (i) the
Revolving Credit Facility, and (ii) the Tranche A Term Loan, the Tranche B Term
Loan and the ESOP Term Loan. See "Description of the Bank Credit Agreement."
RAW MATERIAL SUPPLY. Clarkston was an affiliate of the Company that
primarily sold isobutane to, and also purchased n-butane from, the Company and
certain third parties. Clarkston purchased substantially all of its isobutane
requirements at market prices under a supply contract with EPC Venture, Inc.
("Enterprise"). In connection with the Transactions, this supply contract with
Enterprise was assigned to the Company.
24
SOURCES AND USES OF FUNDS. Pursuant to the Stock Purchase Agreement, the
Acquisition was effected for $363.3 million in cash and $6.2 million represented
by the shares contributed by the Rollover Investors. The following table sets
forth the sources and uses of funds used to effect the Acquisition.
AMOUNT
-------------
(IN MILLIONS)
SOURCES OF FUNDS:
Bank Credit Agreement(1)........ $ 140.0
Original Notes(2)............... 175.0
Discount Notes and Common
Stock.......................... 30.0
Common Stock Placement.......... 43.8
-------------
Total...................... $ 388.8
=============
USES OF FUNDS:
Acquisition..................... $ 363.3
Company ESOP Loan(3)............ 10.0
Fees and expenses(4)............ 15.5
-------------
Total...................... $ 388.8
=============
- ------------
(1) Consists of $85.0 million under the Tranche A Term Loan, $45.0 million under
the Tranche B Term Loan and $10.0 million under the ESOP Term Loan. The
Company has available borrowings under the Revolving Credit Facility of up
to $40.0 million, subject to borrowing base limitations. See "Description of
the Bank Credit Agreement."
(2) Represents the proceeds of the sale of the Original Notes before the
discount to the Initial Purchasers.
(3) For a description of the Company ESOP Loan, see "Management -- Employee
Stock Ownership Plan."
(4) Represents fees and expenses, including (i) the discount payable by Finance
Co. to the Initial Purchasers in connection with the sale of the Original
Notes, (ii) legal, accounting and other professional fees payable in
connection with the Transactions, and (iii) certain other expenses.
25
THE EXCHANGE OFFER
REGISTRATION RIGHTS
At the Closing, the Company entered into the Registration Rights Agreement
with the Initial Purchasers pursuant to which the Company agreed, for the
benefit of the holders of the Original Notes, at its cost, (i) within 75 days
after the date of the original issue of the Original Notes, to file an Exchange
Offer Registration Statement with the Commission with respect to the Exchange
Offer for the Exchange Notes, and (ii) to use all reasonable efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 120 days after the date of original issuance of the
Original Notes. Upon the Exchange Offer Registration Statement being declared
effective, the Company agreed to offer the Exchange Notes in exchange for
surrender of the Original Notes. The Company agreed to keep the Exchange Offer
open for not less than 30 calendar days (or longer if required by applicable
law) after the date notice of the Exchange Offer is mailed to the holders of the
Original Notes. For each Original Note surrendered to the Company pursuant to
its Exchange Offer, the holder of such Original Note will receive an Exchange
Note having a principal amount equal to that of the surrendered Note. Interest
on each Exchange Note will accrue from the last interest payment date on which
interest was paid on the Original Note surrendered in exchange therefor or, if
no interest has been paid on such Original Note, from the date of its original
issue. The Registration Rights Agreement also provides an agreement to include
in the prospectus for the Exchange Offer certain information necessary to allow
a broker-dealer who holds Original Notes that were acquired for its own account
as a result of market-making activities or other ordinary course trading
activities (other than Original Notes acquired directly from the Company or one
of its affiliates) to exchange such Original Notes pursuant to the Exchange
Offer and to satisfy the prospectus delivery requirements in connection with
resales of Exchange Notes received by such broker-dealer in the Exchange Offer,
and to maintain the effectiveness of the Registration Statement for such
purposes for 180 days.
The foregoing agreement is needed because any broker-dealer who acquires
Original Notes for its own account as a result of market-making activities or
other trading activities is required to deliver a prospectus meeting the
requirements of the Securities Act. This Prospectus covers the offer and sale of
the Exchange Notes pursuant to the Exchange Offer made hereby and the resale of
Exchange Notes received in the Exchange Offer by any broker-dealer who held
Original Notes acquired for its own account as a result of market-making
activities or other trading activities (other than Original Notes acquired
directly from the Company or one of its affiliates).
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes would in general
be freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Original Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes (i) will not be able to rely
on the interpretation of the staff of the Commission, (ii) will not be able to
tender its Original Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Original Notes unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Original Notes (other than certain specified holders)
who wishes to exchange Original Notes for Exchange Notes in the Exchange Offer
will be required to make certain representations, including that (i) it is not
an affiliate of the Company, (ii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes.
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
150 days of the date of issuance and sale of the Original Notes, or upon request
of the Initial Purchasers (under certain circumstances), the Company will, at
its cost, (i) as promptly as practicable,
26
file a Shelf Registration Statement (which may be an amendment of the
Registration Statement of which this Prospectus is a part) covering resales of
the Original Notes, (ii) use all reasonable efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act and
(iii) use all reasonable efforts to keep effective the Shelf Registration
Statement until three years after its effective date (or until one year after
such effective date if such Shelf Registration Statement is filed at the request
of the Initial Purchasers under certain circumstances). The Company will, in the
event of the filing of a Shelf Registration Statement, provide to each holder of
the Original Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement for the Original Notes has become effective and take certain other
actions as are required to permit unrestricted resales of the Original Notes. A
holder of Original Notes that sells such Original Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of the Original Notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Original Notes included in
the Shelf Registration Statement and to benefit from the provisions regarding
liquidated damages set forth in the following paragraph.
In the event that either (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 75th calendar day following the
date of original issue of the Original Notes, (ii) the Exchange Offer
Registration Statement or, if required in lieu thereof, the Shelf Registration
Statement, is not declared effective on or prior to the 120th calendar day
following the date of original issue of the Original Notes or (iii) once
effective, the Exchange Offer Registration Statement or the Shelf Registration
Statement ceases to be effective or the prospectus ceases to be usable (under
certain circumstances), the interest rate borne by the Original Notes shall be
increased by one-half of one percent per annum following such 75-day period in
the case of (i) above, such 120-day period in the case of clause (ii) above or
any such period in the case of (iii) above, in each case payable in cash
semiannually, in arrears, on January 1 and July 1 of each year. Upon (x) the
filing of the Exchange Offer Registration Statement in the case of clause (i)
above, (y) the effectiveness of the Exchange Offer Registration Statement or
Shelf Registration Statement in the case of clause (ii) above or (z) the
reeffectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement in the case of clause (iii) above, and provided that none
of the conditions set forth in clauses (i), (ii) and (iii) above continues to
exist, the interest rate borne by the Original Notes from the date of such
filing, effectiveness or reeffectiveness, as the case may be, will be reduced to
the original interest rate.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement.
Except as set forth above, after consummation of the Exchange Offer,
holders of Original Notes have no registration or exchange rights under the
Registration Rights Agreement. See "-- Consequences of Failure to Exchange," and
"-- Resales of Exchange Notes; Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes which are not exchanged for Exchange Notes pursuant to
the Exchange Offer and are not included in a resale prospectus which, if
required, will be filed as part of an amendment to the Registration Statement,
will remain restricted securities and subject to restrictions on transfer.
Accordingly, such Original Notes may be resold (i) to the Company (upon
redemption thereof or otherwise), (ii) so long as the Original Notes are
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act, purchasing for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or other transfer is being made in reliance on Rule 144A, (iii)
in an offshore
27
transaction in accordance with Regulation S under the Securities Act, (iv)
pursuant to an exemption from registration in accordance with Rule 144 (if
available) under the Securities Act, (v) in reliance on another exemption from
the registration requirements of the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United States
and subject to certain requirements of the registrar or co-registrar being met,
including receipt by the registrar or co-registrar of a certification and (in
the case of (iii), (iv) and (v)) an opinion of counsel reasonably acceptable to
the Company and the registrar.
To the extent Original Notes are tendered and accepted in the Exchange
Offer, the principal amount of outstanding Original Notes will decrease with a
resulting decrease in the liquidity in the market therefor. Accordingly, the
liquidity of the market for the Original Notes could be adversely affected. See
"Risk Factors -- Consequences to Non-Tendering Holders of Original Notes."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in the Prospectus
and in the Letter of Transmittal, a copy of which is attached to this Prospectus
as Annex A, the Company will accept any and all Original Notes validly tendered
and not withdrawn prior to the Expiration Date. The Company will issue $1,000
principal amount of Exchange Notes in exchange for each $1,000 principal amount
of Original Notes accepted in the Exchange Offer. Holders may tender some or all
of their Original Notes pursuant to the Exchange Offer. However, Original Notes
may be tendered only in integral multiples of $1,000 principal amount.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes, except that (i) the Exchange Notes will have been
registered under the Securities Act and hence will not bear legends restricting
their transfer pursuant to the Securities Act, and (ii) except as otherwise
described above, holders of the Exchange Notes will not be entitled to the
rights of holders of Original Notes under the Registration Rights Agreement. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace), and will be issued under, and be entitled to the benefits of, the
Indenture which governs all of the Notes.
Solely for reasons of administration (and for no other purpose) the Company
has fixed the close of business on , 1996 as the record date for the Exchange
Offer for purposes of determining the persons to whom this Prospectus and the
Letter of Transmittal will be mailed initially. Only a registered holder of
Original Notes (or such holder's legal representative or attorney-in-fact) as
reflected on the records of the trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered holders of the Original Notes entitled to participate in the Exchange
Offer.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the Texas Business Corporation Act or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if they have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of the Original Notes for the purposes of receiving the Exchange Notes. The
Exchange Notes delivered pursuant to the Exchange Offer will be issued on the
earliest practicable date following the acceptance for exchange of Original
Notes by the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions of fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to
28
the exchange of the Original Notes pursuant to the Exchange Offer. The Company
will pay all charges and expenses, other than certain applicable taxes, in
connection with the Exchange Offer. See " -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
,1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, (iii) if any of
the conditions set forth below under " -- Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (iv) to amend the terms of the Exchange Offer in any manner. Except as
specified in the immediately preceding paragraph, any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by a public announcement thereof. If the Exchange Offer is amended in a manner
determined by it to constitute a material change, the Company will promptly
disclose such amendment by means of a prospectus supplement that will be
distributed to the registered holders of the Original Notes, and the Exchange
Offer will be extended for a period of five to 10 business days, as required by
law, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to 10 business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, termination or amendment of its
Exchange Offer, the Company shall not have an obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release thereof to the Dow Jones News Service.
PROCEDURES FOR TENDERING ORIGINAL NOTES
TENDERS OF ORIGINAL NOTES. The tender by a holder of Original Notes
pursuant to any of the procedures set forth below will constitute the tendering
holder's acceptance of the terms and conditions of the Exchange Offer. The
Company's acceptance for exchange of Original Notes tendered pursuant to any of
the procedures described below will constitute a binding agreement between such
tendering holder and the Company in accordance with the terms and subject to the
conditions of the Exchange Offer. Only holders are authorized to tender their
Original Notes. The procedures by which Original Notes may be tendered by
beneficial owners that are not holders will depend upon the manner in which the
Original Notes are held.
DTC has authorized DTC participants that are beneficial owners of Original
Notes through DTC to tender their Original Notes as if they were holders. To
effect a tender, DTC participants should either (i) complete and sign the Letter
of Transmittal (or a facsimile thereof), have the signature thereon guaranteed
if required by Instruction 1 of the Letter of Transmittal, and mail or deliver
the Letter of Transmittal or such facsimile pursuant to the procedures for
book-entry transfer set forth below under " -- BOOK-ENTRY DELIVERY PROCEDURES,"
or (ii) transmit their acceptance to DTC through the DTC Automated Tender Offer
Program ("ATOP"), for which the transaction will be eligible, and follow the
procedures for book-entry transfer set forth below under " -- BOOK-ENTRY
DELIVERY PROCEDURES."
TENDER OF ORIGINAL NOTES HELD IN PHYSICAL FORM. To tender effectively
Original Notes held in physical form pursuant to the Exchange Offer, a properly
completed Letter of Transmittal (or a facsimile thereof) duly executed by the
holder thereof, and any other documents required by the Letter of Transmittal,
must be received by the Exchange Agent at one of its addresses set forth below,
and tendered Original Notes must be received by the Exchange Agent at such
address (or delivery effected through the deposit of Original Notes into the
Exchange Agent's account with DTC and making book-entry delivery as set forth
29
below) on or prior to the Expiration Date, or the tendering holder must comply
with the guaranteed delivery procedure set forth below. LETTERS OF TRANSMITTAL
OR ORIGINAL NOTES SHOULD BE SENT ONLY TO THE EXCHANGE AGENT AND SHOULD NOT BE
SENT TO THE COMPANY.
TENDER OF ORIGINAL NOTES HELD THROUGH A CUSTODIAN. To tender effectively
Original Notes that are held of record by a custodian bank, depository, broker,
trust company or other nominee, the beneficial owner thereof must instruct such
holder to tender the Original Notes on the beneficial owner's behalf. A Letter
of Instructions from the record owner to the beneficial owner may be included in
the materials provided along with this Prospectus which may be used by the
beneficial owner in this process to instruct the registered holder of such
owner's Original Notes to effect the tender.
TENDER OF ORIGINAL NOTES HELD THROUGH DTC. To tender effectively Original
Notes that are held through DTC, DTC participants should either (i) properly
complete and duly execute the Letter of Transmittal (or a facsimile thereof),
and any other documents required by the Letter of Transmittal, and mail or
deliver the Letter of Transmittal or such facsimile pursuant to the procedures
for book-entry transfer set forth below or (ii) transmit their acceptance
through ATOP, for which the transaction will be eligible, and DTC will then edit
and verify the acceptance and send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of tendered Original Notes held through DTC must be
made to the Exchange Agent pursuant to the book-entry delivery procedures set
forth below or the tendering DTC participant must comply with the guaranteed
delivery procedures set forth below.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND LETTERS OF TRANSMITTAL, ANY
REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC AND ANY ACCEPTANCE OR AGENT'S MESSAGE TRANSMITTED THROUGH
ATOP, IS AT THE ELECTION AND RISK OF THE PERSON TENDERING ORIGINAL NOTES AND
DELIVERING LETTERS OF TRANSMITTAL AND, EXCEPT AS OTHERWISE PROVIDED IN THE
LETTER OF TRANSMITTAL, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER
USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT
THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
Except as provided below, unless the Original Notes being tendered are
deposited with the Exchange Agent on or prior to the Expiration Date
(accompanied by a properly completed and duly executed Letter of Transmittal or
a properly transmitted Agent's Message), the Company may, at its option, reject
such tender. Exchange of Exchange Notes for the Original Notes will be made only
against deposit of the tendered Original Notes and delivery of all other
required documents.
BOOK-ENTRY DELIVERY PROCEDURES. The Exchange Agent will establish accounts
with respect to the Original Notes at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in DTC may make book-entry delivery of the
Original Notes by causing DTC to transfer such Original Notes into the Exchange
Agent's account in accordance with DTC's procedures for such transfer. However,
although delivery of Original Notes may be effected through book-entry at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Exchange Agent at one or more of its addresses set forth in this
Prospectus on or prior to the Expiration Date, or compliance must be made with
the guaranteed delivery procedures described below. Delivery of documents to DTC
does not constitute delivery to the Exchange Agent. The confirmation of a
book-entry transfer into the Exchange Agent's account at DTC as described above
is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each participant in DTC tendering the Original Notes and that such participant
has received the Letter of Transmittal and agrees to be bound by the terms of
the Letter of Transmittal and the Company may enforce such agreement against
such participant.
30
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Original Notes tendered thereby are tendered
(i) by a registered holder of Original Notes (or by a participant in DTC whose
name appears on a DTC security position listing as the owner of such Original
Notes) who has not completed either the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal,
or (ii) for the account of an Eligible Institution. See Instruction 1 of the
Letter of Transmittal. If the Original Notes are registered in the name of a
person other than the signer of the Letter of Transmittal or if Original Notes
not accepted for exchange or not tendered are to be returned to a person other
than the registered holder, then the signatures on the Letter of Transmittal
accompanying the tendered Original Notes must be guaranteed by an Eligible
Institution as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Original Notes pursuant
to the Exchange Offer and time will not permit the Letter of Transmittal,
certificates representing such Original Notes and all other required documents
to reach the Exchange Agent, or the procedures for book-entry transfer cannot be
completed, on or prior to the Expiration Date, such Original Notes may
nevertheless be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company
herewith, or an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, is received by the
Exchange Agent on or prior to the Expiration Date, as provided
below; and
(iii) the certificates for the tendered Original Notes, in proper
form for transfer (or a Book-Entry Confirmation of the transfer
of such Original Notes into the Exchange Agent's account at DTC
as described above), together with a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other documents
required by the Letter of Transmittal or a properly transmitted
Agent's Message, are received by the Exchange Agent within two
business days after the date of execution of the Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, delivery of Exchange Notes by
the Exchange Agent for Original Notes tendered and accepted for exchange
pursuant to the Exchange Offer will, in all cases, be made only after timely
receipt by the Exchange Agent of such Original Notes (or Book-Entry Confirmation
of the transfer of such Original Notes into the Exchange Agent's account at DTC
as described above), and a Letter of Transmittal (or facsimile thereof) with
respect to such Original Notes, properly completed and duly executed, with any
required signature guarantees and any other documents required by the Letter of
Transmittal, or a properly transmitted Agent's Message.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Original Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
interpretation of the terms and conditions of its Exchange Offer (including the
instructions in the Letter of Transmittal) by the Company will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of
31
Original Notes, neither the Company, the Exchange Agent nor any other person is
under any duty to give such notice, nor shall they incur any liability for
failure to give such notification. Tenders of Original Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Original Notes received by the Exchange Agent that are not validly
tendered and as to which the defects or irregularities have not been cured or
waived, or if Original Notes are submitted in a principal amount greater than
the principal amount of Original Notes being tendered by such tendering holder,
such unaccepted or non-exchanged Original Notes will be returned by the Exchange
Agent to the tendering holders (or, in the case of Original Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described below, such
unaccepted or non-exchanged Original Notes will be credited to an account
maintained with such Book-Entry Transfer Facility), unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration Date.
By tendering, each registered holder will represent to the Company that,
among other things, (i) the Exchange Notes to be acquired by the holder and any
beneficial owner(s) of the Original Notes ("Beneficial Owner(s)") in connection
with the Exchange Offer are being acquired by the holder and any Beneficial
Owner(s) in the ordinary course of business of the holder and any Beneficial
Owner(s), (ii) the holder and each Beneficial Owner are not participating, do
not intend to participate, and have no arrangement or understanding with any
person to participate, in a distribution of the Exchange Notes, (iii) the holder
and each Beneficial Owner acknowledge and agree that (x) any person
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction with
respect to the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Commission set forth in no-action letters that are
discussed herein under " -- Resale of the Exchange Notes; Plan of Distribution,"
and (y) any broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes pursuant to the Exchange Offer must deliver a
prospectus in connection with any resale of such Exchange Notes, but by so
acknowledging, the holder shall not be deemed to admit that, by delivering a
prospectus, it is an "underwriter" within the meaning of the Securities Act,
(iv) neither the holder nor any Beneficial Owner is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company except as otherwise
disclosed to the Company in writing, and (v) the holder and each Beneficial
Owner understands that a secondary resale transaction described in clause (iii)
above should be covered by an effective registration statement containing the
selling securityholder information required by Item 507 of Regulation S-K of the
Commission.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "-- Resale of the Exchange Notes;
Plan of Distribution."
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes pursuant to
the Exchange Offer may be withdrawn, unless theretofore accepted for exchange as
provided in the Exchange Offer, at any time prior to the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior to
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Original Notes to be withdrawn (the
"Depositor"), (ii) identify the Original Notes to be withdrawn, including the
certificate number or numbers of the particular certificates evidencing the
Original Notes (unless such Original Notes were tendered by book-entry
transfer), and aggregate principal amount of such Original Notes, and (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of the Original Notes into the name of the person
withdrawing such Original Notes. If Original Notes have been delivered pursuant
to the procedures for book-entry transfer set forth in
32
"-- Procedures for Tendering Original Notes -- BOOK-ENTRY DELIVERY PROCEDURES,"
any notice of withdrawal must specify the name and number of the account at the
appropriate book-entry transfer facility to be credited with such withdrawn
Original Notes and must otherwise comply with such book-entry transfer
facility's procedures. If the Original Notes to be withdrawn have been delivered
or otherwise identified to the Exchange Agent, a signed notice of withdrawal
meeting the requirements above is effective immediately upon written or
facsimile notice of withdrawal even if physical release is not yet effected. A
withdrawal of Original Notes can only be accomplished in accordance with the
foregoing procedures.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding on all parties. No
withdrawal of Original Notes will be deemed to have been properly made until all
defects or irregularities have been cured or expressly waived. Neither the
Company nor the Exchange Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or revocation, nor shall they incur any liability for failure to give any such
notification. Any Original Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Original Notes so withdrawn are
retendered. Properly withdrawn Original Notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering Original
Notes" at any time prior to the Expiration Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the prior
termination of the Exchange Offer, or which have been validly withdrawn, will be
returned to the holder thereof (unless otherwise provided in the Letter of
Transmittal), as soon as practicable following the Expiration Date or, if so
requested in the notice of withdrawal, promptly after receipt by the Company of
notice of withdrawal without cost to such holder.
CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer shall not be subject to any conditions, other than that
(i) the Commission has issued an order or orders declaring the Indenture
governing the Notes qualified under the Trust Indenture Act of 1939, (ii) the
Exchange Offer, or the making of any exchange by a holder, does not violate
applicable law or any applicable interpretation of the staff of the Commission,
(iii) no action or proceeding shall have been instituted or threatened in any
court or by or before any governmental agency with respect to the Exchange
Offer, which, in the judgment of the Company, might impair the ability of the
Company to proceed with the Exchange Offer, (iv) there shall not have been
adopted or enacted any law, statute, rule or regulation which, in the Company's
judgment, would materially impair its ability to proceed with the Exchange Offer
or (v) there shall not have occurred any material change in the financial
markets in the United States or any outbreak of hostilities or escalation
thereof or other calamity or crisis the effect of which on the financial markets
of the United States, in the Company's judgment, would materially impair its
ability to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions
to the Exchange Offer are not satisfied, it may (i) refuse to accept any
Original Notes and return all tendered Original Notes to the tendering holders,
(ii) extend its Exchange Offer and retain all Original Notes tendered prior to
the Expiration Date, subject, however, to the rights of holders to withdraw such
Original Notes (see "-- Withdrawal of Tenders") or (iii) waiver such unsatisfied
conditions with respect to the Exchange Offer and accept all validly tendered
Original Notes which have not been withdrawn. If such waiver constitutes a
material change to the Exchange Offer, the Company will promptly disclose such
waiver by means of a prospectus supplement that will be distributed to the
registered holders, and will extend the Exchange Offer for a period of five to
10 business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to 10 business day period.
33
EXCHANGE AGENT
Fleet National Bank, the Trustee under the Indenture governing the Notes,
has been appointed as Exchange Agent for the Exchange Offer. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery and
other documents should be directed to the Exchange Agent addressed as follows:
BY MAIL: BY FACSIMILE: BY HAND:
Fleet National Bank (860) 986-7908 Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level Confirm by Telephone: 777 Main Street, Lower Level
Hartford, CT 06115 Hartford, CT 06115
Attention: Patricia Williams (860) 986-2910 Attention: Patricia Williams
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
No dealer-manager has been retained in connection with the Exchange Offer
and no payments will be made to brokers, dealers or others soliciting acceptance
of the Exchange Offer. However, reasonable and customary fees will be paid to
the Exchange Agent for its service and it will be reimbursed for its reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include fees and expenses of the Exchange Agent and the
trustee under the Indenture, accounting and legal fees and printing costs, among
others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of its Original Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of its Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The carrying values of the Original Notes are not expected to be materially
different from the fair value of the Exchange Notes at the time of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer will be amortized over the term of the Exchange
Notes.
RESALE OF THE EXCHANGE NOTES; PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 1996, all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be
34
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses approved in writing of
one counsel for the holders of the Notes) other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the Notes (including
any broker-dealers) required to use this Prospectus in connection with their
resale of Exchange Notes as described above against certain liabilities,
including liabilities under the Securities Act.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes offered
hereby. In consideration for issuing the Exchange Notes as contemplated in this
Prospectus, the Company will receive in exchange Original Notes in like
principal amount, the form and terms of which are the same as the form and terms
of the Exchange Notes, except as otherwise described herein under "The Exchange
Offer -- Terms of the Exchange Offer." The Original Notes surrendered in
exchange for the Exchange Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the Exchange Notes will not result in any
increase in the indebtedness of the Company.
35
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996. See "The Transactions." The information set forth below should be read
in conjunction with the "Pro Forma Combined Financial Information" and the
Combined Financial Statements of TOC, its subsidiaries and Clarkston and related
notes thereto included elsewhere herein.
AS OF
JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
Cash and investment securities....... 11.6 7.6
====== ===========
Long-term debt, including current maturities:
Existing revolving line of
credit........................ 13.0 --
Revolving Credit Facility....... --
Tranche A Term Loan............. 85.0
Tranche B Term Loan............. 45.0
ESOP Term Loan.................. 10.0
11 1/8% Senior Subordinated
Notes Due 2006................ 175.0
------ -----------
Total long-term debt,
including current
maturities.............. 13.0 315.0
Minority interest in net
assets of consolidated
subsidiary.............. 1.1 --
Common stock held by ESOP............ 10.0
Less -- Note receivable
from ESOP............... (10.0)
Total stockholders'
equity.................. 92.5 66.2
------ -----------
Total
capitalization..... 106.6 381.2
====== ===========
36
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Statements of Operations for the
twelve months ended May 31, 1996 and the one month ended June 30, 1996 give
effect to the Transactions as if they had occurred on June 1, 1995, and the
following unaudited Pro Forma Combined Balance Sheet gives effect to the
Transactions as if they had occurred on June 30, 1996. The acquisition was
accounted for as a purchase under generally accepted accounting principles.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma combined
financial information does not purport to represent what the results of
operations or financial condition would actually have been had the Transactions
in fact occurred on the dates set forth above or to project the Company's
results of operations or financial condition for any future period or as of any
date, respectively. The pro forma combined financial information set forth below
should be read in conjunction with the historical Combined Financial Statements
and Notes thereto of TOC, its subsidiaries and Clarkston included elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
37
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR ONE MONTH ENDED JUNE 30, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
TOC, ITS ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
SUBSIDIARIES FOR THE FOR THE FOR THE FOR THE
AND CLARKSTON ACQUISITION ACQUISITION FINANCINGS TRANSACTIONS
------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................. $41.4 $(0.2)(a) $ 41.2 $ 41.2
Cost of goods sold................... 36.0 (0.6)(c) 35.4 35.4
Depreciation and amortization........ 1.3 1.8(d) 3.1 3.1
------------- ----------- ------------ ----------- ------------
Gross profit.................... 4.1 (1.4) 2.7 -- 2.7
Selling, general and administrative
expenses........................... 1.7 (0.2)(a) 1.5 1.5
0.1(c)
(0.1)(e)
------------- ----------- ------------ ----------- ------------
Income from operations..... 2.4 (1.2) 1.2 -- 1.2
Interest expense, net................ .1 (0.1)(a) 0.1 2.5(j) 2.6
0.1(g)
Other income (expense):
Dividend income................. -- -- --
Charitable contribution......... (0.1) 0.1(h) -- --
Loss on disposal of assets and
investment securities, net.... (0.3) (0.3) (0.3)
Impairment of investment in
land.......................... -- -- --
Other, net...................... 0.1 0.1 0.1
------------- ----------- ------------ ----------- ------------
Income before income taxes and
minority interest.................. 2.0 (1.1) 0.9 (2.5) (1.6)
Provision for income taxes........... 0.8 (0.3)(i) 0.5 (0.5)(i) --
Minority interest in net loss of
consolidated subsidiary............ 0.0 0.0(a) -- -- --
------------- ----------- ------------ ----------- ------------
Net income (loss).......... $ 1.2 $(0.8) $ 0.4 $(2.0) $ (1.6)
============= =========== ============ =========== ============
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements
38
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MAY 31, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
TOC, ITS ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
SUBSIDIARIES FOR THE FOR THE FOR THE FOR THE
AND CLARKSTON ACQUISITION ACQUISITION FINANCINGS TRANSACTIONS
------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................. $ 455.6 $ (1.4)(a) $ 454.2 $454.2
Cost of goods sold................... 379.5 (0.2)(a) 367.3 367.3
(12.0)(c)
Depreciation and amortization........ 15.0 (0.3)(a) 36.3 36.3
(0.1)(b)
21.7(d)
------------- ----------- ----------- ----------- ------------
Gross profit.................... 61.1 (10.5) 50.6 -- 50.6
Selling, general and administrative
expenses........................... 19.1 (1.7)(a) 12.7 12.7
(0.3)(b)
(3.2)(c)
(1.2)(e)
------------- ----------- ----------- ----------- ------------
Income from operations..... 42.0 (4.1) 37.9 37.9
Interest expense, net................ 1.6 0.1(a) 1.3 30.6(j) 31.9
(1.7)(f)
1.3(g)
Other income (expense):
Dividend income................. 0.3 (0.3)(f) -- --
Charitable contribution......... (0.6) 0.6(h) -- --
(Loss) on disposal of assets and
investment securities, net.... (3.1) (3.1) (3.1)
Impairment of investment in
land.......................... (12.6) (12.6) (12.6)
Other, net...................... 0.1 0.1 0.1
------------- ----------- ----------- ----------- ------------
Income before income taxes and
minority interest.................. 24.5 (3.5) 21.0 (30.6) (9.6)
Provision for income taxes........... 7.9 2.1(i) 10.0 (10.0)(i) --
Minority interest in net loss of
consolidated subsidiary............ 0.1 (0.1)(a) -- --
------------- ----------- ----------- ----------- ------------
Net income................. $ 16.7 $ (5.7) $ 11.0 $ (20.6) $ (9.6)
============= =========== =========== =========== ============
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements
39
PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
TOC, ITS ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
SUBSIDIARIES FOR THE FOR THE FOR THE FOR THE
AND CLARKSTON ACQUISITION ACQUISITION FINANCINGS TRANSACTIONS
------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 4.8 $ (0.5)(a) $ (355.7) $ 363.3(n) $ 7.6
3.3(k)
(363.3)(m)
Investment securities........... 6.8 (6.8)(k) -- --
Accounts receivable............. 35.3 35.3 35.3
Inventories..................... 11.9 11.9 11.9
Other current assets............ 11.8 (0.8)(k) 11.0 11.0
------------- ----------- ------------ ----------- ------------
Total current assets....... 70.6 (368.1) (297.5) 363.3 65.8
Property, plant and equipment, net... 81.8 (2.2)(b) 260.5 260.5
180.9(m)
Investments in land.................. 6.2 (2.3)(a) 3.9 3.9
Investment in and advances to limited
partnership........................ 2.8 2.8 2.8
Other assets, net of accumulated
amortization....................... 6.5 (2.8)(a) 192.7 14.9(n) 207.6
63.3(l)
35.0(o)
90.7(m)
------------- ----------- ------------ ----------- ------------
Total assets............... $ 167.9 $ (5.5) $ 162.4 $ 378.2 $540.6
============= =========== ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................ $ 40.1 $ 40.1 $ 40.1
Accrued expenses................ 4.4 (0.2)(a) 4.2 4.2
Dividends payable............... 0.7 0.7 0.7
------------- ----------- ------------ ----------- ------------
Total current
liabilities............. 45.2 (0.2) 45.0 -- 45.0
Revolving line of credit............. 13.0 (5.6)(a) -- --
(2.2)(b)
(5.2)(k)
Senior Term Loans.................... -- -- 130.0(n) 130.0
Senior Subordinated Notes............ -- -- 175.0(n) 175.0
ESOP Term Loan....................... -- -- 10.0(n) 10.0
Other liabilities.................... 0.3 35.0(o) 35.3 35.3
Deferred income taxes................ 15.8 79.1 79.1
63.3(l)
Minority interest in net assets of
consolidated subsidiary............ 1.1 (1.1)(m) -- --
Common Stock held by ESOP............ -- -- 10.0(n) 10.0
Less: Note receivable from
ESOP.......................... -- -- (10.0)(n) (10.0)
Stockholders' equity................. 92.5 0.2(a) 3.0 63.2(n) 66.2
0.9(k)
(90.6)(m)
------------- ----------- ------------ ----------- ------------
Total liabilities and
stockholders' equity.... $ 167.9 $ (5.5) $ 162.4 $ 378.2 $540.6
============= =========== ============ =========== ============
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements
40
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE ONE MONTH ENDED JUNE 30, 1996, THE TWELVE MONTHS ENDED
MAY 31, 1996 AND FOR THE YEAR ENDED MAY 31, 1995
(DOLLARS IN MILLIONS)
(UNAUDITED)
(a) Represents the elimination of operations, assets and liabilities
associated with The Texas Falls Corporation, which was not acquired as
part of the Acquisition. Pursuant to the Stock Purchase Agreement, 80% of
the outstanding capital stock of The Texas Falls Corporation was sold at
Closing to Mr. Swalm for $5.6 million. The proceeds were used to reduce
the Company's outstanding indebtedness.
ONE MONTH TWELVE MONTHS
ENDED ENDED
JUNE 30, 1996 MAY 31, 1996
------------- -------------
Revenues............................. $0.2 $1.4
Cost of goods sold................... 0.0 0.2
Depreciation and amortization........ 0.0 0.3
Selling, general and administrative
expenses........................... 0.2 1.7
Interest income (expense), net....... (0.1) 0.1
Minority interest in net loss of
consolidated subsidiary............ 0.0 0.1
------------- -------------
Net loss................... $ (0.1) $ (0.6)
============= =============
Cash................................. 0.5
Investments in land.................. 2.3
Other assets, net of accumulated
amortization....................... 2.8
Accrued expenses..................... (0.2)
-------------
Net adjustment............. $ 5.4
=============
(b) Represents the elimination of operations and assets associated with the
Ranch, which was sold pursuant to the Stock Purchase Agreement at Closing
to a former shareholder for $2.2 million. The proceeds were used to reduce
the Company's outstanding indebtedness.
ONE MONTH TWELVE MONTHS
ENDED ENDED
JUNE 30, 1996 MAY 31, 1996
------------- -------------
Depreciation......................... -- $0.1
Selling, general and administrative
expenses........................... -- $0.3
Fixed assets associated with the
Ranch.............................. $2.2
(c) Pursuant to the Stock Purchase Agreement, the existing profit sharing plan
was replaced with a new profit sharing plan. The Pro Forma Combined
Statements of Operations reflect (i) a reduction in the cost of goods sold
and selling, general and administrative expenses resulting from the
elimination of bonuses attributable to the existing profit sharing plan,
and (ii) an increase associated with bonuses attributable to the new
profit sharing plan.
ONE MONTH TWELVE MONTHS
ENDED ENDED
JUNE 30, 1996 MAY 31, 1996
------------- -------------
Cost of goods sold:
Bonuses under the previous
profit sharing plan........... $(0.6) $ (12.0)
============= =============
Selling, general and administrative expenses:
Bonuses under the previous
profit sharing plan........... $(0.4) $ (11.5)
Bonuses under the proposed
profit sharing plan........... 0.5 8.3
------------- -------------
Net increase (decrease).... $ 0.1 $ (3.2)
============= =============
(d) Represents an increase in depreciation and amortization resulting from the
preliminary purchase price allocation in accordance with the purchase
method of accounting. Goodwill is amortized over 40 years.
41
(e) In connection with the Transactions, certain shareholders will no longer
be employed by the Company. The Pro Forma Combined Statements of
Operations reflect a decrease in selling, general and administrative
expenses for the elimination of related shareholder salaries and expenses.
ONE MONTH TWELVE MONTHS
ENDED ENDED
JUNE 30, 1996 MAY 31, 1996
------------- -------------
Shareholder salaries................. $ 0.1 $ 0.8
Expenses............................. 0.0 0.4
------------- -------------
$ 0.1 $ 1.2
============= =============
(f) Represents the reduction of interest expense, interest income and dividend
income for the sales of marketable equity securities, the Ranch and 80% of
the outstanding capital stock of The Texas Falls Corporation at June 1,
1995.
(g) Represents interest expense associated with the Cash Bonus Plan.
(h) Represents the elimination of charitable contributions paid to an
affiliate organization. Such contributions will not be made after the
Acquisition.
(i) Represents the tax effect of all adjustments and the net income of
Clarkston using a combined state and federal statutory income tax rate of
approximately 37%.
(j) Represents interest incurred on borrowings under the Bank Credit Agreement
and the Notes. Debt issuance costs are amortized over the terms of the
related debt and included as a component of interest expense. Assumes a
7.8% average borrowing rate and average outstanding borrowings under the
Bank Credit Agreement of $120.4 million and $110.4 million for the
twelve-month period ended May 31, 1996 and the one-month period ended June
30, 1996, respectively. The interest rate on the Notes is 11.125%.
ONE MONTH TWELVE MONTHS
ENDED ENDED
JUNE 30, 1996 MAY 31, 1996
------------- -------------
Bank Credit Agreement................ $ 0.8 $ 9.6
ESOP Note, net of interest income.... -- --
Notes................................ 1.6 19.4
Amortization of debt issuance
costs.............................. .1 1.6
------------- -------------
$ 2.5 $30.6
============= =============
A 1% change in the interest rate payable on the outstanding balance under
the Bank Credit Agreement would change annual interest expense by $1.2
million on an annual basis before the effect of income taxes.
(k) Pursuant to the Stock Purchase Agreement, investment securities were sold
prior to Closing. A $0.5 million loss was recognized on the sale. The
related proceeds were used to reduce the Company's outstanding
indebtedness.
(l) Represents the adjustment to deferred taxes resulting from the adjustment
to property, plant and equipment.
42
(m) The cash expended for the Acquisition pursuant to the Stock Purchase
Agreement and the allocation associated with the purchase method of
accounting are presented in the table below.
Purchase price ............................................... $ 377.3
Cash received from sales of the Ranch
and The Texas Falls Corporation ............................ (7.8)
Rollover shares .............................................. (6.2)
--------
Cash expended ................................................ $ 363.3
========
The resultant pro forma purchase price
entries are as follows:
Fixed assets ............................................ $ 180.9
Elimination of historical equity, less predecessor basis
of rollover shares of $3.0 million...................... 90.6
Elimination of minority interest
in The Texas Falls
Corporation ............................................ 1.1
Other assets ............................................ 90.7
--------
$ 363.3
========
(n) In order to finance the Acquisition and related fees and expenses, the
Company used the proceeds of the issuance of the Notes, the Discount Notes
and the Common Stock Placement, and obtained borrowings under the Bank
Credit Agreement. The net proceeds from such financings were $363.3
million.
Notes................................ $ 175.0
Common stock (less Rollover shares of
$6.2 million)...................... 63.8
Equity financing costs............... (0.6)
--------
63.2
Common Stock held by ESOP............ 10.0
--------
248.2
Bank Credit Agreement:
Tranche A Term Loan............. 85.0
Tranche B Term Loan............. 45.0
ESOP Term Loan.................. 10.0
--------
140.0
Deferred financing costs............. (14.4)
--------
125.6
Less: Loan to ESOP................... (10.0)
Less: Organizational Costs........... (0.5)
--------
$ 363.3
========
(o) Represents the recording of the Cash Bonus Plan in accordance with the
Stock Purchase Agreement.
43
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data set forth below has been derived
from the combined financial statements of TOC, its subsidiaries and Clarkston
which appear elsewhere in this Prospectus and from combined financial statements
of TOC, its subsidiaries and Clarkston for prior fiscal years, and should be
read in conjunction with, and is qualified in its entirety by reference to, such
combined financial statements and their accompanying notes. Such 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
audited by Coopers & Lybrand L.L.P., independent auditors for such entities. The
combined financial information set forth below for the years ended May 31, 1992
has been derived from unaudited combined financial statements of TOC, its
subsidiaries and Clarkston, which, in the opinion of management, have been
prepared on a basis consistent with the audited combined financial statements of
such entities and contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for these periods.
The unaudited combined financial information for the year ended May 31, 1992 has
been prepared from audited financial statements of TOC and its subsidiaries and
unaudited financial statements of Clarkston. The results of the one month period
is 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 and the
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
TWELVE ONE
MONTHS MONTH
ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30,
------------------------------------------ -------- ---------
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 416.1 $ 410.7 $ 352.4 $ 474.7 $455.6 $ 41.4
Cost of goods sold(1)................ 318.3 340.8 268.8 396.3 379.5 36.0
Depreciation and amortization........ 12.0 12.6 13.6 14.3 15.0 1.3
--------- --------- --------- --------- -------- ---------
Gross profit......................... 85.8 57.3 70.0 64.1 61.1 4.1
Selling, general and administrative
expenses(1)........................ 15.4 14.4 16.7 16.6 19.1 1.7
--------- --------- --------- --------- -------- ---------
Income from operations............... 70.4 42.9 53.3 47.5 42.0 2.4
Interest income (expense), net....... (0.6) (0.6) (0.2) 0.7 (1.6) (0.1)
Other income (expense)(2)............ (6.3) (1.2) (0.8) 1.1 (15.9) (0.3)
--------- --------- --------- --------- -------- ---------
Income before income taxes and
minority interest.................. 63.5 41.1 52.3 49.3 24.5 2.0
Provision for income taxes........... 24.3 13.0 18.4 16.9 7.9 0.8
Minority interest in net loss of
consolidated subsidiary............ -- -- 0.0 0.1 0.1 0.0
--------- --------- --------- --------- -------- ---------
Net income........................... 39.2 28.1 33.9 32.5 16.7 1.2
OPERATING DATA:
Revenues by product:
Butadiene(3)..................... $ 64.9 $ 81.3 $ 68.7 $ 106.2 $112.6 $ 10.2
MTBE............................. 252.0 211.0 175.2 199.1 187.4 21.0
n-Butylenes...................... 29.2 21.7 28.1 42.7 48.2 3.2
Specialty Isobutylenes........... 38.2 54.8 59.9 75.5 74.5 5.5
Other(4)......................... 31.8 41.9 20.5 51.2 32.9 1.5
Sales volumes (in millions of pounds):
Butadiene........................ 559.1 556.2 484.4 580.8 622.6 64.6
MTBE(5).......................... 254.4 225.1 194.8 211.1 219.8 26.6
n-Butylenes...................... 158.7 114.7 150.8 245.9 284.6 17.1
Specialty Isobutylenes........... 240.4 309.0 312.2 398.0 368.2 23.0
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
44
JUNE 30, 1996
--------------------
AS
ACTUAL ADJUSTED
------- ---------
(IN MILLIONS)
BALANCE SHEET DATA (AT PERIOD END):
Working capital...................... $ 25.3 $ 20.8
Property, plant and equipment, net... 81.8 260.5
Total assets......................... 167.9 540.6
Long-term debt (including current
portion)........................... 13.0 315.0
Total stockholders' equity........... 92.5 66.2
<TABLE>
<CAPTION>
TWELVE ONE
MONTHS MONTH
ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30,
------------------------------------------ -------- ---------
1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- -------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(6)............................ $ 82.4 $ 55.5 $ 66.9 $ 61.8 $ 57.6 $ 3.7
Employee profit sharing and
bonuses(1)......................... 22.5 18.6 23.6 20.9 23.5 1.0
Capital expenditures................. 7.1 12.0 12.5 8.7 5.5 2.0
Ratio of earnings to fixed
charges(7)......................... 23.6x 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. 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, 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 from operations before taking into consideration
depreciation and amortization. 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 considered by an investor as an alternative to
income from operations, as an indicator of the operating performance of the
Company or as an alternative to cash flows 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.
45
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of the results of operations,
financial condition and liquidity of TOC, its subsidiaries and Clarkston should
be read in conjunction with the combined financial statements of TOC, its
subsidiaries and Clarkston included in this Prospectus and the notes thereto.
The financial statements and other information set forth herein combine the
historical results of TOC, its subsidiaries and Clarkston. As a result, the
transactions between Clarkston and the Company have been eliminated in the
combined financial statements.
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.
The markets for the Company's principal products, butadiene and MTBE, are
cyclical, and market conditions may have a significant impact on the Company's
operating results. During the past five years, industry-wide pricing and
operating rates for butadiene and MTBE have fluctuated significantly and have
affected the Company's revenues and profit margins. The Company has, however,
achieved relatively stable profitability on its sales of butadiene due to the
nature of the supply contracts under which the Company purchases crude
butadiene, the raw material from which most of the Company's butadiene is
produced. The Company purchases approximately 95% of its crude butadiene
requirements at prices which are adjusted based on the Company's selling price
of butadiene as well as the energy cost of natural gas used to produce
butadiene, thereby providing the Company with a fixed profit on such sales.
Moreover, the Company sells butadiene under contracts which typically require
its customers to purchase a certain minimum volume from the Company.
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. Since
December 1994, the Company, as well as most other U.S. MTBE producers, has sold
all of its MTBE production at prices related to spot market prices. The Company
believes that the reduction of industry-wide volumes sold under these types of
fixed profit contracts and the large U.S. capacity additions built in the early
1990s in anticipation of demand created by the implementation of the CAAA's
oxygenated gasoline program in 1992 has acted as a deterrent to possible
capacity additions. Despite the transition in the industry away from fixed
profit contracts, the Company has consistently achieved profitability on its
sales of MTBE. One of the Company's principal raw materials used in the
production of MTBE, methanol, which the Company purchases at market prices, has
experienced considerable price fluctuations over the past several years. The
addition of significant new methanol production capacity in 1995 and early 1996
has resulted in a decline in the price of methanol from the historically high
levels reached in the winter of 1994. The Company believes that this current
imbalance between supply and demand will continue over the next several years,
and that the price of methanol will remain relatively stable at historically low
levels, which is expected to have a positive impact on the profitability of the
Company's MTBE operations.
46
The markets and pricing for the Company's n-butylene and specialty
isobutylene products historically have been less cyclical than those for
butadiene and MTBE. These products are generally more specialized in nature,
typically account for a smaller proportion of the end-use product's overall cost
than commodity products, and are produced by a fewer number of producers. The
Company sells certain n-butylenes and specialty isobutylenes under contracts
which link their selling prices to the prices of products (principally gasoline
and butanes) for which prices fluctuate in a manner that correlates closely with
those of the raw materials used to manufacture n-butylenes and specialty
isobutylenes. In addition, the Company sells certain of these products under
contracts which link selling prices directly to raw material costs. The Company
has increased its focus on maximizing sales of these products. In the twelve
months ended May 31, 1996 and the one month ended June 30, 1996, sales of
n-butylenes and specialty isobutylenes represented 27% and 21%, respectively, of
the Company's revenues as compared to 19% in fiscal 1993.
For the twelve months ended May 31, 1996 and the one month ended June 30,
1996, approximately 43% and 45% of the Company's revenues were derived from
products which were sold on a fixed profit basis or for which selling prices
were linked directly or indirectly to raw material costs. Historically, the
percentage of the Company's revenues represented by such contracts has been
relatively stable. However, there can be no assurance that such contracts will
remain in effect beyond their current terms or, if extended, that the same
provisions would continue to apply. See "Business -- Contracts." The pricing of
the Company's other products, including MTBE, is typically based on prevailing
market prices.
Other revenues include Clarkston's trading revenues from third parties,
utility revenues, revenues realized from the Company's terminalling facilities
and sales of chemical by-products. The Company's utility revenues have been
primarily a function of natural gas costs since demand has been relatively
stable. The Company's terminalling revenues are primarily a function of the
volume of services provided. Sales of chemical by-products are primarily a
function of plant production levels. Clarkston, which was owned by certain of
the same shareholders as TOC, historically engaged in the purchase of isobutane,
one of the Company's principal raw materials, primarily on behalf of the
Company, and also on behalf of certain third parties. As part of the
Transactions, the Company has assumed from Clarkston a contract between
Clarkston and a certain supplier for the purchase of isobutane. Clarkston's
historical revenues derived from third parties have been included in other
revenues, and the raw material costs relating to such revenues have been
included in cost of goods sold. Historically, trading costs have substantially
offset Clarkston's third party trading revenues. Historical transactions between
the Company and Clarkston have been eliminated.
The Company believes its relationships with its largest customers are good.
Certain of its largest customers account for a significant percentage of the
Company's sales of particular products. As a result, the loss of significant
volumes or a significant customer could affect revenues from year to year.
Historically the Company has successfully replaced lost volumes or customers
with new customers or open market sales.
47
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 years
ended May 31, 1994 and 1995, the twelve-month period ended May 31, 1996 and the
one-month period ended June 30, 1996.
REVENUES
<TABLE>
<CAPTION>
TWELVE MONTHS ONE MONTH
ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30,
------------------------------------------ -------------------- --------------------
1994 1995 1996 1996
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Butadiene............................ $ 68.7 19% $ 106.2 22% $ 112.6 25% $ 10.2 25%
MTBE................................. 175.2 50 199.1 42 187.4 41 21.0 50
n-Butylenes.......................... 28.1 8 42.7 9 48.2 11 3.2 8
Specialty Isobutylenes............... 59.9 17 75.5 16 74.5 16 5.5 13
Other(1)............................. 20.5 6 51.2 11 32.9 7 1.5 4
--------- --- --------- --- --------- --- --------- ---
Total............................ $ 352.4 100% $ 474.7 100% $ 455.6 100% $ 41.4 100%
========= === ========= === ========= === ========= ===
</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>
TWELVE MONTHS ONE MONTH
YEAR ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30,
-------------------- ------------- ----------
1994 1995 1996 1996
--------- --------- ------------- ----------
(MILLIONS OF POUNDS, EXCEPT WHERE NOTED)
<S> <C> <C> <C> <C>
Butadiene............................ 484.4 580.8 622.6 64.6
MTBE(1).............................. 194.8 211.1 219.8 26.6
n-Butylenes.......................... 150.8 245.9 284.6 17.1
Specialty Isobutylenes............... 312.2 398.0 368.2 23.0
</TABLE>
- ------------
(1) Volumes in millions of gallons.
AVERAGE SELLING PRICES
<TABLE>
<CAPTION>
TWELVE MONTHS ONE MONTH
YEAR ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30,
-------------------- ------------- ----------
1994 1995 1996 1996
--------- --------- ------------- ----------
(DOLLARS PER POUND, EXCEPT WHERE NOTED)
<S> <C> <C> <C> <C>
Butadiene............................ $ 0.16 $ 0.21 $0.20 $ 0.18
MTBE(1).............................. 0.90 0.94 0.85 0.80
n-Butylenes(2)....................... 0.19 0.17 0.17 0.19
Specialty Isobutylenes(2)............ 0.19 0.19 0.20 0.24
</TABLE>
- ------------
(1) Prices in dollars per gallon.
(2) Weighted average of the products under these categories.
48
RAW MATERIALS
The Company's principal purchased raw materials are crude butadiene,
methanol and isobutane. The Company purchases approximately 95% 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. The following table sets forth the Company's average raw material prices
for crude butadiene, methanol and isobutane for the years ended May 31, 1994 and
1995, the twelve-month period ended May 31, 1996 and the one-month period ended
June 30, 1996.
<TABLE>
<CAPTION>
TWELVE MONTHS ONE MONTH
YEAR ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30,
-------------------- -------------- ---------------
1994 1995 1996 1996
--------- --------- -------------- ---------------
(DOLLARS PER GALLON, EXCEPT WHERE NOTED)
<S> <C> <C> <C> <C>
Crude Butadiene(1)................... $ 0.09 $ 0.15 $ 0.14 $0.12
Methanol............................. 0.44 0.80 0.40 0.41
Isobutane............................ 0.39 0.41 0.43 0.46
</TABLE>
- ------------
(1) Prices in dollars per pound.
RESULTS OF OPERATIONS
The following table sets forth an overview of the Company's results of
operations .
<TABLE>
<CAPTION>
TWELVE MONTHS ONE MONTH
ENDED ENDED
YEAR ENDED MAY 31, MAY 31, JUNE 30,
------------------------------------------ -------------------- --------------------
1994 1995 1996 1996
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Revenues............................. $ 352.4 100% $ 474.7 100% $ 455.6 100% $ 41.4 100%
Cost of goods sold(1)................ 268.8 76 396.3 83 379.5 84 36.0 87
Depreciation and amortization........ 13.6 4 14.3 3 15.0 3 1.3 3
--------- --- --------- --- --------- --- --------- ---
Gross profit......................... 70.0 20 64.1 13 61.1 13 4.1 10
Selling, general and administrative
expenses(1)........................ 16.7 5 16.6 3 19.1 4 1.7 4
--------- --- --------- --- --------- --- --------- ---
Income from operations............... $ 53.3 15% $ 47.5 10% $ 42.0 9% 2.4 6%
========= === ========= === ========= === ========= ===
</TABLE>
- ------------
(1) Employee profit sharing and bonuses were historically included in cost of
goods sold and selling, general and administrative expenses in the following
amounts:
<TABLE>
<CAPTION>
TWELVE MONTHS ONE MONTH
YEAR ENDED ENDED ENDED
MAY 31, MAY 31, JUNE 30,
-------------------- -------------- ---------------
1994 1995 1996 1996
--------- --------- -------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Cost of goods sold................... $ 13.4 $ 12.5 $ 12.0 -$-
Selling, general and administrative
expenses........................... 10.2 8.4 11.5 1.0
--------- --------- -------------- ---------------
Total............................ $ 23.6 $ 20.9 23.5 $ 1.0
========= ========= ============== ===============
</TABLE>
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.
49
GROSS PROFIT
Gross profit decreased by approximately 26%, 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. The
Company's revenues by product for the year ended May 31, 1995 and the
twelve-month period ended May 31, 1996 were as follows:
<TABLE>
<CAPTION>
TWELEVE
INCREASE (DECREASE) MONTHS
YEAR ENDED IN REVENUES ENDED
MAY 31, DUE TO CHANGES IN MAY 31,
----------- --------------------- -----------
1995 PRICE VOLUME 1996
----------- ------ ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Butadiene............................ $ 106.2 $ (1.2) $ 7.6 $ 112.6
MTBE................................. 199.1 (19.9) 8.2 187.4
n-Butylenes.......................... 42.7 (1.2) 6.7 48.2
Specialty Isobutylenes............... 75.5 4.7 (5.7 ) 74.5
Other(1)............................. 51.2 32.9
----------- -----------
Total............................ $ 474.7 $ 455.6
=========== ===========
</TABLE>
- ------------
(1) The component mix of other revenues does not make it meaningful to show
increases or decreases due to price or volume.
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
50
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 from a competing supplier
offering an alternate, lower purity product during this period. The Company
offset a portion of these lower volumes by sales 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.
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 10%, or $4.9 million, to
$42.6 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
9.4% 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 $1.3 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."
51
YEAR ENDED MAY 31, 1995 COMPARED TO YEAR ENDED MAY 31, 1994
REVENUES
The Company's revenues increased by 35%, or $122.3 million, to $474.7
million for the year ended May 31, 1995 from $352.4 million for the year ended
May 31, 1994. This increase was primarily attributable to increased sales prices
and volumes for butadiene and MTBE, to increased sales volumes for n-butylenes
and specialty isobutylenes, and to an increase in other revenues. The Company's
revenues by product for the fiscal years 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
YEAR ENDED IN REVENUES YEAR ENDED
MAY 31, DUE TO CHANGES IN MAY 31,
---------- ---------------------- ----------
1994 PRICE VOLUME 1995
---------- ------ ------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Butadiene............................ $ 68.7 $23.8 $13.7 $106.2
MTBE................................. 175.2 9.6 14.3 199.1
n-Butylenes.......................... 28.1 (3.2 ) 17.8 42.7
Specialty Isobutylenes............... 59.9 (0.9 ) 16.5 75.5
Other(1)............................. 20.5 51.2
---------- ----------
Total............................ $352.4 $474.7
========== ==========
</TABLE>
- ------------
(1) The component mix of other revenues does not make it meaningful to show
increases or decreases due to price or volume.
Butadiene revenues increased by 55%, or $37.5 million, to $106.2 million
for the year ended May 31, 1995 from $68.7 million for the year ended May 31,
1994. This increase was primarily attributable to an increase in selling prices
due to higher U.S. demand relative to supply. U.S. demand for butadiene
increased primarily as a result of rubber end-users substituting synthetic
rubber for higher priced natural rubber. Supply of butadiene decreased in fiscal
1995 as imports of butadiene and crude butadiene declined due to reduced foreign
ethylene production and higher ocean freight costs. Butadiene sales volumes also
increased by approximately 20%, or 96.4 million pounds, as a result of an
increase in sales under contract to two major customers, one of which expanded
its production capacity.
MTBE revenues increased by 14%, or $23.9 million, to $199.1 million for the
year ended May 31, 1995 from $175.2 million for the year ended May 31, 1994.
This increase was primarily attributable to an increase in sales volumes of 8%,
or 16.3 million gallons. This volume increase was the result of MTBE users
building inventories in anticipation of greater demand for MTBE due to further
implementation of the CAAA in early 1995. In addition, MTBE selling prices
increased as a result of higher methanol raw material prices. Methanol prices on
the U.S. Gulf Coast increased from $0.40 per gallon in June 1994 to $1.45 per
gallon in December 1994, before falling to $0.75 per gallon in May 1995.
n-Butylenes revenues increased by 52%, or $14.6 million, to $42.7 million
for the year ended May 31, 1995 from $28.1 million for the year ended May 31,
1994. This increase was primarily the result of increased sales volumes of
butene-1 to new customers and increased sales volumes of butene-2 in response to
periodic customer demand. Overall n-butylenes sales volumes increased by 63%, or
95.1 million pounds, during this period. This increase was partially offset by a
decline in n-butylenes average selling prices as a result of butene-1 price
reductions by the Company in response to market competition.
Specialty isobutylenes revenues increased by 26%, or $15.6 million, to
$75.5 million for the year ended May 31, 1995 from $59.9 million for the year
ended May 31, 1994. This increase was due to an increase in specialty
isobutylenes sales volumes of 27%, or 85.8 million pounds. This volume increase
was the result of the Company actively seeking alternate uses for its
isobutylene as a result of the lower margin realized for MTBE in this period due
to higher methanol prices. This led to higher sales volumes for diisobutylene
and high purity isobutylene attributable to increased sales to a major customer,
as well as increased sales volumes of isobutylene concentrate during the first
half of the fiscal year as the Company gained a greater share of a major
customer's business.
52
Other revenues increased by 149%, or $30.7 million, to $51.2 million for
the year ended May 31, 1995 from $20.5 million for the year ended May 31, 1994.
This increase was primarily due to an increase of $28.9 million in revenues from
Clarkston's third party trading activities, partially offset by a decrease in
utility revenues.
GROSS PROFIT
Gross profit decreased by 8%, or $5.9 million, to $64.1 million for the
year ended May 31, 1995 from $70.0 million for the year ended May 31, 1994.
Gross margin during this period declined to 13.5% from 19.9%. The decline in
gross profit and gross margin was primarily attributable to a significant
increase in the price of methanol, a primary raw material used to produce MTBE,
partially offset by increased sales volumes of specialty isobutylenes produced
from isobutylene, which would otherwise have been used to produce lower margin
MTBE. The average price of methanol increased to $0.80 per gallon for the year
ended May 31, 1995 from $0.44 per gallon for the prior period. In addition,
crude butadiene prices increased to $0.15 per pound from $0.09 per pound in the
prior period directly attributable to the increase in the Company's selling
price of butadiene. Costs associated with Clarkston's third party trading
activities increased, offsetting increases in revenues.
INCOME FROM OPERATIONS
Income from operations decreased by approximately 11%, or $5.8 million, to
$47.5 million for the year ended May 31, 1995 from $53.3 million for the year
ended May 31, 1994. Operating margin during this period declined to 10.0% from
15.1%. The decrease in income from operations and operating margin was
attributable to the same factors contributing to the decline in gross profit and
gross margin. Selling, general and administrative expenses were generally
unchanged from the prior period.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
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 increases
in 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
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.
53
YEAR ENDED MAY 31, 1995 COMPARED TO YEAR ENDED MAY 31, 1994
Net cash provided by operating activities was $50.3 million for the year
ended May 31, 1995 compared to $30.2 million for the year ended May 31, 1994.
This increase of $20.1 million was primarily attributable to increases in
changes in working capital and an increase in losses realized on the disposal of
assets and investment securities, partially offset by a decrease in net income.
Net cash used in investing activities was $25.9 million for the year ended May
31, 1995 compared to $5.3 million for the year ended May 31, 1994. This increase
of $20.6 million was primarily attributable to a reduction in proceeds from the
sale of investment securities and a decrease in purchases of investment
securities, partially offset by a decrease in capital expenditures. Net cash
used in financing activities was $23.3 million for the year ended May 31, 1995
compared to $17.6 million for the year ended May 31, 1994. This increase of $5.7
million was primarily due to decreased borrowings under revolving credit lines
and also to increased repayments of notes payable, partially offset by decreased
repayments under revolving credit lines and decreased dividends paid.
LIQUIDITY
The Company's liquidity needs will arise primarily from debt service on the
indebtedness incurred in connection with the Acquisition. After the consummation
of the Transactions, the Company had outstanding approximately $315.0 million of
indebtedness, primarily consisting of $175.0 million principal amount of the
Notes and $140.0 million in Term Loans. See "Risk Factors -- Substantial
Leverage."
DEBT SERVICE
Principal and interest payments under the Bank Credit Agreement and
interest payments on the Notes will represent significant liquidity requirements
for the Company. With respect to the $140.0 million borrowed under the Term
Loans, the Company will be required to make scheduled principal payments of
approximately $13.0 million in fiscal 1997. The Term Loans bear interest at
floating rates based upon the interest rate option elected by the Company. See
"Description of the Bank Credit Agreement." As a result of the indebtedness
incurred in connection with the Acquisition, the Company's interest expense will
be higher and will have a greater proportionate impact on net income in
comparison to pre-Transactions periods.
CASH BONUS PLAN
In connection with the Acquisition, TPC established a $35.0 million Cash
Bonus Plan for certain employees of the Company as of Closing and certain
employees of its independent contractors as of Closing. Within 45 days after
Closing, 10% of this amount was paid to eligible participants and the remaining
payments will be made in sixteen quarterly installments. The Company will be
expected to make scheduled payments of approximately $10.4 million in fiscal
1997, $8.9 million in fiscal 1998, $8.6 million in fiscal 1999, $8.2 million in
fiscal 2000 and $2.0 million in fiscal 2001. See "Management -- Cash Bonus
Plan."
FUTURE FINANCING AND CASH FLOWS
The Company believes that cash flow from operations and the availability of
borrowings under the Revolving Credit Facility will provide adequate funds for
ongoing operations, planned capital expenditures and debt service during the
term of such Revolving Credit Facility. The Company believes that it will be
able to refinance the Bank Credit Agreement prior to its termination, although
there can be no assurance that it will be able to do so. The Company's ability
to borrow is limited by the terms of the Bank Credit Agreement and the
Indenture. See "Risk Factors -- Restrictive Financing Covenants," "Description
of the Bank Credit Agreement" and "Description of the Notes."
CAPITAL EXPENDITURES
The Company's historical capital expenditures since 1993 have in
substantial part resulted from implementing its strategic plan of improving
operating efficiency, and complying with environmental and safety standards. The
Company's capital expenditures were $12.5 million, $8.7 million and $12.2
million
54
for the years ended May 31, 1994 and 1995 and the twelve-month period ended May
31, 1996, respectively, of which $1.0 million, $2.2 million and $2.1 million,
respectively, related to environmental compliance. Capital expenditures are
expected to be $12.5 million for the fiscal year ended June 30, 1997. See
"Business -- Environmental Regulation."
Capital expenditures for fiscal 1997 will relate principally to improving
operating efficiencies and environmental expenditures.
The Company expenses approximately $20 million annually for plant
maintenance and expects to incur cash expenditures of a similar amount in fiscal
1997 for such purposes. These maintenance costs are not treated as capital
expenditures.
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 Texas Natural Resource Conservation Commission ("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.
The Company routinely incurs expenses associated with managing hazardous
substances and pollution in its ongoing operations. The amounts of these
operating expenses were approximately $3.1 million, $3.1 million and $2.8
million for the years ended May 31, 1994 and 1995 and the twelve-month period
ended May 31, 1996, respectively.
Capital expenditures for fiscal 1997 are expected to relate principally to
improving operating efficiencies and environmental expenditures (including the
installation of an environmentally superior waste-heat boiler in one of the
Company's dehydrogenation units).
OTHER
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
- -- "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (the "Standard"). The Standard requires, among other things,
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. During the twelve months ended May 31, 1996 the Company adopted the
Standard and as a result recorded a provision of $12,592,112, with an associated
tax benefit of $4,660,000, to write down certain properties to estimated fair
market value.
RECENTLY ISSUED PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123, which is effective for fiscal years beginning after
December 31, 1995, encourages but does not require companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on new fair value accounting rules. The Company
has not yet determined if it will adopt this new fair value-based method of
accounting for its stock-based incentive plans or elect the disclosure
provisions of SFAS No. 123.
55
BUSINESS
GENERAL
The Company is the largest producer of butadiene and butene-1, and the
second 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 twelve months ended May 31, 1996, butadiene
represented 25% of the Company's total revenues, MTBE represented 41%,
n-butylenes 11%, specialty isobutylenes 16% and other revenues the remaining 7%.
On a pro forma basis after giving effect to the Transactions, the Company's
revenues for the twelve months ended May 31, 1996 and the one month ended June
30, 1996 would have been $454.2 million and $41.2 million, respectively, and
EBITDA (as defined) for the twelve months ended May 31, 1996 and the one month
ended June 30, 1996 would have been $74.2 million and $4.3 million,
respectively.
The Company seeks to reduce its exposure to the cyclical nature of the
petrochemical industry through long-term, fixed profit contracts and to increase
its profitability by maximizing its production flexibility and increasing sales
of high margin n-butylenes and specialty isobutylenes. For the twelve months
ended May 31, 1996 and the one month ended June 30, 1996, approximately 43% and
45% of the Company's total revenues were derived from products sold on a fixed
profit basis or whose selling prices were linked, directly or indirectly, to raw
material costs. The Company believes that the combination of its fixed profit
contracts, competitive cost position and specialty product sales provides
stability to its cash flows and helps to offset the effects of cyclical
downturns.
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, which, in aggregate, accounted for 92% and 88% of its butadiene sales
in the twelve months ended May 31, 1996, and the one month ended June 30, 1996,
respectively.
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. For the twelve months ended May 31, 1996 and the one month
ended June 30, 1996, fixed profit supply contracts for crude butadiene accounted
for approximately 92% and 72%, respectively, of the Company's butadiene sales
volume.
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 25% 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
56
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. In the twelve months ended
May 31, 1996 and the one month ended June 30, 1996, sales of n-butylenes and
specialty isobutylenes represented 27% and 21%, respectively, of the Company's
revenues as compared to 19% in fiscal 1993.
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 the twelve months ended May 31, 1996 and the one month ended June 30,
1996, approximately 18% and 11%, respectively, of the Company's isobutylene was
used in the production of specialty isobutylenes with the remainder being used
for MTBE production. 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-Tex Chemical 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. In the
twelve months ended
57
May 31, 1996 and the one month ended June 30, 1996, approximately 43% and 45%,
respectively, of the Company's total revenues were derived from products sold on
a fixed profit basis or whose selling prices were linked, directly or
indirectly, to raw material costs. In addition, the Company intends to increase
its sales of less cyclical n-butylene and specialty isobutylene products. In the
twelve months ended May 31, 1996 and the one month ended June 30, 1996, sales of
n-butylenes and specialty isobutylenes represented 27% and 21%, respectively, of
the Company's revenues as compared to 19% in fiscal 1993.
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 MTBE 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 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 since U.S.
producers have limited alternative uses for their crude butadiene
by-product streams.
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 (I.E. use in butylene oxide, a gasoline
additive) 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.
58
The following table summarizes the Company's products.
<TABLE>
<CAPTION>
REVENUES REVENUES
FOR TWELVE FOR ONE
MONTHS ENDED MONTH ENDED INTERMEDIATE
COMPANY PRODUCT MAY 31, 1996 JUNE 30, 1996 CHEMICAL PRODUCTS PRINCIPAL APPLICATIONS
- ------------------------------------ -------------- ---------------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
BUTADIENE $ 112.6 10.2 Styrene-Butadiene Rubber Tires, gaskets, pipes and hoses
Styrene-Butadiene Latex Paints, adhesives and paper coatings
Acrylonitrile Butadiene High-performance plastics
Styrene
Polybutadiene Rubber Tires
Hexamethylenediamine Nylon
MTBE $ 187.4 21.0 Reduces automotive emissions and
improves engine performance
N-BUTYLENES $ 48.2 3.2
Butene-1 High Density and Linear Trash bags, film wrap, pipe and
Low Density Polyethylene plastic containers
Butylene Oxide Detergent packages used in new
gasoline formulations to improve
engine performance
Butene-2 SEC-Butyl and other Used in the production of coatings,
Alcohols adhesives and plasticizers
SPECIALTY
ISOBUTYLENES $ 74.5 5.5
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>
59
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.
1995 NORTH AMERICAN BUTADIENE DEMAND
[Pie chart depicting data below]
SB Latex 11.8%
ABS 4.5%
Nylon Intermediates 12.2%
Polychloroprene 3.4%
Nitrile Rubber 2.9%
Polybutadiene 25.1%
SBR 30.5%
Other 9.6%
TOTAL DEMAND = 4.78 BILLION POUNDS
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.
60
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.
U.S. BUTADIENE PRICES(1) AND OPERATING RATES, 1985-1995
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Butadiene
Contract Price, Operating
U.S. Gulf Coast Rate
--------------- ----------
1985 29.4 62.7%
1986 15.8 68.2%
1987 23.3 79.2%
1988 22.3 86.2%
1989 20.5 84.9%
1990 26.7 82.1%
1991 15.5 73.6%
1992 16.6 80.2%
1993 16.7 78.9%
1994 18.4 84.2%
1995 24.0 89.4%
- ------------
(1) Refers to butadiene spot market prices. Butadiene is typically sold at a
discount to such prices.
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.
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
61
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. As
indicated by the following table, 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.
U.S. MTBE PRICES AND OPERATING RATES RELATIVE TO UNLEADED GASOLINE PRICES,
1985-1995
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
MTBE
Unleaded Global
MTBE Spot Regular Operating
Price, USGC Gasoline Rate
----------- -------- ---------
1985 101 80.0 77.0%
1986 65 43.7 82.0%
1987 69 51.3 78.0%
1988 82 49.5 79.0%
1989 86 58.1 78.0%
1990 113 73.6 75.0%
1991 92 66.1 73.0%
1992 89 59.0 75.0%
1993 71 51.5 72.0%
1994 81 50.0 67.0%
1995 83 55.1 71.0%
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
62
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.
Butene-1 is also used to produce butylene oxide, a key component of
detergent additive packages used in many gasoline formulations. The Company
believes that this use represents one of the fastest growing end-uses for
butene-1.
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.
able source of supply for its customers.
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 twelve months ended May 31, 1996 and the one month ended June
30, 1996, the Company sold and toll-processed 623 million pounds and 65 million
pounds, respectively, of butadiene.
63
[CHART DESCRIBING BUTADIENE PRODUCTION PROCESS, CARRYING N-BUTYLENES AND
N-BUTANE THROUGH THE OXODEHYDROGENATION PROCESS AND THROUGH THE DEHYDROGENATION
PROCESS, RESPECTIVELY, TO PRODUCE CRUDE BUTADIENE WHICH IS THEN CARRIED THROUGH
THE EXTRACTION PROCESS TO PRODUCE 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.
64
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 14,335 barrels per day and 21,115
barrels per day, respectively, in the twelve months ended May 31, 1996 and the
one month ended June 30, 1996.
[CHART DESCRIBING MTBE PRODUCTION PROCESS, SHOWING RAFFINATE-1, ISOBUTANE AND
N-BUTYLENES RUNNING THROUGH THE EXTRACTION, DEHYDROGENATION AND SKIP PROCESS,
RESPECTIVELY, LEADING TO ISOBUTYLENE LEADING TO MTBE, WHILE METHANOL LEADS
SEPARATELY TO 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.
65
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
twelve months ended May 31, 1996 and the one month ended June 30, 1996, the
Company sold 229 million pounds and 17 million pounds, respectively, of
butene-1, and in the twelve months ended May 31, 1996 and the one month ended
June 30, 1996, the Company sold 55 million pounds and .2 million pounds,
respectively, of butene-2.
[CHART DESCRIBING N-BUTYLENE PRODUCTION PROCESS, SHOWING RAFFINATE-1 LEADING TO
THE PRODUCTION OF RAFFINATE-2, FOLLOWED BY FRACTIONATION PROCESSES PRODUCING
BUTANES, BUTENE-2 AND BUTENE-1 AS WELL AS N-BUTYLENES RUNNING THROUGH THE SKIP
PROCESS DIRECTLY TO PRODUCE BUTENE-1. SEPARATELY N-BUTYLENES EMPLOY THE SKIP
PROCESS TO PRODUCE ISOBUTYLENE.]
- ------------
(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.
66
SPECIALTY ISOBUTYLENE PRODUCTION PROCESSES
[CHART DESCRIBING SPECIAL ISOBUTYLENE PRODUCTION PROCESSES, SHOWING METHANOL
BEING PROCESSED INTO MTBE WHICH IS BACK-CRACKED TO PRODUCE HIGH-PURITY
ISOBUTYLENE. SEPARATELY, ISOBUTYLENE IS FRACTIONATIONED AND DIMERIZATIONED TO
PRODUCE ISOBUTYLENE CONCENTRATE AND DIISOBUTYLENE, RESPECTIVELY.]
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 May 31, 1996, it sold 74 million pounds.
The Company uses its patented dimerization process to produce diisobutylene
and has an annual production capacity of 50 million pounds. In the twelve months
ended May 31, 1996 and the one month ended June 30, 1996, the Company sold 38
million pounds and 3.0 million pounds, respectively, of diisobutylene
principally on a contractual basis.
67
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 a
single supplier 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 expand such role significantly in the future.
Any of these developments would have a negative impact on the Company's
financial position, results of operations and cash flows.
68
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 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, thereby enabling the Company to
produce additional products on an economically opportunistic basis, and 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 twelve months ended May 31, 1996 and the one
month ended June 30, 1996, The Goodyear Tire & Rubber Company accounted for
approximately 16.1% and 14.1%, respectively, 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.
69
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.
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 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. 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
70
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 will be able to achieve substantial
compliance with the HON Rule after incorporating additional monitoring and
record-keeping systems into its operations at a cost that management believes
will not be material.
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 carbon monoxide in Harris County. Under the SIP,
new controls must be in operation by November 15, 1996. To comply with these new
requirements, the Company is installing controls at an estimated total capital
cost of $7.2 million. The Company spent $ million on this project by June 30,
1996, and estimates that it will spend the remaining $3.6 million by November
1996. 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.
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, which were signed by the EPA Administrator on May 24, 1996, will
require the Company to conduct a hazards assessment and develop a risk
management plan by May 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 costs of this program are included in the Company's
operating budget at approximately $500,000 per year for the next five years.
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. The Company has budgeted to expend approximately $750,000 by 1998 to
upgrade the sludge-handling equipment of the wastewater treatment system. Under
the joint wastewater treatment agreement, Bayer will pay the remaining cost of
the upgrade, which is expected to be approximately $250,000. The Company has
budgeted approximately $120,000 for fiscal 1997 for maintenance work on the
wastewater treatment facility.
71
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.
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.
Some recent studies have suggested that MTBE may cause cancer or other adverse
health effects, and the EPA considers MTBE to be a possible human carcinogen.
However, in February 1996, 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. Nevertheless, EPA, California and
other states reportedly are expected to adopt limits for MTBE levels in drinking
water possibly as early as late 1996. The EPA has also determined that butadiene
is a probable human carcinogen. Based on an agreement between industry and labor
organizations, the Occupational Safety and Health Administration proposed on
March 8, 1996 to lower 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 proposed 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
has budgeted $600,000 for fiscal 1997 to control butadiene emissions in its
laboratory. 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, 1996, the Company had approximately 350 full-time employees,
all of whom were salaried employees. In addition, the Company contracts with a
third party to provide approximately 155 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 six 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
72
terminal facility in Lake Charles, Louisiana and leases tank storage capacity in
Bayonne, New Jersey. In addition, the Company owns its headquarters building and
an adjacent building on the Katy Freeway in Houston, Texas. The Company believes
that is has adequate facilities for the conduct of its current and planned
operations.
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
financial position or results of operation.
73
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....................... 83 Director 13
James J. Collis...................... 33 Director --
William R. Huff...................... 46 Director --
William A. McMinn.................... 65 Director and Chairman 9
Susan O. Rheney...................... 36 Director --
John T. Shelton...................... 65 Director 13
B. W. Waycaster...................... 57 Director, President and Chief 4
Executive Officer
Claude E. Manning.................... 50 Chief Financial Officer 24
Ronald W. Woliver.................... 56 Vice President, Marketing 28
Stephen R. Wright.................... 48 Vice President and General Counsel --
Bill R. McNeese...................... 61 Vice President, Operations 9
</TABLE>
Mr. Cain is President of Beta Consulting, Inc. ("Beta Consulting"), a
consulting and investment company. From August 1982 until his retirement in
December 31, 1992, he was Chairman of the Board of Sterling. Mr. Cain is
currently the Chairman of the Board of Sterling Chemicals, Inc. and has been on
the Board of Directors of Arcadian Corporation since May 1989 and Atlantic Coast
Airlines, Inc. since November 1991. Mr. Cain also serves as a director of
Agennix, Incorporated, a biotechnology company, and Martinaire, Inc., an air
freight company. Prior to organizing 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. Collis has been a Vice President of Chase Capital Partners since April
1996. From May 1995 to April 1996, he was a Vice President, and prior to that he
was an associate, in the Merchant Banking Group of the Chase Manhattan Bank,
N.A.
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. 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 is also a director
of Arcadian Corporation, a fertilizer manufacturer.
Mr. McMinn 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. He has been a director of PM Holdings Corporation and its principal
operating subsidiary, Purina Mills, Inc., a leading manufacturer of animal
nutrition products, since October 1993.
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.
74
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, 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.
THE BOARD AND CERTAIN BOARD COMMITTEES
Prior to the consummation of the Transactions, the Board of Directors held
five regularly scheduled meetings during the fiscal year ended June 30, 1996.
Each director attended all such meetings.
Following the consummation of the Acquisition, the Company's Board
established the following committees:
o The Executive Committee, which will possess all the powers and
authority of the Company's Board with respect to the management and
direction of the business and affairs of the Company, except as
limited by law. The Executive Committee is composed of Messrs. McMinn
(Chair), Shelton and Waycaster.
o The Audit Committee, which will recommend independent public
accountants to the Company's Board, review the annual audit reports of
the Company and review the fees paid to the Company's independent
public accountants. The Audit Committee will report its findings and
recommendations to the Board for ratification. The Audit Committee is
composed of Mr. Collis (Chair) and Ms. Rheney.
o The Compensation Committee, which will be charged with the
responsibility for supervising the Company's executive compensation
policies, administering the employee incentive plans, reviewing
officers' salaries, approving significant changes in executive
employee benefits and recommending to the Board such other forms of
remuneration as it deems appropriate. The Compensation Committee is
composed of Messrs. Cain (Chair), McMinn and Shelton.
o The Finance Committee which will research, evaluate and recommend
corporate growth opportunities and review and make recommendations
regarding debt and equity financing. The Finance Committee is composed
of Ms. Rheney (Chair) and Messrs. Huff, Cain and Waycaster.
75
COMPENSATION OF DIRECTORS
Directors of Holdings and the Company who are not employees of the Company
will 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 will not receive Director compensation. No compensation
will be paid to any directors of TPC Holding for attendance at TPC Holding's
board meetings.
EXECUTIVE COMPENSATION
The following table sets forth the total value of compensation received by
the Chief Executive Officer and the five most highly compensated executive
officers, other than the Chief Executive Officer, who served as executive
officers of the Company as of May 31, 1996 (the "Named Executive Officers") for
services rendered in all capacities to the Company for the twelve months ended
May 31, 1996 and the years ended May 31, 1995 and 1994.
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS(2)
- ------------------------------------- -------- ---------- ------------
David C. Swalm, Chief Corporate
Officer and Chairman............... 1996 $ 480,000 $ 5,210,440
1995 480,000 5,652,400
1994 480,000 6,355,700
B. W. Waycaster, President and Chief
Executive Officer.................. 1996 $ 300,000 $ 2,899,100
1995 300,000 565,300
1994 300,000 636,500
John T. Shelton, Executive Vice
President.......................... 1996 $ 180,000 $ 1,012,300
1995 180,000 1,084,900
1994 180,000 1,216,700
Ronald W. Woliver, Vice President,
Marketing.......................... 1996 $ 180,000 $ 1,012,300
1995 180,000 1,084,900
1994 180,000 1,216,700
Claude E. Manning, Chief Financial
Officer............................ 1996 $ 132,000 $ 72,966
1995 121,000 100,811
1994 116,000 103,683
Bill R. McNeese, Vice President,
Operations......................... 1996 $ 132,000 $ 72,293
1995 121,000 100,133
1994 116,000 103,346
- ------------
(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 except Mr. Swalm, who received approximately $54,000 in
1995.
(2) Includes 401(k) contributions in 1996, 1995 and 1994 of $21,035, $24,618 and
$20,309, respectively, for Mr. Manning and $21,149, $24,440 and $19,972,
respectively, for Mr. McNeese.
EMPLOYMENT AND OTHER AGREEMENTS
In 1992, Mr. Waycaster entered into an employment agreement with TOC and
TPC which provides for an annual base salary of $300,000 and a minimum annual
cash bonus of $300,000. The agreement expires on April 1, 1997. In the event of
Mr. Waycaster's retirement, death or disability, salary payments will continue
for the term of the agreement. In the event of the involuntary termination of
his employment, Mr. Waycaster would receive amounts prescribed in the 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.
76
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
Transactions.
In 1994, TPC entered into agreements with each of Messrs. Swalm, Shelton
and Woliver which provide 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 $25,000 per
month with respect to Mr. Swalm, $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 Transactions, 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 purchase 100,000 shares of Common Stock at the Closing.
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
the Closing Date 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
77
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.
The Company 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).
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
Transactions effect a Change of Control and distributions from the Cash Bonus
Plan have commenced.
STOCK OPTION PLAN
Holdings established a stock option plan (the "Option Plan") immediately
prior to the consummation of the Transactions. The Option Plan will be
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
78
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 is in the process of establishing 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 each fiscal quarter. 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 earnings
before interest, taxes, depreciation, amortization and profit sharing
("EBITDAPS") exceed certain prescribed levels, the officers participating in the
Officers' Plan will receive distributions in cash from the Company equal to a
certain percentage of EBITDAPS as determined by the Committee on the basis of
the officer's level of authority. Under the other Nonqualified Profit Sharing
Incentive Plan which is for all employees not participating in the Officers'
Plan, if EBITDAPS exceeds certain prescribed levels, a percentage of EBITDAPS
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; and fourth, to distribute any
remaining excess in cash to employees based on the number of base hours they
worked for the Company in the fiscal quarter and 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.
79
COMMON STOCK PLACEMENT
In connection with the Acquisition, Holdings offered an aggregate of
437,782 shares of Common Stock to the ESOP, certain directors and officers of
Holdings and the Company, certain employees of the Company and the Investor
Group, including Sterling. See "Related Transactions" and "Beneficial Ownership
of Holdings' Common Stock." The Common Stock was sold pursuant to separate
subscription agreements between Holdings and the various purchasers. The Common
Stock Placement formed an integral part of the Acquisition and, in addition to
providing funds to be used to finance a portion of the Acquisition, is intended
to provide equity incentives to the Company's directors, officers, managers and
employees. Prior to the Common Stock Placement, there had been no public market
for the Common Stock, and no public market is likely to develop. The offering
price for the Common Stock was determined by Holdings based on considerations
relating to the financing of the Acquisition. See "The Transactions."
Purchasers of the Common Stock in the Common Stock Placement entered into
stockholders' agreements pursuant to which they have certain rights to
participate in private sales of Common Stock by other purchasers in the Common
Stock Placement and are subject to certain restrictions on transfer, including
certain rights of first refusal. Holdings and certain purchasers in the Common
Stock Placement entered into a registration rights agreement pursuant to which
such purchasers have certain demand and piggy-back registration rights with
respect to their Common Stock.
RELATED TRANSACTIONS
TPC historically engaged in certain raw material purchase transactions with
Clarkston, which prior to the consummation of the Transactions was owned by
several of the same individuals (including Mr. Swalm) who were stockholders of
TOC and/or TPC. In the twelve months ended May 31, 1996, the Company made
purchases of raw materials from Clarkston of approximately $113.4 million. As
part of the Transactions, the Company assumed from Clarkston a contract between
Clarkston and a certain supplier for the purchase of isobutane. In connection
with the Transactions, Clarkston was dissolved.
As indicated under "The Transactions," the 80% of the outstanding capital
stock owned by TOC of The Texas Falls Corporation was sold to Mr. Swalm. Messrs.
Swalm, Shelton, Woliver and Waycaster 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, 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. At
the Closing, the Company 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 the Company 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, the Company 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, the Company 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 the Company.
See "Management." Mr. Cain and Ms. Rheney purchased 76,150 and 5,000 shares of
Common Stock, respectively, in connection with the Transactions at a price of
$100 per share, the same price at which all shares were sold in the Common Stock
Placement referred to above.
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.
See "-- Employment and Other Agreements" for a description of Mr.
Waycaster's employment agreement.
80
BENEFICIAL OWNERSHIP OF HOLDINGS' COMMON STOCK
The following table sets forth as of August 1, 1996, 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....................... 76,150 14.4%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
James J. Collis(1)................... -- --
380 Madison Avenue
New York, New York 10017
William R. Huff(2)................... -- --
67 Park Place
Morristown, New Jersey 07960
Claude E. Manning.................... 4,000 0.8%
8707 Katy Freeway, Suite 300
Houston, Texas 77024
William A. McMinn.................... 10,000 1.9%
Eight Greenway Plaza, Suite 702
Houston, Texas 77046
Bill R. McNeese...................... 2,000 0.4%
8707 Katy Freeway, Suite 300
Houston, Texas 77024
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%
8707 Katy Freeway, Suite 300
Houston, Texas 77024
Ronald W. Woliver.................... 10,000 1.9%
8707 Katy Freeway, Suite 300
Houston, Texas 77024
All directors and Named Executive
Officers as a group (10 persons)... 157,150 29.8%
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................................ 60,000 11.4%
380 Madison Avenue
New York, New York 10017
The Huff Alternative Income Fund,
L.P................................ 57,778 10.9%
67 Park Place
Morristown, New Jersey 07960
- ------------
(1) Excludes 60,000 shares of Common Stock owned of record and beneficially by
Chase Venture Capital Associates L.P. ("CVCA"). Mr. Collis is Vice
President of Chase Capital Partners, the general partner of CVCA. Mr. Collis
disclaims beneficial ownership of shares of Common Stock owned by CVCA.
(2) Excludes indirect beneficial ownership of 57,778 shares of Common Stock held
by The Huff Alternative Income Fund, L.P. (the "Fund") and reflected
elsewhere in the table. Mr. Huff is President and sole director of the
general manager of WRH Partners, L.L.C., the general partner of the Fund.
(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 Board of Directors
or by a committee to be designated by the Board of Directors, 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.
As explained under "The Transactions," subject to distribution of TPC
shares from the Subsequent Escrow, all the capital stock of the Company is owned
by TPC Holding.
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DESCRIPTION OF THE BANK CREDIT AGREEMENT
GENERAL
Finance Co. and TPC entered into 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 the Closing Date. The following description summarizes
certain provisions which the Company currently expects will be included in the
Bank Credit Agreement. The following 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. 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.
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 the Company, 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.
At the Closing, Finance Co. borrowed the entire amount of the Senior Term Loans
and $0.5 million under the Revolving Credit Facility and lent the proceeds of
such borrowings to TPC Holding to finance a portion of the purchase price of the
Acquisition and pay a portion of the fees and expenses related to the
Transactions. At the Closing, Finance Co. also borrowed the full amount of the
ESOP Term Loan and lent such amount to the ESOP. The ESOP used those funds to
purchase Common Stock at the Closing.
AMORTIZATION; PREPAYMENTS
The Bank Credit Agreement required 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
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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.
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 the Company 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 the Company and on substantially all of the assets of the Company.
INTEREST RATES; LETTER OF CREDIT FEES
The Term Loans and the Revolving Credit Facility bear interest (i) through
December 31, 1996, at a rate per annum, at the Company's option, of either the
Alternate Base Rate plus 1% or the LIBOR Rate plus 2% and (ii) after December
31, 1996, at a rate per annum, at the Company's option, within the range of
either (A) the Alternate Base Rate to the Alternate Base Rate plus 1.5% or (B)
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 (A) prior to the Financial Statement Delivery Date for the
fiscal quarter ending December 31, 1996, 2% per annum of the undrawn face amount
of such letter of credit, and (B) during any Margin Period commencing after the
Financial Statement Delivery Date for any fiscal quarter ending after December
31, 1996, 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 (A) through the Financial Statement Delivery Date for the
fiscal quarter ending December 31, 1996, 1/2% per annum, and (B) thereafter,
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 the Closing Date 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.
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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; (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 certain
financial covenants and tests, including (i) a Fixed Charge Coverage Ratio; (ii)
a minimum Net Worth test; (iii) a ratio of (a) Total Debt to (b) EBITDA as of
the end of each fiscal quarter for the most recent four-quarter period; and (iv)
a ratio of Current Assets to Current Liabilities.
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 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 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.
84
DESCRIPTION OF THE NOTES
GENERAL
The Notes are to be issued under an Indenture, as amended, dated as of July
1, 1996 (the "Indenture"), between the Company and Fleet National Bank, as
Trustee (the "Trustee").
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of the form of which Indenture and the form of Notes is filed as
an exhibit to the Registration Statement. Upon the effectiveness of the Exchange
Offer Registration Statement, the Indenture became subject to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of certain provisions of the Indenture and the Notes (i) is a
description of such provisions after giving effect to the consummation of the
Transactions, 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 Indenture
and the Notes, including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act. As used in this
"Description of the Notes" section, the term "Company" means Texas
Petrochemicals Corporation.
Principal of, premium, if any, and interest on the Notes will be payable,
and the 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 the Company,
payment of interest may be made by check mailed to the address of the Holders as
such address appears in the Note register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. See "-- Book-Entry,
Delivery and Form." No service charge shall be made for any registration of
transfer or exchange of 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.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $175 million aggregate principal amount, and will mature on July 1,
2006. The Notes will bear interest at the rate per annum shown on the cover page
hereof from July 1, 1996, or from the most recent date to which interest has
been paid or provided for, payable semiannually to Holders of record at the
close of business on the December 15 or June 15 immediately preceding the
interest payment date on January 1 and July 1 of each year, commencing January
1, 1997. The Company will pay interest on overdue principal at 1% per annum in
excess of such rate, and it will pay interest on overdue installments of
interest at such higher rate to the extent lawful. Interest on the Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to July 1, 2001. Thereafter, the
Notes will be redeemable, at the Company's option, 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 principal amount), 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 relevant
interest payment date), if redeemed during the 12-month period commencing on
July 1 of the years set forth below:
REDEMPTION
PERIOD PRICE
------ ----------
2001................................. 105.562%
2002................................. 103.708
2003................................. 101.854
2004 and thereafter.................. 100.000
85
In addition, at any time and from time to time prior to July 1, 1999, the
Company may redeem in the aggregate up to 35% of the original principal amount
of the Notes 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 110% 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 relevant interest payment date); provided, however,
that at least $113.75 million aggregate principal amount of the Notes must
remain outstanding after each such redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes represents senior subordinated,
unsecured obligations of the Company. The payment of the principal of, premium
(if any) and interest on the Notes is subordinate in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Indebtedness
of the Company, whether outstanding on the Issue Date or thereafter incurred,
including the obligations of the Company under the Bank Credit Agreement. The
Notes are also effectively subordinated to all Secured Indebtedness of the
Company to the extent of the value of the assets securing such indebtedness.
As of June 30, 1996, after giving pro forma effect to the Transactions as
if they had occurred on such date, the Company's Senior Indebtedness would have
been approximately $140.0 million, all of which is Secured Indebtedness.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "-- Certain Covenants -- Limitation on
Indebtedness" and "-- Limitation on Indebtedness and Preferred Stock of
Subsidiaries."
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in right of payment to its Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is
not deemed to be subordinated or junior to secured indebtedness merely because
it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Designated Senior Indebtedness is not
paid when due or (ii) any other default on Designated Senior Indebtedness occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the second preceding sentence) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders
86
of such Designated Senior Indebtedness specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Trustee and
the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period. The Notes shall not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness of
the Company will be entitled to receive payment in full of such Senior
Indebtedness before the Noteholders are entitled to receive any payment, and
until the Senior Indebtedness of the Company is paid in full, any payment or
distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such Senior Indebtedness
as their interests may appear. If a distribution is made to Noteholders that,
due to the subordination provisions, should not have been made to them, such
Noteholders are required to hold it in trust for the holders of Senior
Indebtedness of the Company and pay it over to them as their interests may
appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness of the Company may recover more, ratably, than the Noteholders, and
creditors of the Company who are not holders of Senior Indebtedness may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "-- Defeasance."
BOOK-ENTRY, DELIVERY AND FORM
The Notes sold will be issued in the form of a Global Note. The Global Note
will be deposited with, or on behalf of, the Depository and registered in the
name of the Depository or its nominee. Except as set forth below, the Global
Note may be transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. Investors may hold their beneficial interests
in the Global Note directly through the Depository if they have an account with
the Depository or indirectly through organizations which have accounts with the
Depository.
Notes that were (i) originally issued to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) who are not qualified institutional buyers ("QIBs") or (ii) issued as
described below under "Certificated Notes" will be issued in definitive,
certificated form. Upon the transfer of a Note in definitive, certificated form,
such Note will, unless the Global Note has previously been exchanged for Notes
in definitive, certificated form, be exchanged for an interest in the Global
Note representing the principal amount of Notes being transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Depository was created to hold
securities of institutions that have
87
accounts with the Depository ("participants") and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers (which may include the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depository (with respect to participants' interest) and such participants
(with respect to the owners of beneficial interests in the Global Note other
than participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have the Notes
represented by the Global Note registered in their names, will not receive or be
entitled to receive physical delivery of certificated Notes in definitive form
and will not be considered to be the owners or holders of any Notes under the
Global Note. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Note desires to take
any action that the Depository, as the holder of the Global Note, is entitled to
take, the Depository would authorize the participants to take such action, and
that the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its
88
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by the Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of $1,000
and integral multiples thereof if (i) the Depository notifies the Company that
it is unwilling or unable to continue as Depository for the Global Note or if at
any time the Depository ceases to be a clearing agency registered under the
Exchange Act, (ii) the Company in its discretion at any time determines not to
have all of the Notes represented by the Global Note or (iii) a default
entitling the holders of the Notes to accelerate the maturity thereof has
occurred and is continuing. Any Note that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Note is not exchangeable, except for a
Global Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee. In addition, such certificates will bear
substantially the legend referred to under "Transfer Restrictions" (unless the
Company determines otherwise in accordance with applicable law) subject, with
respect to such Notes, to the provisions of such legend.
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 Notes at a purchase price in cash equal to 101% of the
principal amount 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 the
Company; 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 the Company 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 (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of 66 2/3% of the directors of the Company 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 then in office; or
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(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.
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 Notes at a purchase price in cash equal to 101% of the
principal amount 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 30 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 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 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 Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company, TPC Holding or Holdings would decide to do so in the future.
Subject to the limitations discussed below, the Company, 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 Indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's, TPC Holding's or
Holdings' capital structure or credit ratings. Restrictions on the ability of
the Company 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 Notes then outstanding. Except for the limitations
contained in such covenants, however, the Indenture will not contain any
covenants or provisions that may afford holders of the Notes protection in the
event of a highly leveraged transaction. The Indenture will not contain any
covenants that restrict the ability of Holdings or TPC Holding to incur
Indebtedness.
If a Change of Control offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be delivered by holders of the Notes seeking to accept
the Change of Control offer. The failure of the Company to make or consummate
the Change of Control offer or pay the purchase price when due will give the
Trustee and the holders of the Notes the rights described under "-- Events of
Default."
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The existence of a holder's right to require the Company to offer to
repurchase such holder's Notes upon a Change of Control may deter a third party
from acquiring the Company in a transaction which constitutes a Change of
Control.
The Bank Credit Agreement, under certain circumstances, prohibits the
Company from purchasing any Notes prior to June 30, 2004, and also provides that
the occurrence of certain change of control events with respect to the Company,
TPC Holding and Holdings constitutes a default thereunder. In the event a Change
of Control occurs at a time when the Company is prohibited from purchasing
Notes, the Company could seek the consent of its lenders to the purchase of
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Bank Credit Agreement. In such circumstances, the subordination provisions
in the Indenture would likely restrict payment to the Holders of Notes.
Future indebtedness of the Company 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 the Company to
repurchase the 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 the Company. Finally, the Company's ability to pay cash to the
holders of Notes following the occurrence of a Change of Control may be limited
by the Company's 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 Indenture relating to the Company's
obligation to make an offer to repurchase the 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 Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not Incur, directly or
indirectly, any Indebtedness unless, on the date of such Incurrence, the
Consolidated Coverage Ratio 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.
(b) Notwithstanding the foregoing paragraph (a), the Company 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 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 the Company and its
Restricted Subsidiaries and (B) 85% of the book value of the accounts
receivables of the Company and its Restricted Subsidiaries; (3) Indebtedness
owed to and held by 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 another Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the Company; (4) the Notes or any Indebtedness, the proceeds of
which are used to Refinance the Notes in full; (5) Indebtedness outstanding on
the Issue Date (other than Indebtedness described in clause (1), (2), (3) or (4)
of this covenant); (6) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (4) or (5) or this
clause (6)
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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 the Company pursuant to the Indenture; (8)
Indebtedness of the Company consisting of obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of assets by
the Company or any Restricted Subsidiary permitted under the Indenture; (9)
Capital Lease Obligations in an aggregate principal amount not exceeding $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)) does not exceed $10 million at
any one time outstanding.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall constitute Refinancing Indebtedness and shall be
subordinated to the Notes to at least the same extent as such Subordinated
Obligations.
(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, the
Company, 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.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not
Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness
that is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Company shall not permit any Restricted Subsidiary to Incur, directly or
indirectly, any Indebtedness or Preferred Stock except:
(a) Indebtedness or Preferred Stock issued to and held by the Company
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 the Company
or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute
the issuance of such Indebtedness or Preferred Stock by the issuer thereof;
(b) Indebtedness or Preferred Stock of a Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary was acquired
by the Company (other than Indebtedness or Preferred Stock Incurred in
connection with, 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 Subsidiary became a Subsidiary or was
acquired by the Company); provided, however, that on the date of such
acquisition and after giving effect thereto, the Company 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;"
(c) Indebtedness or Preferred Stock outstanding on the Issue Date
(other than Indebtedness described in clause (a) or (b) of this paragraph);
(d) Indebtedness of any Restricted Subsidiary consisting of
obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets by the Company or any Restricted
Subsidiary permitted under the Indenture;
(e) Preferred Stock which is not Disqualified Stock; PROVIDED,
HOWEVER, that such Restricted Subsidiary shall not pay cash dividends on
such Preferred Stock; and
92
(f) Refinancing Indebtedness Incurred in respect of Indebtedness or
Preferred Stock referred to in clause (b) or (c) of this paragraph or this
clause (f); PROVIDED, HOWEVER, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness or Preferred
Stock of a Subsidiary described in clause (b), such Refinancing
Indebtedness shall be Incurred only by such Subsidiary.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes, and
after giving effect to, the proposed Restricted Payment: (i) a Default shall
have occurred and be continuing (or would result therefrom); (ii) the Company is
not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a)
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 Notes achieve an Investment Grade
Rating during any fiscal quarter, the percentage for such fiscal quarter (and
for any other fiscal quarter where, on the first day of such fiscal quarter, the
Notes shall have an Investment Grade Rating) will be 100% of Consolidated Net
Income during 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 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 the Company 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
the Company 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 the
Company 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 the Company, such
aggregate Net Cash Proceeds shall be limited to an amount equal to any increase
in the Consolidated Net Worth of the Company resulting from principal repayments
made by such employee stock ownership plan with respect to such Indebtedness;
(D) the amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date, of any Indebtedness of the Company for
Capital Stock (other than Disqualified Stock) of the Company (less the amount of
any cash, or the fair value of any other property, distributed by the Company
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 the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value 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 the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary; and (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 the Company as capital contributions (other than from any of
its Restricted Subsidiaries) plus $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 the
Company made by exchange for, or out of the proceeds
93
of the substantially concurrent sale of, Capital Stock of the Company (other
than (A) Disqualified Stock, (B) Capital Stock issued or sold to a Subsidiary of
the Company 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 the Company);
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 made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company which is permitted to be
Incurred pursuant to the covenant described under "-- Limitation on
Indebtedness;" PROVIDED, 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 the Company to TPC Holding, Holdings or the ESOP, or
directly by the Company, 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 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 $2,000,000 in any
fiscal year; PROVIDED FURTHER, HOWEVER, that such amount shall be excluded in
the calculation of Restricted Payments; (v) a payment by the Company to
Holdings, TPC Holding or 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; (vi) a payment by
the Company to TPC Holding or Holdings pursuant to the Tax Sharing Agreement;
PROVIDED, HOWEVER, that the amount of any such payment shall not exceed the sum
of (A) the amount of taxes which the Company would have been liable for on a
stand-alone basis plus (B) the amount of any state net worth tax applicable to
Holdings and TPC Holding; PROVIDED FURTHER, HOWEVER, such amount shall be
excluded in the calculation of Restricted Payments; and (vii) a payment by the
Company to TPC Holding or Holdings to pay their operating and administrative
expenses, including, without limitation, directors' fees, legal and audit
expenses, SEC compliance expenses and corporate franchise and other taxes, in an
amount not to exceed the greater of $1,000,000 per fiscal year and 0.125% of the
consolidated net sales of the Company for the preceding fiscal year; PROVIDED,
HOWEVER, that such amount shall be excluded in the calculation of Restricted
Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES.
The Company 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 the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) to make any loans or advances to the Company or (c) to transfer any of its
property or assets to the Company, 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 the Company (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 the
Company) 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
94
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 Noteholders 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; (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) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company 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 the
shares and assets subject to such Asset Disposition, and at least 85% of the
consideration thereof received by the Company 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 the Company (or
such Restricted Subsidiary, as the case may be) (A) FIRST, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness), to
prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other
than any Disqualified Stock) of a Wholly Owned Subsidiary or such Restricted
Subsidiary (in each case other than Indebtedness owed to the Company or an
Affiliate of the Company) 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 the Company elects, to acquire Additional Assets;
PROVIDED, HOWEVER, that the Company 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 Notes (and to holders of other Senior Subordinated
Indebtedness designated by the Company) to purchase Notes (and such other Senior
Subordinated Indebtedness) 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 the Company 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 the Company
(other than Indebtedness owed to an Affiliate of the Company) or Indebtedness of
any Subsidiary (other than Indebtedness owed to the Company or an Affiliate of
the Company), 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,
the Company 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, the Company and the
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 $2.5 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments. 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
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related transactions to any Person, including, but not limited to, any
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 Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company 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
Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(ii)(C)
above, the Company will be required to purchase Notes tendered pursuant to an
offer by the Company for the Notes (and other Senior Subordinated Indebtedness)
at a purchase price of 100% of their principal amount (without premium) plus
accrued but unpaid interest (or, in respect of such other Senior Subordinated
Indebtedness, such lesser price, if any, as may be provided for by the terms of
such Senior Subordinated Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of Notes (and any other Senior
Subordinated Indebtedness) tendered pursuant to such offer is less than the Net
Available Cash allotted to the purchase thereof, the Company will be required to
apply the remaining Net Available Cash in accordance with clause (a)(ii)(D)
above. The Company shall not be required to make such an offer to purchase Notes
(and other Senior Subordinated Indebtedness) pursuant to this covenant if the
Net Available Cash available therefor is less than $10 million (which lesser
amount shall be carried forward for purposes of determining whether such an
offer is required with respect to any subsequent Asset Disposition).
(c) 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 Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company 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) The Company 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 the Company (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 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 the Company 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
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 or the
board of directors of the relevant Restricted Subsidiary, (iii) the grant of
stock options or similar rights to employees and directors pursuant to plans
approved by the Board of Directors 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 the Company and its Restricted Subsidiaries who are not
employees of the Company or its Restricted Subsidiaries, (vi) any
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Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries, (vii) the purchase of or the payment of
Indebtedness of or monies owed by the Company 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 the payment of
Indebtedness of or monies owed by the Company 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 the
Indenture and (ix) any Tax Sharing Agreement; PROVIDED, HOWEVER, that the
aggregate amount payable by the Company pursuant thereto shall not exceed the
sum of (A) the amount of taxes which the Company would have been liable for on a
stand-alone basis plus (B) the amount of any state net worth tax applicable to
Holdings and TPC Holding.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company 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 the Company 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 the Company or any such Restricted Subsidiary complies with the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock."
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, its assets substantially as an entirety to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
shall be 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
(if not the Company) shall expressly assume, by an indenture supplemental
thereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (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, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-- Certain Covenants -- Limitation on Indebtedness;" (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 the Company prior to such transaction minus any costs incurred in
connection with such transaction; and (v) the Company shall have delivered to
the Trustee an officer's certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor company, only in the case
of a conveyance, transfer or lease, shall not be released from the obligation to
pay the principal of and interest on the Notes.
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, the Company shall file with the SEC and provide within 15 days to the
Trustee and Noteholders 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;
PROVIDED, HOWEVER, that if Holdings shall have become a Guarantor with respect
to all obligations relating to the Notes (or the Exchange Notes), the reports,
information and other documents required to be filed and provided as described
hereunder may, at the Company's option, be filed by and be those of Holdings
rather than the Company; PROVIDED FURTHER, HOWEVER, that in the event Holdings
conducts, directly or indirectly, any business or holds, directly or indirectly,
any significant assets other than the capital stock of TPC Holding or the
Company at the time of filing and providing any such report, information or
other
97
document containing financial statements of Holdings, Holdings shall include in
such report, information or other document summarized financial information (as
defined in Rule 1-02(bb) of Regulation S-X promulgated by the SEC) with respect
to the Company.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any 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 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 the Company to
comply for 60 days after notice with its other agreements contained in the
Indenture, (vi) Indebtedness of the Company 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, TPC Holding, the Company or any Significant Subsidiary (the
"bankruptcy provisions") or (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 discharged, waived or stayed within 10 days after notice (the
"judgment default provision"). However, a default under clause (iv) or (v) will
not constitute an Event of Default until the Trustee or the holders of 25% in
principal amount of the outstanding Notes notify the Company of the default and
the Company 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
the Company) occurs and is continuing, the Trustee or the holders of at least
25% in principal amount of the outstanding Notes may declare the principal of
and accrued but unpaid interest on all the 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 the Company occurs and is continuing, the principal of and interest
on all the Notes will IPSO FACTO become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders
of the Notes. Under certain circumstances, the holders of a majority in
principal amount of the outstanding Notes may rescind any such acceleration with
respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the 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 Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the 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 of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any
98
trust or power conferred on the Trustee. The Trustee, however, may refuse to
follow any direction that conflicts with law or the Indenture or that the
Trustee determines is unduly prejudicial to the rights of any other holder of a
Note or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the 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 Note, the 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 Notes. In addition, the Company is
required to deliver to the 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. The Company also is required to deliver
to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the 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 of the Notes then outstanding.
Without the consent of each holder of an outstanding Note affected thereby,
no amendment may (i) reduce the amount of Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "-- Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's 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 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 Indenture that
would adversely affect the Noteholders.
Without the consent of any holder of the Notes, the Company and the Trustee
may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to add guarantees with respect
to the Notes, to secure the Notes, to add to the covenants of the Company for
the benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any holder of the Notes or to comply with any requirement of the
SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consent to such change.
The consent of the holders of the Notes is not necessary under the
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 Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
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TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company 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
The Company at its option at any time may terminate all its obligations
under the Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. In addition, the Company 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 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 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").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the 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 the Company 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, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal of and interest on the Notes
to redemption or maturity, as the case may be, and must comply with certain
other conditions, including delivery to the Trustee of an Opinion of Counsel to
the effect that holders of the 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 Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
Such bank may also act as a depository of funds for or makes loans to, and
performs other services for, the Company or its affiliates in the ordinary
course of business in the future. The corporate trust office of the Trustee is
located at 777 Main Street, Hartford, Connecticut 06115.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the 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 Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the 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 Indenture. The Trustee may resign at any
time or may be removed by the Company. If the Trustee resigns, is removed or
becomes incapable of acting
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as Trustee or if a vacancy occurs in the office of the Trustee for any cause, a
successor Trustee shall be appointed in accordance with the provisions of the
Indenture.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the 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 Indenture. The Indenture also
contains certain limitations on the right of the Trustee, as a creditor of the
Company, 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.
GOVERNING LAW
The Indenture provides that it and the 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
"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 Company 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 dispositions) by the Company
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 the Company or a Restricted Subsidiary), (ii) all
or substantially all the assets of any division or line of business of the
Company or any Restricted Subsidiary or (iii) any other assets of the Company or
any Restricted Subsidiary outside of the ordinary course of business of the
Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and
(iii) above, (x) a disposition of the Excluded Assets, (y) a disposition by a
Restricted Subsidiary to the Company or by the Company 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 Notes, 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.
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"Bank Credit Agreement" means the Bank Credit Agreement, dated as of the
date of the Indenture, among the Company, as successor to Finance Co., 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 Bank Credit Agreements and the term "Bank Credit Agreement" shall mean
all such Bank Credit Agreements.
"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 the Company or (except
for the purposes 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 the Company 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 the
Company 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 the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company 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 the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment
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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 the
Company 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
the Company 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 effect
to the pro forma adjustments set forth under "Pro Forma Combined Financial
Information" above and to a one-time employee compensation expense incurred in
connection with the Transactions. 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 the Company. 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).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company 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 the Company 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 the Company 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 the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company 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, the Company's 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 the Company 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) the Company's 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 the Company 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 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
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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 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) 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; (iv) any gain
(but not loss) realized upon the sale or other disposition of any assets of the
Company 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 the Company 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 the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company 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 the Company 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.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $15 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"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."
"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 the
Company, (b) depreciation expense, (c) amortization expense, and (d) all other
non-cash items reducing such Consolidated Net Income (excluding any non-cash
item to the extent it
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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 any registration of shares of Common Stock by
Holdings for sale to certain employees of Holdings and its Subsidiaries
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, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"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 "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"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
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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 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 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 the
Company 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 the Company 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 the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company 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, the Company shall
be deemed to continue to have a permanent "Investment" in
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an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the
Company's "Investment" in such Subsidiary at the time of such redesignation less
(y) the portion (proportionate to the Company's 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.
"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.
"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 the
Company 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. 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 the Company.
"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 Notes or (b) the Common Stock in
connection with the Employee Offering, (ii) any Person who on the date of
issuance of the Notes 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 the Company or 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).
107
"Permitted Investment" means an Investment by the Company 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, the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such
Person's primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to the Company 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 the Company 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 the Company or such Restricted Subsidiary; (vii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company 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."
"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.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of Holdings, TPC Holding or the Company 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, TPC Holding or the Company, as applicable, 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 Notes 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.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company 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
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Refinanced; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Company on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"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 the Company 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 the Company held by any Person or
of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company 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 the Company 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 the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" means (i) Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter Incurred and (ii) accrued and unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent
post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes;
PROVIDED, HOWEVER, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary, (2) any liability for Federal, state, local or
other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness of the Company (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect to any other Indebtedness
or other obligation of the Company or (5) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of the Indenture.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
109
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company 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 occurred).
"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 the Company.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes 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 the
Company, TPC Holding and Holdings or any other person with which the Company is
required to, or is permitted to, file a consolidated tax return or with which
the Company is or could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following: (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 any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (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 six 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.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (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, the
Company or any other Subsidiary of the Company that is not a Subsidiary of
110
the Subsidiary to be so designated; PROVIDED, 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 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, the Company 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 shall be by
the Company 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.
"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 the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
111
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of the principal federal
income tax matters of general application relating to the Exchange Offer and the
holding and disposing of the Original Notes and the Exchange Notes and reflects
the opinion of Bracewell & Patterson, L.L.P. ("Counsel"), counsel to the
Company, as to these matters. There can be no assurance that the Internal
Revenue Service will take a similar view as to any of the tax consequences
described below. The discussion is based on current provisions of the Internal
Revenue Code, existing Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof, all of which are subject to
change. The discussion does not purport to describe all aspects of federal
income taxation that may be relevant to a holder in light of its particular tax
status and its other income, deductions and credits and does not discuss any
state, local or foreign tax matters. Moreover, certain holders (including
insurance companies, tax-exempt organizations and foreign persons) may be
subject to special rules not discussed below. The discussion is limited to
investors who hold the Original Notes, and will hold any Exchange Notes acquired
pursuant to the Exchange Offer, as capital assets (generally, property held for
investment).
DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH HOLDER OF ORIGINAL
NOTES IS URGED TO CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF THE EXCHANGE OF ITS ORIGINAL NOTES FOR EXCHANGE NOTES, AND
THE OWNERSHIP AND DISPOSITION OF NOTES, INCLUDING THE EFFECT OF POSSIBLE CHANGES
IN THE TAX LAWS.
EXCHANGE OF ORIGINAL NOTES FOR EXCHANGE NOTES
Under Treasury Regulations, a "significant modification" of a debt
instrument is deemed to constitute a sale or exchange therefor for federal
income tax purposes, resulting (in appropriate circumstances) in gain or loss to
the holder of the modified debt instrument, cancellation of indebtedness to the
issuer of the modified debt instrument, and various changes under the original
issue discount rules.
Although there is no precedent directly on point or closely analogous,
because the economic rights of the holder of Original Notes VIS-A-VIS the
Company will not be modified as a result of an exchange of such notes for
Exchange Notes, such exchange should not be a significant modification for these
purposes and the Exchange Notes should be treated as a continuation of the
corresponding Original Notes. The Company will take this position and intends to
report the transaction in this manner for federal income tax purposes. Even if
the exchange of Exchange Notes for Original Notes is not treated as a
continuation of the Original Notes, the exchange should constitute a
recapitalization of the Company within the meaning of section 368(a)(1)(E) of
the Internal Revenue Code, which would be a tax-free transaction of the holders
of Original Notes, except to the extent the principal amount of securities
received exceeds the principal amount of securities surrendered therefor. Thus,
the holder of an Original Notes should not recognize gain or loss upon the
exchange of such security for Exchange Notes; the holder's basis in the Exchange
Notes should be the same as its basis in the Original Notes, and the holder's
holding period for the Exchange Notes for federal income tax purposes should
include any holding period for the Original Notes.
If the exchange of Exchange Notes for Original Notes were not viewed as a
continuation of the Original Notes, then notwithstanding that the Original Notes
were issued without original issue discount, if the issue price of the Exchange
Notes is less than that of the Original Notes, the Exchange Notes would be
viewed as possessing original issue discount. However, the holder would also
have amortizable bond premium (see " -- AMORTIZABLE BOND PREMIUM" below) with
respect to the Exchange Notes to the extent the holder's tax basis in the
Exchange Notes exceeds the issue price for such notes. It is likely that any
original issue discount income attributable to the Exchange Notes and any
amortizable bond premium on such notes would offset one another, leaving the
holder with substantially the same taxable interest income for each period under
the Exchange Notes as it would have had under the Original Coupon Notes.
The remaining summary of federal income tax consequences of owning and
disposing of the Exchange Notes also applied to holders of Original Notes who do
not accept the Exchange Offer.
112
THE NOTES
STATED INTEREST. A holder of a Note is required to report as ordinary
income the stated interest earned on the Note in accordance with such holder's
method of tax accounting.
AMORTIZABLE BOND PREMIUM. If a holder purchases a Note after issuance and
its tax basis in the Note as of the date of purchase exceeds the greater of the
principal amount or the amount payable on a call date prior to maturity, the
holder may be entitled to elect to treat such excess as bond premium which is
amortizable over the term of the Note in accordance with a constant yield to
maturity method that takes into account the compounding of interest. An election
to amortize bond premium applies to all debt obligations acquired by the
taxpayer in the taxable year of the election and all subsequent years, unless
revoked with the consent of the Internal Revenue Service ("IRS"). If amortizable
bond premium for a holder is determined by reference to a call price, and if the
Note is not subsequently redeemed on the call date, then, for purposes of
determining future amounts of amortizable bond premium, the Note will be
considered to be reissued on such date for an amount equal to the nonexercised
call price. The amount of amortizable bond premium with respect to a Note
generally will be treated as a reduction in the holder's interest income on the
Note. The holder's tax basis in the Note will be reduced by any bond premium it
is allowed to amortize. Purchasers of Notes should consult their tax advisors
concerning the existence of amortizable bond premium and the effect of the
associated election.
DISPOSITION. In general, upon the sale, redemption or other disposition of
a Note, the holder will recognize (i) ordinary interest income to the extent of
any interest that has accrued while the holder held the Note but has not yet
been taken into income by the holder and (ii) gain or loss equal to the
difference between the amount realized from such disposition (exclusive of any
amounts treated as ordinary interest income under clause (i)) and the holder's
tax basis in the Note. Except as provided under " -- MARKET DISCOUNT" below, the
gain or loss described in clause (ii) of the preceding sentence will be capital
gain or loss and will be long-term if the Note was held for more than one year.
MARKET DISCOUNT. If a holder purchases a Note after issuance, there will be
market discount equal to the excess, if any, of the principal amount of the Note
over the holder's tax basis in the Note at the time of acquisition, unless such
excess qualified for a de minimis exception. Under the market discount rules,
any gain recognized by a holder upon the sale or other disposition of a Note
with market discount will be taxable as ordinary interest income to the extent
of the portion of the market discount that accrued on a straight-line basis (or,
at the election of the holder, on a constant yield to maturity basis) while the
holder held the Note. Market discount income may be recognized on a gift of a
Note as if the Note had been sold for its fair market value. A holder of a Note
with market discount may be required to defer deductions for a portion of such
holder's interest expense on any indebtedness incurred or maintained to purchase
or carry the Note.
As an alternative to the foregoing, a holder of a Note with market discount
may elect under certain circumstances to accrue such market discount income
currently (in which case its tax basis in the Note will be increased by such
accrued market discount income and the deduction-deferral rule described in the
preceding paragraph will not apply to the Note). Any such election applies to
all obligations acquired by the holder in the taxable year of the election and
all subsequent years, unless revoked with the consent of the IRS.
BACKUP WITHHOLDING. Under certain circumstances, the failure of a holder of
Notes to provide sufficient information to establish that such holder is exempt
from the backup withholding provisions of the Internal Revenue Code will subject
such holder to backup withholding at a rate of 31% of interest paid with respect
to the Notes and on the proceeds of a sale or redemption of the Notes. In
general, backup withholding applies if a holder fails to furnish a correct
taxpayer identification number, fails to report dividends and interest income in
full, or fails to certify that such holder has provided a correct taxpayer
identification number and that the holder is not subject to withholding. An
individual taxpayer's identification number is such person's Social Security
number.
113
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Bracewell
& Patterson, L.L.P., Houston, Texas. Certain members of Bracewell & Patterson,
L.L.P. own less than 0.5% 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
and the financial statements of Finance Co. as of June 30, 1996 included in this
Prospectus and Registration Statement have been audited by Coopers & Lybrand
L.L.P., independent public accountants, as stated in their reports included
herein and are included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
114
INDEX TO COMBINED FINANCIAL STATEMENTS
PAGE
----
TPC Finance Corp. ........................................................
Report of Independent Accountants ................................... F-2
Balance Sheet as of June 30, 1996 ................................... F-3
Texas Olefins Company, subsidiaries and affiliate
Report of Independent Accountants ................................... F-4
Combined Balance Sheets as of June 30, 1996 and as of May 31, 1995 .. F-5
Combined Statements of Operations for the one month ended June 30,
1996 and 1995 (1995 unaudited), for the twelve months ended May 31,
1996, and for the years ended May 31, 1995 and 1994 .............. F-6
Combined Statements of Stockholders' Equity for the
one month ended June 30, 1996, for the twelve months ended May
31, 1996, and for the years ended May 31, 1995 and 1994 .......... F-7
Combined Statements of Cash Flows for the one month ended June 30,
1996 and 1995 (1995 unaudited), for the twelve months ended May 31,
1996, and for the years ended May 31, 1995 and 1994 .............. F-8
Notes to Combined Financial Statements .............................. F-9
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
TPC Finance Corp.:
We have audited the accompanying balance sheet of TPC Finance Corp.
("Finance Co.") as of June 30, 1996. This balance sheet is the responsibility of
Finance Co.'s management. Our responsibility is to express an opinion on this
balance sheet 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, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Finance Co. as of June 30, 1996 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 16, 1996
F-2
TPC FINANCE CORP.
BALANCE SHEET
JUNE 30, 1996
ASSETS
Cash................................. $ 1,000
---------
Total...................... $ 1,000
=========
STOCKHOLDER'S EQUITY
Common stock $0.01 par value; 1,000
shares authorized; 1,000 shares
issued and outstanding............. $ 10
Additional paid-in capital........... 990
---------
Total...................... $ 1,000
=========
NOTE: TPC Finance Corp. ("Finance Co.") was incorporated in Texas on May 2,
1996. On May 14, 1996, Finance Co.'s parent, TPC Holding Corp. ("TPC
Holding") entered into an agreement to purchase the outstanding capital
stock of Texas Olefins Company ("TOC") and the outstanding capital stock
(not already owned by TOC) of Texas Petrochemicals Corporation and its
subsidiaries. Effective July 1, 1996, the acquisition closed for total
consideration of approximately $377 million. In connection with the
acquisition, Finance Co. incurred indebtedness of approximately $315
million and loaned the combined net proceeds to TPC Holding. Finance Co.
was then merged with and into Texas Petrochemicals Corporation.
F-3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Texas Olefins Company:
We have audited the accompanying combined balance sheet of Texas Olefins
Company, subsidiaries and affiliate as of June 30, 1996 and May 31, 1995, 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 years ended May 31, 1995 and 1994. 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 May 31,
1995, 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 years ended May 31, 1995 and 1994, in conformity with generally accepted
accounting principles.
As further described in Note 2 to the combined financial statements,
effective July 1, 1996 the Company was acquired for approximately $377 million
in a series of transactions.
As discussed in Note 1 to the combined financial statements, effective June
1, 1993 and June 1, 1994, the Company changed its method of accounting for
income taxes and its method of accounting for investment securities,
respectively.
COOPERS & LYBRAND L.L.P.
Houston, Texas
August 16, 1996
F-4
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
COMBINED BALANCE SHEET
JUNE 30, MAY 31,
1996 1995
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents....... $ 4,780,401 $ 17,829,432
Investment securities........... 6,794,395 21,125,602
Accounts receivable:
Trade...................... 35,278,643 40,097,811
Due from broker............ -- 4,497,600
Inventories (Note 4)............ 11,933,478 17,232,101
Prepaid expenses................ 9,665,174 8,245,440
Other current assets............ 2,087,740 2,225,000
--------------- ---------------
Total current
assets............. 70,539,831 111,252,986
Property, plant and equipment, net
(Note 5)........................... 81,814,284 90,071,528
Investments in land held for sale in
1996 (Note 6)...................... 6,180,907 18,773,019
Investment in and advances to limited
partnership (Note 7)............... 2,824,251 3,216,608
Other assets, net of accumulated
amortization of $1,410,701 and
$1,178,558 at June 30, 1996 and May
31, 1995, respectively............. 6,522,776 7,422,870
--------------- ---------------
Total assets.......... $ 167,882,049 $ 230,737,011
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable -- trade....... $ 40,130,860 $ 35,957,817
Notes payable to stockholders
and former stockholder (Note
9)............................ -- 697,445
Accrued expenses (Note 10)...... 4,382,657 6,795,234
Dividends payable............... 677,000 --
--------------- ---------------
Total current
liabilities........ 45,190,517 43,450,496
--------------- ---------------
Revolving line of credit (Note 8).... 13,000,000 --
Notes payable to stockholders and
former stockholder (Note 9)........ -- 325,045
Other liabilities.................... 344,000 502,862
Deferred income taxes (Note 11)...... 15,763,393 22,125,000
Minority interest in net assets of
consolidated subsidiary............ 1,107,070 1,061,410
Commitments and contingencies (Note
12)................................
Stockholders' equity:
Class A common stock, $1 par
value, 500,000 shares
authorized, 200,000 shares
issued and outstanding........ 200,000 200,000
Class B common stock, $1 par
value, nonvoting, 10,000,000
shares authorized, 3,800,000
and 5,021,200 shares outstanding
at June 30, 1996 and May 31, 1995,
respectively.................. 3,800,000 5,021,200
Common stock (Affiliate) $1 par
value, 1,000,000 shares
authorized and issued,
1,000,000 shares outstanding
at
May 31, 1995.................. -- 1,000,000
Retained earnings............... 89,864,328 161,169,582
Unrealized loss on investment
securities, net of taxes...... (1,387,259) (3,650,584)
Treasury stock at cost, 7,200
shares at May 31, 1995........ -- (468,000)
--------------- ---------------
Total stockholders'
equity............. 92,477,069 163,272,198
--------------- ---------------
Total
liabilities
and
stockholders'
equity........ $ 167,882,049 $ 230,737,011
=============== ===============
The accompanying notes are an integral part of the financial statements.
F-5
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
ONE MONTH ONE MONTH TWELVE MONTHS
ENDED ENDED ENDED YEAR ENDED MAY 31,
JUNE 30, JUNE 30, MAY 31, --------------------------------
1996 1995 1996 1995 1994
-------------- -------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 41,383,797 $ 36,187,002 $ 455,585,097 $ 474,676,801 $ 352,447,026
Cost of goods sold................... 35,991,859 29,407,893 379,467,795 396,360,220 268,813,284
Depreciation and amortization........ 1,277,144 1,210,082 14,981,820 14,298,015 13,571,905
-------------- -------------- --------------- --------------- ---------------
Gross profit.................... 4,114,794 5,569,027 61,135,482 64,018,566 70,061,837
Selling, general and administrative
expenses........................... 1,682,536 2,245,682 19,070,256 16,571,150 16,729,941
-------------- -------------- --------------- --------------- ---------------
Income from operations..... 2,432,258 3,323,345 42,065,226 47,447,416 53,331,896
-------------- -------------- --------------- --------------- ---------------
Interest income (expense), net....... (75,769) 149,314 (1,630,078) 720,118 (237,838)
Other income (expense):
Dividend income................. -- 28,961 252,211 361,625 487,402
Charitable contributions........ (51,520) -- (655,536) (656,509) (5,115,991)
Gain (loss) on disposal of
assets and investment
securities, net............... (279,686) 297,577 (3,098,725) 1,112,092 3,385,362
Impairment of investment in
land.......................... -- -- (12,592,112) -- --
Other, net...................... (37,130) (261,209) 167,145 283,475 452,592
-------------- -------------- --------------- --------------- ---------------
(368,336) 65,329 (15,927,017) 1,100,683 (790,635)
-------------- -------------- --------------- --------------- ---------------
Income before income taxes
and minority interest... 1,988,153 3,537,988 24,508,131 49,268,217 52,303,423
Provision for income taxes (Note
10)................................ 761,000 1,263,543 7,902,549 16,880,010 18,396,363
Minority interest in net loss of
consolidated subsidiary............ 8,774 7,325 143,037 128,630 5,051
-------------- -------------- --------------- --------------- ---------------
Net income................. $ 1,235,927 $ 2,281,770 $ 16,748,619 $ 32,516,837 $ 33,912,111
============== ============== =============== =============== ===============
Net income per common share.......... $0.31 $0.44 $3.69 $6.23 $6.48
============== ============== =============== =============== ===============
Pro Forma net income to reflect
income taxes for Affiliate (Note
11)................................ $ 1,235,927 $ 2,177,910 $ 15,097,813 $ 30,447,872 $ 32,755,480
============== ============== =============== =============== ===============
Pro Forma net income per common share
to reflect income taxes for
Affiliate.......................... $0.31 $0.42 $3.33 $5.83 $6.26
============== ============== =============== =============== ===============
Weighted average number of shares
outstanding........................ 4,000,000 5,221,200 4,534,716 5,221,200 5,231,438
============== ============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
CLASS A CLASS B AFFILIATE LOSS ON
COMMON COMMON COMMON RETAINED INVESTMENT TREASURY
STOCK STOCK STOCK EARNINGS SECURITIES STOCK TOTAL
-------- --------- --------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1993................ $200,000 $5,042,800 $1,000,000 $123,780,734 $(1,872,000) $128,151,534
Net income........................... 33,912,111 33,912,111
Dividends............................ (21,404,500) (21,404,500)
Purchase of 60,000 shares of treasury
stock.............................. (250,743) (250,743)
Cancellation of 14,400 shares of
Class B common stock............... (14,400) (921,600) 936,000
-------- --------- --------- ----------- ---------- ---------- -----------
Balance, May 31, 1994................ 200,000 5,028,400 1,000,000 135,366,745 (1,186,743) 140,408,402
Net income........................... 32,516,837 32,516,837
Dividends............................ (6,253,200) (6,253,200)
Sale of 60,000 shares of treasury
stock.............................. 250,743 250,743
Cancellation of 7,200 shares of Class
B common stock..................... (7,200) (460,800) 468,000
Unrealized loss on investment
securities, net of taxes........... $(3,650,584) (3,650,584)
-------- --------- --------- ----------- ---------- ---------- -----------
Balance, May 31, 1995................ 200,000 5,021,200 1,000,000 161,169,582 (3,650,584) (468,000) 163,272,198
Net income........................... 16,748,619 16,748,619
Redemption of 25,000 shares of Class
A common stock and 1,565,670 shares
of Class B common stock............ (95,440,200)
(95,440,200)
Sale of 376,670 shares of treasury
stock.............................. 22,600,200 22,600,200
Dividends............................ (16,526,000) (16,526,000)
Change in unrealized loss on
investment securities, net of
taxes.............................. 3,007,034 3,007,034
Cancellation of 1,214,000 shares of
Class B Common Stock............... (1,214,000) (71,626,000) 72,840,000
Cancellation of 7,200 shares of Class
B common stock..................... (7,200) (460,800) 468,000
Redemption and cancellation of
1,000,000 shares of Affiliate
common stock....................... (1,000,000) (1,000,000)
-------- --------- --------- ----------- ---------- ---------- -----------
Balance, May 31, 1996................ 200,000 3,800,000 -- 89,305,401 (643,550) -- 92,661,851
Net income........................... 1,235,927 1,235,927
Net change in unrealized loss on
investment securities, net of
taxes.............................. (743,709) (743,709)
Liquidating dividend to affiliate
shareholders....................... (677,000) (677,000)
-------- --------- --------- ----------- ---------- ---------- -----------
Balance June 30, 1996................ $200,000 $3,800,000 $ -- $89,864,328 $(1,387,259) $ -- $92,477,069
======== ========= ========= =========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
ONE MONTH ONE MONTH TWELVE MONTHS
ENDED ENDED ENDED YEAR ENDED MAY 31,
JUNE 30, JUNE 30, MAY 31, ----------------------------
1996 1995 1996 1995 1994
------------- ------------ ------------- ------------- -------------
(UNAUDITED)
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net income....................... $ 1,235,927 $ 2,281,770 $ 16,748,619 $ 32,516,837 $ 33,912,111
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization................ 1,277,144 1,210,082 14,981,820 14,298,015 13,571,905
(Gain) loss on disposal of
assets and investment
securities, net............. 279,686 (297,577) 3,098,725 (1,112,092) (3,385,362)
Impairment of investment in
land........................ -- -- 12,592,112 -- --
Earnings from limited
partnership................. 190,000 (35,000) 202,357 (260,000) (576,687)
Minority interest in net loss
of consolidated
subsidiary.................. (8,774) (7,325) (143,037) (128,630) (5,051)
Deferred income taxes.......... (237,000) (142,476) (5,829,000) 818,000 272,000
Change in:
Accounts receivable......... 7,723,615 8,188,953 1,593,153 (18,099,625) 5,630,239
Inventories................. 3,068,781 (6,119,679) 2,229,842 12,954,019 (20,902,013)
Other current assets........ 726,761 230,814 (3,586,208) (822,816) (3,669,581)
Other assets................ 697,341 (367,933) (29,390) (30,825) 2,927,143
Accounts payable............ (107,025) (6,198,691) 4,280,068 9,786,553 1,027,441
Other liabilities........... (152,713) 41,138 (6,149) 153,562 5,296
Accrued expenses............ (779,778) 3,082,400 (1,632,799) 227,082 1,434,238
------------- ------------ ------------- ------------- -------------
Net cash provided by
operating activities.... 13,913,965 1,866,476 44,500,113 50,300,080 30,241,679
------------- ------------ ------------- ------------- -------------
Cash flows from investing activities:
Capital expenditures............. (1,997,002) (470,780) (5,462,265) (8,679,630) (12,549,782)
Purchase of investment securities
available for sale............. -- -- (19,138,418) (33,998,414) (35,017,639)
Proceeds from sale of investment
securities available for
sale........................... 701,872 6,394,764 32,821,193 16,777,979 42,240,795
------------- ------------ ------------- ------------- -------------
Net cash provided by (used
in) investing
activities................ (1,295,130) 5,923,984 8,220,510 (25,900,065) (5,326,626)
------------- ------------ ------------- ------------- -------------
Cash flows from financing activities:
Bank overdraft................... (12,382,192) -- 12,382,192 -- --
Proceeds from revolving line of
credit......................... 17,100,000 -- 100,050,001 25,000,000 88,100,000
Payments of revolving line of
credit......................... (14,100,000) -- (90,050,000) (36,000,001) (87,100,000)
Proceeds from notes payable...... -- -- -- 1,000,000 1,000,000
Payments of notes payable........ -- (716,565) (1,022,490) (4,697,445) (1,487,120)
Redemption of common stock....... -- -- (96,440,200) -- (518,428)
Dividends paid................... -- (3,763,000) (16,526,000) (9,082,700) (18,575,000)
Proceeds from sale of common
stock.......................... -- -- 22,600,200 450,744 1,000,000
------------- ------------ ------------- ------------- -------------
Net cash used in financing
activities................ (9,382,192) (4,479,565) (69,006,297) (23,329,402) (17,580,548)
------------- ------------ ------------- ------------- -------------
Net increase (decrease) in cash and
cash equivalents................... 3,236,643 3,310,895 (16,285,674) 1,070,613 7,334,505
Cash and cash equivalents, at
beginning of year.................. 1,543,758 17,829,432 17,829,432 16,758,819 9,424,314
------------- ------------ ------------- ------------- -------------
Cash and cash equivalents, at end of
year $ 4,780,401 $ 21,140,327 $ 1,543,758 $ 17,829,432 $ 16,758,819
============= ============ ============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................... $ 61,646 $ -- $ 2,330,285 $ 526,970 $ 662,731
Income taxes................ 877,211 -- 14,756,310 14,740,083 16,992,041
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Texas Olefins Company, its subsidiaries and its affiliate, Clarkston
Corporation ("Affiliate") (collectively, the "Company") are principally engaged
through its facility in Houston, Texas in the manufacturing and sale of various
petrochemical products in North America.
The Company is the largest producer of butadiene and butene-1, and the
second 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.
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.
For the twelve months ended May 31, 1996 and for the one month ended June
30, 1996, approximately 43% and 45%, respectively, of the Company's total
revenues were derived from products sold on a fixed profit basis or whose
selling prices were linked, directly or indirectly, to raw material costs. The
Company believes that the combination of its fixed profit contracts, competitive
cost position and specialty product sales provides stability to its cash flows
and helps to offset the effects of cyclical downturns.
The significant accounting policies of the Company are described below.
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.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Texas Olefins
Company, its subsidiaries and Affiliate. Texas Olefins Company's subsidiaries
include Texas Petrochemicals Corporation (the "Corporation"), an 80.7%
majority-owned subsidiary, and its wholly-owned subsidiary, Texas Butylene
Chemical Company. All significant intercompany transactions have been
eliminated. For purposes of these combined financial statements, the minority
interest in the investment and earnings of the Corporation has been presented as
if the Corporation was a wholly-owned subsidiary of the Company. The minority
interest reflected in the accompanying financial statements reflects
approximately 20% of the common stock of The Texas Falls Corporation not owned
by the Company.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INVESTMENT SECURITIES
Effective June 1, 1994, the Company adopted 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
F-9
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
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 is 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 1/2
years, with the plants being depreciated over 12 years.
OTHER ASSETS
Other assets include certain intangible assets and catalysts which are
amortized using the straight-line method over their useful lives ranging from 2
to 10 years.
REVENUE RECOGNITION
The Company recognizes revenue from sales of refined products in the period
of delivery.
INCOME TAXES
Effective June 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The
adoption had no effect on financial position or net income. Under SFAS No. 109,
deferred taxes are provided at the enacted tax rate on temporary differences
between assets and liabilities for financial and tax reporting purposes.
Deferred taxes are recorded to reflect the effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
The Affiliate of the Company 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. Pro
Forma net income to reflect the effect on the combined company of income taxes
for the Affiliate as if it were a taxable entity has been included or face the
income statement. 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.
F-10
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
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 PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123, which is effective for fiscal years beginning after
December 31, 1995, encourages but does not require companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on new fair value accounting rules. The Company
has not yet determined if it will adopt this new fair value-based method of
accounting for its stock-based incentive plans or elect the disclosure
provisions of SFAS No. 123.
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.
2. ACQUISITION OF THE COMPANY:
Effective July 1, 1996, the Company, including a raw material supply
contract of the Affiliate, was acquired for approximately $377 million in a
series of transactions. After the transactions Texas Olefins Company was merged
with and into Texas Petrochemicals Corporation with Texas Petrochemicals
Corporation becoming a 100% owned subsidiary of Texas Petrochemicals Holdings,
Inc. In connection with the acquisition, Texas Petrochemicals Corporation
incurred $175 million of Senior Subordinated Notes due 2006 and approximately
$140.0 million pursuant to a bank debt agreement. In June 1996, Clarkston
Corporation was dissolved and a $677,000 liquidating dividend was declared to
its shareholders.
F-11
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
The following unaudited pro forma combined balance sheet assumes the
acquisition of the Company occurred on June 30, 1996. The unaudited pro forma
combined statements of operations assumes the acquisition occurred on June 1,
1995 for the twelve months ended May 31, 1996 and on June 1, 1996 for the one
month ended June 30, 1996.
PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(DOLLARS IN MILLIONS)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 7.6
Investment securities ........................................ --
Accounts receivable .......................................... 35.3
Inventories .................................................. 11.9
Other current assets ......................................... 11.0
--------
Total current assets .................................... 65.8
--------
Property, plant and equipment, net ................................ 260.5
Investments in land ............................................... 3.9
Investment in and advances to limited partnership ................. 2.8
Other assets ...................................................... 207.6
--------
Total assets ............................................ $ 540.6
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................. $ 40.1
Accrued expenses ............................................. 4.2
Dividends payable ................................................. 0.7
--------
Total current liabilities ............................... 45.0
Revolving line of credit .......................................... --
Senior Term Loans ................................................. 130.0
Senior Subordinated Notes ......................................... 175.0
ESOP Term Loan .................................................... 10.0
Other liabilities ................................................. 35.3
Deferred income taxes ............................................. 79.1
Minority interest in net assets of consolidated subsidiary ........ --
Common Stock held by ESOP ......................................... 10.0
Less: Note receivable from ESOP .............................. (10.0)
Stockholders' equity .............................................. 66.2
--------
Total liabilities and stockholders' equity .............. $ 540.6
========
F-12
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
(UNAUDITED)
ONE MONTH TWELVE MONTHS
ENDED ENDED
JUNE 30, 1996 MAY 31, 1996
-------------- --------------
Revenues............................. $ 41.2 $454.2
Cost of goods sold................... 35.4 367.3
Depreciation and amortization........ 3.1 36.3
-------------- --------------
Gross profit.................... 2.7 50.6
Selling, general and administrative
expenses........................... 1.5 12.7
-------------- --------------
Income from operations..... 1.2 37.9
Interest expense, net................ 2.6 31.9
Other income (expense):
Dividend income................. -- --
Charitable contribution......... -- --
Loss on disposal of assets and
investment securities, net..... (0.3) (3.1)
Impairment of investment in
land........................... -- (12.6)
Other, net...................... 0.1 0.1
-------------- --------------
Loss before income taxes and minority
interest........................... (1.6) (9.6)
Provision for income taxes........... -- --
Minority interest in net loss of
consolidated subsidiary............ -- --
Net loss................... $ (1.6) $ (9.6)
============== ==============
3. INVESTMENT SECURITIES:
As of June 30, 1996 the Company held $6,794,700 of equity securities with
an unamortized cost of $8,996,394 and gross unrealized losses of $2,201,999.
Unrealized losses of $643,550 and $1,387,259 (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 $1,897,000 and $0,
respectively, and gross realized losses of approximately $4,996,000 and
$280,000, respectively, were recognized on the sale of securities.
The Company held $3,680,409 of bankers acceptance notes at May 31, 1995,
with scheduled maturities of less than one year. The Company also held
approximately $17,445,193 of equity securities at May 31, 1995. Unrealized
losses of $3,650,584 (net of deferred tax) related to these securities is
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
$1,163,000 and gross realized losses of approximately $51,000 were recognized on
the sale of securities.
F-13
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
The amortized cost and estimated market values of investment securities at
May 31, 1995 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS GAINS LOSSES VALUE
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Bankers acceptance notes............. $ 3,680,409 $ 3,680,409
Equity securities.................... 23,061,776 $ 350,000 $ 5,966,583 17,445,193
-------------- -------------- -------------- --------------
Total........................... $ 26,742,185 $ 350,000 $ 5,966,583 $ 21,125,602
============== ============== ============== ==============
</TABLE>
Included in cash and cash equivalents at May 31, 1995 and June 30, 1996 was
$22,959,113 and $5,500,000 of commercial paper with scheduled maturities of less
than three months. Aggregate cost approximated market value at May 31, 1995 and
June 30, 1996.
4. INVENTORIES:
Inventories at June 30, 1996 and May 31, 1995 are summarized as follows:
JUNE 30, MAY 31,
1996 1995
-------------- --------------
Finished goods....................... $ 5,480,723 $ 6,756,936
Raw materials........................ 4,533,037 8,787,386
Chemicals and supplies............... 1,919,718 1,687,779
-------------- --------------
$ 11,933,478 $ 17,232,101
============== ==============
5. PROPERTY, PLANT AND EQUIPMENT:
Following is a summary of the Company's property, plant and equipment at
June 30, 1996 and May 31, 1995:
JUNE 30, MAY 31,
1996 1995
---------------- ---------------
Chemical plants...................... $ 173,369,404 $ 161,129,527
Construction in progress............. 5,377,880 10,294,420
Land................................. 2,805,363 2,805,363
Buildings............................ 325,140 325,140
Leased buildings and improvements.... 2,308,260 2,273,694
Automotive equipment................. 566,441 624,579
Furniture and fixtures............... 384,623 411,611
Machinery and equipment.............. 2,867,684 2,864,221
Other................................ 4,554,967 4,396,870
---------------- ---------------
192,559,762 185,125,425
Less allowance for depreciation,
depletion and amortization......... (110,745,478) (95,053,897)
---------------- ---------------
Total........................... $ 81,814,284 $ 90,071,528
================ ===============
F-14
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
6. INVESTMENT IN LAND HELD FOR SALE:
Land which is held for sale at June 30, 1996 consists principally of
unimproved real estate and is summarized as follows:
JUNE 30, MAY 31,
LOCATION 1996 1995
- ------------------------------------- ---------------- ---------------
Highway 6
Houston, Texas....................... $ 1,306,800 $ 6,798,538
Macgregor-Highway 288
Houston, Texas....................... 521,320 5,619,549
Richmond West Hollow
Houston, Texas....................... 975,000 2,977,145
The Falls,
New Ulm, Texas....................... 2,295,000 2,295,000
Baytown, Texas....................... 1,067,787 1,067,787
Other miscellaneous.................. 15,000 15,000
---------------- ---------------
$ 6,180,907 $ 18,773,019
================ ===============
During the twelve months ended May 31, 1996, the Company adopted SFAS No.
121 "Impairment of Long-Lived Assets and Assets to be Disposed of." As a result,
the Company recorded a provision for estimated impairment of $12,592,112, with
an associated tax benefit of $4,660,000, to writedown certain investments in
land to estimated fair market value. Actual sales proceeds from investments in
land may differ from the carrying amounts at June 30, 1996.
7. 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. Texas Olefins 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 combined 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.
8. REVOLVING LINE OF CREDIT:
The Corporation has a revolving line of credit agreement with a bank which
permits borrowings up to $30,000,000 of which $13,000,000 was outstanding at
June 30, 1996. The agreement expires September 30, 1997, bears interest at the
Corporation's option of the prime rate or the Eurodollar rate plus 1% and
requires a commitment fee of 0.375% on the unused portion of the line of credit.
The line of credit is collateralized by the Corporation's accounts receivable
and inventory. The agreement also contains various restrictive covenants which,
among other things, requires the Corporation to maintain certain financial
ratios and restricts the Corporation's ability to incur additional indebtedness.
The above requirement to maintain certain financial ratios effectively restricts
the amount of dividends that may be declared in any given year. The Company's
weighted average borrowing rate under this agreement was 7.49%, 6.70% and 6.06%
for the one month ended June 30, 1996, the twelve months ended May 31, 1996 and
the year ended May 31, 1995, respectively. The Company's weighted average
borrowing rate under various other agreements which expired in 1996 was
approximately 8%.
F-15
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
On July 1, 1996, Texas Petrochemicals Corporation through the merger of TPC
Finance Corp. into Texas Petrochemicals Corporation, incurred $175 million of
Senior Subordinated Notes due 2006 (the "Subordinated Notes") under an
indenture, pursuant to which the Subordinated Notes were issued. The
Subordinated Notes bear interest at a rate per annum equal to 11 1/8% payable
semiannually on July 1 and January 1. The indenture governing the Subordinated
Notes contains certain restrictive covenants which include, but are not limited
to, limitations on indebtedness and limitations on sales of assets and
subsidiary stock.
Additionally, on July 1, 1996, Texas Petrochemicals Corporation in
connection with the merger of TPC Finance Corp. into Texas Petrochemicals
Corporation, incurred $140.0 million of bank debt under a credit agreement. The
debt initially bears interest at the greater of the prime rate and the federal
funds effective rate plus 1/2% plus a margin of 1% payable quarterly beginning
September 30, 1996. The credit agreement contains certain restrictive covenants
including, but not limited to, the maintenance of certain financial ratios, and
limitations on capital expenditures, indebtedness and investments.
9. NOTES PAYABLE TO STOCKHOLDERS AND FORMER STOCKHOLDER:
At June 30, 1996 and May 31, 1995, notes payable consisted of the
following:
JUNE 30, MAY 31,
1996 1995
---------- -----------
7%note payable to stockholder;
principal payable in four equal
annual installments through
May 1, 1996, collateralized by
treasury stock..................... $ -- $ 468,000
5.23% note payable to a former
stockholder for the redemption
of common stock; principal and
interest payable in 42 monthly
installments of $19,120, balance
due at maturity and collateralized
by treasury stock.................. -- 554,490
8% note payable to an officer, due
October 1, 1995 and
uncollateralized................... -- --
---------- -----------
Total........................... -- 1,022,490
Less current portion................. -- 697,445
---------- -----------
Non-current portion.................. $ -- $ 325,045
========== ===========
During the year ended May 31, 1995, proceeds of $1,000,000 were borrowed
and payments of $4,000,000 were made on an 8% note payable to an officer. There
were no borrowings outstanding under the note at May 31, 1995.
10. ACCRUED EXPENSES:
At June 30, 1996 and May 31, 1995, accrued expensesconsisted of the
following:
JUNE 30, MAY 31,
1996 1995
------------ ------------
Federal and state taxes.............. $ 959,336 $ 3,013,024
Accrued interest..................... 81,157 23,958
Property and sales taxes............. 2,369,815 2,144,497
Accrued shipping costs............... 456,351 79,468
Charitable contributions............. -- 1,264,316
Other expenses....................... 515,998 269,971
------------ ------------
$ 4,382,657 $ 6,795,234
============ ============
F-16
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
11. FEDERAL AND STATE INCOME TAXES:
Significant components of the Company's deferred tax asset and liability at
June 30, 1996 and May 31, 1995 are as follows:
JUNE 30, MAY 31,
1996 1995
--------------- ---------------
Deferred tax asset -- current:
Unrealized loss on investment
securities.................... $ 814,740 $ 1,966,000
Costs capitalized to
inventory..................... -- 259,000
--------------- ---------------
$ 814,740 $ 2,225,000
=============== ===============
Deferred tax asset (liability) -- noncurrent:
Investment in land.............. $ 4,660,000 $ --
Property, plant and equipment... $ (20,423,393) $ (22,125,000)
--------------- ---------------
Net deferred tax
(liability) -- noncurrent..... $ (15,763,393) $ (22,125,000)
=============== ===============
The current deferred tax asset is included in other current assets in the
accompanying balance sheet.
The provision for federal and state income taxes is comprised of the
following:
<TABLE>
<CAPTION>
ONE MONTH ONE MONTH TWELVE MONTHS
ENDED ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31, MAY 31,
1996 1995 1996 1995 1994
------------ ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Current:
Federal........................ $ 880,000 $ 1,281,108 $12,149,599 $ 14,314,000 $ 16,173,000
State.......................... 118,000 124,911 1,581,950 1,748,010 1,951,363
------------ ------------ ------------- -------------- --------------
998,000 1,406,019 13,731,549 16,062,010 18,124,363
------------ ------------ ------------- -------------- --------------
Deferred:
Federal........................ (210,000) (122,476) (5,461,000) 895,000 250,000
State.......................... (27,000) (20,000) (368,000) (77,000) 22,000
------------ ------------ ------------- -------------- --------------
(237,000) (142,476) (5,829,000) 818,000 272,000
------------ ------------ ------------- -------------- --------------
Total provision for income
taxes.................. $ 761,000 $ 1,263,543 $ 7,902,549 $ 16,880,010 $ 18,396,363
============ ============ ============= ============== ==============
Pro Forma income tax
provision.............. $ 761,000 $ 1,363,958 $ 9,553,355 $ 18,948,975 $ 19,552,994
============ ============ ============= ============== ==============
</TABLE>
The Affiliate is a Subchapter S corporation and accordingly pays no federal
income tax. The Pro Forma income tax provision assumes that the income of the
Affiliate was taxable to the Company based on the Company's effective tax rate.
F-17
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
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 MONTH ONE MONTH TWELVE MONTHS
ENDED ENDED ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, MAY 31, MAY 31, MAY 31,
1996 1995 1996 1995 1994
------------ ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Statutory federal income
tax rate.......................... 35% 35% 35% 35% 35%
Computed "expected" federal income
tax............................... $ 695,854 $ 1,247,090 $ 8,577,845 $ 17,437,711 $ 18,306,198
Increase (decrease) in tax resulting
from:
Affiliate earnings not subject
to federal income tax........ -- (100,415) (1,650,806) (2,068,965) (1,156,631)
State income taxes, net of
federal benefit.............. 76,700 81,192 1,028,267 1,086,157 1,282,686
Other, net..................... (3,804) 43,426 40,243 518,107 (150,654)
Amortization................... (7,750) (7,750) (93,000) (93,000) (93,000)
Effect of 1% increase in
statutory federal income tax
rate......................... 207,764
------------ ------------ ------------- -------------- --------------
Provision for income taxes.......... $ 761,000 $ 1,263,543 $ 7,902,549 $ 16,880,010 $ 18,396,363
============ ============ ============= ============== ==============
</TABLE>
12. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
The Corporation leases tank cars under noncancelable operating leases.
Under the terms of the lease agreements, the Corporation is reimbursed by
customers at a fixed rate per mile, based on the distance the tank cars travel.
Reimbursements were approximately $35,000, $800,000, $650,000, and $800,000 for
the one month period ended June 30, 1996, for the twelve months ended May 31,
1996 and for the years ended May 31, 1995 and 1994, respectively. The
Corporation is also obligated under two operating leases to Hollywood/Texas
Olefins, Ltd. for the rental of four barges.
Total rent expense was approximately $421,000, $4,800,000, $4,400,000 and
$4,300,000 (net of reimbursements described above and including $160,000,
$2,000,000, $2,000,000 and $2,000,000 for the rental of four barges) for the one
month period ended June 30, 1996, for the twelve months ended May 31, 1996 and
for the years ended May 31, 1995 and 1994, respectively.
Future minimum lease payments at June 30, 1996 are as follows:
FISCAL YEAR
- -------------------------------------
1997............................... $ 2,934,739
1998............................... 1,578,812
1999............................... 1,208,707
2000............................... 825,748
2001............................... 282,365
STOCK PURCHASE AGREEMENT
The Company entered into a stock purchase agreement with a certain minority
stockholder who owns 20,000 shares of the Company's outstanding Class A common
stock and 80,000 shares of the Company's
F-18
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
outstanding Class B common stock. Under the terms of this agreement, in the
event of the stockholder's death, the Company 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 Company has entered into a death benefit agreement with an officer of
the Company who owns 660,000 shares of Class B common stock of the Company. This
agreement provides that in the event of the death of the officer, the Company 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 agreement that obligated the Company to
redeem the shares in the event of the death of the officer at a price of $80 per
share.
The Corporation has entered into a stock purchase agreement with certain of
its minority stockholders who own 171,000 shares of the Corporation's
outstanding common stock. Under the terms of this agreement, such stockholders
may sell their shares to the Corporation at a formula price, which is adjusted
annually. Under this agreement, the Corporation 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 Corporation has also entered into a Section 303 stock purchase
agreement with an officer of the Corporation who owns 85,000 shares of the
Corporation's outstanding common stock. This agreement allows for the officer's
estate to require the Corporation 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 Corporation entered into separate stock purchase
agreements with an officer of the Corporation and his spouse who own 500,000
shares of the Corporation's outstanding common stock as part of a community
estate. The agreement with the officer requires the Corporation 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 Corporation 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 Corporation 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 Corporation has 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
F-19
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
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 Corporation and the officers will
enter into stock purchase agreements. Under the terms of the agreement, transfer
of the stock is restricted and only the Corporation, at its option, may redeem
the stock. However, upon death of the officer, the Corporation 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.
SALARY CONTINUATION AGREEMENTS
The Corporation has entered into salary continuation agreements with three
of its officers. The agreements provide that if the officer is an employee of
the Corporation upon death, an amount ranging from $10,000 to $25,000 would be
payable monthly to his estate for a period of five years.
PURCHASE COMMITMENTS
The Company and the Affiliate have 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 rates for such
products. These commitments generally have cancellation provisions given proper
notification.
LITIGATION
The Company is involved in various legal proceedings which arose during the
normal course of 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 effect on the Company. See Note 17.
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 compliances 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, results of operations or cash flows, there can be no
assurance that future legislation, regulation or judicial or administrative
decisions will not have such an effect.
13. PROFIT SHARING PLANS:
The Corporation 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 Corporation at the rate of $.25 per one dollar contributed by
the employee up to 6% of the employee's base compensation. The Corporation's
expense to match employee contributions was approximately $14,786, $195,627,
$180,000 and $150,000 for the one month period ended June 30, 1996, for the
twelve month period ended May 31, 1996 and for the years ended May 31, 1995 and
1994, respectively. Additionally, the Corporation made additional discretionary
contributions to the plan which amounted to approximately $240,000, $2,430,783,
$2,570,000 and $2,200,000 for the one month period ended June 30, 1996, for the
twelve month period ended May 31, 1996 and for the years ended May 31, 1995 and
1994, respectively. The Corporation's contributions vest with the employee at a
rate of 20% per year.
F-20
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
14. RELATED PARTY TRANSACTIONS:
The Company makes contributions from time to time to a charitable
organization that is an affiliate of the Company.
15. CONCENTRATION OF CREDIT RISK:
The Company sells its products primarily to chemical and petroleum based
companies in North America. For the one month periods ended June 30, 1996, for
the twelve month period ended May 31, 1996 and for the years ended May 31, 1995
and 1994 approximately 46%, 50%, 35% and 53% of the Company's sales were to four
customers. 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.
16. FINANCIAL INSTRUMENTS:
At June 30, 1996 the Company estimated that the carrying value and fair
value of its financial instruments other than investment securities were
approximately the same. The methods and assumptions used to estimate the fair
value of each class of financial instruments were as follows:
CASH AND CASH EQUIVALENTS -- Fair value was considered to be the same as
the carrying value.
ACCOUNTS RECEIVABLE -- The Company estimated that the net carrying amount
of its accounts receivable was not materially different from the fair value of
such receivables.
ACCOUNTS PAYABLE -- Fair value was considered to be the same as the
carrying value.
DEBT -- In the absence of an active trading market, and considering such
debt has floating interest rates the Company estimated that the carrying amount
of its debt, both current and non-current, was not materially different from the
fair value of such debt.
17. STOCK REDEMPTION:
Effective July 28, 1995 the Company'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 Company.
In connection with the above redemption the Company's Board of Directors
approved the sale of (1) 351,670 shares of Class B treasury stock to certain
officers of the Company and to a trust at the price of $60 per share, and (2)
25,000 shares of Class A treasury stock to an officer of the company at a price
of $60 per share.
STOCKHOLDER ACTION
On September 12, 1995, the stock redemption and other transactions
described above, the management bonus and other transactions previously approved
by the Board of Directors were not ratified by the Company's stockholders. Those
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
F-21
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE ONE MONTH ENDED JUNE 30, 1995 IS UNAUDITED)
take. Accordingly, the Company cannot determine the effect, if any, of this
uncertainty on the combined financial position, results of operations or cash
flows of the Company.
STOCK PURCHASE AGREEMENTS
The Company's Board of Directors has also approved a stock purchase
agreement with certain officers who own 185,000 shares of the Company's
outstanding Class A common stock and 1,081,670 shares of the Company'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 Company or in the
event of the stockholder's death, the Company must redeem all of the
stockholder's shares at a redemption price of $60 per share. This agreement
supersedes the previous stock purchase agreements of the Company which are
described in Note 12. During 1996, the Company's board of directors approved the
cancellation of such stock purchase agreement in anticipation of the acquisition
of the Company.
F-22
ANNEX A
TEXAS PETROCHEMICALS CORPORATION
LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 1/8% SENIOR SUBORDINATED NOTES DUE 2006
OF
TEXAS PETROCHEMICALS CORPORATION
PURSUANT TO THE PROSPECTUS
DATED , 1996
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996, UNLESS
EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION DATE"). TENDERS
OF NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
FLEET NATIONAL BANK
BY MAIL: BY FACSIMILE: BY HAND:
Fleet National Bank (860) 986-7908 Fleet National Bank
Corporate Trust Operations Corporate Trust Operations
777 Main Street, Lower Level Confirm by Telephone: 777 Main Street, Lower Level
Hartford, CT 06115 Hartford, CT 06115
Attention: Patricia Williams (860) 986-2910 Attention: Patricia Williams
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
A-1
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR ORIGINAL NOTES TO
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal is to be used by holders ("Holders") of 11 1/8%
Senior Subordinated Notes due 2006 (the "Original Notes") of Texas
Petrochemicals Corporation (the "Company") if: (i) certificates representing
Original Notes are to be physically delivered to the Exchange Agent herewith by
such Holders; (ii) tender of Original Notes is to be made by book-entry transfer
to the Exchange Agent's account at The Depository Trust Company ("DTC") pursuant
to the procedures set forth under the caption "The Exchange Offer -- Procedures
for Tendering Original Notes -- BOOK-ENTRY DELIVERY PROCEDURES" in the
Prospectus dated , 1996 (the "Prospectus"); or (iii) tender of Original Notes is
to be made according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer -- Procedures for Tendering Original Notes --
GUARANTEED DELIVERY" in the Prospectus, and, in each case, instructions are not
being transmitted through the DTC Automated Tender Offer Program ("ATOP"). The
undersigned hereby acknowledges receipt of the Prospectus. All capitalized terms
used herein and not defined shall have the meanings ascribed to them in the
Prospectus.
Holders of Original Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
exchange offer as set forth in the Prospectus and this Letter of Transmittal
(together, the "Exchange Offer") must transmit their acceptance to DTC which
will edit and verify the acceptance and execute a book-entry delivery to the
Exchange Agent's account at DTC. DTC will then send an Agent's Message to the
Exchange Agent for its acceptance. Delivery of the Agent's Message by DTC will
satisfy the terms of the Offer as to execution and delivery of a Letter of
Transmittal by the participant identified in the Agent's Message. DTC
participants may also accept the Exchange Offer by submitting a notice of
guaranteed delivery through ATOP.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
If a Holder desires to tender Original Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Original Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, then such Holder must tender such Original Notes
according to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Procedures for Tendering Original Notes -- GUARANTEED
DELIVERY" in the Prospectus. See Instruction 2.
The undersigned should complete, execute and deliver this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
A-2
TENDER OF ORIGINAL NOTES
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Account Number:
Transaction Code Number:
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
A-3
List below the Original Notes to which this Letter of Transmittal relates.
The name(s) and address(es) of the registered Holder(s) should be printed, if
not already printed below, exactly as they appear on the Original Notes tendered
hereby. The Original Notes and the principal amount of Original Notes that the
undersigned wishes to tender should be indicated in the appropriate boxes. If
the space provided is inadequate, list the certificate number(s) and principal
amount(s) on a separately executed schedule and affix the schedule to this
Letter of Transmittal.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL NOTES
- -------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) AGGREGATE PRINCIPAL
(PLEASE FILL IN IF BLANK) CERTIFICATE PRINCIPAL AMOUNT AMOUNT
SEE INSTRUCTION 3. NUMBER(S)* REPRESENTED** TENDERED**
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF
ORIGINAL NOTES
- -------------------------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED BY HOLDERS TENDERING BY BOOK-ENTRY TRANSFER.
** UNLESS OTHERWISE SPECIFIED, THE ENTIRE AGGREGATE PRINCIPAL AMOUNT REPRESENTED BY THE ORIGINAL NOTES
DESCRIBED ABOVE WILL BE DEEMED TO BE TENDERED. SEE INSTRUCTION 4.
- -------------------------------------------------------------------------------------------------------
</TABLE>
A-4
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Texas Petrochemicals Corporation ("the
Company"), upon the terms and subject to the conditions set forth in its
Prospectus dated ___________________________, 1996 (the "Prospectus"), receipt
of which is hereby acknowledged, and in accordance with this Letter of
Transmittal (which together constitute the "Exchange Offer"), the principal
amount of Original Notes indicated in the foregoing table entitled "Description
of Original Notes" under the column heading "Principal Amount Tendered." The
undersigned represents that it is duly authorized to tender all of the Original
Notes tendered hereby which it holds for the account of beneficial owners of
such Original Notes ("Beneficial Owner(s)") and to make the representations and
statements set forth herein on behalf of such Beneficial Owner(s).
Subject to, and effective upon, the acceptance for purchase of the
principal amount of Original Notes tendered herewith in accordance with the
terms and subject to the conditions of the Exchange Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company, all
right, title and interest in and to all of the Original Notes tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company) with
respect to such Original Notes, with full powers of substitution and revocation
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (i) present such Original Notes and all evidences of transfer and
authenticity to, or transfer ownership of, such Original Notes on the account
books maintained by DTC to, or upon the order of, the Company, (ii) present such
Original Notes for transfer of ownership on the books of the Company, and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Original Notes, all in accordance with the terms and conditions of the
Exchange Offer as described in the Prospectus.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) except as indicated below, neither the
undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405
under the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Securities Act"), of the Company and
(iv) the undersigned and each Beneficial Owner acknowledge and agree that (x)
any person participating in the Exchange Offer with the intention or for the
purpose of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the Exchange Notes acquired by such person with a
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K of the Securities and Exchange Commission
(the "Commission") and cannot rely on the interpretation of the Staff of the
Commission set forth in the no-action letters that are noted in the section of
the Prospectus entitled "The Exchange Offer -- Registration Rights" and (y) any
broker-dealer that pursuant to the Exchange Offer receives Exchange Notes for
its own account in exchange for Original Notes which it acquired for its own
account as a result of market-making activities or other trading activities must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Original Notes that were acquired as the result of market-making activities
or other trading activities, it acknowledges that it will deliver a prospectus
in connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer shall not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that tenders of Original Notes may be withdrawn
by written notice of withdrawal received by the Exchange Agent at any time prior
to the Expiration Date in accordance with the Prospectus. In the event of a
termination of the Exchange Offer, the Original Notes tendered pursuant to the
A-5
Exchange Offer will be returned to the tendering Holders promptly (or, in the
case of Original Notes tendered by book-entry transfer, such Original Notes will
be credited to the account maintained at DTC from which such Original Notes were
delivered). If the Company makes a material change in the terms of the Exchange
Offer or the information concerning the Exchange Offer or waives a material
condition of such Exchange Offer, the Company will disseminate additional
Exchange Offer materials and extend such Exchange Offer, if and to the extent
required by law.
The undersigned understands that the tender of Original notes pursuant to
any of the procedures set forth in the Prospectus and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Exchange Offer. The Company's acceptance for exchange of Original Notes tendered
pursuant to any of the procedures described in the Prospectus will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions of the Exchange Offer. For purposes of the
Exchange Offer, the undersigned understands that validly tendered Original Notes
(or defectively tendered Original Notes with respect to which the Company has,
or has caused to be, waived such defect) will be deemed to have been accepted by
the Company if, as and when the Company gives oral or written notice thereof to
the Exchange Agent.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Original Notes
tendered hereby, and that when such tendered Original Notes are accepted for
purchase by the Company, the Company will acquire good title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or by the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Original Notes tendered hereby.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall not be affected by, and shall survive the death or incapacity
of the undersigned and any Beneficial Owner(s), and any obligation of the
undersigned or any Beneficial Owner(s) hereunder shall be binding upon the
heirs, executors, administrators, trustees in bankruptcy, personal and legal
representatives, successors and assigns of the undersigned and such Beneficial
Owner(s).
The undersigned understands that the delivery and surrender of any Original
Notes is not effective, and the risk of loss of the Original Notes does not pass
to the Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, together with all accompanying evidences of authority and any other
required documents in form satisfactory to the Company. All questions as to form
of all documents and the validity (including time of receipt) and acceptance of
tenders and withdrawals of Original Notes will be determined by the Company, in
its sole discretion, which determination shall be full and binding.
Unless otherwise indicated herein under "Special Issuance Instructions,"
the undersigned hereby requests that any Original Notes representing principal
amounts not tendered or not accepted for exchange be issued in the name(s) of
the undersigned (and in the case of Original Notes tendered by book-entry
transfer, by credit to the account of DTC), and Exchange Notes issued in
exchange for Original Notes pursuant to the Exchange Offer be issued to the
undersigned. Similarly, unless otherwise indicated herein under "Special
Delivery Instructions," the undersigned hereby requests that any Original Notes
representing principal amounts not tendered or not accepted for exchange and
Exchange Notes issued in exchange for Original Notes pursuant to the Exchange
Offer be delivered to the undersigned at the address shown below the
undersigned's signature(s). In the event that the "Special Issuance
Instructions" box or the "Special Delivery Instructions" box is, or both are,
completed, the undersigned hereby requests that any Original Notes representing
principal amounts not tendered or not accepted for purchase be issued in the
name(s) of, certificates for such Original Notes be delivered to, and Exchange
Notes issued in exchange for Original Notes pursuant to the Exchange Offer be
issued in the name(s) of, and be delivered to, the person(s) at the address(es)
so indicated, as applicable. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" box or "Special
Delivery Instructions" box to transfer any Original Notes from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the principal amount of such Original Notes so tendered.
A-6
[] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD ORIGINAL NOTES IS
AN AFFILIATE OF THE COMPANY.
[] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD ORIGINAL NOTES
TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED SUCH NOTES DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY.
[] CHECK HERE AND COMPLETE THE LINES BELOW IF YOU OR ANY BENEFICIAL OWNER FOR
WHOM YOU HOLD ORIGINAL NOTES TENDERED HEREBY IS A BROKER-DEALER
WHO ACQUIRED SUCH NOTES IN MARKET-MAKING OR OTHER TRADING ACTIVITIES.
IF THIS BOX IS CHECKED, THE COMPANY WILL SEND 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO TO YOU OR
SUCH BENEFICIAL OWNER AT THE ADDRESS SPECIFIED IN THE FOLLOWING LINES.
Name:
Address:
A-7
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Original Notes in a principal amount not tendered
or not accepted for exchange are to be issued in the name of, or Exchange Notes
are to be issued in the name of, someone other than the person(s) whose
signature(s) appear(s) within this Letter of Transmittal or issued to an address
different from that shown in the box entitled "Description of Original Notes"
within this Letter of Transmittal.
Issue: [ ] Original Notes
[ ] Exchange Notes
(check as applicable)
Name..............................................
(PLEASE PRINT)
Address...........................................
(PLEASE PRINT)
..................................................
(ZIP CODE)
..................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Original Notes in a principal amount not tendered
or not accepted for exchange or Exchange Notes are to be sent to some- one other
than the person(s) whose signature(s) appear(s) within this Letter of
Transmittal or to an address different from that shown in the box entitled
"Description of Original Notes" within this Letter of Transmittal.
Delivery: [ ] Original Notes
[ ] Exchange Notes
(check as applicable)
Name..............................................
(PLEASE PRINT)
Address...........................................
(PLEASE PRINT)
..................................................
(ZIP CODE)
..................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
- --------------------------------------------------------------------------------
A-8
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(To be completed by all tendering
Holders of Original Notes regardless of whether Original Notes
are being physically delivered herewith)
This Letter of Transmittal must be signed by the registered Holder(s) exactly
as name(s) appear(s) on certificate(s) for Original Notes or, if tendered by a
participant in DTC exactly as such participant's name appears on a security
position listing as owner of Original Notes, or by the person(s) authorized to
become registered Holder(s) by endorsements and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.
...............................................................................
...............................................................................
Signature(s) of Registered Holder(s) or Authorized Signatory
(SEE GUARANTEE REQUIREMENT BELOW)
Dated: ................................................................ 1996
Name(s): .....................................................................
.....................................................................
(Please Print)
Capacity (Full Title).........................................................
Address: .....................................................................
.....................................................................
(Including Zip Code)
Area Code and
Telephone Number .............................................................
Tax Identification or
Social Security Number:.......................................................
(Complete Accompanying Substitute Form W-9)
SIGNATURE GUARANTEE
(IF REQUIRED-SEE INSTRUCTIONS 1 AND 5)
Authorized Signature..........................................................
Name of Firm..................................................................
[PLACE SEAL HERE]
- --------------------------------------------------------------------------------
A-9
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. SIGNATURE GUARANTEES. Signatures of this Letter of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Original Notes tendered hereby are tendered
(i) by a registered Holder of Original Notes (or by a participant in DTC whose
name appears on a security position listing as the owner of such Original Notes)
that has not completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" on this Letter of
Transmittal, or (ii) for the account of an Eligible Institution. If the Original
Notes are registered in the name of a person other than the signer of this
Letter of Transmittal, if Original Notes not accepted for exchange or not
tendered are to be returned to a person other than the registered Holder or if
Exchange Notes are to be issued in the name of or sent to a person other than
the registered Holder, then the signatures on this Letter of Transmittal
accompanying the tendered Original Notes must be guaranteed by an Eligible
Institution as described above. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND ORIGINAL NOTES. This Letter of
Transmittal is to be completed by Holders if (i) certificates representing
Original Notes are to be physically delivered to the Exchange Agent herewith by
such Holders; (ii) tender of Original Notes is to be made by book-entry transfer
to the Exchange Agent's account at DTC pursuant to the procedures set forth
under the caption "The Exchange Offer -- Procedures for Tendering Original Notes
- -- BOOK-ENTRY DELIVERY PROCEDURES" in the Prospectus; or (iii) tender of
Original Notes is to be made according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer -- Procedures for Tendering Original
Notes -- GUARANTEED DELIVERY" in the Prospectus. All physically delivered
Original Notes, or a confirmation of a book-entry transfer into the Exchange
Agent's account at DTC of all Original Notes delivered electronically, as well
as a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof), any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the cover page hereto on or
prior to the Expiration Date, or the tendering Holder must comply with the
guaranteed delivery procedures set forth below. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If a Holder desires to tender Original Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Original Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, such Holder must tender such Original Notes
pursuant to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Procedures for Tendering Original Notes -- GUARANTEED
DELIVERY" in the Prospectus. Pursuant to such procedures, (i) such tender must
be made by or through an Eligible Institution; (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by the Company, or an Agent's Message with respect to guaranteed delivery that
is accepted by the Company, must be received by the Exchange Agent, either by
hand delivery, mail, telegram, or facsimile transmission, on or prior to the
Expiration Date; and (iii) the certificates for all tendered Original Notes, in
proper form for transfer (or confirmation of a book-entry transfer or all
Original Notes delivered electronically into the Exchange Agent's account at DTC
pursuant to the procedures for such transfer set forth in the Prospectus),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal, or in the case of a book-entry transfer, a properly
transmitted Agent's Message, must be received by the Exchange Agent within two
business days after the date of the execution of the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE ORIGINAL NOTES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC AND ANY
ACCEPTANCE OR AGENT'S MESSAGE DELIVERED THROUGH ATOP, IS AT THE ELECTION AND
RISK OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS
A-10
INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE
MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or a facsimile
thereof), waive any right to receive any notice of the acceptance of their
Original Notes for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the principal amount represented by Original Notes
should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to Holders who tender by book-entry
transfer). If Holders wish to tender less than the entire principal amount
evidenced by any Original Note submitted, such Holders must fill in the
principal amount that is to be tendered in the column entitled "Principal Amount
Tendered." The minimum permitted tender is $1,000 in principal amount of
Original Notes. All other tenders must be in integral multiples of $1,000 in
principal amount. In the case of a partial tender of Original Notes, as soon as
practicable after the Expiration Date, new certificates for the remainder of the
Original Notes that were evidenced by such Holder's old certificates will be
sent to such Holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal. The entire principal amount that is represented by
Original Notes delivered to the Exchange Agent will be deemed to have been
tendered, unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
Holder(s) of the Original Notes tendered hereby, the signatures must correspond
with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever. If this Letter of Transmittal
is signed by a participant in DTC whose name is shown as the owner of the
Original Notes tendered hereby, the signature must correspond with the name
shown on the security position listing as the owner of the Original Notes.
If any of the Original Notes tendered hereby are registered in the name of
two or more Holders, all such Holders must sign this Letter of Transmittal. If
any of the Original Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Original Note or instrument of
transfer is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to the Company of such person's
authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered Holder(s) of
the Original Notes listed herein and transmitted hereby, no endorsements of
Original Notes or separate instruments of transfer are required unless Exchange
Notes are to be issued, or Original Notes not tendered or exchanged are to be
issued, to a person other than the registered Holder(s), in which case
signatures on such Original Notes or instruments of transfer must be guaranteed
by an Eligible Institution.
IF THIS LETTER OF TRANSMITTAL IS SIGNED OTHER THAN BY THE REGISTERED
HOLDER(S) OF THE ORIGINAL NOTES LISTED HEREIN, THE ORIGINAL NOTES MUST BE
ENDORSED OR ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER, IN EITHER CASE
SIGNED EXACTLY AS THE NAME(S) OF THE REGISTERED HOLDER(S) APPEAR ON THE ORIGINAL
NOTES AND SIGNATURES ON SUCH ORIGINAL NOTES OR INSTRUMENTS OF TRANSFER ARE
REQUIRED AND MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION, UNLESS THE SIGNATURE
IS THAT OF AN ELIGIBLE INSTITUTION.
A-11
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for Exchange
Notes or unexchanged or untendered Original Notes are to be issued in the name
of a person other than the signer of this Letter of Transmittal, or if Exchange
Notes or such Original Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown herein, the
appropriate boxes on this Letter of Transmittal should be completed. All
Original Notes tendered by book-entry transfer and not accepted for payment will
be returned by crediting the account at DTC designated herein as the account for
which such Original Notes were delivered.
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Original Notes to it, or to its order, pursuant to the Exchange Offer.
If Exchange Notes, or Original Notes not tendered or exchanged are to be
registered in the name of any persons other than the registered owners, of if
tendered Original Notes are registered in the name of any persons other than the
persons signing this Letter of Transmittal, the amount of any transfer taxes
(whether imposed on the registered Holder or such other person) payable on
account of the transfer to such other person must be paid to the Company or the
Exchange Agent (unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted) before the Exchange Notes will be issued.
8. WAIVER OF CONDITIONS. The conditions of the Exchange Offer may be
amended or waived by the Company, in whole or in part, at any time and from time
to time in the Company's sole discretion, in the case of any Original Notes
tendered.
9. SUBSTITUTE FORM W-9. Each tendering owner of a Note (or other payee) is
required to provide the Exchange Agent with a correct taxpayer identification
number ("TIN"), generally the owner's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided hereafter under "Important Tax Information," and to
certify that the owner (or other payee) is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
tendering owner (or other payee) to a $50 penalty imposed by the Internal
Revenue Service and 31% federal income tax withholding on the payment of the
Purchase Price. The box in Part 3 of the Substitute Form W-9 may be checked if
the tendering owner (or other payee) has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked and the Exchange Agent is not provided with a TIN by the time of
payment, the Exchange Agent will withhold 31% on all such payments of the
Purchase Price until a TIN is provided to the Exchange Agent.
10. BROKER-DEALERS PARTICIPATING IN THE EXCHANGE OFFER. If no broker-dealer
checks the last box on page 7 of this Letter of Transmittal, the Company has no
obligation under the Registration Rights Agreement to allow the use of the
Prospectus for resales of the Exchange Notes by broker-dealers or to maintain
the effectiveness of the Registration Statement of which the Prospectus is a
part after the consummation of the Exchange Offer.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance or additional copies of the Prospectus, this Letter of
Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange
Agent at the telephone numbers and location listed above. A Holder or owner may
also contact such Holder's or owner's broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Exchange Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES REPRESENTING THE ORIGINAL NOTES AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
A-12
IMPORTANT TAX INFORMATION
Under federal income tax law, an owner of Original Notes whose tendered
Original Notes are accepted for exchange is required to provide the Exchange
Agent with such owner's current TIN on Substitute Form W-9 below. If such owner
is an individual, the TIN is his or her social security number. If the Exchange
Agent is not provided with the correct TIN, the owner or other recipient of
Exchange Notes may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, any interest on Exchange Notes paid to such owner or other
recipient may be subject to 31% backup withholding tax.
Certain owners of Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that owner must submit to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
Backup withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding, the owner is required to notify the Exchange
Agent of the owner's current TIN (or the TIN of any other payee) by completing
the following form, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such owner is awaiting a TIN), and that (i) the owner has not
been notified by the Internal Revenue Service that the owner is subject to
backup withholding as a result of failure to report all interest or dividends or
(ii) the Internal Revenue Service has notified the owner that the owner is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the owner of the Original
Notes. If the Original Notes are registered in more than one name or are not
registered in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9," for
additional guidance on which number to report.
A-13
- -------------------------------------------------------------------------------
PAYER'S NAME: FLEET NATIONAL BANK
- -------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW.
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
PART 2--Certification--Under the
penalties of perjury, I certify that:
(1) The number shown on this form is my
correct taxpayer identification number
(or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup
withholding because: (a) I am exempt
from backup withholding, or (b) I have
not been notified by the Internal
Revenue Service (IRS) that I am subject
to backup withholding as a result of a
failure to report all interest or
dividends, or (c) the IRS has notified
me that I am no longer subject to backup
withholding. CERTIFICATION
INSTRUCTIONS--You must cross out item
(2) above if you have been notified by
the IRS that you are currently subject
to backup withholding because of under
reporting interest or dividends on your
tax return.
- -------------------------------------------------------------------------
PAYER'
- -------------------------------------------------------------------------
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY Social security number(s) or
INTERNAL REVENUE SERVICE Employer Identification Number(s)
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
SIGNATURE
DATE
PART 3--
Awaiting TIN H
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHOLDING OF 31%.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify
under penalties of perjury that a taxpayer identification number has not been
issued to me, and either (1) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable cash payments made to me will be withheld until I provide a taxpayer
identification number.
Signature ___________________
Date_________________________
A-14
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 OR HOLDINGS. 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 OR HOLDINGS SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
PAGE
----
Available Information................... 3
Prospectus Summary...................... 5
Risk Factors............................ 16
The Transactions........................ 22
The Exchange Offer...................... 26
Use of Proceeds......................... 35
Capitalization.......................... 36
Pro Forma Combined Financial
Information........................... 37
Selected Historical Financial Data...... 44
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 46
Business................................ 56
Management.............................. 74
Common Stock Placement.................. 80
Related Transactions.................... 80
Beneficial Ownership of Holdings' Common
Stock................................. 81
Description of the Bank Credit
Agreement............................. 82
Description of the Notes................ 85
Certain Federal Income Tax
Considerations........................ 112
Legal Matters........................... 114
Experts................................. 114
Index to Combined Financial
Statements............................ F-1
Annex A-Texas Petrochemicals Corporation
Letter of Transmittal................. A-1
Until , 1996 (90 days after the date of this Prospectus),
all dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This requirement is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[LOGO FOR TEXAS PETROCHEMICALS CORPORATION]
Texas Petrochemicals
Corporation
PROSPECTUS
- ------------------------------------------------------
- ------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Article 2.02A of the Texas Business Corporation Act (the "TBCA") provides,
in relevant part, as follows:
Subject to the provisions of Section B and C of this Article, each
corporation shall have the power:
(16) To indemnify directors, officers, employees, and agents of the
corporation, and to purchase and maintain liability insurance for those
persons.
Pursuant to policies of Directors and Officers Liability and Company
Reimbursement insurance with total limits of $10,000,000, the Directors and
Officers of the Company 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 the Company.
In addition, Section 5(b) of the Registration Rights Agreement filed as
Exhibit 4.2 hereto provides for indemnification of the Company and the
Directors, Officers and Controlling Persons of the Company by holders of the
Notes.
The Company has entered into Indemnity Agreements with its directors and
certain officers pursuant to which the Company generally is obligated to
indemnify its directors and such officers to the full extent permitted by the
TBCA, as described above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
3.1 -- Certificate of Incorporation of the Company, as amended
3.2 -- Bylaws of the Company
4.1 -- Indenture, as supplemented, 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
4.2 -- Registration Rights Agreement by and between TPC,
CS First Boston Corporation, and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, effective as of
June 25, 1996
5* -- Opinion of Bracewell & Patterson, L.L.P. as to the validity of the Exchange Notes being
offered
8* -- Opinion of Bracewell & Patterson, L.L.P. as to certain federal income tax matters
10.1 -- Holdings' 1996 Stock Option Plan
10.2 -- TPC Employee Stock Ownership Plan
10.3 -- TPC Employee Stock Ownership Plan Trust Agreement
10.4 -- TPC Cash Bonus Plan
10.5 -- Security Agreement by and between Boatmen's Trust Company of Texas and TPC
10.6 -- TPC Profit Sharing Plan
10.7 -- Lease for Calcasieu Parish, Louisiana
10.8 -- Credit Agreement dated as of July 1, 1996 among TPC, Texas Commerce Bank, National
Association, ABN AMRO North America, Inc., and The Bank of Nova Scotia
10.9 -- Security Agreement dated as of July 1, 1996 by and between TPC and Texas Commerce Bank,
National Association
</TABLE>
II-1
<TABLE>
<CAPTION>
<S> <C> <C>
10.10 -- Pledge Agreement dated as of July 1, 1996 by and between TPC and Texas Commerce Bank,
National Association
10.11 -- Letter Agreement dated May 6, 1996, by and among The Sterling Group, Inc., Holdings, TPC
Holding, and TPC
10.12 -- Form of Indemnity Agreement between TPC and each of its
officers and directors 10.13 -- Form of Tax Sharing Agreement among
Holdings, TPC Holding, TPC and Texas Butylene Chemical
Corporation
12 -- Statement re Computation of Ratio of Earnings to Fixed Charges
21 -- Subsidiaries of the Registrant
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consents of Bracewell & Patterson, L.L.P. (included in their opinions filed as Exhibits 5
and 8 hereto)
24 -- Powers of Attorney
25 -- Statement of Eligibility and Qualification on Form T-1 of Fleet National Bank as Trustee
under the Indenture
</TABLE>
- ------------
* To be filed by amendment
(b) Financial Statement Schedules
None.
ITEM 22. 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 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
II-2
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.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, TEXAS
PETROCHEMICALS CORPORATION 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 SEPTEMBER 3, 1996.
TEXAS PETROCHEMICALS CORPORATION
By:/s/ B. W. WAYCASTER
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 SEPTEMBER 3, 1996.
SIGNATURE TITLE
- ---------------------------- --------------------------------------------------
/s/ WILLIAM A. McMINN* Chairman
William A. McMinn
/s/ B. W. WAYCASTER Director, President and Chief Executive Officer
B. W. Waycaster (principal executive officer)
/s/ CLAUDE E. MANNING Chief Financial Officer
Claude E. Manning (principal financial and accounting officer)
/s/ GORDON A. CAIN* Director
Gordon A. Cain
/s/ JAMES J. COLLIS* Director
James J. Collis
/s/ WILLIAM B. HUFF* Director
William B. Huff
/s/ SUSAN O. RHENEY* Director
Susan O. Rheney
/s/ JOHN T. SHELTON* Director
John T. Shelton
*By:/s/ CLAUDE E. MANNING
Claude E. Manning
(ATTORNEY-IN-FACT FOR PERSONS INDICATED)
II-4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Certificate of Incorporation of the Company, as amended
3.2 -- Bylaws of the Company
4.1 -- Indenture, as supplemented, 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
4.2 -- Registration Rights Agreement by and between TPC,
CS First Boston Corporation, and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, effective as of
June 25, 1996
5* -- Opinion of Bracewell & Patterson, L.L.P. as to the validity of the Exchange Notes being
offered
8* -- Opinion of Bracewell & Patterson, L.L.P. as to certain federal income tax matters
10.1 -- Holdings' 1996 Stock Option Plan
10.2 -- TPC Employee Stock Ownership Plan
10.3 -- TPC Employee Stock Ownership Plan Trust Agreement
10.4 -- TPC Cash Bonus Plan
10.5 -- Security Agreement by and between Boatmen's Trust Company of Texas and TPC
10.6 -- TPC Profit Sharing Plan
10.7 -- Lease for Calcasieu Parish, Louisiana
10.8 -- Credit Agreement dated as of July 1, 1996 among TPC, Texas Commerce Bank, National
Association, ABN AMRO North America, Inc., and The Bank of Nova Scotia
10.9 -- Security Agreement dated as of July 1, 1996 by and between TPC and Texas Commerce Bank,
National Association
10.10 -- Pledge Agreement dated as of July 1, 1996 by and between TPC and Texas Commerce Bank,
National Association
10.11 -- Letter Agreement dated May 6, 1996, by and among The Sterling Group, Inc., Holdings, TPC
Holding, and TPC
10.12 -- Form of Indemnity Agreement between TPC and each of its
officers and directors 10.13 -- Form of Tax Sharing Agreement among
Holdings, TPC Holding, TPC and Texas Butylene Chemical Corporation
12 -- Statement re Computation of Ratio of Earnings to Fixed Charges
21 -- Subsidiaries of the Registrant
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consents of Bracewell & Patterson, L.L.P. (included in their opinions filed as Exhibits 5
and 8 hereto)
24 -- Powers of Attorney
25 -- Statement of Eligibility and Qualification on Form T-1 of Fleet National Bank as Trustee
under the Indenture
</TABLE>
- ------------
* To be filed by amendment
EXHIBIT 3.1
FILED
In the Office of the
Secretary of State of Texas
Dec 20 1973
Betty Waller
Deputy Director, Corporation Division
ARTICLES OF INCORPORATION OF
TEXAS OLEFINS TRANSPORTATION COMPANY
We, the undersigned natural persons of the age of twenty-one (21) years or
more, at least two of whom are citizens of the State of Texas, acting as
incorporators of the corporation under the Texas Business Corporation Act, do
hereby adopt the following articles under corporation for said corporation.
ARTICLE NO. ONE
The name of the corporation is TEXAS OLEFINS TRANSPORTATION COMPANY.
ARTICLE NO. TWO
The period of its duration is perpetual.
ARTICLE NO. THREE
The purpose or purposes for which the corporation is organized are: to
transport by barge, truck, or other types of transportation, liquids, oil, and
other petroleum products.
ARTICLE NO. FOUR
The aggregate number of shares which the corporation shall have the
authority to issue is 500,000 shares, having no par value.
ARTICLE NO. FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of $1000.00, consisting of
money, labor done or property actually received, which sum is not less than
$1,000.00.
ARTICLE NO. SIX
The Post office address of its initial registered office is 5309 Decker
Drive, Baytown, Texas, and the name of its initial registered agent at such
address is DAVE C. SWALM.
ARTICLE NO. SEVEN
The number of directors constituting the initial Board of Directors is
three (93) and the names and addresses of the persons who are to serve as
directors until their successors are elected and qualified are: Dave C. Swalm,
President, 5309 Decker Drive, Baytown, Texas; Louis E. Palmer, Vice-President,
5309 Decker Drive, Baytown, Texas; Patrick A. Bowers, Secretary-Treasurer, 5309
Decker Drive, Baytown, Texas.
ARTICLE NO. EIGHT
The names and addresses of the incorporators are: Dave C. Swalm, 5309
Decker Drive, Baytown, Texas; Louis E. Palmer, 5309 Decker Drive, Baytown,
Texas; Patrick A. Bowers, 5309 Decker Drive, Baytown, Texas.
IN WITNESS WHEREOF, we have hereunto set our hands this the 30th day of
November, 1973.
Dave C. Swalm
DAVE C. SWALM
1
Louis E. Palmer
LOUIS E. PALMER
Patrick A. Bowers
PATRICK A. BOWERS
THE STATE OF TEXAS X
COUNTY OF HARRIS X
That I, Evelyn Underhill, a Notary Public, do hereby certify that on this
the 30th day of November, 1973, personally appeared DAVE C. SWALM, LOUIS E.
PALMER, and PATRICK A. BOWERS, who each being by me first duly sworn, severally
declared that they are the persons who signed the foregoing instrument or
document as incorporators and that the statements therein contained are true.
EVELYN UNDERHILL
Notary Public in and for
Harris County, Texas.
FILED
In the Office of the
Secretary of State of Texas
JAN 14 1995
James B. Chote
Deputy Director, Corporation Division
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE ONE: The name of the corporation is TEXAS OLEFINS TRANSPORTATION
COMPANY.
ARTICLE TWO: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation on December 18, 1974, said
amendment being as follows:
Said amendment changing the name of said corporation to TEXAS
PETROCHEMICALS CORPORATION.
The amendment alters or changes Article One of the original Articles of
Incorporation, and said Article is hereby amended to read as follows:
The name of the corporation is TEXAS PETROCHEMICALS CORPORATION.
ARTICLE THREE: The number of shares of the corporation outstanding at the
time of such adoption was 500,000 and the number of shares entitled to vote
thereon was 500,000, there only being one class of stock.
ARTICLE FOUR: The number of shares voted for such amendment was 500,000,
and the number of shares voted against such amendment was none.
ARTICLE FIVE: The holders of all of the shares outstanding and entitled to
vote on said amendment have signed a consent in writing adopting said amendment.
2
ARTICLE SIX: There was no change in the classification of any issued shares
by virtue of said amendment.
ARTICLE SEVEN: There was no change by said amendment in the amount of the
stated capital.
Dated this the 18th day of December, 1974.
TEXAS OLEFINS TRANSPORTATION COMPANY
By DAVE C. SWALM
Dave C. Swalm, President
PATRICK A. BOWERS
Patrick A. Bowers, Secretary
THE STATE OF TEXAS X
COUNTY OF HARRIS X
I, the undersigned authority, a Notary Public, do hereby certify that on
this the 18th day of December, 1974, personally appeared before me Dave C. Swalm
who declared to me he is President of Texas Olefins Transportation Company, and
Patrick A. Bowers, who declared to me he is Secretary of Texas Olefins
Transportation Company, said persons executed the foregoing document and each of
them having been duly sworn, acknowledged that they signed the foregoing
document in the capacity therein set forth and declared that the statements
therein contained are true and correct.
IN WITNESS THEREOF, I have hereunto set my hand and seal of office this the
18th day of December, 1974.
JAMES A. GIRRADEAU
Notary Public in and for
Harris County, Texas
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
TEXAS PETROCHEMICALS CORPORATION
Articles of Amendment of the Articles of Incorporation of TEXAS
PETROCHEMICALS CORPORATION, CHARTER NUMBER 335221-0.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation and prior Amendments thereto, to-wit:
ARTICLE ONE
The name of the corporation is TEXAS PETROCHEMICALS CORPORATION.
ARTICLE TWO
The following amendments to the Articles of Incorporation was adopted by
the incorporation on January 16, 1984.
This Amendment amends ARTICLE THREE of the original Articles of
Incorporation of said Corporation and substituted in lieu thereof, a new ARTICLE
THREE in its entirely being as follows:
ARTICLE THREE
3
The purpose for which said Corporation is organized is the transaction of
any or all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
This Amendment amends ARTICLE FOUR of the original Articles of
Incorporation of said Corporation, said ARTICLE FOUR being deleted in its
entirely and the following ARTICLE FOUR is substituted in lieu thereof, to-wit:
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have authority
to issue is TEN MILLION (10,000,000) shares having no par value.
ARTICLE THREE
Before the Amendment, the number of shares outstanding was FIVE HUNDRED
THOUSAND (500,000) shares all of one class, there only being one class of stock,
and the number of shares voted for such amendment is FIVE HUNDRED THOUSAND
(500,000) and the number of shares voted against such Amendment was none.
ARTICLE FOUR
There is no change in the classification of any issued shares by virtue of
said Amendment.
ARTICLE FIVE
There was no change by said Amendment in the amount of the stated capital.
DATED -------------------------, 1984.
TEXAS PETROCHEMICALS CORPORATION
BY John T. Shelton
JOHN T. SHELTON, President
Eugene J. Bohny
EUGENE J. BOHNY, Secretary
THE STATE OF TEXAS X
COUNTY OF HARRIS X
I, the undersigned authority, a Notary Public, do hereby certify that on
this the 29th day of February, 1984, personally appeared before me JOHN S.
SHELTON who declared to me he is President of TEXAS PETROCHEMICALS CORPORATION,
and EUGENE J. BOHNY who declared to me he is Secretary of TEXAS PETROCHEMICALS
CORPORATION, said persons executed the foregoing document and each of them
having been duly sworn, acknowledged that they signed the foregoing document in
the capacity therein set forth and declared that the statements therein
contained are true and correct.
IN WITNESS THEREOF, I have hereunto set my hand and seal of office this the
29th day of February, 1984.
LaNell Cooke
NOTARY PUBLIC IN AND FOR
HARRIS COUNTY, TEXAS
Notary's Printed Name:
La Nell Cooke
My Commission Expires: 7/31/84
FILED
In the Office of the
Secretary of State of Texas
Jan 14 1975
James B. Chote
Deputy Director, Corporation Division
4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to it Articles of Incorporation:
ARTICLE ONE: The name of the corporation is TEXAS OLEFINS TRANSPORTATION
COMPANY.
ARTICLE TWO: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation on December 18, 1974, said
amendment being as follows:
Said amendment changing the name of said corporation to TEXAS
PETROCHEMICALS CORPORATION.
The amendment alters or changes Article One of the original Articles of
Incorporation, and said Article is hereby amended to read as follows:
The name of the corporation is TEXAS PETROCHEMICALS CORPORATION.
ARTICLE THREE: The number of shares of the corporation outstanding at the
time of such adoption was 500,000 and the number of shares entitled to vote
thereon was 500,000, there only being one class of stock.
ARTICLE FOUR: The number of shares voted for such amendment was 500,000,
and the number of shares voted against such amendment was none.
ARTICLE FIVE: The holders of all of the shares outstanding and entitled to
vote on said amendment have signed a consent in writing adopting said amendment.
ARTICLE SIX: There was no change in the classification of any issued shares
by virtue of said amendment.
ARTICLE SEVEN: There was no change by said amendment in the amount of the
stated capital.
Dated this the 18th day of December, 1974.
TEXAS OLEFINS TRANSPORTATION COMPANY
By DAVE C. SWALM
Dave C. Swalm President
PATRICK A. BOWERS
Patrick A. Bowers, Secretary
The STATE OF TEXAS X
COUNTY OF HARRIS X
I, the undersigned authority, a Notary Public, do hereby certify that on
this the 18th day of December, 1974, personally appeared before me Dave C. Swalm
who declared to me he is President of Texas Olefins Transportation Company, and
Patrick A. Bowers, who declared to me he is Secretary of Texas Olefins
Transportation Company, said persons executed the foregoing document and each of
them having been duly sworn, acknowledged that they signed the foregoing
document in the capacity therein set forth and declared that the statements
therein contained are true and correct.
IN WITNESS THEREOF, I have hereunto set my hand and seal of office this the
18th day of December, 1974.
JAMES A. GIRRADEAU
Notary Public in and for
Harris County, Texas
5
FILED
In the Office of the
Secretary of State of Texas
MAR 05 1984
Corporation Section
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
TEXAS PETROCHEMICALS CORPORATION
Articles of Amendment of the Articles of Incorporation of TEXAS
PETROCHEMICALS CORPORATION, CHARTER NUMBER 335221-0.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation and prior Amendments thereto, to-wit:
ARTICLE ONE
The name of the corporation is TEXAS PETROCHEMICALS CORPORATION.
ARTICLE TWO
The following amendments to the Articles of Incorporation was adopted by
the incorporation on January 16, 1984.
This Amendment amends ARTICLE THREE of the original Articles of
Incorporation of said Corporation and substituted in lieu thereof, a new ARTICLE
THREE in its entirely being as follows:
ARTICLE THREE
The purpose for which said Corporation is organized is the transaction of
any or all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act.
This Amendment amends ARTICLE FOUR of the original Articles of
Incorporation of said Corporation, said ARTICLE FOUR being deleted in its
entirely and the following ARTICLE FOUR is substituted in lieu thereof, to-wit:
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have authority
to issue is TEN MILLION (10,000,000) shares having no par value.
ARTICLE THREE
Before the Amendment, the number of shares outstanding was FIVE HUNDRED
THOUSAND (500,000) shares all of one class, there only being one class of stock,
and the number of shares voted for such amendment is FIVE HUNDRED THOUSAND
(500,000) and the number of shares voted against such Amendment was none.
ARTICLE FOUR
There is no change in the classification of any issued shares by virtue of
said Amendment.
ARTICLE FIVE
There was no change by said Amendment in the amount of the stated capital.
DATED -----------------------, 1984.
TEXAS PETROCHEMICALS CORPORATION
6
BY JOHN T. SHELTON
John T. Shelton, President
EUGENE J. BOHNY
Eugene J. Bohny, Secretary
THE STATE OF TEXAS X
COUNTY OF HARRIS X
I, the undersigned authority, a Notary Public, do hereby certify that on
this the 29th day of February, 1984, personally appeared before me JOHN S.
SHELTON who declared to me he is President of TEXAS PETROCHEMICALS CORPORATION,
and EUGENE J. BOHNY who declared to me he is Secretary of PETROCHEMICALS
CORPORATION, said persons executed the foregoing document and each of them
having being duly sworn, acknowledged that they signed the foregoing document in
the capacity therein set forth and declared that the statements therein
contained are true and correct.
IN WITNESS THEREOF, I have hereunto set my hand and seal of office this the
29th day of February, 1984.
LA NELL COOKE
NOTARY PUBLIC IN AND FOR
HARRIS COUNTY, TEXAS
Notary's Printed Name:
La Nell Cooke
My Commission Expires: 7/31/84
FILED
In the Office of the
Secretary of State of Texas
APR 06 1992
Corporations Section
ARTICLES OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
TEXAS PETROCHEMICALS CORPORATION
CHARTER NO. 335221-0
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned Corporation adopts the following Articles of
Amendment to its Articles of Incorporation and prior Amendments thereto to-wit:
ARTICLE ONE
The name of the Corporation is: TEXAS PETROCHEMICALS CORPORATION.
ARTICLE TWO
The following Amendments to the Articles of Incorporation were adopted by
the Shareholders of the Corporation on March 16, 1992, by a Statement of
Unanimous Consent, a copy of which is attached hereto as Exhibit "A", so as to:
7
1) Deny preemptive rights; and
2) Prohibit cumulative voting.
ARTICLE THREE
The following Amendments to the Articles of Incorporation are in addition
to the original or amended Articles of Incorporation and the full text of each
Article added to the Articles of Incorporation is as follows:
"ARTICLE TEN
DENIAL OF PREEMPTIVE RIGHTS
"Provisions limiting or denying Shareholders the preemptive right to
acquire additional or treasury shares of the Corporation are:
"No Shareholder shall be entitled, as a matter of right, to subscribe
for, purchase, or receive any shares of stock or any rights or options of
the Corporation which it may issue to sell, whether out of the number of
shares authorized by these Articles of Incorporation or by Amendment
hereof, or out of the shares of stock of the Corporation acquired by it
after the issuance thereof, nor shall any Shareholder be entitled, as a
matter of right, to subscribe for, purchase, or receive any bonds,
debentures, or other securities which the Corporation may issue or sell
that shall be convertible into, or exchangeable for, shares or to which
shall be attached or appertaining any warrant or warrants or other
instrument or instruments that shall confer upon the holder or owner of
such obligations the right to subscribe for, purchase, or receive from the
Corporation any shares of its authorized capital stock, but, in all such
additional issuances of stock, rights, and options, or of bonds,
debentures, or other securities convertible into, exchangeable for, stock
or to which warrants shall be attached or appertain, or which shall confer
upon the holder the right to subscribe for, purchase, or receive any shares
of stock, may be issued, optioned for, and sold or disposed of by the
Corporation pursuant to resolution of its Board of Directors to such
persons, firms, or corporations, and upon such terms as may be lawful and
may to such Board of Directors seem proper and advisable, without first
offering such stock or securities or any part thereof to the Stockholders.
The acceptance of stock in the Corporation shall be a waiver of any
preemptive right or preferential right which, in the absence of this
provision, might otherwise be affected by Shareholders of the Corporation
or any of them.
"ARTICLE ELEVEN
PROHIBITION OF CUMULATIVE VOTING
"At any election of Directors, each Shareholder entitled to vote at such
election shall have the right to vote in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has the right to vote, but it is expressly prohibited for
any Shareholder to cumulate his votes by giving one candidate as many votes as
the number of such Directors multiplied by his shares shall equal, or by
distributing such votes on such principal among any such of candidates."
ARTICLE FOUR
The number of shares of the Corporation outstanding at the time of such
adoption was 3,985,000 shares of Common Stock, each without par value, and each
with a stated value of $1.00 per share.
The number of shares entitled to vote thereon was 3,985,000 shares of
Common Stock.
ARTICLE FIVE
The number of shares voted for such Amendments was:
CLASS FOR AGAINST
------- ------- -------
Common 3,985,000 -0-
ARTICLE SIX
The manner in which any exchange, reclassification, or cancellation of
issued shares provided for in this Amendment to the Articles of Incorporation
shall be effected is as follows:
8
None.
ARTICLE SEVEN
The manner in which this Amendment to the Articles of Incorporation effects
a change in the amount of stated capital, and the amount of stated capital as
changed by this Amendment to the Articles of Incorporation, are as follows:
None.
DATED: March 16, 1992.
TEXAS PETROCHEMICALS CORPORATION
By: DAVE C. SWALM
Dave C. Swalm, President
Attest:
La Nell Cooke, Secretary
STATEMENT OF UNANIMOUS CONSENT
OF THE SHAREHOLDERS
(In lieu of Special Meeting of the Shareholders)
OF
TEXAS PETROCHEMICALS CORPORATION
Pursuant to Article 9.10A of the
Texas Business Corporation Act
We, the undersigned, being all of the Common Stockholders entitled to vote
at a meeting of the Shareholders of Texas Petrochemicals Corporation, a Texas
corporation, organized and existing under the laws of the State of Texas
(hereinafter sometimes called the "Corporation"), acting pursuant to Article
9.10A of the Texas Business Corporation Act (hereinafter called the "Act"), do
hereby consent and declare that when all of the Stockholders have signed this
Statement of Unanimous Consent, the following Resolution shall be deemed to be
adopted to the same extent, and to have the same force and effect, as if adopted
at a formal Special Meeting of the Stockholders duly called by the proper
officers of the Corporation for the purpose of transacting the business
hereinafter set forth.
RESOLUTION NO. S-92-03-16-01 -- Approve Amendment to the Articles of
Incorporation
WHEREAS, the Board of Directors of Texas Petrochemicals ("TPC") recommends
that TPC's Articles of Incorporation be amended in the following respects:
1) Deny preemptive rights; and
2) Prohibit cumulative voting.
WHEREAS, it is the opinion of the Board of Directors of TPC that the TPC
Shareholders approve the aforesaid Amendment to its Articles of
Incorporation;
BE IT RESOLVED, that the Shareholders of TPC do hereby approve the
Amendment to the Articles of Incorporation as set forth on Exhibit "A", a
copy of which Amendment was exhibited to the Shareholders, to which
Amendment reference is hereby made; and
BE IT FURTHER RESOLVED, that, the Shareholders of TPC do hereby authorize
and instruct the President of the Corporation, Dave C. Swalm, to execute
and file the Amendment to the Articles of Incorporation of TPC for and on
behalf of the Corporation and as the act and deed of the Corporation; and
BE IT FURTHER RESOLVED, that the Shareholders of TPC do hereby authorize
and instruct the proper officers of the Corporation to take all steps
necessary to carry into effect the foregoing resolution.
RESOLUTION NO. S-92-03-16-02 -- Amend Section 3.2 of the By-Laws
9
WHEREAS, the By-Laws of the Corporation provide that the number of
Directors of the Corporation shall be five; and
WHEREAS, the Board of Directors has recommended that Section 3.2 of the
By-Laws be amended so as to increase the number of Directors from five to seven;
BE IT RESOLVED, that the Stockholders of TPC do hereby authorize and
approve the following Amendment to Section 3.2 of the By-Laws of TPC, so
that said Section 3.2 shall hereafter read as follows:
"3.2" Number; Qualifications
The number of Directors of the Corporation shall be seven (7),
unless and until otherwise determined by a vote of the majority of
the entire Board of Directors. The number of Directors shall not be
less than three (3), unless all of the outstanding shares are owned
beneficially and of record by less than three (3) shareholders, in
which event the number of Directors shall not be less than the
number of Shareholders. None of the Directors need be residents of
the State of Texas nor a Shareholder of the Corporation."
and
BE IT FURTHER RESOLVED, that the Shareholders do hereby authorized and
instruct the proper officers of the Corporation to execute an Amendment to
the By-Laws amending Section 3.2 as hereinabove set forth and a copy of the
Amendment in the minute book of the Corporation.
The undersigned constitute all of the Shareholders of Texas petrochemicals
Corporation entitled to vote on the aforesaid resolutions.
This consent may be executed in one or more parts, all of which together
shall be one and the same instrument.
IN WITNESS WHEREOF, this Statement of Unanimous Consent has been executed
by the following Shareholders this, the 16th day of March, 1992.
NUMBER OF
NAME OF SHAREHOLDER SHARES HELD SIGNATURE
- -------------------- ------------ --------------
Texas Olefins Company 3,200,000 Texas Olefins Company
By: DAVE C. SWALM
Dave C. Swalm
Chairman of Board
and President
Dave C. Swalm 500,000 DAVE C. SWALM
Ronald W. Woliver 120,000 RONALD W. WOLIVER
John T. Shelton 100,000 JOHN T. SHELTON
Eugene J. Bohny 22,000 EUGENE J. BOHNY
Marsha A. Wilder 10,000 MARSHA A. WILDER
La Nell Cooke 10,000 LA NELL COOKE
Mark C. Mendelovitz 10,000 MARK C. MENDELOVITZ
The Swalm Foundation 7,000 The Swalm Foundation
By: DAVE C. SWALM
Dave C. Swalm
Trustee
Terry Harris 3,000 TERRY HARRIS
Clayton R. Stevens 2,000 CLAYTON R. STEVENS
Claude E. Manning 1,000 CLAUDE E. MANNING
------------
TOTAL: 3,985,000
============
10
FILED
In the Office of the
Secretary of State of Texas
July 19 1991
Corporations Section
ARTICLES OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
TEXAS PETROCHEMICALS CORPORATION
Charter No. 335221-0
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned Corporation adopts the following Articles of
Amendment to its Articles of Incorporation and prior amendments thereto, to-wit:
ARTICLE ONE
The name of the Corporation is: TEXAS PETROCHEMICALS CORPORATION.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by the
Shareholders of the Corporation on July 12, 1991, by a Statement of Unanimous
Consent, a copy of which is attached hereto as Exhibit "A", so as to amend the
purpose clause to authorize the Corporation to trade in future purchases and
sales commodities, commodity options, foreign futures and foreign options,
commodity contracts, and physical commodities, including currencies on margin
and exchanges.
This Amendment amends Article Three of the Articles of Incorporation, as
amended, of said Corporation and substitutes in lieu thereof a new Article Three
in its entirety, being as follows:
"ARTICLE THREE
The purpose for which the Corporation is organized is the transaction of
any and all lawful business for which corporations may be incorporated under the
Texas Business Corporation Act including, but not limited to: trade in future
purchases and sales commodities, commodity options, foreign futures and foreign
options, commodity contracts, and physical commodities, including currencies on
margin and exchanges."
ARTICLE THREE
The number of shares of the Corporation outstanding at the time of such
adoption was 3,987,000 shares of Common Stock, each without par value, and with
a stated value of $1.00 per share.
The designation and number of outstanding shares of each class entitled to
vote thereon as a class were as follows:
Number of Shares Voted
CLASS FOR AGAINST
--------- ------- -------
Common 3,987,000 -0-
ARTICLE FOUR
The holders of all the shares outstanding and entitled to vote on said
amendment have signed a consent in writing, pursuant to Article 9.10A, adopting
said amendment, and any written notice required by Article 9.10A has been given.
ARTICLE FIVE
There is no change in classification of any issued shares by virtue of said
amendment.
ARTICLE SIX
11
There was no change by said amendment in the amount of stated capital.
DATED: July 12, 1991.
TEXAS PETROCHEMICALS CORPORATION
By: JOHN T. SHELTON
John T. Shelton
Executive Vice President
Attest:
LA NELL COOKE
La Nell Cooke, Secretary
STATEMENT OF UNANIMOUS CONSENT
OF THE SHAREHOLDERS
(In lieu of Special Meeting of the Shareholders)
OF
TEXAS PETROCHEMICALS CORPORATION
Pursuant to Article 9.10A of the
Texas Business Corporation Act
We, the undersigned, being all of the Shareholders entitled to vote at a
meeting of the Shareholders of Texas Petrochemicals Corporation, a Texas
corporation, organized and existing under the laws of the State of Texas
(hereinafter sometimes called the "Corporation"), acting pursuant to Article
9.10A of the Texas Business Corporation Act (hereinafter called the "Act"), do
hereby consent and declare that when all of the Shareholders have signed this
Statement of Unanimous Consent, the following Resolution shall be deemed to be
adopted to the same extent, and to have the same force and effect, as if adopted
at a formal Special Meeting of the Shareholders duly called by the proper
officers of the Corporation for the purpose of transacting the business
hereinafter set forth.
RESOLUTION No. S-91-07-12-01 -- Approve Amendment to the Articles of
Incorporation Changing the Purpose Clause
WHEREAS, the Board of Directors of Texas Petrochemicals ("TPC") have
recommended and approved the Amendment to the Articles of Incorporation of TPC,
so as to enlarge the purpose clause; and
WHEREAS, it is the opinion of the Board of Directors of TPC that it
recommend to its Shareholders the option and approval of an amendment to the
Articles of Incorporation of TPC, so as to enlarge its purposes clause; and
WHEREAS, the Shareholders have determine it is in their best interest and
the best interest of the Corporation that the Articles of Amendment to the
Articles of Incorporation of TPC enlarging its purpose clause be approved and
performed;
BE IT RESOLVED, that the Shareholders of TPC hereby adopt and approve the
Articles of Amendment to the Articles of Incorporation, as amended, of TPC,
pursuant to which Article Three of Articles of Incorporation, as amended,
of TPC shall hereafter be stated as follows:
"ARTICLE THREE
The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated
under the Texas Business Corporation Act including, but not limited to:
trade in future purchases and sales commodities, commodity options, foreign
futures and foreign options, commodity contracts, and physical commodities,
including currencies on margin and exchanges."
and
BE IT FURTHER RESOLVED, that the Shareholders of TPC do hereby authorize
and instruct the Board of Directors and Officers of TPC, for and on behalf
of TPC, to take all action and execute and
12
file all documents that are necessary or convenient to carry out and
perform the amendment to the Articles of Incorporation of TPC, as
hereinabove set forth.
The undersigned constitute all the Shareholders of Texas Petrochemicals
Corporation entitled to vote on the action.
This consent may be executed in one or more parts, all of which together
shall be one and the same instrument.
NUMBER OF
DATE NAME OF SHAREHOLDER SHARES HELD SIGNATURE
- ------ ---------------------- ----------
7/12/91 Texas Olefins Company 3,200,000 Texas Olefins Company
By: DAVE C. SWALM
Dave C. Swalm
Chairman of the
Board
and President
7/12/91 Dave C. Swalm 500,000 DAVE C, SWALM
7/12/91 John T. Shelton 100,000 JOHN T. SHELTON
7/12/91 Ronald W. Woliver 120,000 RONALD W. WOLIVER
7/12/91 Eugene J. Bohny 22,000 EUGENE J. BOHNY
7/12/91 La Nell Cooke 10,000 LA NELL COOKE
7/12/91 Mark C. Mendelovitz 10,000 MARK C. MENDELOVITZ
7/12/91 Marsha A. Wilder 10,000 MARSHA A. WILDER
7/12/91 The Swalm Foundation 7,000 The Swalm Foundation
By: DAVE C. SWALM
Dave C. Swalm
Trustee
7/12/91 Terry Harris 3,000 TERRANCE B. HARRIS
7/12/91 Clayton R. Stevens 2,000
7/12/91 Tom Grimsrud 2,000
7/12/91 Claude E. Manning 1,000 CLAUDE E. MANNING
------------
TOTAL: 3,987,000
============
FILED
In the Office of the
Secretary of State of Texas
AUG 17 1988
Corporations Section
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
TEXAS PETROCHEMICALS CORPORATION
Articles of Amendment to the Articles of Incorporation of Texas
Petrochemicals Corporation, Charter No. 335221-0.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation and prior Amendments thereto, to-wit:
ARTICLE ONE
The name of the corporation is Texas Petrochemicals Corporation.
ARTICLE TWO
13
The following amendment to the Articles of Incorporation was adopted by the
Shareholders of the Corporation on August 16, 1988, so as to add a new Article
No. Nine thereto.
The amendment is an addition to the original or amended Articles of
Incorporation and the full text of each provision added is as follows:
ARTICLE NINE
INDEMNIFICATION OF DIRECTORS
"A director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for any act or omission in the
director's capacity as a director, except that this Article Nine does not
eliminate or limit the liability of a director for:
(a) a breach of a director's duty of loyalty to the Corporation or its
shareholders;
(b) an act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
(c) a transaction for which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of a director's office;
(d) an act or omission for which the liability of a director is
expressly provided for by statute; or
(e) an act related to the unlawful stock purchase or payment of a
dividend.
If the Texas Miscellaneous Corporation Laws Act or the Texas Business
Corporation Act, as amended, further eliminates or limits the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by such
statute, as so amended. Any repeal or modification of the foregoing
provisions of this Article Nine shall not adversely affect any right of
protection of a director of the Corporation existing at the time of such
repeal of modification."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 4,000,000 shares of common stock each with a par value of $1.00 per
share; and the number of shares entitled to vote thereon was 1,000,000 shares of
common stock.
ARTICLE FOUR
The number of shares voted for such amendment was 4,000,000; and the number
of shares voted against such amendment was - 0 -.
ARTICLE FIVE
There is no change to the classification of any issued shares by virtue of
said amendment.
ARTICLE SIX
There was no change by said amendment in the amount of stated capital.
Dated: August 16, 1988.
TEXAS PETROCHEMICALS CORPORATION
By: JOHN T. SHELTON
John T. Shelton, President
14
By: LANELL COOKE
LaNell Cooke, Secretary
15
EXHIBIT 3.2
CONFIDENTIAL
PROPRIETARY INFORMATION OF
TEXAS OLEFINS COMPANY AND/OR
TEXAS PETROCHEMICALS CORPORATION
BY-LAWS
OF
TEXAS PETROCHEMICALS CORPORATION
ARTICLE I -- OFFICES
1.1 REGISTERED OFFICE AND AGENT
The registered office of the corporation shall be maintained at 8811 Gaylord,
Suite 100, Houston, Texas 77024 in the State of Texas. The registered office or
the registered agent, or both, may be changed by resolution of the board of
directors, upon filing the statement required by law.
1.2 PRINCIPAL OFFICE
The principal office of the Corporation shall be located at 8811 Gaylord, Suite
100, Houston, Texas 77024.
1.3 OTHER OFFICES
The Corporation may also have offices at such other places both within and
without the State of Texas as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II -- MEETINGS OF SHAREHOLDERS
2.1 ANNUAL MEETING
The annual meeting of shareholders for the election of Directors and such other
business as may properly be brought before the meeting shall be held at such
place within or without the State of Texas and at such date and time as shall be
designated by the Board of Directors and stated in the notice of the meeting or
in a duly executed waiver of notice thereof.
2.2 FAILURE TO HOLD ANNUAL MEETING
Failure to hold any annual meeting shall not work a dissolution of the
Corporation. If the annual meeting is not held within any thirteen (13) month
period, any court of competent jurisdiction in the county in which the principal
office of the Corporation is located may, on the application of any shareholder,
summarily order a meeting to be held.
2.3 SPECIAL MEETINGS
Special meetings of the shareholders for any purpose or purposes may be called
by the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of shareholders owning not less than ten (10%) percent of all the shares
entitled to vote at the meetings. A request for a special meeting shall state
the purpose or purposes of the proposed meeting, and business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice.
2.4 NOTICE AND WAIVERS OF NOTICE
(a) Written notice stating the place, day and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten (10) nor more than fifty (50) days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
by-laws 1
(b) Notice may be waived in writing signed by the person or persons entitled to
such notice. Such waiver may be executed at any time before or after the holding
of such meeting. Attendance at a meeting shall constitute a waiver of notice,
except where the person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called.
2.5 RECORD DATE
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, the Board of Directors may in advance establish a
record date which must be at least ten (10) but not more than fifty (50) days
prior to such meeting. If the Board of Directors fail to establish a record
date, the record date shall be the date on which notice of the meeting is
mailed.
2.6 VOTING LIST
(a) The office or agent having charge of the stock transfer books for shares of
the Corporation shall make, at least ten (10) days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be subject to inspection by any shareholder
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
stock transfer book shall be prima-facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders.
(b) Failure to comply with the requirements of this section shall not affect the
validity of any action taken at such meeting.
(c) An officer or agent having charge of the stock transfer books who shall fail
to prepare the list of shareholders or keep the same on file for a period of ten
(10) days, or produce and keep it open for inspection as provided in this
section, shall be liable to any shareholder suffering damage on account of such
failure, to the extent of such damage. In the event that such officer or agent
does not receive notice of a meeting of shareholders sufficiently in advance of
the date of such meeting reasonably to enable him to comply with the duties
prescribed by these By-laws, the Corporation, but not such officer or agent
shall be liable to any shareholder suffering damage on account of such failure,
to the extent of such damage.
2.7 QUORUM OF SHAREHOLDERS
The holders of a majority of the shares issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the shareholders for the transaction of business
except as otherwise provided by statute or by the Articles of Incorporation. If,
however, a quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting, provided a quorum shall be
present or represented thereat, any business may be transacted which might have
been transacted if the meeting had been held in accordance with the original
notice thereof.
2.3 WITHDRAWAL OF QUORUM
If a quorum is present at any meeting, the vote of the holders of a majority of
the shares entitled to vote, present in person or represented by proxy, shall
decide any question brought before such meeting, unless the question is one upon
which a different vote is required by express provision of the statutes or by
the Articles of Incorporation or these By-laws. The shareholders present at a
meeting at which a quorum is present may continue to transact business until
adjournment, despite the withdrawal of shareholders after the commencement of
the meeting which withdrawal leaves less than a quorum remaining at the meeting.
2.9 PROXIES
by-laws 2
No proxy shall be valid after eleven (11) months from the date of its execution,
unless otherwise provided in the proxy. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law.
2.10 VOTING OF SHARES
Each outstanding share, regardless of class, shall be entitled to one vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the Articles of Incorporation. A shareholder may vote either in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact.
2.11 ACTION WITHOUT MEETING OR BY USE OF CONFERENCE TELEPHONE
Any action permitted or required by law, these By-laws or by the Articles of
Incorporation of the Corporation, to be taken at a meeting of the shareholders,
the Board of Directors or any committee designated by the Board of Directors may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the shareholders or members of the Board of Directors or
committee, as the case may be. 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. Subject to the requirement for
notice of meetings, shareholders, members of the Board of Directors, or members
of any committee designated by the Board of Directors, may participate in and
hold a meeting of such shareholders, Board of Directors or committee, as the
case may be, by means of conference telephone 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.
ARTICLE III -- DIRECTORS
3.1 POWERS
The business and affairs of the Corporation and all corporate powers shall be
managed by the Board of Directors, subject to any limitation imposed by statute,
the Articles of Incorporation or these By-laws as to action which requires
authorization or approval by the shareholders.
3.2 NUMBER; QUALIFICATIONS
The number of the directors of the Corporation shall be ( ), unless and
until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three (3), unless all
of the outstanding shares are owned beneficially and of record by less than
three (3) shareholders, in which event the number of Directors shall not be less
than the number of shareholders. None of the Directors need be residents of the
State of Texas or shareholders of the Corporation.
3.3 ELECTION
The Directors shall be elected at the annual meeting of the shareholders, and
each Director elected shall serve until his successor shall have been elected
and qualified.
3.4 VOTING
Every shareholder entitled to vote shall have the right to: vote the number of
voting shares owned by him for as many persons as there are directors to be
elected and for whose election he has the right to vote; or unless cumulative
voting is prohibited by the Articles of Incorporation to cumulate his votes by
giving one candidate as many votes as the number of such Directors multiplied by
the number of his shares shall equal, or by distributing such votes on the same
principal among any number of such candidates. Any shareholder who intends to
cumulate his votes if herein authorized shall give written notice of his
intention to the Secretary of the Corporation on or before the date preceding
the election at which such shareholder intends to cumulate his votes. All
shareholders may cumulate their votes if any shareholder gives the written
notice provided for herein.
3.5 REMOVAL OF DIRECTORS
by-laws 3
(a) At any meeting of shareholders called expressly for the purpose of removing
a Director, any Director or the entire Board of Directors may be removed, with
or without cause, by a vote of the holders of a majority of the shares then
entitled to vote at an election of Directors.
(b) Unless cumulative voting is prohibited by the Articles of Incorporation, if
less than the entire Board is removed, no one of the Directors may be removed if
the votes cast against his removal would be sufficient to elect him if then
cumulatively voted at an election of the entire Board of Directors.
3.6 VACANCIES
Any vacancy in the Board of Directors caused by death, resignation, removal or
otherwise shall be filled by a majority of the remaining Directors though less
than a quorum of the Board of Directors. A Director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
3.7 INCREASE OR DECREASE IN NUMBER
The number of Directors may be increased or decreased from time to time by
amendment to these By-laws but no decrease shall have the effect of shortening
the term of any incumbent Director. Any directorship to be filled by reason of
an increase in the number of Directors shall be filled by election at an annual
or special meeting of shareholders.
ARTICLE IV -- MEETINGS OF THE BOARD OF DIRECTORS
4.1 PLACE
Meetings of the Board of Directors, regular or special, may be held either
within or without the State of Texas.
4.2 ANNUAL MEETING
Within thirty (30) days after each annual meeting of shareholders the Board of
Directors elected at such meeting shall hold an annual meeting at which they
shall elect officers and transact such other business as shall come before the
meeting.
4.3 REGULAR MEETING
Regular meetings of the Board of Directors may be held upon notice, or without
notice unless notice is required under these By-laws and at such time and at
such place as shall from time to time be determined by the Board.
4.4 SPECIAL MEETING
Special meetings of the Board of Directors may be called by the Chairman of the
Board of Directors, the President, or by a majority of the Directors for the
time being in office and shall be called by the Secretary on the written request
to two (2) Directors. Notice of each special meeting of the Board of Directors
shall be given to each Director at least ten (10) days before the date of the
meeting.
4.5 NOTICE AND WAIVER OF NOTICE
Attendance of a Director at any meeting shall constitute a waiver of notice of
such meeting, except where a Director attends for the express purpose of
objection to the transaction of any business on the ground that the meeting is
not lawfully called or convened. Except as may be otherwise provided by law or
by the Articles of Incorporation or by these By-laws, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
4.6 QUORUM OF DIRECTORS
At all meetings of the Board of Directors a majority of the Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the Directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
by-laws 4
4.7 ACTION WITHOUT MEETINGS
Any action required or permitted to be taken at a meeting of the Board of
Directors or any committee may be taken without a meeting or by means of
conference telephone if a consent in writing, setting forth the action so taken,
is signed by all the members of the Board of Directors or committee, as the case
may be.
4.8 COMMITTEES
The Board of Directors may from time to time designate members of the Board to
constitute committees, including an Executive Committee, which shall in each
case consist of such number of Directors, not less than two, and shall have and
may exercise such power, as the Board may determine and specify in the
respective resolutions appointing them. A majority of all the members of any
such committee may determine its action and fix the time and place of its
meeting, unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to change the number, subject as
aforesaid, and members of any such committee, to fill vacancies and to discharge
any such committee.
4.9 ORDER OF BUSINESS
At meetings of the Board of Directors, business shall be transacted in such
order as from time to time the Board may determine. At meetings of the Board of
Directors, the Chairman of the Board, if any, shall preside. In the absence of
the Chairman of the Board the President shall preside, and in the Absence of the
President, a chairman shall be chosen by the Board from among the Directors
present. The Secretary of the Corporation shall act as secretary of the meetings
of the Board of Directors, but in the absence of the Secretary, the presiding
officer may appoint any person to act as secretary of the meeting.
4.10 COMPENSATION
Directors, as such, shall not receive any stated salary for their service,
but by resolution of the Board a fixed sum and expenses of attendance, if any,
may be allowed for attendance at each annual, regular or special meeting of the
Board; provided, that nothing contained herein shall be construed to preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE V -- OFFICERS
5.1 ELECTION, NUMBER, QUALIFICATION, TERM, COMPENSATION
The officers of the Corporation shall be elected by the Board of Directors
at the annual meeting of the Board of Directors provided for in Article IV, 4.2.
The officers shall consist of a President, a Vice-President, a Secretary and a
Treasurer. The Board of Directors may also elect a Chairman of the Board,
additional Vice-Presidents, one or more Assistant Secretaries and Assistant
Treasurers and such other officers and assistant officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall have such
authority and exercise such powers and perform such duties as shall be
determined from time to time by the Board by resolution not inconsistent with
these By-laws. Two or more offices may be held by the same person, except that
the offices of President and Secretary may not be held by the same person. None
of the officers need be Directors except the President. The Board of Directors
shall have the power to enter into contracts for the employment and compensation
of officers for such terms as the Board deems advisable. The salaries of all
officers and agents of the Corporation shall be fixed by the Board of Directors.
5.2 REMOVAL
The officers of the Corporation shall hold office until their successors
are elected or appointed and qualify, or until their death or until their
resignation or removal from office. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board whenever in its
judgment the best interests of the Corporation will be served thereby. Such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer shall not of itself create
contract rights.
5.3 VACANCIES
by-laws 5
Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors.
5.4 AUTHORITY
Officers and agents shall have such authority and perform such duties in
the management of the Corporation as may be provided in these By-laws or as may
be determined by the Board of Directors, not inconsistent with these By-laws.
5.5 CHAIRMAN OF THE BOARD
The Chairman of the Board, if one is elected, shall preside at all meetings
of the Board of Directors and shall have such other powers and duties as may
from time to time be prescribed by the Board of Directors upon written
directions given to him pursuant to resolutions duly adopted by the Board of
Directors.
5.6 PRESIDENT
The President shall be the chief executive officer of the Corporation,
shall have general and active management of the business and affairs of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors, unless a Chairman of
the Board has been elected, in which event the President shall preside at
meetings of the Board of Directors in the absence or disability of the Chairman
of the Board. He or any vice-president shall execute bonds, mortgages and other
instruments requiring a seal, in the name of the Corporation, and, when
authorized by the Board, he or any vice-president may affix the seal to any
instrument requiring the same, and the seal when so affixed shall be attested by
the signature of either the Secretary or an Assistant Secretary. He or any
vice-president shall sign certificates of stock. He shall submit a report of the
operations of the corporation for the year to the Directors at their meeting
next preceding the annual meeting of the shareholders and to the shareholders at
their annual meeting.
5.7 VICE-PRESIDENT
The Vice-Presidents, in the order of their seniority, unless otherwise
determined by the Board of Directors, shall, in the absence or disability of the
President, perform the duties and have the authority and exercise the powers of
the President. They shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe
or as the President may from time to time delegate.
5.8 SECRETARY
The Secretary shall attend all meetings of the Board of Directors and all
meetings of shareholders and record all of the proceedings of the meetings of
the Board of Directors and of the shareholders in a minute book to be kept for
that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President,
under whose supervision he shall be. He shall keep in safe custody the seal of
the Corporation and, when authorized by the Board of Directors, shall affix the
same to any instrument requiring it and, when so affixed, it shall be attested
by his signature or by the signature of an Assistant Secretary or of the
Treasurer. In the absence of the Secretary or an Assistant Secretary, the
minutes of all meetings of the Board and shareholders shall be recorded by such
person as shall be designated by the President or by the Board of Directors.
5.9 TREASURER
(a) The Treasurer shall have custody of the corporate funds and securities
and shall keep full and accurate accounts and records of receipts, disbursements
and other transactions in books belonging to the Corporation, and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
(b) The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render the President and the Board of
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Directors, at its regular meetings, or when the President or Board of Directors
so requires, an account of all his transactions as Treasurer and of the
financial condition of the Corporation.
(c) If required by the Board of Directors, the Treasurer shall give the
Corporation a bond of such type, character and amount as the Board of Directors
may require.
5.10 ASSISTANT SECRETARY AND ASSISTANT TREASURER
In the absence of the Secretary or Treasurer, an Assistant Secretary or
Assistant Treasurer, respectively shall perform the duties of the Secretary or
Treasurer. Assistant Treasurers may be required to give bond as in 5.9(c). The
Assistant Secretaries and Assistant Treasurers, in general shall have such
powers and perform such duties as the Treasurer or Secretary, respectively, or
the Board of Directors or President may prescribe.
ARTICLE VI -- CERTIFICATES REPRESENTING SHARES
6.1 CERTIFICATES
The shares of the Corporation shall be represented by certificates signed
by the President or a Vice-President and the Secretary or an Assistant Secretary
of the Corporation, and shall be sealed with the seal of the Corporation or a
facsimile thereof. The signatures of the President or Vice-President and the
Secretary or Assistant Secretary upon a certificate may be facsimiles if the
certificate is counter-signed by a transfer agent, or registered by a registrar,
other than the Corporation itself or an employee of the Corporation. The
certificates shall be consecutively numbered and shall be entered in the books
of the Corporation as they are issued. Each certificate shall state on the face
thereof the holder's name, the number of shares. Certificates shall be in such
form as shall in conformity to law be prescribed from time to time by the Board
of Directors. The Corporation may appoint from time to time transfer agents and
registrars, who shall perform their duties under the supervision of the
Secretary.
6.2 PAYMENT, ISSUANCE
Shares may be issued for such consideration, not less than the par value
thereof, as may be fixed from time to time by the Board of Directors. The
consideration for the payment of shares shall consist of money paid, labor done
or property actually received. Shares may not be issued until the full amount of
the consideration fixed therefor has been paid.
6.3 LOST, STOLEN OR DESTROYED CERTIFICATES
The Board of Directors may direct a new certificate to be issued in place
of any certificate theretofore issued by the Corporation alleged to have been
lost, stolen or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, prescribe such
terms and conditions as it deems expedient and may require such indemnities as
it deems adequate to protect the Corporation from any claim that may be made
against it with respect to any such certificate alleged to have been lost or
destroyed.
6.4 REGISTRATION OF TRANSFER
Shares of stock shall be transferable only on the books of the corporation
by the holder thereof in person or by his duly authorized attorney. Upon
surrender to the Corporation or the Transfer Agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, a new certificate shall be
issued to the person entitled thereto and the old certificate cancelled and the
transaction recorded upon the books of the Corporation.
6.5 REGISTERED SHAREHOLDERS
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and 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 Texas.
ARTICLE VII -- DIVIDENDS
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7.1 DECLARATION AND PAYMENT
Subject to the Laws of the State of Texas and the Articles of
Incorporation, dividends may be declared by the Board of Directors, in its
discretion, at any regular or special meeting, pursuant to law and may be paid
in cash, in property or in the Corporation's own shares.
7.2 RESERVES
Before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Directors from
time to time, in their absolute discretion, think proper as a reserve fund for
meeting contingencies, or for equalizing dividends or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
Directors shall think conducive to the interest of the Corporation, and the
Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE VIII - INDEMNIFICATION
OF OFFICERS, DIRECTORS AND EMPLOYEES
8.1 INDEMNIFICATION
The Corporation shall indemnify any Director or officer or former Director
or officer of the Corporation, or any person who may have served at its request
as a director or officer or former director or officer of another corporation in
which it owns shares of capital stock or of which it is a creditor, against
expenses actually and necessarily incurred by him in connection with the defense
of any action, suit, or proceeding, whether civil or criminal, in which he is
made a party by reason of being or having been such Director or officer, except
in relation to matters as to which he shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in performance of duty. The
Corporation shall also reimburse any such Director or officer or former Director
or officer or any such person serving or formerly serving in the capacities set
forth in the first sentence above at the request of the Corporation for the
reasonable cost of settlement of any such action, suit or proceeding, if it
shall be found by a majority of the Directors not involved in the matter in
controversy, whether or not a quorum, that it was in the best interest of the
Corporation that such settlement be made, and that such Director or officer or
former Director or officer or such person was not guilty of negligence or
misconduct in performance of duty.
8.2 INSURANCE
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
these By-laws or the laws of the State of Texas.
8.3 ADVANCED EXPENSES
The Corporation may pay in advance any expenses which may become subject to
indemnification if the Board of Directors authorizes the specific payment, and
the person receiving the payment undertakes in writing to repay unless it is
ultimately determined that he is entitled to indemnification by the Corporation.
8.4 OTHER PROTECTION AND INDEMNIFICATION
The protection and indemnification provided hereunder shall not be deemed
exclusive of any other rights to which such Director or officer or former
Director of officer or such person may be entitled, under any agreement,
insurance policy or vote of shareholders, or otherwise.
ARTICLE IX -- MISCELLANEOUS PROVISIONS
9.1 FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
9.2 SEAL
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The corporate seal shall be circular in form and shall contain the name of
the Corporation, and the word "Texas" encircling an image of the Lone Star. The
seal may be used by causing it or a facsimile to be impressed or affixed or in
any other manner reproduced. The corporate seal may be altered by order of the
Board of Directors at any time.
9.3 MINUTES
The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors, and shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of the shares held by each.
9.4 RESIGNATIONS
Any director or officer may resign at any time. Such resignations shall be
made in writing and shall take effect at the time specified therein, or if no
time is specified at the time of its receipt by the Chairman of the Board, if
any, the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
9.5 AMENDMENT
These By-Laws may be altered, amended or repealed and new By-laws may be
adopted by the Board of Directors, subject to repeal or change any action of the
shareholders, at any meeting of the Board of Directors at which a quorum is
present, provided notice of the proposed alteration, amendment, or repeal is
contained in the notice of the meeting.
9.6 NOTICE
Any notice to Directors or shareholders shall be in writing and shall be
delivered personally or mailed to the Directors or shareholders at their
respective addresses appearing on the books of the Corporation. Notice by mail
shall be deemed to be given at the time when the same shall be deposited in the
United States mail, postage prepaid. Notice to Directors may also be given by
telegram. Whenever any notice is required to be given under the provisions of
applicable statutes or of the Articles of Incorporation or of these By-laws, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
9.7 CLOSE CORPORATIONS: SHAREHOLDER MANAGEMENT
If the Articles of Incorporation of the Corporation and each certificate
representing its issued and outstanding shares states that the business and
affairs of the Corporation shall be managed by the Shareholders of the
Corporation rather than by a Board of Directors, then, whenever the context so
requires the Shareholders of the Corporation shall be deemed the Directors of
the Corporation for purposes of applying any provision of these By-Laws.
TEXAS PETROCHEMICALS CORPORATION
AMENDMENT TO BYLAWS
(Adopted at Special Meeting of the
Board of Directors Held on April 26, 1984
At a Special Meeting of the Board of Directors of Texas Petrochemicals
Corporation held on April 26, 1984, the following Amendment to Section 9.5 of
Article IX of the Bylaws of Texas Petrochemicals Corporation was adopted by the
Board of Directors:
Texas Petrochemicals Corporation
RESOLUTION NO. D-84-04-26-05 -- AMEND SECTION 9.5 OF BYLAWS
BE IT RESOLVED, that Section 9.5 Article IX of the Bylaws of Texas
Petrochemicals Corporation is hereby amended in its entirety so that it
shall hereafter read as follows:
Section 9.5 AMENDMENT.
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These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted only by a majority of the Shareholders of the Corporation.
I hereby certify that the foregoing is a true, full and accurate copy of
the Amendment to the Bylaws of Texas Petrochemicals Corporation amending Article
VIII in its entirety, as approved and authorized by the Board of Directors by
Resolution adopted on April 26, 1984.
WITNESS my hand and seal.
LANELLE COOKE, Secretary
Texas Petrochemical Corporation
TEXAS PETROCHEMICALS CORPORATION
AMENDMENT TO BYLAWS
(Adopted at Special Meeting of the
Board of Directors Held on April 26, 1984
At a Special Meeting of the Board of Directors of Texas Petrochemicals
Corporation held on April 26, 1984, the following Amendment to Section IX of the
Bylaws of Texas Petrochemicals Corporation was adopted by the Board of
Directors, adding a new Section 9.7 thereto:
Texas Petrochemicals Corporation
RESOLUTION NO. D-84-04-26-05 --AMEND ARTICLE IX OF BYLAWS
BE IT RESOLVED, that Article IX of the Bylaws of Texas Petrochemicals
Corporation is hereby amended so as to add a new Section 9.7, so that it
shall hereafter read as follows:
Section 9.7 Additional Shares.
No additional shares of the Corporation shall be issued without approval of
a majority of the Shareholders of the Corporation.
I hereby certify that the foregoing is a true, full and accurate copy of the
Amendment to the Bylaws of Texas Petrochemicals Corporation amending Article IX
so as to add a new Section 9.7 thereto, which was approved and authorized by the
Board of Directors by Resolution adopted on April 26, 1984.
WITNESS my hand and seal.
LANELLE COOKE, Secretary
Texas Petrochemical Corporation
TEXAS PETROCHEMICALS CORPORATION
AMENDMENT TO BYLAWS
(Adopted at Special Meeting of the
Board of Directors Held on June 15, 1984)
At a Special Meeting of the Board of Directors of Texas Petrochemicals
Corporation held on June 15, 1984, the following Amendment to Article VIII of
the Bylaws of Texas Petrochemicals Corporation was adopted by the Board of
Directors:
Texas Petrochemicals Corporation
RESOLUTION NO. D-84-06-15-07 --
AMEND ARTICLE VIII OF BYLAWS -- INDEMNIFICATION.
BE IT RESOLVED, that Article VIII of the Bylaws of Texas Petrochemicals
Corporation is hereby amended in its entirety so that it shall hereafter
read as follows:
ARTICLE 8.08 -- Indemnification.
8.1 PERSONS ENTITLED TO INDEMNIFICATION. The corporation shall indemnify
[provided the standard set forth in Section 8.4 or 8.6 below is satisfied],
to the extent provided in Sections 8.3 or 8.5 below:
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(1) Any person who is or was a director, and any person who, while a
director of the corporation is or was serving at the request of the
corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise;
(2) Any person who is or was an officer, agent or employee of the
corporation, but not services for any other foreign or domestic
corporation or any partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise; and
(3) Any person who is or was a nominee or designee, who was not an
officer, employee or agent of the corporation, who is or was serving at
the request of the corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
foreign corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise.
8.2 PROCEEDING AND EXPENSE.
(1) For the purposes of indemnification, "proceeding" shall be construed
to mean any threatened, pending or completed action, suit or proceeding,
whether civil or criminal, administrative, arbitrative or investigative,
and any appeal in such an action, suit or proceeding.
(2) For purposes of indemnification, "expenses" shall be construed to
include court costs and attorney's fees.
8.3 EXTENT -- DERIVATIVE PROCEEDINGS. In case of a proceeding brought by
or in behalf of the corporation (hereinafter referred to as a "Derivative
Proceeding") against a person named in Section 8.1 by reason of his holding
a position named in Section 8.1, the corporation shall indemnify him if he
satisfies the standard set forth in Section 8.4 below, for reasonable
expenses (including attorney's fees and court costs, but excluding amounts
paid in settlement) actually incurred by him in connection with the defense
or settlement of the proceeding.
8.4 STANDARD -- DERIVATION PROCEEDINGS. In case of a proceeding brought
by or in behalf of the corporation, a person named in Section 8.1 shall be
indemnified only if:
(1) He is successful on the merits or otherwise in the defense of the
proceeding; or
(2) He acted in good faith in the transaction which is the subject of
the proceeding, and reasonably believed he conducted himself in his
capacity as a director in a manner reasonably believed to be in the best
interests of the corporation and in all other cases, his conduct was at
least not opposed to the corporation's best interest; or, in the case of a
criminal proceeding, he had no reason to believe that his conduct was
unlawful. However, a director shall not be indemnified in respect of any
claim, issue or matter as to which he has been adjudged liable (a) for
negligence or misconduct in the performance of his duty to the
corporation, or (b) on the basis that personal benefit was improperly
received by him regardless of whether or not the benefit resulted from an
action taken by him while acting for the corporation; or
(3) With regard to any Employee Benefit Plan; a person in performance
of his duty who acted against or deviated from the employee benefit plan,
acted in a manner in the best interest of or at least not opposed to the
best interest of the corporation, if he did so under the presumption that
his actions or omissions with respect to an employee benefit plan would be
in the best interest of the participants and/or their beneficiaries of the
plan.
8.5 EXTENT -- NONDERIVATIVE PROCEEDINGS. In case of a proceeding other than
a proceeding brought by or in behalf of the corporation (together hereafter
referred to as a "Nonderivative Proceeding") against a person named in Section
8.1, the corporation shall indemnify him if he satisfies the standard set forth
in Section 8.6 below for the amounts actually incurred by him in connection with
the defense or settlement of the Nonderivative Proceeding as:
(1) Reasonable expenses actually incurred (including attorney's fees
and court costs);
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(2) Amounts paid in settlement;
(3) Judgments, penalties (including excise taxes in regard to any
employee benefit plan, and similar taxes); and
(4) Fines.
8.6 STANDARD -- NONDERIVATIVE PROCEEDINGS. In case of a nonderivative
proceeding, a person named in Section 8.1 shall be indemnified only if:
(1) He is successful, on the merits or otherwise, in the defense of
the proceeding; or
(2) He acted in good faith in the transaction which is the subject of
the nonderivative proceeding, and reasonably believed he conducted himself
in his capacity as a director in a manner he reasonably believed to be in
the best interest of the corporation and in all other cases, his conduct
was at least not opposed to the corporation's best interest; and, with
respect to any criminal action or proceeding, he had no reason to believe
his conduct was unlawful; or
(3) Any with regard to any Employee Benefit Plan; a person in
performance of his duty who acted against or deviated from the employee
benefit plan, acted in a manner in the best interest of or at least not
opposed to the best interest of the corporation, if he did so under the
presumption that his actions or omissions with respect to an employee
benefit plan would be in the best interest of the participants and/or their
beneficiaries of the plan.
The termination of a nonderivative proceeding by judgment, order,
settlement or conviction, or on a plea of NOLO CONTENDERE or its equivalent
shall not of itself create, a presumption that the person failed to satisfy the
standard set forth in this Section 8.6.
8.7 DETERMINATION THAT STANDARD HAS BEEN MET. The determination of
indemnification that the standard set forth in Sections 8.4 or 8.6 has been
satisfied, excepting Section 8.4(2) (second sentence), shall be made by:
(1) A court of competent jurisdiction if the court determines that:
(a) In a suit for indemnification the person as defined in Section
8.1 is entitled to indemnification and awards him the expenses incurred
in securing the indemnification; or
(b) The person as defined in Section 8.1 is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances
(i) whether or not he has met the requirements of Sections 8.4 or 8.6,
or (ii) has been adjudged liable in the circumstances described in the
last sentence of Section 8.6, provided the person shall only be entitled
to reasonable expenses (i-a) if the proceeding is brought by or on
behalf of the corporation, or (i-b) if the person is found liable on the
basis that personal benefit was improperly received by him, regardless
of whether or not the benefit resulted from his actions; or
(2) A majority vote of a quorum consisting of directors of the
corporation who at the time of the vote are not named parties to the
proceeding, or
(3) If no quorum can be obtained, a majority vote of a committee of
the Board of Directors, designated by a majority vote of all directors
consisting of two or more, who at the time of the vote, are not named
parties in the proceeding; or
(4) Independent or special legal counsel (selected by the Board of
Directors or a committee of the Board by vote as set forth in (2) or (3) of
this Section 8.7, or, if such a quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all directors; or
(5) The shareholders of the corporation in a vote that excludes the
shares held by directors who are named defendants or respondents in the
proceeding.
8.8 AUTHORIZATION OF INDEMNIFICATION. Authorization of Indemnification
and/or the determination as to reasonableness of expenses shall be made by only
those parties set forth in Section 8.7 and only in the manner set forth in
Section 8.7; except that if special legal counsel has been appointed to
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determine that the standards of Sections 8.4 or 8.6, as the case may be, have
been met, then that legal counsel shall also authorize indemnification and make
the determination as to reasonable expenses.
8.9 PAYMENT OR REIMBURSEMENT OF EXPENSES. The corporation may pay or
reimburse any expenses (including attorney's fees) incurred by a person who has
satisfied the standard for indemnification under Sections 8.4 or 8.6, as the
case may be, and provided the determination of eligibility has been made in the
manner specified in Sections 8.7 and 8.8, as the case may be, and prior to final
disposition of the proceeding if:
(1) The corporation receives from the person who is to receive payment
or reimbursement of expenses (a) a written affirmation that in good faith
he has met the standard of conduct set forth in Sections 8.4 and 8.6, as
the case may be, and (b) an undertaking to repay the amount paid or
reimbursed if it is ultimately determined that he has not met the
requirements of indemnification.
(2) Likewise, if it is ultimately determined that he is eligible for
indemnification his obligation to repay monies paid or reimbursed to him is
null and void.
(3) The written undertaking must be an unlimited general obligation of
the person, but need not be secured, and may be accepted without reference
to financial ability to make repayment.
8.10 OTHER PROVISIONS FOR INDEMNIFICATION. A person may be eligible for
payment or reimbursement of expenses incurred as a result of a proceeding where
he had been called as a witness or party other than a named defendant or
respondent in that proceeding.
8.11 NONEXCLUSIVE. The indemnification provided by Sections 8.1 through 8.9
shall not be exclusive of any other rights to which a person may be entitled
bylaw, the articles of incorporation, bylaws, agreement, vote of shareholders or
disinterested directors, or otherwise.
8.12 CONTINUATION. The indemnification and advance payment or reimbursement
provided by Sections 8.1 through 8.10 shall continue as to a person who has
ceased to hold a position named in Section 8.1 and shall inure to the benefit of
his heirs, executors and administrators.
8.13 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who holds or who has held any position described in Section
8.1, against any liability, which is the basis of a proceeding, despite the
corporation's inability to indemnify him against such liability incurred by him
in any such position or arising out of his status as such under Sections 8.1
through 8.12.
8.14 REPORTS. Indemnification payments, advance payments or reimbursements,
and insurance purchases and payments made under Sections 8.1 through 8.12 shall
be reported in writing to the shareholders with or before the notice or waiver
of notice of the next shareholders' meeting, or with or before the next consent
of shareholders to action without a meeting, in any case within the 12-month
period immediately following the date of the indemnification or advance.
I hereby certify that the foregoing is a true, full and accurate copy of
the Amendment to the Bylaws of Texas Petrochemicals Corporation amending Article
VIII in its entirety, as approved and authorized by the Board of Directors by
Resolution adopted on June 15, 1984.
WITNESS my hand and seal.
LANELLE COOKE
LaNelle Cooke, Secretary
Texas Petrochemicals Corporation
by-laws 13
EXHIBIT 4.1
EXECUTION COPY
===========================================================
TPC FINANCE CORP.
11-1/8% Senior Subordinated Notes Due 2006
INDENTURE
Dated as of July 1, 1996
FLEET NATIONAL BANK,
Trustee
===========================================================
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
PAGE
----
SECTION 1.01. Definitions ........................................... 1
SECTION 1.02. Other Definitions ..................................... 26
SECTION 1.03. Incorporation by Reference of Trust Indenture Act ..... 26
SECTION 1.04. Rules of Construction ................................. 27
ARTICLE II
THE SECURITIES
SECTION 2.01. Form and Dating ....................................... 28
SECTION 2.02. Execution and Authentication .......................... 28
SECTION 2.03. Registrar and Paying Agent ............................ 29
SECTION 2.04. Paying Agent To Hold Money in Trust.................... 30
SECTION 2.05. Securityholder Lists .................................. 30
SECTION 2.06. Transfer and Exchange ................................. 30
SECTION 2.07. Replacement Securities ................................ 31
SECTION 2.08. Outstanding Securities ................................ 32
SECTION 2.09. Temporary Securities .................................. 32
SECTION 2.10. Cancelation ........................................... 32
SECTION 2.11. Defaulted Interest .................................... 33
SECTION 2.12. CUSIP Numbers ......................................... 33
ARTICLE III
REDEMPTION
SECTION 3.01. Notices to Trustee .................................... 33
SECTION 3.02. Selection of Securities To Be Redeemed ................ 34
SECTION 3.03. Notice of Redemption .................................. 34
SECTION 3.04. Effect of Notice of Redemption ........................ 35
SECTION 3.05. Deposit of Redemption Price ........................... 35
SECTION 3.06. Securities Redeemed in Part ........................... 35
2
PAGE
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Securities ................................. 36
SECTION 4.02. SEC Reports ........................................... 36
SECTION 4.03. Limitation on Indebtedness ............................ 37
SECTION 4.04. Limitation on Indebtedness and Preferred Stock of
Restricted Subsidiaries ............................. 39
SECTION 4.05. Limitation on Restricted Payments ..................... 40
SECTION 4.06. Limitation on Restrictions on Distributions from
Restricted Subsidiaries ............................. 44
SECTION 4.07. Limitation on Sales of Assets and Subsidiary Stock .... 46
SECTION 4.08. Limitation on Affiliate Transactions .................. 50
SECTION 4.09. Limitation on the Sale or Issuance of Capital Stock of
Restircted Subsidiaries ............................. 51
SECTION 4.10. Change of Control ..................................... 52
SECTION 4.11. Compliance Certificate ................................ 53
SECTION 4.12. Further Instruments and Acts .......................... 53
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. When Company May Merge or Transfer Assets ............. 54
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default ..................................... 55
SECTION 6.02. Acceleration .......................................... 58
SECTION 6.03. Other Remedies ........................................ 58
SECTION 6.04. Waiver of Past Defaults ............................... 58
SECTION 6.05. Control by Majority ................................... 59
SECTION 6.06. Limitation on Suits ................................... 59
3
PAGE
SECTION 6.07. Rights of Holders To Receive Payment .................. 60
SECTION 6.08. Collection Suit by Trustee ............................ 60
SECTION 6.09. Trustee May File Proofs of Claim ...................... 60
SECTION 6.10. Priorities ............................................ 60
SECTION 6.11. Undertaking for Costs ................................. 61
SECTION 6.12. Waiver of Stay or Extension Laws ...................... 61
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee ..................................... 62
SECTION 7.02. Rights of Trustee ..................................... 63
SECTION 7.03. Individual Rights of Trustee .......................... 64
SECTION 7.04. Trustee's Disclaimer .................................. 64
SECTION 7.05. Notice of Defaults .................................... 64
SECTION 7.06. Reports by Trustee to Holders ......................... 64
SECTION 7.07. Compensation and Indemnity ............................ 65
SECTION 7.08. Replacement of Trustee ................................ 66
SECTION 7.09. Successor Trustee by Merger ........................... 67
SECTION 7.10. Eligibility; Disqualification ......................... 67
SECTION 7.11. Preferential Collection of Claims Against Company ..... 67
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Discharge of Liability on Securities; Defeasance ...... 68
SECTION 8.02. Conditions to Defeasance .............................. 69
SECTION 8.03. Application of Trust Money ............................ 70
SECTION 8.04. Repayment to Company .................................. 71
SECTION 8.05. Indemnity for Government Obligations .................. 71
SECTION 8.06. Reinstatement ......................................... 71
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PAGE
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders ............................ 72
SECTION 9.02. With Consent of Holders ............................... 73
SECTION 9.03. Compliance with Trust Indenture Act ................... 74
SECTION 9.04. Revocation and Effect of Consents and Waivers ......... 74
SECTION 9.05. Notation on or Exchange of Securities ................. 74
SECTION 9.06. Trustee To Sign Amendments ............................ 75
SECTION 9.07. Payment for Consent ................................... 75
ARTICLE X
SUBORDINATION
SECTION 10.01. Agreement To Subordinate ............................. 75
SECTION 10.02. Liquidation, Dissolution, Bankruptcy ................. 76
SECTION 10.03. Default on Senior Indebtedness ....................... 76
SECTION 10.04. Acceleration of Payment of Securities ................ 78
SECTION 10.05. When Distribution Must Be Paid Over .................. 78
SECTION 10.06. Subrogation .......................................... 78
SECTION 10.07. Relative Rights ...................................... 78
SECTION 10.08. Subordination May Not Be Impaired by Company ......... 78
SECTION 10.09. Rights of Trustee and Paying Agent ................... 79
SECTION 10.10. Distribution or Notice to Representative ............. 79
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate ............................... 79
SECTION 10.12. Trust Moneys Not Subordinated ........................ 79
SECTION 10.13. Trustee Entitled To Rely ............................. 80
SECTION 10.14. Trustee To Effectuate Subordination .................. 80
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness ....................................... 81
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions ........................... 81
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls ......................... 81
SECTION 11.02. Notices .............................................. 81
SECTION 11.03. Communication by Holders with Other Holders .......... 83
SECTION 11.04. Certificate and Opinion as to Conditions Precedent ... 83
SECTION 11.05. Statements Required in Certificate or Opinion ........ 83
SECTION 11.06. When Securities Disregarded .......................... 84
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar ......... 84
SECTION 11.08. Legal Holidays ....................................... 84
SECTION 11.09. Governing Law ........................................ 84
SECTION 11.10. No Recourse Against Others ........................... 84
SECTION 11.11. Successors ........................................... 85
SECTION 11.12. Multiple Originals ................................... 85
SECTION 11.13. Table of Contents; Headings .......................... 85
APPENDIX A - Provisions Relating to Initial Securities,
Private Exchange Securities and Exchange
Securities
EXHIBIT 1 TO APPENDIX A - Form of Initial Security EXHIBIT A - Form of
Exchange Security or Private Exchange Security
<PAGE>
INDENTURE dated as of July 1, 1996, between TPC
Finance Corp., a Texas corporation, to be merged with and
into Texas Petrochemicals Corporation, a Texas corporation
(the "Company"), and Fleet National Bank, a national
banking association duly organized and existing under the
laws of the United States (the "Trustee").
Each party agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the Company's 11-1/8%
Senior Subordinated Notes Due 2006 (the "Initial Securities") and, if and when
issued pursuant to a registered exchange for Initial Securities, the Company's
11-1/8% Senior Subordinated Notes Due 2006 (the "Exchange Securities"), and if
and when issued pursuant to a private exchange for Initial Securities, the
Company's 11-1/8% Senior Subordinated Notes Due 2006 (the "Private Exchange
Securities", together with the Exchange Securities and the Initial Securities,
the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquisition" means the acquisition by TPC Holding of all of the
outstanding capital stock of Texas Olefins Company and all of the outstanding
capital stock (other than the capital stock owned by Texas Olefins Company) of
Texas Petrochemicals Corporation.
"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 Company 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.
2
"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 dispositions) by
the Company 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 the Company or a Restricted
Subsidiary), (ii) all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary or (iii) any other assets
of the Company or any Restricted Subsidiary outside of the ordinary course of
business of the Company or such Restricted Subsidiary (other than, in the case
of (i), (ii) and (iii) above, (x) a disposition of the Excluded Assets, (y) a
disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of
Section 4.07 only, a disposition that constitutes a Restricted Payment permitted
by Section 4.05 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
3
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 the Company
or (except for the purposes of Section 4.10) 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.
"Change of Control" means the occurrence of any of
the following events:
4
(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 the Company; 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 the Company 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
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of 66-2/3% of the
5
directors of the Company 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 then in office; or
(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.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Company" means TPC Finance Corp., until a successor replaces it
and, thereafter, means the successor and, for purposes of any provision
contained herein and required by the TIA, each other obligor on the indenture
securities.
"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 the Company or any Restricted
Subsidiary has Incurred any
6
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 the Company 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 the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company 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 the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (3) if since the beginning of
such period the Company 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 the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition, any
7
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company 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 effect to the pro forma adjustments set forth under
the caption "Pro Forma Combined Financial Information" in the Offering Circular
and to a one-time employee compensation expense incurred in connection with the
Transactions. 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
the Company. 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).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company 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 the
Company or a Wholly
8
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 the Company 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 the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income
of the Company 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, the Company's 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 the Company 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) the Company's 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 the Company 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 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 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) 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;(iv) any gain (but
9
not loss) realized upon the sale or other disposition of any assets of the
Company 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 purpose of Section 4.05 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 the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
Section pursuant to clause (a)(iii)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on
the balance sheet of the Company and its consolidated Subsidiaries, determined
on a consolidated basis in accordance with GAAP, as of the end of the most
recent fiscal quarter of the Company 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 the Company 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.
"Credit Agreement" means the Credit Agreement, dated as of the
date of this Indenture, among the Company, 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 this 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 this Indenture, there may be multiple
Credit Agreements and the term "Credit Agreement" shall mean all such Credit
Agreements.
10
"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.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness
and (ii) any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $15 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture.
"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 4.07 and Section 4.10.
"EBITDA" for any period means the sum of
Consolidated Net Income, plus Consolidated Interest Expense
11
plus the following to the extent deducted in calculating such Consolidated Net
Income: (a) all income tax expense of the Company, (b) depreciation expense, (c)
amortization expense, 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 any registration of shares of Common
Stock by Holdings for sale to certain employees of Holdings and its Subsidiaries
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.
12
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Issue Date, including those set
forth (i) in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants, (ii) in statements
and pronouncements of the Financial Accounting Standards Board, (iii) in such
other statements by such other entity as approved by a significant segment of
the accounting profession, and (iv) in the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"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 "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Holdings" means Texas Petrochemical Holdings, Inc., a Delaware
corporation.
13
"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 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 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
14
(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.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
solely to
15
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 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 the
Company 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 the Company 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 4.05, (i) "Investment" shall
include the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of any Subsidiary of the
Company 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, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's 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.
16
"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 Initial
Securities are originally issued.
"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 the Company or any Restricted Subsidiary after
such Asset Disposition, including, without limitation, pension and
17
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Disposition. 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 the Company.
"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.
"Offering Circular" means the Offering Circular dated June 25,
1996 relating to the sale of the Securities.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal counsel
who is acceptable to the Trustee. The counsel may be an employee of or counsel
to the Company or the Trustee.
"Permitted Holders" means (i) each Person who owns Capital Stock
of Holdings on the date of original issuance of (a) the Securities or (b) the
Common Stock in connection with the Employee Offering, (ii) any Person who on
the date of original issuance of the 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 the Company or 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
18
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 the Company 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, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company 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 the
Company 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 the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company 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 Section 4.07.
"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
19
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of Holdings, TPC Holding or the Company 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, TPC Holding or the Company, as applicable, 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.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this 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
20
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 the Company or (y)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company on the Issue Date.
"Representative" means any trustee, agent or representative (if
any) for an issue of Senior Indebtedness of the Company.
"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 the Company 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 the Company
held by any Person or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company 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
21
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 the Company 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 the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
"Securities" means the Securities issued under this Indenture.
"Senior Indebtedness" means (i) Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter Incurred and (ii) accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Securities;
PROVIDED, HOWEVER, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary, (2) any liability for Federal, state, local or
other taxes owed or owing by the Company, (3) any accounts
22
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect to
any other Indebtedness or other obligation of the Company or (5) that portion of
any Indebtedness which at the time of Incurrence is Incurred in violation of
this Indenture.
"Senior Subordinated Indebtedness" means the Securities and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank PARI PASSU with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning of Rule
1-02 under Regulation S-X promulgated by the SEC.
"S&P means Standard & Poor's Rating 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 occurred).
"Sterling" means The Sterling Group, Inc.
"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 the Company.
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.
23
"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
the Company, TPC Holding and Holdings or any other person with which the Company
is required to, or is permitted to, file a consolidated tax return or with which
the Company is or could be part of a consolidated group for tax purposes.
"Temporary Cash Investments" means any of the following: (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 any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (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
24
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 six 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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
"TPC Holding" means TPC Holding Corp., a Delaware corporation.
"Transactions" means the sale of the Securities, the Acquisition,
the borrowings under the Credit Agreement, the sale of approximately $50 million
of common stock of Holdings, the sale by Holdings of its 13-1/2% Senior Discount
Notes Due 2007 and common stock of Holdings to raise approximately $30 million,
the establishment of the ESOP, the payment of certain fees and expenses, and
other related transactions.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial
Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company
25
(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, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated; PROVIDED, 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
4.05. The Board of Directors 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, the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be by the Company 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.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally
26
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 the Company or a Restricted Subsidiary) is owned by
the Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM SECTION
"Affiliate Transaction" ................ 4.08
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.03
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Offer" ................................ 4.07
"Offer Amount" ......................... 4.07
"Offer Period" ......................... 4.07
"pay the Securities" ................... 10.03
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 10.03
"Purchase Date" ........................ 4.07
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
27
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate
or junior to Secured Indebtedness merely by virtue of its nature as
unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater; and
28
(9) all references to the date the Securities were originally
issued shall refer to the date the Initial Securities were originally
issued.
ARTICLE II
THE SECURITIES
SECTION 2.01. FORM AND DATING. Provisions relating to the Initial
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in Appendix A, which is hereby incorporated in and expressly made part of
this Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to Appendix A
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is hereby incorporated in and expressly made a part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Security shall be dated the date of its authentication.
The terms of the Securities set forth in Exhibit 1 to Appendix A and Exhibit A
are part of the terms of this Indenture.
SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
29
The Trustee shall authenticate and deliver Securities for
original issue in an aggregate principal amount of $175,000,000 upon a written
order of the Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company. Such order shall
specify the amount of the Securities to be authenticated and the date on which
the original issue of Securities is to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed that amount except
as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
30
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each
due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in
as current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company
31
shall execute and the Trustee shall authenticate Securities at the Registrar's
or co-registrar's request. The Company may require payment of a sum sufficient
to pay all taxes, assessments or other governmental charges in connection with
any transfer or exchange pursuant to this Section. The Company shall not be
required to make and the Registrar need not register transfers or exchanges of
Securities selected for redemption (except, in the case of Securities to be
redeemed in part, the portion thereof not to be redeemed) or any Securities for
a period of 15 days before a selection of Securities to be redeemed or 15 days
before an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture will evidence the same debt and will be entitled to
the same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.
32
Every replacement Security is an obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at
any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to
be outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.09. TEMPORARY SECURITIES. Until definitive Securities
are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and deliver them in exchange for temporary Securities.
SECTION 2.10. CANCELATION. The Company at any time may deliver
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver a certificate of such destruction
33
to the Company unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancelation.
SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; PROVIDED, HOWEVER, that any such notice may 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 a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE III
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in
this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
34
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer
than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Securities not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them the Trustee selects shall be in amounts of $1,000 or a
whole multiple of $1,000. Provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the particular
Securities to be redeemed;
35
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption which have been delivered by the Company to the
Trustee for cancelation.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
36
ARTICLE IV
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly
pay the principal of and interest on the Securities on the dates and in the
manner provided in the Securities and in this Indenture. Principal and interest
shall be considered paid on the date due if on such date the Trustee or the
Paying Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. 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, the Company shall file with the SEC and provide
within 15 days to the Trustee and Securityholders 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; PROVIDED, HOWEVER, that if Holdings shall have
become a Guarantor with respect to all obligations relating to the Securities,
the reports, information and other documents required to be filed and provided
as described hereunder may, at the Company's option, be filed by and be those of
Holdings rather than the Company; PROVIDED FURTHER, HOWEVER, that in the event
Holdings conducts, directly or indirectly, any business or holds, directly or
indirectly, any significant assets other than the capital stock of TPC Holding
or the Company at the time of filing and providing any such report, information
or other document containing financial statements of Holdings, Holdings shall
include in such report, information or other document summarized financial
information (as defined in
37
Rule 1-02(bb) of Regulation S-X promulgated by the SEC) with respect to the
Company. The Company also shall comply with the other provisions of TIA ss.
314(a).
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall
not Incur, directly or indirectly, any Indebtedness unless, on the date of such
Incurrence, the Consolidated Coverage Ratio 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.
(b) Notwithstanding Section 4.03(a), the Company
may Incur any or all of the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Term Loan Provisions of
the Credit Agreement or any indenture or term loan provision 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 (i) 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 Issue Date (other
than any such principal repayments made as a result of the Refinancing
of any such Indebtedness);
(ii) 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 (ii) 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 the Company and its Restricted Subsidiaries
and (B) 85% of the book value of the accounts receivables of the Company
and its Restricted Subsidiaries;
(iii) Indebtedness owed to and held by 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
38
another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the Company;
(iv) the Securities or any Indebtedness, the proceeds of which are
used to Refinance the Securities in full;
(v) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (i), (ii), (iii) or (iv) of this
covenant);
(vi) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (iv) or (v) or this
clause (vi) or pursuant to Section 4.04;
(vii) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
pursuant to this Indenture;
(viii) Indebtedness of the Company consisting of obligations in
respect of purchase price adjustments in connection with the acquisition
or disposition of assets by the Company or any Restricted Subsidiary
permitted under this Indenture;
(ix) Capital Lease Obligations in an aggregate principal amount not
exceeding $5 million at any one time outstanding; and
(x) 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 (i)
through (ix) above or Section 4.03(a)) does not exceed $10 million at
any one time outstanding.
(c) Notwithstanding the foregoing, the Company shall not Incur
any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall constitute Refinancing Indebtedness and shall be subordinated
to the Securities to at least the same extent as such Subordinated Obligations.
39
(d) For purposes of determining compliance with Section 4.03, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, 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.
(e) Notwithstanding Sections 4.03(a) and (b), the Company shall
not Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness
that is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Securities equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.04. LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF
RESTRICTED SUBSIDIARIES. The Company shall not permit any Restricted Subsidiary
to Incur, directly or indirectly, any Indebtedness or Preferred Stock except:
(a) Indebtedness or Preferred Stock issued to and held by the
Company 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 the Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the issuance of such Indebtedness or
Preferred Stock by the issuer thereof;
(b) Indebtedness or Preferred Stock of a Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary was
acquired by the Company (other than Indebtedness or Preferred Stock
Incurred in connection with, 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 Subsidiary became
a
40
Subsidiary or was acquired by the Company); PROVIDED, HOWEVER, that on
the date of such acquisition and after giving effect thereto, the
Company would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to Section 4.03(a);
(c) Indebtedness or Preferred Stock outstanding on the Issue Date
(other than Indebtedness described in Section 4.04(a) or Section
4.04(b);
(d) Indebtedness of any Restricted Subsidiary consisting of
obligations in respect of purchase price adjustments in connection with
the acquisition or disposition of assets by the Company or any
Restricted Subsidiary permitted under this Indenture;
(e) Preferred Stock which is not Disqualified Stock; PROVIDED,
HOWEVER, that such Restricted Subsidiary shall not pay cash dividends on
such Preferred Stock; and
(f) Refinancing Indebtedness Incurred in respect of Indebtedness or
Preferred Stock referred to in Section 4.04(b) or Section 4.04(c) or
this Section 4.04(f); PROVIDED, HOWEVER, that to the extent such
Refinancing Indebtedness directly or indirectly Refinances Indebtedness
or Preferred Stock of a Subsidiary described in Section 4.04(b), such
Refinancing Indebtedness shall be Incurred only by such Subsidiary.
SECTION 4.05. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes, and after giving effect to, the proposed Restricted
Payment:
(i) a Default shall have occurred and be continuing (or would
result therefrom);
(ii) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a); or
41
(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 during any fiscal quarter, the percentage
for 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 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 the
Company 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 the Company 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 the
Company 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
42
Incurrence of Indebtedness in connection with such issue or sale
of Capital Stock, which Indebtedness also constitutes
Indebtedness of the Company, such aggregate Net Cash Proceeds
shall be limited to an amount equal to any increase in the
Consolidated Net Worth of the Company resulting from principal
repayments made by such employee stock ownership plan with
respect to such Indebtedness;
(D) the amount by which Indebtedness of the Company is
reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent
to the Issue Date, of any Indebtedness of the Company for Capital
Stock (other than Disqualified Stock) of the Company (less the
amount of any cash, or the fair value of any other property,
distributed by the Company 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 the Company or any Restricted Subsidiary
from Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the fair market value 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 the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary; and
(F) to the extent not covered in clauses (A) through (E)
of this Section 4.05(a)(iii), the aggregate net cash proceeds
received after the date of this Indenture by the Company as
capital contributions (other than from any of its Restricted
Subsidiaries) plus $5 million.
43
(b) The provisions of Section 4.05(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Capital Stock of the Company
(other than (A) Disqualified Stock, (B) Capital Stock issued or sold to
a Subsidiary of the Company or (C) Capital Stock issued or sold to an
employee stock ownership plan or to a trust established by the 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 the Company); 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 Section 4.05(a)(3)(B);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 4.03; PROVIDED, 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 the Company to TPC Holding, Holdings or the ESOP,
or directly by the Company, 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
44
plan in effect as of the Issue Date or such similar employee plan or
agreement or employee benefit plan as may be adopted by 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 $2,000,000 in any fiscal year; PROVIDED FURTHER, HOWEVER, that
such amount shall be excluded in the calculation of Restricted Payments;
(v) a payment by the Company to Holdings, TPC Holding or 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;
(vi) a payment by the Company to TPC Holding or Holdings pursuant
to the Tax Sharing Agreement; PROVIDED, HOWEVER, that the amount of any
such payment shall not exceed the sum of (A) the amount of taxes which
the Company would have been liable for on a stand-alone basis plus (B)
the amount of any state net worth tax applicable to Holdings and TPC
Holding; PROVIDED FURTHER, HOWEVER, such amount shall be excluded in the
calculation of Restricted Payments; and
(vii) a payment by the Company to TPC Holding or Holdings to pay
their operating and administrative expenses, including, without
limitation, directors' fees, legal and audit expenses, SEC compliance
expenses and corporate franchise and other taxes, in an amount not to
exceed the greater of $1,000,000 per fiscal year and 0.125% of the
consolidated net sales of the Company for the preceding fiscal year;
PROVIDED, HOWEVER, that such amount shall be excluded in the calculation
of Restricted Payments.
SECTION 4.06. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES. The Company 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 the Company or a Restricted Subsidiary or pay any
Indebtedness
45
owed to the Company, (b) to make any loans or advances to the Company or (c) to
transfer any of its property or assets to the Company, 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 the Company (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
the Company) 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 Section 4.06(i) or Section 4.06(ii) or this
Section 4.06(iii) or contained in any amendment to an agreement referred
to in Section 4.06(i) or Section 4.06(ii) or this Section 4.06(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 Section 4.06(c), 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;
46
(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 4.07. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless (i) the Company
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 the shares and assets subject to such Asset Disposition, and at least 85% of
the consideration thereof received by the Company 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 the Company (or
such Restricted Subsidiary, as the case may be) (A) FIRST, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness), to
prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other
than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other
than Indebtedness owed to the Company or an Affiliate of the Company) 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
the Company elects, to acquire Additional Assets; PROVIDED, HOWEVER, that the
Company 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 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 Section 4.07(b) to the holders of the Securities (and
to holders of other Senior Subordinated Indebtedness designated by the Company)
to purchase
47
Securities (and such other Senior Subordinated Indebtedness) pursuant to and
subject to the conditions contained in this 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 the Company 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 the Company (other than Indebtedness owed to an Affiliate
of the Company) or Indebtedness of any Subsidiary (other than Indebtedness owed
to the Company or an Affiliate of the Company), in each case within one year
from the later of the receipt of such Net Available Cash and the date the offer
described in Section 4.07(b) is consummated; PROVIDED, HOWEVER, that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A), (C) or (D) above, the Company 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,
the Company and the 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 $2.5 million. Pending
application of Net Available Cash pursuant to this Section 4.07, such Net
Available Cash shall be invested in Permitted Investments. Notwithstanding
anything contained in Article IV 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, including, but not limited to, any Subsidiary,
except for (i) pledges or security interests granted in connection with securing
Indebtedness borrowed under the Credit Agreement, and (ii) transactions that
comply with Article V.
For the purposes of this Section 4.07, the following are deemed
to be cash or cash equivalents: (x) the express assumption of Indebtedness of
the Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are converted by the
48
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 Securities (and other Senior Subordinated Indebtedness) pursuant
to Section 4.07(a)(ii)(C), the Company will be required to purchase Securities
tendered pursuant to an offer by the Company for the Securities (and other
Senior Subordinated Indebtedness) at a purchase price of 100% of their principal
amount (without premium) plus accrued but unpaid interest (or, in respect of
such other Senior Subordinated Indebtedness, such lesser price, if any, as may
be provided for by the terms of such Senior Subordinated Indebtedness) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in this Indenture. If the aggregate purchase price
of Securities (and any other Senior Subordinated Indebtedness) tendered pursuant
to such offer is less than the Net Available Cash allotted to the purchase
thereof, the Company will be required to apply the remaining Net Available Cash
in accordance with Section 4.07(a)(ii)(D). The Company shall not be required to
make such an offer to purchase Securities (and other Senior Subordinated
Indebtedness) pursuant to this covenant if the Net Available Cash available
therefor is less than $10 million (which lesser amount shall be carried forward
for purposes of determining whether such an offer is required with respect to
any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum will
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form
49
10-Q and any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such Reports, and (iii) if material,
appropriate pro forma financial information) and all instructions and materials
necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.07(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) in Temporary Cash Investments an amount equal to the Offer Amount to be
held for payment in accordance with the provisions of this Section. Upon the
expiration of the period for which the Offer remains open (the "Offer Period"),
the Company shall deliver to the Trustee for cancelation the Securities or
portions thereof which have been properly tendered to and are to be accepted by
the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to
each tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Offer Amount, the Trustee shall deliver the excess to
the Company immediately after the expiration of the Offer Period for application
in accordance with this Section.
(3) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and
50
a statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
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.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company will also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) 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 Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.08. LIMITATION ON AFFILIATE TRANSACTIONS. (a) The
Company 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 the Company (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 having no material
51
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 the Company or its Restricted Subsidiary, as the case may be.
(b) The provisions of Section 4.08(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.05, 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 or
the board of directors of the relevant Restricted Subsidiary, (iii) the grant of
stock options or similar rights to employees and directors pursuant to plans
approved by the Board of Directors 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 the Company and its Restricted Subsidiaries who are not
employees of the Company or its Restricted Subsidiaries, (vi) any Affiliate
Transaction between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries, (vii) the purchase of or the payment of Indebtedness of or
monies owed by the Company 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 the payment of Indebtedness of or monies owed by the
Company 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 and (ix) any Tax Sharing Agreement;
PROVIDED, HOWEVER, that the aggregate amount payable by the Company pursuant
thereto shall not exceed the sum of (A) the amount of taxes which the Company
would have been liable for on a stand-alone basis plus (B) the amount of any
state net worth tax applicable to Holdings and TPC Holding.
SECTION 4.09. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK
OF RESTRICTED SUBSIDIARIES. The Company 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
52
sell or otherwise dispose of any shares of its Capital Stock except (i) to the
Company 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 the Company or any such Restricted
Subsidiary complies with Section 4.07.
SECTION 4.10. CHANGE OF CONTROL. (a) Upon the occurrence of 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 principal amount 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 terms contemplated in Section 4.10(b).
(b) 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
Securities at a purchase price in cash equal to 101% of the principal
amount 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 30 days
nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with
this Section, that a Holder must follow in order to have its Securities
purchased.
53
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered by the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) 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 Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.11. COMPLIANCE CERTIFICATE. The Company shall deliver
to the Trustee within 120 days after the end of each fiscal year of the Company
an Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA ss. 314(a)(4).
SECTION 4.12. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
54
ARTICLE V
SUCCESSOR COMPANY
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The
Company shall not consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, its assets substantially
as an entirety to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be 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 (if not the Company) shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (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, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(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 the Company prior to such
transaction minus any costs incurred in connection with such
transaction; and
(v) the Company 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 this Indenture.
55
The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture, but the predecessor company, only in the
case of a conveyance, transfer or lease, shall not be released from the
obligation to pay the principal of and interest on the Securities.
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.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article X, and such default continues for
a period of 30 days;
(2) the Company (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,
whether or not such payment shall be prohibited by Article X or (ii)
fails to redeem or purchase Securities when required pursuant to this
Indenture or the Securities, whether or not such redemption or purchase
shall be prohibited by Article X;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04,
4.05, 4.06, 4.07, 4.08, 4.09 or 4.10 (other than a failure to purchase
Securities) and such failure continues for 30 days after the notice
specified below;
(5) the Company fails to comply with any of its agreements in
the Securities or this Indenture (other
56
than those referred to in (1), (2), (3) or (4) above) and such failure
continues for 60 days after the notice specified below;
(6) Indebtedness of the Company 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 $5,000,000 or
its foreign currency equivalent at the time;
(7) Holdings, TPC Holding, the Company 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 Custo- dian of it
or for any substantial part of its property; or
(D) makes a general assignment for the bene- fit of its
creditors;
or takes any comparable action under any foreign laws
relating to insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against Holdings, TPC Holding or the
Company or any Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of Holdings, TPC Holding or the
Company or any Significant Subsidiary or for any substantial
part of its property; or
(C) orders the winding up or liquidation of Holdings,
TPC Holding or the Company or any Significant Subsidiary;
57
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) 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 the Company 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.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is 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.
The term "Bankruptcy Law" means Title 11, UNITED STATES 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.
A Default under clause (4) or (5) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4),
(5) or (9), its status and what action the Company is taking or proposes to take
with respect thereto.
58
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or Section 6.01(8) with respect to the
Company occurs and is continuing, the principal of and interest on 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 Securityholders.
The Holders of a majority in principal amount of the outstanding Securities by
notice to the Trustee may rescind any such acceleration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of acceleration. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and
is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority
in principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected.
59
When a Default is waived, it is deemed cured, but no such waiver shall extend to
any subsequent or other Default or impair any consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. A Security- holder may not
pursue any remedy with respect to this Inden- ture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that
an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the
outstanding Securities do not give the Trustee a direction inconsistent
with the request during such 60- day period.
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A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its creditors or
its property and, unless prohibited by law or applicable regulations, may vote
on behalf of the Holders in any election of a trustee in bankruptcy or other
Person performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make 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 to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. PRIORITIES. If the Trustee col- lects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Sec- tion 7.07;
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SECOND: to holders of Senior Indebtedness to the extent required
by Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securi- ties for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by
Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to
the extent it may lawfully do so) shall 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 wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
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ARTICLE VII
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture 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.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations 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, 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. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
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(d) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur 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 to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) 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 and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genu- ine and to have been signed or presented by
the proper per- son. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
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(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The recitals contained
herein and in the Securities, except for the Trustee's certificates of
authentication, shall be taken as the statements of the Company, 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 on Form T-1 supplied to the Company are true and
accurate, subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each June 30 beginning with the June 30 following the date of
this Indenture, the
65
Trustee shall mail to each Securityholder a brief report dated as of June 30
that complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay
to the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim and the Trustee may have separate counsel and the Company shall pay the
fees and expenses of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Trustee through
the Trustee's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(7) or (8) with respect to
66
the Company, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at
any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10,
any Securityholder may petition any court of competent
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jurisdiction for the removal of the Trustee and the appoint- ment of a successor
Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the 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.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with
TIAss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIAss. 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are out- standing if the requirements for such exclusion set forth
in TIAss. 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA
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ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA
ss. 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES; DEFEASANCE.
(a) When (i) the Company delivers to the Trustee all outstanding Securities
(other than Securities replaced pursuant to Section 2.07) for cancelation or
(ii) all outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article III
hereof and the Company irrevocably deposits with the Trustee funds sufficient to
pay at maturity or upon redemption all outstanding Securities, including
interest thereon to maturity or such redemption date (other than Securities
replaced pursuant to Section 2.07), and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time
may terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09 and Section 4.10 and the operation of Section
6.01(4), Section 6.01(6), Sections 6.01(7) and 6.01(8) with respect only to
Significant Subsidiaries, and Section 6.01(9) and the limitations contained in
clauses (iii) and (iv) of Section 5.01)("covenant defeasance option"). The
Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of
the Securities may not be accelerated because of an Event of Default with
respect thereto. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
specified in Section 6.01(4), (6), (7), (8) (with respect only to Significant
Subsidiaries) or Section 6.01(9)
69
or because of the failure of the Company to comply with Sections 5.01(iii) and
(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07 and 7.08 and this
Article VIII shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may exercise
its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations for the payment of principal of and
interest on the Secu- rities to redemption or maturity, as the case may
be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and
in such amounts as will be sufficient to pay principal and interest when
due on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article X;
(5) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a
70
regulated investment company under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) 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 of Counsel shall
confirm that, the Securityholders 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;
(7) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Security- holders will not recognize income, gain or loss for
Federal income tax purposes as a result of such covenant 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
covenant defeasance had not occurred; and
(8) the Company delivers to the Trustee an Offi- cers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Securities as
contemplated by this Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold
in trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article X.
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SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Securityholders entitled to the money must look to the Company
for payment as general creditors.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGA- TIONS. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; PROVIDED, HOWEVER, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company 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.
72
ARTICLE IX
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Security- holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article X that would limit or
terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article X;
(5) to add guarantees with respect to the Securities or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA; or
(8) to make any change that does not adversely affect the rights
of any Securityholder.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
73
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities. However, without the consent of
each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any
Security or change the time at which any Security may be redeemed in
accordance with Article III;
(5) make any Security payable in money other than that stated in
the Security;
(6) make any change in Article X that adversely affects the
rights of any Securityholder under Arti- cle X; or
(7) make any change in Section 6.04 or 6.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment. It shall
be sufficient if such consent approves the substance of the proposed amendment.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or
74
representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Security- holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and
75
return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms. Failure to
make the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign
any amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE X
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article X, to the prior payment in full of
all Senior Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter incurred, including the obligations of the Company under the Credit
Agreement, and that the subordination is for the benefit of and enforceable by
the holders of Senior Indebtedness. The Securities shall in all respects rank
PARI PASSU with all other Senior Subordinated Indebtedness
76
of the Company and only Indebtedness of the Company which is Senior Indebtedness
shall rank senior to the Securities in accordance with the provisions set forth
herein. All provisions of this Article X shall be subject to Section 10.12.
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of the Senior Indebtedness before Securityholders shall
be entitled to receive any payment of principal of or interest on the
Securities; and
(2) until the Senior Indebtedness is paid in full, any
distribution to which Securityholders would be entitled but for this
Article X shall be made to holders of Senior Indebtedness as their
interests may appear, except that Securityholders may receive shares of
stock and any debt securities that are subordinated to Senior
Indebtedness to at least the same extent as the Securities.
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. The Company may
not pay the principal of, premium (if any) or interest on, the Securities or
make any deposit pursuant to Section 8.01 and may not repurchase, redeem or
otherwise retire any Securities (collectively, "pay the Securities") if (i) any
Designated Senior Indebtedness is not paid when due or (ii) any other default on
Designated Senior Indebtedness occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such acceleration has been
rescinded or (y) such Senior Indebtedness has been paid in full; PROVIDED,
HOWEVER, that the Company may pay the Securities without regard to the foregoing
if the Company and the Trustee receive written notice approving such payment
from the Representative of the Designated Senior Indebtedness with respect to
which either of the events set forth in clause (i) or (ii) above has occurred
and is continuing. During the continuance of any default (other than a default
77
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company may not pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Company and the Trustee of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because such Designated Senior Indebtedness has been repaid in full or (iii)
because the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Securities after the end of such Payment Blockage Period. Not more than
one Blockage Notice may be given in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period; PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
(other than the Bank Indebtedness), the Representative of the Bank Indebtedness
may give another Blockage Notice within such period; PROVIDED FURTHER, HOWEVER,
that in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period. For purposes of this Section, no default or event of
default which existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event
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of default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment
of the Securities is accelerated because of an Event of Default, the Company or
the Trustee shall promptly notify the holders of the Designated Senior
Indebtedness (or their Representative) of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for the holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness is paid
in full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article X to holders of Senior Indebtedness which otherwise would have been made
to Securityholders is not, as between the Company and Securityholders, a payment
by the Company on Senior Indebtedness.
SECTION 10.07. RELATIVE RIGHTS. This Article X defines the
relative rights of Securityholders and holders of Senior Indebtedness. Nothing
in this Indenture shall:
(1) impair, as between the Company and Secu- rityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to
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act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two Business Days prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article X. The Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness may give the
notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever
a distribution is to be made or a notice given to holders of Senior
Indebtedness, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. ARTICLE X NOT TO PREVENT EVENTS OF DEFAULT OR
LIMIT RIGHT TO ACCELERATE. The failure to make a payment pursuant to the
Securities by reason of any provision in this Article X shall not be construed
as preventing the occurrence of a Default. Nothing in this Article X shall have
any effect on the right of the Secu- rityholders or the Trustee to accelerate
the maturity of the Securities.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary,
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payments from money or the proceeds of U.S. Government Obligations held in trust
under Article VIII by the Trustee for the payment of principal of and interest
on the Securities shall not be subordinated to the prior payment of any Senior
Indebtedness or subject to the restrictions set forth in this Article X, and
none of the Securityholders shall be obligated to pay over any such amount to
the Company or any holder of Senior Indebtedness of the Company or any other
creditor of the Company.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Security- holders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article X. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article X, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article X, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINA- TION. Each
Securityholder by accepting a Security author- izes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination between the Securityholders and
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the holders of Senior Indebtedness as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article X or otherwise.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. NOTICES. Any request, demand, authorization,
direction, declaration, notice, consent, waiver or act of Holders or other
document provided or pertained by this Indenture (herein collectively called
"Notice") to be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, which shall initially be 777
Main Street, Hartford, Connecticut 06115; or
(2) the Company 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 the Company addressed to it at the address of its principal office,
Attention: Chief Financial Officer, which shall initially be 8707 Katy
Freeway, Suite 300, Houston, Texas 77024.
Any Notice to be given hereunder by any party to another shall be
in writing and delivered in person or by courier service requiring
acknowledgement 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 the
Company is (713) 461-1029.
Any notice or communication mailed to a Security- holder shall be
mailed by first-class mail, postage prepaid to the Securityholder at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
83
Failure to mail a notice or communication to a Securityholder or
any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed to a Securityholder in
the manner provided above, it shall be effective five days after deposit with
the United States postage service, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condi- tion;
(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;
84
(3) a statement that, in the opinion of such individual, he has
made such examination or investigation as is necessary to enable him 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 or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. WHEN SECURITIES DISREGARDED. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Trust Officer of the Trustee knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 11.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. 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 date shall not be affected.
SECTION 11.09. GOVERNING LAW. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the
85
Company shall not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder shall waive and release all such liability. The waiver and
release shall be part of the consideration for the issue of the Securities.
SECTION 11.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. MULTIPLE ORIGINALS. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
SECTION 11.13. TABLE OF CONTENTS; HEADINGS. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted
86
for convenience of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
TPC FINANCE CORP.,
by SUSAN O. RHENEY
Name: SUSAN O. RHENEY
Title:
FLEET NATIONAL BANK,
by STEVE CIMALORE
Name:STEVE CIMALORE
Title:VICE PRESIDENT
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7)) AND TO CERTAIN PERSONS
IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. DEFINITIONS
1.1 DEFINITIONS
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security
bearing the restricted securities legend set forth in Section 2.3(d) and which
is held by an IAI in accordance with Section 2.1(c).
"Depository" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 11-1/8% Senior Subordinated
Notes Due 2006 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Rights Agreement.
"IAI" means an institutional "accredited investor" as described
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means CS First Boston Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Initial Securities" means the 11-1/8% Senior Subordinated Notes
Due 2006, issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to
the Registration Rights Agreement, to the Initial Purchasers to issue and
deliver to each Initial Purchaser, in exchange for the Initial Securities held
by such Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
2
"Purchase Agreement" means the Purchase Agreement dated June 25,
1996, between TPC Finance Corp. and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated June 25, 1996, among TPC Finance Corp. and the Initial
Purchasers.
"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement
issued by the Company, in connection with the offer and sale of Initial
Securities or Private Exchange Securities, pursuant to the Registration Rights
Agreement.
"Transfer Restricted Securities" means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(d).
1.2 OTHER DEFINITIONS
DEFINED IN
TERM SECTION:
"Agent Members"...........................................................2.1(b)
3
"Global Security".........................................................2.1(a)
"Regulation S"............................................................2.1(a)
"Rule 144A"...............................................................2.1(a)
2. THE SECURITIES.
2.1 FORM AND DATING.
The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
(a) GLOBAL SECURITIES. Initial Securities offered and sold to a
QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, shall be issued initially in the form of
one or more permanent global Securities in definitive, fully registered form
without interest coupons with the global securities legend and restricted
securities legend set forth in Exhibit 1 hereto (each, a "Global Security"),
which shall be deposited on behalf of the purchasers of the Initial Securities
represented thereby with the Trustee, at its New York office, as custodian for
the Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depository or its nominee as hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only
to a Global Security deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (b)
shall be delivered by the Trustee to such Depository or pursuant to such
Depository's instructions or held by the Trustee as custodian for the
Depository.
4
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) CERTIFICATED SECURITIES. Except as provided in this Section
2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of certificated Securities.
Purchasers of Initial Securities who are IAI's and are not QIBs and did not
purchase Initial Securities sold in reliance on Regulation S will receive
Definitive Securities; PROVIDED, HOWEVER, that upon transfer of such Definitive
Securities to a QIB, such Definitive Securities will, unless the Global Security
has previously been exchanged, be exchanged for an interest in a Global Security
pursuant to the provisions of Section 2.3.
2.2 AUTHENTICATION. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$175,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $175,000,000 except
as provided in Section 2.07 of this Indenture.
5
2.3 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF
DEFINITIVE SECURITIES. When Definitive Securities are presented to the Registrar
or a co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Company and the
Registrar or co-registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to
the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to
that effect (in the form set forth on the reverse of the
Security); or
(B) if such Definitive Securities are being transferred to
the Company, a certification to that effect (in the form set
forth on the reverse of the Security); or
(C) if such Definitive Securities are being transferred
pursuant to an exemption from registration in accordance with
Rule 144; or (x) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a
certification to that effect (in the form set forth
6
on the reverse of the Security) and (ii) if the Company or
Registrar so requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section
2.3(d)(i).
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in an
offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or
to direct the Securities Custodian to make, an adjustment on its books
and records with respect to such Global Security to reflect an increase
in the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
7
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES AND BENEFICIAL
INTERESTS THEREIN. (i) The transfer and exchange of Global Securities or
beneficial interests therein shall be effected through the Depository, in
accordance with this Indenture (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Depository therefor. A
transferor of a beneficial interest in a Global Security shall deliver to the
Registrar a written order given in accordance with the Depositary's procedures
containing information regarding the participant account of the Depository to be
credited with a beneficial interest in the Global Security. The Registrar shall,
in accordance with such instructions instruct the Depositary to credit to the
account of the Person specified in such instructions a beneficial interest in
the Global Security and to debit the account of the Person making the transfer
the beneficial interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4), a Global Security may not
be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 or
Section 2.09 of this Indenture, prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be
exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial
Securities intended to ensure that such transfers comply with Rule 144A
or Regulation S, as the case may be) and such other procedures as may
from time to time be adopted by the Company.
(d) LEGEND.
(i) Except as permitted by the following paragraphs (ii), (iii)
and (iv), each Security certificate
8
evidencing the Global Securities and the Definitive Securities (and all
Securities issued in exchange therefor or in substitution thereof) shall
bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (I) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
Each Definitive Security will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
9
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
certificated Security that does not bear the legend set forth
above and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that
is represented by a Global Security, the Registrar shall permit
the Holder thereof to exchange such Transfer Restricted Security
for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies in writing
to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set
forth on the reverse of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Securities or
Private Exchange Securities, as the case may be, all requirements
pertaining to legends on such Initial Security or such Private Exchange
Security will cease to apply, the requirements requiring any such
Initial Security or such Private Exchange Security issued to certain
Holders be issued in global form will cease to apply, and a certificated
Initial Security or Private Exchange Security without legends will be
available to the transferee of the Holder of such Initial Securities or
Private Exchange Securities upon exchange of such transferring Holder's
certificated Initial Security or Private Exchange Security or directions
to transfer such Holder's interest in the Global Security, as
applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such
Initial Securities are offered Exchange Securities in exchange for their
Initial
10
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form
will cease to apply and certificated Initial Securities with the
restricted securities legend set forth in Exhibit 1 hereto will be
available to Holders of such Initial Securities that do not exchange
their Initial Securities, and Exchange Securities in certificated or
global form will be available to Holders that exchange such Initial
Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to
the Initial Securities pursuant to which Holders of such Initial
Securities are offered Private Exchange Securities in exchange for their
Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will still apply, and Private Exchange Securities in
global form with the Restricted Securities Legend set forth in Exhibit 1
hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(e) CANCELATION OR ADJUSTMENT OF GLOBAL SECURITY. At such time as
all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancelation or retained
and canceled by the Trustee. At any time prior to such cancelation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(f) OBLIGATIONS WITH RESPECT TO TRANSFERS AND
EXCHANGES OF SECURITIES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and Global Securities at the
Registrar's or co-registrar's request.
11
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.06, 4.10 and 9.05).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated or
Definitive Security selected for redemption in whole or in part pursuant
to Article III of this Indenture, except the unredeemed portion of any
certificated or Definitive Security being redeemed in part, or (b) any
Security for a period beginning 15 Business Days before the mailing of a
notice of an offer to repurchase or redeem Securities or 15 Business
Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar may deem and treat the person in whose name a
Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and interest on such
Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by notice to
the contrary.
(v) All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(g) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in
the Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Securities or
with respect to the delivery to any
12
participant, member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption) or the
payment of any amount, under or with respect to such Securities. All
notices and communications to be given to the Holders and all payments
to be made to Holders under the Securities shall be given or made only
to or upon the order of the registered Holders (which shall be the
Depository or its nominee in the case of a Global Security). The rights
of beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures of
the Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers
between or among Depository participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
2.4 CERTIFICATED SECURITIES.
(a) A Global Security deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for such Global
Security or if at any time such Depository ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the
13
Trustee in writing that it elects to cause the issuance of certificated
Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depository
to the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depository shall direct. Any certificated
Initial Security delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(d), bear the restricted
securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a 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.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
EXHIBIT 1
to
APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC 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 THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT
TO AN
2
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.]1
- --------
1Include if a Definitive Security to be held by an institutional "accredited
investor" (as defined in Rule 501(a),(1),(2),(3) or (7) under the Securities
Act).
3
No. $
CUSIP: 882650AA2
ISIN: US882650AA28
11-1/8% Senior Subordinated Notes Due 2006
TEXAS PETROCHEMICALS CORPORATION, a Texas corporation, as
successor by merger to TPC Finance Corp., a Texas corporation, promises to pay
to
, or registered assigns, the
principal sum of Dollars on July 1, 2006.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: July 1, 1996
TPC FINANCE CORP.,
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FLEET NATIONAL BANK,
as Trustee, certifies
[Seal] that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
4
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
11-1/8% Senior Subordinated Note Due 2006
1. INTEREST
Texas Petrochemicals Corporation, a Texas corporation, as
successor by merger to TPC Finance Corp., a Texas Corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Security at the rate per annum shown above; PROVIDED, HOWEVER,
that if a Registration Default (as defined in the Registration Rights Agreement)
occurs, interest will accrue on this Security at a rate of 11-5/8% per annum
from and including the date on which any such Registration Default shall occur
to but excluding the date on which all Registration Defaults have been cured.
The Company will pay interest semiannually on January 1, and July 1 of each
year. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 1, 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. METHOD OF PAYMENT
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the December 15 or June 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by a
Global
5
Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; PROVIDED, HOWEVER, that
payments on the Securities may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
3. PAYING AGENT AND REGISTRAR
Initially, Fleet National Bank, a national banking association
duly organized and existing under the laws of the United States ("Trustee"),
will act as Paying Agent and Registrar. The Company may appoint and change any
Paying Agent, Registrar or co-registrar without notice. The Company or any of
its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
July 1, 1996 ("Indenture"), between the Company and the Trustee. 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 of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $175,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The
6
Indenture contains certain covenants that, among other things, limit the ability
of the Company and/or its Restricted Subsidiaries 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 Indenture also limits
the ability of the Company's Restricted Subsidiaries to issue Capital Stock and
to create restrictions on the ability of such Restricted Subsidiaries to pay
dividends or make any other distributions. In addition, the Company will be
obligated, under certain circumstances, to offer to repurchase Securities at a
purchase price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase, with the net cash proceeds
of certain sales or other dispositions of assets.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not
be redeemed at the option of the Company prior to July 1, 2001. On and after
that date, the Company 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 principal amount), 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 relevant interest
payment date), if redeemed during the 12-month period commencing on July 1 of
the years set forth below:
Redemption
PERIOD PRICE
2001 105.562%
2002 103.708
2003 101.854
2004 and thereafter 100.000
In addition, at any time and from time to time prior to July 1, 1999,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Securities with the proceeds of one or more Public Equity
7
Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 110% 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 relevant interest payment date);
PROVIDED, HOWEVER, that at least $113.75 million aggregate principal amount of
the Securities must remain outstanding after each such redemption.
6. NOTICE OF REDEMPTION
Notice of 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 his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the
right , subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to the
8
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, minimum denominations of $100,000) and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the
owner of it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company deposits with
9
the Trustee money or U.S. Government Obligations for the payment of principal of
and interest on the Securities to redemption or maturity, as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Securities) and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority in
principal amount of the Securities then outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article V of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities (provided that
the uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code), or to add
guarantees with respect to the Securities or to secure the Securities, or to add
to the covenants of the Company for the benefit of the Securityholders or to
surrender any right or power conferred upon the Company, or to comply with any
requirement of the SEC in connection with qualification of the Indenture under
the Act, or to make certain changes in the subordination provisions, or to make
any change that does not adversely affect the rights of any Securityholder.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal of the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in
10
certain cases subject to notice and lapse of time; (iv) certain accelerations
(including failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$5,000,000; (v) certain events of bankruptcy or insolvency with respect to the
Company and the Significant Subsidiaries; and (vi) certain judgments or decrees
for the payment of money in excess of $5,000,000. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their crea-
11
tion. By accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
19. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
20. GOVERNING LAW.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITY
12
HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY IN
LARGER TYPE. REQUESTS MAY BE MADE TO:
TEXAS PETROCHEMICALS CORPORATION
8707 KATY FREEWAY, SUITE 300
HOUSTON, TEXAS 77024
ATTENTION OF PRESIDENT
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Date: ________________ Your Signature: _____________________
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:
13
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration
statement under the Securities Act of 1933;
or
(3) |_| inside the United States to a "qualified
institutional buyer" (as defined in Rule 144A
under the Securities Act of 1933) that
purchases for its own account or for the
account of a qualified institutional buyer to
whom notice is given that such transfer is
being made in reliance on Rule 144A, in each
case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933;
or
(4) |_| outside the United States in an offshore transaction
within the meaning of Regulation S under the Securities
Act in compliance with Rule 904 under the Securities Act
of 1933; or
(5) |_| pursuant to another available exemption from
registration provided by Rule 144 under the Securities Act
of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; PROVIDED, HOWEVER, that
if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
------------------------
Signature
14
Signature Guarantee:
- --------------------- --------------------------
Signature must be guaranteed Signature
- ------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) 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, 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 the Company 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
15
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have
been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount of Signature of
Exchange in Principal in Principal Amount this Global authorized officer
Amount of this of this Global Security following of Trustee or
Global Security Security such decrease or Securities
increase) Custodian
<S> <C> <C> <C> <C>
-- -- -- -- --
</TABLE>
16
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by
the Company pursuant to Section 4.07 or 4.10 of the Indenture,
check the box:
[_]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.07 or 4.10 of the Indenture, state the
amount in principal amount: $
Date: _______________ Your Signature: ___________________________
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE
SECURITY]
[*/]
[**/]
No. $
11-1/8% Senior Subordinated Notes Due 2006
TEXAS PETROCHEMICALS CORPORATION, a Texas corporation, as
successor by merger to TPC Finance Corp., a Texas corporation, promises to pay
to , or registered assigns, the principal sum of Dollars on July 1, 2006.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
TPC FINANCE CORP.,
by
-----------------------
President
-----------------------
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
FLEET NATIONAL BANK,
as Trustee, certifies
[Seal] that this is one of
the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
2
*/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY".
**/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the
Assignment Form included in this Exhibit A with the Assignment Form included in
such Exhibit 1.
3
FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE
SECURITY
11-1/8% Senior Subordinated Note Due 2006
1. INTEREST
Texas Petrochemicals Corporation, a Texas corporation, as successor
by merger to TPC Finance Corp., a Texas corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein
called the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above; PROVIDED, HOWEVER, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
interest will accrue on this Security at a rate of 11-5/8% per annum from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. The
Company will pay interest semiannually on January 1 and July 1 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 1, 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. METHOD OF PAYMENT
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the December 15 or June 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities represented by a
Global Security (including principal, premium and interest) will be
4
made by wire transfer of immediately available funds to the accounts specified
by The Depository Trust Company. The Company will make all payments in respect
of a certificated Security (including principal, premium and interest), by
mailing a check to the registered address of each Holder thereof; PROVIDED,
HOWEVER, that payments on the Securities may also be made, in the case of a
Holder of at least $1,000,000 aggregate principal amount of Securities, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).
3. PAYING AGENT AND REGISTRAR
Initially, Fleet National Bank, a national banking association duly
organized and existing under the laws of the United States ("Trustee"), will act
as Paying Agent and Registrar. The Company may appoint and change any Paying
Agent, Registrar or co-registrar without notice. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
July 1, 1996 ("Indenture"), between the Company and the Trustee. 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 of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $175,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture contains certain covenants that, among other
5
things, limit the ability of the Company and/or its Restricted Subsidiaries 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
Indenture also limits that ability of the Company's Restricted Subsidiaries to
issue Capital Stock and to create restrictions on the ability of such Restricted
Subsidiaries to pay dividends or make any other distributions. In addition, the
Company will be obligated, under certain circumstances, to offer to repurchase
Securities at a purchase price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of repurchase, with the
net cash proceeds of certain sales or other dispositions of assets.
5. OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Securities may not be
redeemed at the option of the Company prior to July 1, 2001. On and after that
date, the Company 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 principal amount), 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 105.562%
2002 103.708
2003 101.854
2004 and thereafter 100.000
In addition, at any time prior to July 1, 1999, the Company may
redeem in the aggregate up to 35% of the original principal amount of the
Securities with the proceeds of one or more Public Equity Offerings following
6
which there is a Public Market, at a redemption price (expressed as a percentage
of principal amount) of 110% 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); PROVIDED, HOWEVER,
that at least $113.75 million aggregate principal amount of the Securities must
remain outstanding after each such redemption.
6. NOTICE OF REDEMPTION
Notice of 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 his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is deposited with
the Paying Agent on or before the redemption date and certain other conditions
are satisfied, on and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the
right , subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the
7
subordination provisions contained in the Indenture and authorizes the Trustee
to give it effect and appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in
denominations of $1,000 (or in the case of Definitive Securities sold to
institutional accredited investors as described in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, minimum denominations of $100,000) and whole
multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements or transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities for a period of 15 days before a
selection of Securities to be redeemed or 15 days before an interest payment
date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner
of it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with
8
the Trustee money or U.S. Government Obligations for the payment of principal of
and interest on the Securities to redemption or maturity, as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Securities) and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority in
principal amount of the Securities then outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article V of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities (provided that
the uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code) or to add
guarantees with respect to the Securities or to secure the Securities, or to add
to the covenants of the Company for the benefit of the Securityholders or to
surrender any right or power conferred upon the Company, or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the Act, or to make certain changes in the subordination provisions, or to
make any change that does not adversely affect the rights of any Securityholder.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal of the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in
9
certain cases subject to notice and lapse of time; (iv) certain accelerations
(including failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$5,000,000; (v) certain events of bankruptcy or insolvency with respect to the
Company and the Significant Subsidiaries; and (vi) certain judgments or decrees
for the payment of money in excess of $5,000,000. If an Event of Default occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Securities may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their crea-
10
tion. By accepting a Security, each Securityholder waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
19. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
11
21. GOVERNING LAW.
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH
HAS IN IT THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
TEXAS PETROCHEMICALS CORPORATION
8707 KATY FREEWAY, SUITE 300
HOUSTON, TEXAS 77024
ATTENTION OF PRESIDENT
12
- ------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company. The
agent may substitute another to act for him.
- ------------------------------------------------------------
Date: ________________ Your Signature: _____________________
- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
13
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.07 or 4.10 of the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased
by the Company pursuant to Section 4.07 or 4.10 of the Indenture, state the
amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
member firm of the New York Stock
Exchange or a commercial bank or trust company)
EXHIBIT 4.2
EXECUTION COPY
TPC FINANCE CORP.
$175,000,000
111/8% Senior Subordinated Notes Due 2006
REGISTRATION RIGHTS AGREEMENT
June 25, 1996
CS First Boston Corporation
Merrill Lynch, Pierce, Fenner & Smith Incorporated
c/o CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
Ladies and Gentlemen:
TPC Finance Corp., a Texas corporation (the "Issuer"), proposes
to issue and sell to CS First Boston Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (collectively, the "Initial Purchasers"), upon the
terms set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), $175,000,000 aggregate principal amount of its 111/8% Senior
Subordinated Notes Due 2006 (the "Notes"). The Notes will be issued pursuant to
an Indenture, dated as of July 1, 1996, (the "Indenture") among the Issuer and
Fleet National Bank (the "Trustee"). As an inducement to the Initial Purchasers,
the Issuer agrees with the Initial Purchasers, for the benefit of the holders of
the Notes (including, without limitation, the Initial Purchasers), the Exchange
Notes (as defined below) and the Private Exchange Notes (as defined below)
(collectively the "Holders"), as follows:
1. REGISTERED EXCHANGE OFFER. The Issuer shall, at its cost,
prepare and, not later than 75 days after (or if the 75th day is not a business
day, the first business day thereafter) the issue date of the Notes (the "Issue
Date"), file with the Securities and Exchange Commission (the "Commission") a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the
Holders of Transfer Restricted Notes (as defined in Section 6 hereof), who are
not prohibited by
2
any law or policy of the Commission from participating in the Registered
Exchange Offer, to issue and deliver to such Holders, in exchange for the Notes,
a like aggregate principal amount of debt securities (the "Exchange Notes") of
the Issuer issued under the Indenture and identical in all material respects to
the Notes (except for the transfer restrictions relating to the Notes) that
would be registered under the Securities Act. The Issuer shall use all
reasonable efforts to cause such Exchange Offer Registration Statement to become
effective under the Securities Act within 120 days (or if the 120th day is not a
business day, the first business day thereafter) after the Issue Date of the
Notes and shall keep the Exchange Offer Registration Statement effective for not
less than 30 days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders (such
period being called the "Exchange Offer Registration Period").
If the Issuer effects the Registered Exchange Offer, the Issuer
will be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof provided that the Issuer has accepted all the Notes
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange
Offer Registration Statement, the Issuer shall promptly commence the Registered
Exchange Offer. In connection with such Registered Exchange Offer, the Issuer
shall take such further action, including, without limitation, appropriate
filings under state securities laws, as may be necessary to realize the
foregoing objective subject to the proviso of Section 3(h).
Pursuant to current interpretations by the Commission's staff of
Section 5 of the Securities Act, in the absence of an applicable exemption
therefrom, (i) each Holder which is a broker-dealer electing to exchange Notes,
acquired for its own account as a result of market making activities or other
trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to
deliver a prospectus containing substantially the information set forth in Annex
A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and in Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection with a
sale of any such Exchange Notes received
3
by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an
Initial Purchaser that elects to sell Exchange Notes acquired in exchange for
Notes constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Issuer shall use all reasonable efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be usable by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; PROVIDED, HOWEVER, that (i) in the case
where such prospectus and any amendment or supplement thereto must be delivered
by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser
of 180 days and the date on which all Exchanging Dealers and the Initial
Purchasers have sold all Exchange Notes held by them (unless such period is
extended pursuant to Section 3(j) below) and (ii) the Issuer shall make such
prospectus and any amendment or supplement thereto, available to any
broker-dealer for use in connection with any resale of any Exchange Notes for a
period not less than 90 days after the consummation of the Registered Exchange
Offer.
If, upon consummation of the Registered Exchange Offer, any
Initial Purchaser holds Notes acquired by it as part of its initial
distribution, the Issuer, simultaneously with the delivery of the Exchange Notes
pursuant to the Registered Exchange Offer, shall, to the extent lawful, issue
and deliver to such Initial Purchaser upon the written request of such Initial
Purchaser, in exchange (the "Private Exchange") for the Notes held by such
Initial Purchaser, a like principal amount of debt securities of the Issuer
issued under the Indenture and identical in all material respects (including the
existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States) to the Notes (the
"Private Exchange Notes"). The Notes, the Exchange Notes and the Private
Exchange Notes are herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Issuer
shall:
4
(a) mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior
to the close of business, New York time, on the last business day on
which the Registered Exchange Offer shall remain open, by delivering to
the institution specified in the notice, a telegram, telex, facsimile
transmission or letter by courier, setting forth the name of such
Holder, the principal amount of Notes delivered for exchange, and a
statement that such Holder is withdrawing such Holder's election to have
Notes exchanged; and
(e) otherwise comply in all material respects with
all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Issuer shall:
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer (and the Letter of
Transmittal which is an exhibit thereto) and the Private Exchange;
(ii) deliver to the Trustee for cancelation all the
Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of the Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
5
The Indenture will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue of the Notes.
Each Holder participating in the Registered Exchange Offer shall
be required to represent to the Issuer that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Notes received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Notes or the Exchange Notes within the meaning of the
Securities Act, (iii) such Holder is not an "affiliate", as defined in Rule 405
of the Securities Act, of the Issuer or if it is an affiliate, such Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Notes and (v) if such Holder is a broker-dealer,
that it will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities and that it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Issuer will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part
6
of any Exchange Offer Registration Statement, and any supplement to such
prospectus, does not, as of its date, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
2. SHELF REGISTRATION. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Issuer is
not permitted to effect a Registered Exchange Offer, as contemplated by Section
1 hereof, (ii) the Registered Exchange Offer is not consummated within 150 days
of the Issue Date, (iii) any Initial Purchaser so requests with respect to the
Notes (or any Private Exchange Notes) not eligible to be exchanged for Exchange
Notes in the Registered Exchange Offer and held by it following consummation of
the Registered Exchange Offer or (iv) any Holder (other than an Exchanging
Dealer) is not eligible to participate in the Registered Exchange Offer or, in
the case of any Holder (other than an Exchanging Dealer) that participates in
the Registered Exchange Offer, such Holder does not receive freely tradeable
Exchange Notes on the date of the exchange, the Issuer shall take the following
actions:
(a) The Issuer shall, at its cost, as promptly as practicable
(but in no event more than 30 days after so required or requested
pursuant to this Section 2) file with the Commission and thereafter
shall use all reasonable efforts to cause to be declared effective a
registration statement (the "Shelf Registration Statement", which may be
combined with the Exchange Offer Registration Statement, and, together
with the Exchange Offer Registration Statement, a "Registration
Statement") on an appropriate form under the Securities Act relating to
the offer and sale of the Transfer Restricted Notes by the Holders
thereof from time to time in accordance with the methods of distribution
set forth in the Shelf Registration Statement and Rule 415 under the
Securities Act (hereinafter, the "Shelf Registration"); PROVIDED,
HOWEVER, that no Holder (other than an Initial Purchaser) shall be
entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound
by all the provisions of this Agreement applicable to such Holder.
7
(b) The Issuer shall use all reasonable efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be usable by the Holders of the relevant
Securities, for a period of three years (or for such longer period if
extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement have been sold
pursuant thereto. The Issuer shall be deemed not to have used all
reasonable efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that
would result in Holders of Securities covered thereby not being able to
offer and sell such Securities during that period, unless such action is
required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Issuer shall cause the Shelf Registration Statement and
the related prospectus and any amendment or supplement thereto, as of
the effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein (in the case of the
prospectus, in light of the circumstances under which they were made)
not misleading.
3. REGISTRATION PROCEDURES. In connection with
any Shelf Registration contemplated by Section 2 hereof and,
to the extent applicable, any Registered Exchange Offer
contemplated by Section 1 hereof, the following provisions
shall apply:
(a) The Issuer shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, shall use all reasonable
8
efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may
propose; (ii) include the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto in the
"Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement and include the information set
forth in Annex D hereto in the Letter of Transmittal delivered pursuant
to the Registered Exchange Offer; (iii) if requested by an Initial
Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement;
(iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff
of the Commission with respect to the potential "underwriter" status of
any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Exchange Notes received by such broker-dealer in the
Registered Exchange Offer (a "Participating Broker-Dealer"), whether
such positions or policies have been publicly disseminated by the staff
of the Commission or such positions or policies, in the reasonable
judgment of the Initial Purchasers based upon advice of counsel (which
may be in-house counsel), represent the prevailing views of the staff of
the Commission; and (v) in the case of a Shelf Registration Statement,
include the names of the Holders, who propose to sell Securities
pursuant to the Shelf Registration Statement, as selling
securityholders.
(b) The Issuer shall give written notice to the Initial
Purchasers, the Holders of the Securities and any Participating
Broker-Dealer from whom the Issuer has received prior written notice
that it will be a Participating Broker-Dealer in the Registered Exchange
Offer (which notice pursuant to clauses (ii)-(v) hereof shall be
accompanied by an instruction to suspend the use of the prospectus until
the requisite changes have been made):
9
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration
Statement or the prospectus included therein or
for additional information;
(iii) of the issuance by the Commission of
any stop order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Issuer or its legal counsel
of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose;
and
(v) of the happening of any event that requires the
Issuer to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus do not contain an untrue statement of a material fact
nor omit to state a material fact required to be stated therein
or necessary in order to make the statements therein (in the case
of the prospectus, in light of the circumstances under which they
were made) not misleading.
(c) The Issuer shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) In the case of a Shelf Registration, the Issuer shall furnish
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, at least one conformed copy of the Shelf
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
10
(e) The Issuer shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without
charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if any Initial Purchaser or any such
Holder requests, all exhibits thereto (including those incorporated by
reference).
(f) In the case of a Shelf Registration, the Issuer shall deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as such
person may reasonably request. The Issuer consents, subject to the
provisions of this Agreement and all applicable laws, to the use of the
prospectus or any amendment or supplement thereto by each of the selling
Holders of the Securities in connection with the offering and sale of
the Securities covered by the prospectus, or any amendment or supplement
thereto, included in the Shelf Registration Statement.
(g) The Issuer shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus
included in the Exchange Offer Registration Statement and any amendment
or supplement thereto as such persons may reasonably request. The Issuer
consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by any Initial
Purchaser, if necessary, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer in connection with the offering and sale of the Exchange
Notes covered by the prospectus, or any amendment or supplement thereto,
included in such Exchange Offer Registration Statement.
(h) Prior to the effective date of any
Registration Statement, the Issuer shall use reasonable
efforts to register or qualify or cooperate with the
11
Holders of the Securities included therein and one counsel selected by
them in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of
such states of the United States as any Holder of the Securities
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by such Registration Statement;
PROVIDED, HOWEVER, that the Issuer shall not be required to (i) qualify
generally to do business or register as a dealer in securities in any
jurisdiction where it is not then so qualified or (ii) take any action
which would subject it to general service of process or to taxation in
any jurisdiction where it is not then so subject.
(i) The Issuer shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations (in
accordance with the provisions of the Indenture) and registered in such
names as the Holders may request a reasonable period of time prior to
sales of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs
(ii) through (v) of Section 3(b) above during the period for which the
Issuer is required to maintain an effective Registration Statement, the
Issuer shall use all reasonable efforts to prepare and file a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus and any other required document so that, as
thereafter delivered to Holders of the Notes or purchasers of
Securities, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. If the Issuer notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section
3(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made or any stop order has been
lifted, as the case may be,
12
then the Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and
the period of effectiveness of the Shelf Registration Statement provided
for in Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended by the number of
days from and including the date of the giving of such notice to and
including the date when the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer shall have received
such amended or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable
Registration Statement, the Issuer will provide a CUSIP number for the
Notes, the Exchange Notes or the Private Exchange Notes, as the case may
be, and provide the applicable trustee with printed certificates for the
Notes, the Exchange Notes or the Private Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(l) The Issuer will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf Registration and will make
generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder, no later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning
with the first month of the Issuer's first fiscal quarter commencing
after the effective date of the Registration Statement, which statement
shall cover such 12-month period.
(m) The Issuer shall cause the Indenture to be qualified under
the Trust Indenture Act of 1939, as amended, in a timely manner and
containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuer shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.
13
(n) In the case of a Shelf Registration, the Issuer may require
each Holder of Securities to be sold pursuant to the Shelf Registration
Statement to furnish to the Issuer such information regarding the Holder
and the distribution of the Securities as the Issuer may from time to
time reasonably require for inclusion in the Shelf Registration
Statement, and the Issuer may exclude from such registration the
Securities of any Holder that unreasonably fails to furnish such
information within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration, the Issuer shall enter
into such customary agreements (including if requested an underwriting
agreement in customary form) and take all such other action, if any, as
any Holder of the Securities shall reasonably request in order to
facilitate the disposition of the Securities pursuant to any Shelf
Registration.
(p) In the case of a Shelf Registration, upon the execution of a
confidentiality agreement reasonably requested by the Issuer, the Issuer
shall (i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement and any attorney, accountant or other
agent retained by the Holders of the Securities or any such underwriter
all relevant financial and other records, pertinent corporate documents
and properties of the Issuer and (ii) cause the Issuer's officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any
such underwriter, attorney, accountant or agent in connection with the
Shelf Registration Statement, in each case, as shall be reasonably
necessary, in the judgment of the Holder or any such underwriter,
attorney, accountant or agent referred to in this paragraph, to conduct
a reasonable investigation within the meaning of Section 11 of the
Securities Act; PROVIDED, HOWEVER, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in
Section 4 hereof.
14
(q) In the case of any Shelf Registration, the Issuer, if
requested by any Holder of Securities covered thereby, shall cause (i)
its counsel to deliver an opinion and updates thereof relating to the
Securities in customary form addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial
opinion, the effective date of such Shelf Registration Statement (it
being agreed that the matters to be covered by such opinion shall be
subject to customary qualifications and exceptions and shall include,
without limitation, the due incorporation and good standing of the
Issuer; the qualification of the Issuer to transact business as foreign
corporations; the due authorization, execution and delivery of the
relevant agreement of the type referred to in Section 3(o) hereof; the
due authorization, execution, authentication and issuance, and the
validity and enforceability, of the applicable Securities; the absence
of material legal or governmental proceedings involving the Issuer; the
absence of governmental approvals required to be obtained in connection
with the Shelf Registration Statement, the offering and sale of the
applicable Securities, or any agreement of the type referred to in
Section 3(o) hereof; the compliance as to form of such Shelf
Registration Statement and any documents incorporated by reference
therein and of the Indenture with the requirements of the Securities Act
and the Trust Indenture Act, respectively; and, as of the date of the
opinion and as of the effective date of the Shelf Registration Statement
or most recent post-effective amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any
documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading (in the case of any such documents, in the light of the
circumstances existing at the time that such documents were filed with
the Commission under the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof
reasonably requested by any underwriters of the applicable Securities;
and (iii) its independent public accountants to provide to the selling
Holders of the applicable Securities and any underwriter therefor a
15
comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary
underwritten offerings, subject to receipt of appropriate documentation
as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by
any Initial Purchaser or any known Participating Broker-Dealer, the
Issuer shall cause (i) its counsel to deliver to such Initial Purchaser
or such Participating Broker-Dealer a signed opinion in the form set
forth in Section 6(h) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement
and (ii) its independent public accountants to deliver to such Initial
Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as
set forth in Section 6(a) of the Purchase Agreement, with appropriate
date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Issuer (or to
such other Person as directed by the Issuer) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the
Issuer shall mark, or cause to be marked, on the Notes so exchanged that
such Notes are being canceled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be, or take such other action as
may be necessary to cancel such Notes; in no event shall the Notes be
marked as paid or otherwise satisfied.
(t) The Issuer will use all reasonable efforts to (i) if the
Notes have been rated prior to the initial sale of such Notes, confirm
that such ratings will apply to the Securities covered by a Registration
Statement, or (b) if the Notes were not previously rated, cause the
Securities covered by a Registration Statement to be rated with the
appropriate rating agencies, if so requested by Holders of a majority in
aggregate principal amount of Securities covered by such Registration
Statement, or by the managing underwriters, if any.
16
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice (the
"Rules") and the By-Laws (the "ByLaws") of the National Association of
Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such
Securities or as an underwriter, a placement or sales agent or a broker
or dealer in respect thereof, or otherwise, the Issuer will assist such
broker-dealer in complying with the requirements of such Rules and
By-Laws, including, without limitation, by (A) if such Rules or By-Laws,
including Schedule E thereto, shall so require, engaging a "qualified
independent underwriter" (as defined in such Schedule) to participate in
the preparation of the Registration Statement relating to such
Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities, (B)
indemnifying any such qualified independent underwriter to the extent of
the indemnification of underwriters provided in Section 5 hereof and (C)
providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the
Rules of Fair Practice of the NASD.
(v) The Issuer shall use all reasonable efforts to take all other
reasonable steps necessary to effect the registration of the Securities
covered by a Registration Statement contemplated hereby.
4. REGISTRATION EXPENSES. The Issuer shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof including (i) all Commission, stock exchange or NASD
registration and filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws and compliance with the
rules of the NASD (including reasonable fees and disbursements of one counsel
for Holders in connection with blue sky qualification of any of the Exchange
Notes), (iii) all expenses of preparing, word processing, printing and
distributing any Registration Statement, any prospectus and any amendments or
supplements
17
thereto, (iv) all rating agency fees, (v) the fees and disbursements of counsel
for the Issuer and of the independent public accounts of the Issuer, including
the expenses of any "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees of counsel to the underwriters or
the Holders (unless such fees have been approved in writing by Finance Co.) and
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Securities by a Holder, (vi) the fees and expenses of
the Trustee, and any escrow agents or custodians, and (vii) any fees and
disbursements of the underwriters customarily required to be paid by issuers and
sellers of securities and the reasonable fees and expenses of any special
experts retained by the Issuer in connection with any Registration Statement,
but excluding underwriting discounts and commissions and transfer taxes, if any.
5. INDEMNIFICATION. (a) The Issuer agrees to indemnify and hold
harmless each Holder of the Securities (other than a Holder which acquires
Securities pursuant to the Registered Exchange Offer which are freely
transferable without compliance with the prospectus delivery requirements of the
Securities Act), any Participating Broker-Dealer and each person, if any, who
controls such Holder or such Participating Broker-Dealer within the meaning of
the Securities Act or the Exchange Act (each Holder, any Participating
Broker-Dealer and such controlling persons are referred to collectively as the
"Seller Indemnified Party") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including, but
not limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Securities) to which each Seller Indemnified Party
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus included therein or in
any amendment or supplement thereto, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse, as incurred, each Seller Indemnified Party for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
PROVIDED, HOWEVER, that (i) the
18
Issuer shall not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in a Registration
Statement or prospectus included therein or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Issuer by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Seller Indemnified
Party from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Issuer had
previously furnished copies thereof to such Seller Indemnified Party and such
final prospectus corrected such untrue statement or omission; PROVIDED FURTHER,
HOWEVER, that this indemnity agreement will be in addition to any liability
which the Issuer may otherwise have to such Indemnified Party. The Issuer shall
also indemnify underwriters, selling brokers, dealer-managers and similar
securities industry professionals participating in the distribution (as
described in the Registration Statement), their officers and directors and each
person who controls such persons within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly,
will indemnify and hold harmless the Issuer and each person, if any, who
controls the Issuer within the meaning of the Securities Act or the Exchange Act
(each, a "Company Indemnified Party") from and against any losses, claims,
damages or liabilities or any actions in respect thereof, to which each Company
Indemnified Party may become subject under the Securities Act, the Exchange Act
or
19
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Issuer by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Issuer for any legal or
other expenses reasonably incurred by each Company Indemnified Party in
connection with investigating or defending any loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in addition to any
liability which such Holder may otherwise have to each Company Indemnified
Party.
(c) Promptly after receipt by a Seller Indemnified Party or a
Company Indemnified Party (each, an "Indemnified Party") under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such Indemnified Party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not, in any event, relieve the indemnifying party
from any obligations to any Indemnified Party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any Indemnified Party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party (who shall not, except with the consent
of the Indemnified Party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense thereof the indemnifying party will not be liable to such
Indemnified Party under this Section 5 for any legal or other expenses,
20
other than reasonable costs of investigation, subsequently incurred by such
Indemnified Party in connection with the defense thereof. No indemnifying party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened action in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party unless such settlement includes an
unconditional release of such Indemnified Party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an Indemnified Party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the Indemnified Party on the other from the exchange of the Notes,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the Indemnified Party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuer on the one hand or
such Holder or such other indemnified person, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any
21
other provision of this Section 5(d), no Seller Indemnified Party shall be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Seller Indemnified Party from the sale of the
Securities pursuant to a Registration Statement exceeds the amount of damages
which such Seller Indemnified Party has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) The agreements contained in this Section 5 shall survive the
sale of the Securities pursuant to a Registration Statement and shall remain in
full force and effect, regardless of any termination or cancelation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. ADDITIONAL INTEREST UNDER CERTAIN
CIRCUMSTANCES. (a) Additional interest (the "Additional
Interest") with respect to the Securities shall be assessed
as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration
Default"):
(i) if by September 16, 1996, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed
with the Commission;
(ii) if by November 28, 1996, neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) if after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective, (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Notes during the periods specified herein, because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any
22
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or (2) it
shall be necessary to amend such Registration Statement or supplement
the related prospectus, to comply with the Securities Act or the
Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Notes over and above the interest set
forth in the title of the Notes from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B)
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Issuer where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Issuer that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Issuer is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
PROVIDED, HOWEVER, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day following such 30-day period
until the date on which such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause
(a)(i), (a)(ii) or (a)(iii) of Section 6 above will be payable in cash on the
regular interest payment dates with respect to the Notes. The amount of
Additional Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Notes, multiplied by a fraction,
the numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
23
(d) "Transfer Restricted Notes" means each Security until (i) the
date on which such Transfer Restricted Note has been exchanged by a person other
than a broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Transfer Restricted Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Transfer Restricted Note is distributed
to the public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act.
7. RULES 144 AND 144A. For so long as the Issuer is subject to
the reporting requirements of Section 13 or 15 of the Exchange Act, the Issuer
shall use all reasonable efforts to file the reports required to be filed by it
under the Securities Act and Section 13(a) or 15(d) of the Exchange Act in a
timely manner and, if at any time the Issuer is not required to file such
reports, it will, upon the request of any Holder of Transfer Restricted Notes,
make publicly available other information so long as necessary to permit sales
of their securities pursuant to Rules 144 and 144A. The Issuer covenants that it
will take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Issuer will provide a
copy of this Agreement to prospective purchasers of Notes identified to the
Issuer by the Initial Purchasers upon request. Upon the request of any Holder of
Transfer Restricted Notes, the Issuer shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Issuer
to register any of its securities pursuant to the Exchange Act.
8. UNDERWRITTEN REGISTRATIONS. If any of the
Transfer Restricted Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment
24
banker or investment bankers and manager or managers that will administer the
offering ("Managing Underwriters") will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Notes to be included
in such offering and shall be reasonably acceptable to the Issuer.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Notes on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Issuer and the
written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Issuer in accordance with the provisions of
this Section 9(b), which address initially is, with respect to each
Holder, the address of such Holder to which confirmation of the sale of
the Notes to such Holder was first sent by the Initial Purchasers, with
a copy (which shall not constitute notice) in like manner to you as
follows:
CS First Boston Corporation
Park Avenue Plaza
New York, NY 10055
Fax No.: (212) 318-0532
Attention: Transactions Advisory Group
25
with a copy (which shall not constitute notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman, Esq.
(2) if to the Initial Purchasers, at the addresses
specified in Section 9(b)(1);
(3) if to the Issuer, at its address as follows:
TPC Finance Corp.
c/o Texas Petrochemicals Corporation
8707 Katy Freeway, Suite 300
Houston, TX 77024
Fax No.: (713) 461-1029
Attention: President
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator when
acknowledged during the recipient's normal business hours, and otherwise on the
following business day, if sent by facsimile transmission; and on the day
delivered, if sent by overnight air courier guaranteeing next day delivery.
(c) SUBMISSION TO JURISDICTION. The Issuer hereby submits to the
nonexclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in the City of New York in any suit or proceeding between the parties
arising out of or relating to this Agreement or the transactions contemplated
hereby.
(d) NO INCONSISTENT AGREEMENTS. The Issuer has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon the Issuer and its successors and assigns,
26
including Texas Petrochemicals Corporation, as successor by
merger.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
(i) SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(j) SECURITIES HELD BY THE ISSUER. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Issuer or its affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed to
be affiliates solely by reason of their holdings of such Securities) shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers and the Issuer in accordance with its
terms.
Very truly yours,
TPC FINANCE CORP.,
by
/s/ SUSAN O.RHENEY
Name: Susan O. Rheney
Title: President
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
CS FIRST BOSTON CORPORATION,
by
/s/ JOHN L. GARCIA
Name: John L. Garcia
Title: Managing Director
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
by
/s/ PASCAL-ANDRE J. MAETER
Name: Pascal-Andre J. Maeter
Title: Vice President
ANNEX A
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuer has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution".
ANNEX B
Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution".
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Issuer has agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until
, 199 , all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.1
The Issuer will not receive any proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that
- --------
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
2
it is an "underwriter" within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date the Issuer
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuer has agreed to pay all expenses incident
to the Exchange Offer (including the expenses approved in writing of one counsel
for the Holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
ANNEX D
[X] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ____________________________________________
Address: _________________________________________
-----------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
EXHIBIT 10.1
TEXAS PETROCHEMICAL HOLDINGS, INC.
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE OF THE PLAN. The purpose of this Texas Petrochemical
Holdings, Inc. 1996 Stock Option Plan ("Plan") is to encourage ownership of
common stock, $.01 par value ("Common Stock"), of Texas Petrochemical Holdings,
Inc., a Delaware corporation (the "Com pany"), by eligible key employees and
directors of the Company and its Affiliates (as defined below) and to provide
increased incentive for such employees and directors to render services and to
exert maximum effort for the business success of the Company. In addition, the
Company expects that the Plan will further strengthen the identification of
employees and directors with the stockholders. Certain options to be granted
under this Plan are intended to qualify as Incentive Stock Options ("ISOs")
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), while other options granted under this Plan will be nonqualified
options which are not intended to qualify as ISOs ("Nonqualified Options"),
either or both as provided in the agreements evidencing the options as provided
in Section 6 hereof. As used in this Plan, the term "Affiliates" means any
"parent corporation" of the Company and any "subsidiary corporation" of the
Company within the meaning of Code Sections 424(e) and (f), respectively.
SECTION 2. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by
the Board of Directors (the "Board") or a Compensation Committee
designated by the Board which shall also designate the Chairman of the
Compensation Committee. If the Company is governed by Rule 16b-3
promulgated by the Securities and Exchange Commission ("Commission")
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange
Act"), no director shall serve as a member of the Compensation Committee
unless he is a "disinterested person" within the meaning of such Rule
16b-3. The Board or the Compensation Committee as administrators of the
Plan shall hereinafter be referred to as "Committee."
(b) COMMITTEE ACTION. The Committee shall hold its meetings at
such times and places as it may determine. A majority of its members
shall constitute a quorum, and all determinations of the Committee shall
be made by not less than a majority of its members. Any decision or
determination reduced to writing and signed by a majority of the members
shall be fully effective as if it had been made by a majority vote of
its members at a meeting duly called and held. The Committee may
designate the Secretary of the Company or other Company employees to
assist the Committee in the administration of the Plan, and may grant
authority to such persons to execute award agreements or other documents
on behalf of the Committee and the Company. Any duly constituted
committee of the Board satisfying the qualifications of this Section 2
may be appointed as the Committee.
(c) COMMITTEE EXPENSES. All expenses and liabilities incurred by
the Committee in the administration of the Plan shall be borne by the
Company. The Committee may employ attorneys, consultants, accountants or
other persons.
-1-
SECTION 3. STOCK RESERVED FOR THE PLAN. Subject to adjustment as
provided in Section 6(k) hereof, the aggregate number of shares of Common Stock
that may be optioned under the Plan is 27,778. The shares subject to the Plan
shall consist of authorized but unissued shares of Common Stock and such number
of shares shall be and is hereby reserved for sale for such purpose. Any of such
shares which may remain unsold and which are not subject to outstanding options
at the termination of the Plan shall cease to be reserved for the purpose of the
Plan, but until termination of the Plan or the termination of the last of the
options granted under the Plan, whichever last occurs, the Company shall at all
times reserve a sufficient number of shares to meet the requirements of the
Plan. Should any option expire or be cancelled prior to its exercise in full,
the shares theretofore subject to such option may again be made subject to an
option under the Plan.
SECTION 4. ELIGIBILITY. The persons eligible to participate in the Plan
as a recipient of options ("Optionee") shall include only key employees and
directors of the Company or its Affiliates at the time the option is granted. An
employee who has been granted an option hereunder may be granted an additional
option or options, if the Committee shall so determine.
SECTION 5. GRANT OF OPTIONS.
(a) COMMITTEE DISCRETION. Except where the Committee has
explicitly given the authority to some other individual, the Committee
shall have sole and absolute discretionary authority (i) to determine,
authorize, and designate those key employees and directors of the
Company or its Affiliates who are to receive options under the Plan,
(ii) to determine the number of shares of Common Stock to be covered by
such options and the terms thereof, and (iii) to determine the type of
option granted: ISO, Nonqualified Option or a combination of ISO and
Nonqualified Options; provided that a director may not receive any ISOs.
The Committee shall thereupon grant options in accordance with such
determinations as evidenced by a written option agreement. Subject to
the express provisions of the Plan, the Committee shall have
discretionary authority to prescribe, amend and rescind rules and
regulations relating to the Plan, to interpret the Plan, to prescribe
and amend the terms of the option agreements (which need not be
identical) and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(b) STOCKHOLDER APPROVAL. All options granted under this Plan are
subject to, and may not be exercised before, the approval of this Plan
by the stockholders prior to the first anniversary date of the Board
meeting held to approve the Plan, by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present, or
represented by proxy, and entitled to vote thereat or by written consent
in accordance with the laws of the State of Delaware; provided that if
such approval by the stockholders of the Company is not forthcoming, all
options previously granted under this Plan shall be void.
(c) LIMITATION ON INCENTIVE STOCK OPTIONS. The aggregate fair
market value (determined in accordance with Section 6(b) of this Plan at
the time the option is granted)
-2-
of the Common Stock with respect to which ISOs may be exercisable for
the first time by any Optionee during any calendar year under all such
plans of the Company and its Affiliates shall not exceed $100,000.
SECTION 6. TERMS AND CONDITIONS. Each option granted under the Plan
shall be evidenced by an agreement, in a form approved by the Committee, which
shall be subject to the following express terms and conditions and to such other
terms and conditions as the Committee may deem appropriate.
(a) OPTION PERIOD. The Committee shall promptly notify the
Optionee of the option grant and a written agreement shall promptly be
executed and delivered by and on behalf of the Company and the Optionee,
provided that the option grant shall expire if a written agreement is
not signed by said Optionee (or his agent or attorney) and returned to
the Company within 60 days from date of receipt by the Optionee of such
agreement. The date of grant shall be the date the option is actually
granted by the Committee, even though the written agreement may be
executed and delivered by the Company and the Optionee after that date.
Each option agreement shall specify the period for which the option
thereunder is granted (which in no event shall exceed ten years from the
date of grant) and shall provide that the option shall expire at the end
of such period. If the original term of an option is less than ten years
from the date of grant, the option may be amended prior to its
expiration, with the approval of the Committee and the Optionee, to
extend the term so that the term as amended is not more than ten years
from the date of grant. However, in the case of an ISO granted to an
individual who, at the time of grant, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of
the Company or its Affiliate ("Ten Percent Stockholder"), such period
shall not exceed five years from the date of grant.
(b) OPTION PRICE. The purchase price of each share of Common
Stock subject to each option granted pursuant to the Plan shall be
determined by the Committee at the time the option is granted and, in
the case of ISOs, shall not be less than 100% of the fair market value
of a share of Common Stock on the date the option is granted, as
determined by the Committee. In the case of an ISO granted to a Ten
Percent Stockholder, the option price shall not be less than 110% of the
fair market value of a share of Common Stock on the date the option is
granted. The purchase price of each share of Common Stock subject to a
Nonqualified Option under this Plan shall be determined by the Committee
prior to granting the option. The Committee shall set the purchase price
for each share subject to a Nonqualified Option at such price as the
Committee in its sole discretion shall determine, provided that the
purchase price of each share of Common Stock subject to a Nonqualified
Option shall not be less than 85% of the fair market value of a share of
Common Stock on the date the option is granted as determined by the
Committee.
-3-
For all purposes under the Plan, the fair market value of a share
of Common Stock on a particular date shall be equal to the mean of the
reported high and low sales prices of the Common Stock on the New York
Stock Exchange Composite Tape on that date, or if no prices are reported
on that date, on the last preceding date on which such prices of the
Common Stock are so reported. If the Common Stock is not traded on the
New York Stock Exchange at the time a determination of its fair market
value is required to be made hereunder, its fair market value shall be
deemed to be equal to the average between the closing bid and ask prices
of the Common Stock on the most recent date the Common Stock was
publicly traded. In the event the Common Stock is not publicly traded at
the time a determination of its value is required to be made hereunder,
the determination of its fair market value shall be made by the
Committee in such manner as it deems appropriate.
(c) EXERCISE PERIOD. The Committee may provide in the option
agreement that an option may be exercised in whole, immediately, or is
to be exercisable in increments. However, no portion of any option may
be exercisable by an Optionee prior to the approval of the Plan by the
stockholders of the Company.
(d) PROCEDURE FOR EXERCISE. Options shall be exercised by the
delivery of written notice to the Secretary of the Company setting forth
the number of shares with respect to which the option is being
exercised. Such notice shall be accompanied by cash or cashier's check,
bank draft, postal or express money order payable to the order of the
Company, or at the option of the Committee, in Common Stock theretofore
owned by such Optionee (or any combination of cash and Common Stock).
Notice may also be delivered by fax or telecopy provided that the
purchase price of such shares is delivered to the Company via wire
transfer on the same day the fax is received by the Company. The notice
shall specify the address to which the certificates for such shares are
to be mailed. An Optionee shall be deemed to be a stockholder with
respect to shares covered by an option on the date the Company receives
such written notice and such option payment.
As promptly as practicable after receipt of such written notification
and payment, the Company shall deliver to the Optionee certificates for
the number of shares with respect to which such option has been so
exercised, issued in the Optionee's name or such other name as Optionee
directs; provided, however, that such delivery shall be deemed effected
for all purposes when a stock transfer agent of the Company shall have
deposited such certificates in the United States mail, addressed to the
Optionee at the address specified pursuant to this Section 6(d).
(e) TERMINATION OF EMPLOYMENT. If an employee to whom an option
is granted ceases to be employed by the Company for any reason other
than death or disability or if a director to whom an option is granted
ceases to serve on the Board for any reason other than death or
disability, any option which is exercisable on the date of such
termination of employment or cessation from the Board shall expire upon
such date of such termination of
-4-
employment or cessation from the Board; provided, however, the
Committee, in its sole discretion, may allow an Optionee to exercise all
or a portion of the Options granted but unexercised for a period of time
after the Optionee's termination of employment or cessation from the
Board.
(f) DISABILITY OR DEATH OF OPTIONEE. In the event of the
determination of disability or death of an Optionee under the Plan while
he is employed by the Company or while he serves on the Board, the
options previously granted to him may be exercised (to the extent he
would have been entitled to do so at the date of the determination of
disability or death) at any time and from time to time, within a
three-month period after such determination of disability or death, by
the former employee or director, the guardian of his estate, the
executor or administrator of his estate or by the person or persons to
whom his rights under the option shall pass by will or the laws of
descent and distribution, but in no event may the option be exercised
after its expiration under the terms of the option agreement. An
Optionee shall be deemed to be disabled if, in the opinion of a
physician selected by the Committee, he is incapable of performing
services for the Company of the kind he was performing at the time the
disability occurred by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long, continued and indefinite duration. The date of determination of
disability for purposes hereof shall be the date of such determination
by such physician. The Committee, in its sole discretion, may allow an
Optionee to exercise all or a portion of the Options granted but
unexercised for a longer period than three months after disability or
death.
(g) ASSIGNABILITY. An option shall not be assignable or otherwise
transferable except by will or by the laws of descent and distribution.
During the lifetime of an Optionee, an option shall be exercisable only
by him.
(h) INCENTIVE STOCK OPTIONS. Each option agreement may contain
such terms and provisions as the Committee may determine to be necessary
or desirable in order to qualify an option designated as an incentive
stock option.
(i) NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights
as a stockholder with respect to shares covered by an option until the
option is exercised by the written notice and accompanied by payment as
provided in clause (d) above.
(j) EXTRAORDINARY CORPORATE TRANSACTIONS. The existence of
outstanding options shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, exchanges, or other
changes in the Company's capital structure or its business, or any
merger or consolidation of the Company, or any issuance of Common Stock
or other securities or subscription rights thereto, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the
-5-
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise. If the Company recapitalizes or otherwise
changes its capital structure, or merges, consolidates, sells all of its
assets or dissolves (each of the foregoing a "Fundamental Change"), then
thereafter upon any exercise of an option theretofore granted the
Optionee shall be entitled to purchase under such option, in lieu of the
number of shares of Common Stock as to which option shall then be
exercisable, the number and class of shares of stock and securities to
which the Optionee would have been entitled pursuant to the terms of the
Fundamental Change if, immediately prior to such Fundamental Change, the
Optionee had been the holder of record of the number of shares of Common
Stock as to which such option is then exercisable. If (i) the Company
shall not be the surviving entity in any merger or consolidation (or
survives only as a subsidiary of another entity), (ii) the Company sells
all or substantially all of its assets to any other person or entity
(other than a wholly-owned subsidiary), (iii) any person or entity
(including a "group" as contemplated by Section 13(d)(3) of the Exchange
Act) acquires or gains ownership or control of (including, without
limitation, power to vote) more than 50% of the outstanding shares of
Common Stock, (iv) the Company is to be dissolved and liquidated, or (v)
as a result of or in connection with a contested election of directors,
the persons who were directors of the Company before such election shall
cease to constitute a majority of the Board (each such event in clauses
(i) through (v) above is referred to herein as a "Corporate Change"),
the Committee, in its sole discretion, may accelerate the time at which
all or a portion of an Optionee's Options may be exercised for a limited
period of time before or after a specified date.
(k) CHANGES IN COMPANY'S CAPITAL STRUCTURE. If the
outstanding shares of Common Stock or other securities of the
Company, or both, for which the option is then exercisable shall
at any time be changed or exchanged by declaration of a stock
dividend, stock split, or combination of shares, the number and
kind of shares of Common Stock or other securities which are
subject to the Plan or subject to any options theretofore
granted, and the option prices, shall be appropriately and
equitably adjusted so as to maintain the proportionate number of
shares or other securities without changing the aggregate option
price.
(l) ACCELERATION OF OPTIONS. Except as hereinbefore expressly
provided, (i) the issuance by the Company of shares of stock of any
class of securities convertible into shares of stock of any class, for
cash, property, labor or services, upon direct sale, upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or
other securities, (ii) the payment of a dividend in property other than
Common Stock or (iii) the occurrence of any similar transaction, and in
any case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
of shares of Common Stock subject to options theretofore granted or the
purchase price per share, unless the Committee shall determine in its
sole discretion than an adjustment is necessary to provide equitable
treatment to Optionee.
-6-
Notwithstanding anything to the contrary contained in this Plan, the
Committee may in its sole discretion accelerate the time at which any
option may be exercised, including, but not limited to, upon the
occurrence of the events specified in this Section 6, and is authorized
at any time (with the consent of the Optionee) to purchase options
pursuant to Section 7.
(m) STOCKHOLDERS AGREEMENT. The Committee shall provide in the
option agreement that prior to receiving any shares of Common Stock or
other securities on the exercise of the option, the Optionee (or the
Optionee's representative upon the Optionee's death) shall be required
to execute the Company's Employee Stockholders Agreement.
SECTION 7. RELINQUISHMENT OF OPTIONS.
(a) The Committee, in granting options hereunder, shall have
discretion to determine whether or not options shall include a right of
relinquishment as hereinafter provided by this Section 7. The Committee
shall also have discretion to determine whether an option agreement
evidencing an option initially granted by the Committee without a right
of relinquishment shall be amended or supplemented to include such a
right of relinquishment. Neither the Committee nor the Company shall be
under any obligation or incur any liability to any person by reason of
the Committee's refusal to grant or include a right of relinquishment in
any option granted hereunder or in any option agreement evidencing the
same. Subject to the Committee's determination in any case that the
grant by it of a right of relinquishment is consistent with clause i)
hereof, any option granted under this Plan, and the option agreement
evidencing such option, may provide:
i) That the Optionee, or his heirs or other legal
representatives to the extent entitled to exercise the option
under the terms thereof, in lieu of purchasing the entire number
of shares subject to purchase thereunder, shall have the right to
relinquish all or any part of the then unexercised portion of the
option (to the extent then exercisable) for a number of shares of
Common Stock, for an amount of cash or for a combination of
Common Stock and cash to be determined in accordance with the
following provisions of this clause i):
a) The written notice of exercise of such right of
relinquishment shall state the percentage, if any, of the
Appreciated Value (as defined below) that the Optionee
elects to receive in cash ("Cash Percentage"), such Cash
Percentage to be in increments of 10% of such Appreciated
Value up to 100% thereof;
b) The number of shares of Common Stock, if any,
issuable pursuant to such relinquishment shall be the
number of such shares, rounded to the next greater number
of full shares, as shall be equal to the quotient obtained
by dividing (A) the difference between (I) the Appreciated
Value
-7-
and (II) the result obtained by multiplying the
Appreciated Value and the Cash Percentage by (B) the then
current market value per share of Common Stock;
c) The amount of cash payable pursuant to such
relinquishment shall be an amount equal to the Appreciated
Value less the aggregate current market value of the
Common Stock issued pursuant to such relinquishment, if
any, which cash shall be paid by the Company subject to
such conditions as are deemed advisable by the Committee
to permit compliance by the Company with the withholding
provisions applicable to employers under the Code and any
applicable state income tax laws;
d) For the purpose of this clause i), "Appreciated
Value" means the excess of (x) the aggregate current
market value of the shares of Common Stock covered by the
option or the portion thereof to be relinquished over (y)
the aggregate purchase price for such shares specified in
such option;
ii) That such right of relinquishment may be exercised
only upon receipt by the Company of a written notice of such
relinquishment which shall be dated the date of election to make
such relinquishment; and that, for the purposes of this Plan,
such date of election shall be deemed to be the date when such
notice is sent by registered or certified mail, or when receipt
is acknowledged by the Company, if mailed by other than
registered or certified mail or if delivered by hand or by any
telegraphic communications equipment of the sender or otherwise
delivered; provided, that, in the event the method just described
for determining such date of election shall not be or remain
consistent with the provisions of Section 16(b) of the Exchange
Act or the rules and regulations adopted by the Commission
thereunder, as presently existing or as may be hereafter amended,
which regulations exempt from the operation of Section 16(b) of
the Exchange Act in whole or in part any such relinquishment
transaction, then such date of election shall be determined by
such other method consistent with Section 16(b) of the Exchange
Act or the rules and regulations thereunder as the Committee
shall in its discretion select and apply;
iii) That the "current market value" of a share of Common
Stock on a particular date shall be deemed to be its fair market
value on that date as determined in accordance with Paragraph
6(b); and
iv) That the option, or any portion thereof, may be
relinquished only to the extent that (A) it is exercisable on the
date written notice of relinquishment is received by the Company,
(B) the Committee, subject to the provisions of Paragraph 7(b),
shall consent to the election of the holder to relinquish such
option in whole or in part for cash as set forth in such written
notice of relinquishment and (C) the
-8-
holder of such option pays, or makes provision satisfactory to
the Company for the payment of, any taxes which the Company is
obligated to collect with respect to such relinquishment.
(b) The Committee shall have sole discretion to consent to or
disapprove, and neither the Committee nor the Company shall be under any
liability by reason of the Committee's disapproval of, any election by a
holder of an option to relinquish such option in whole or in part for
cash as provided in Paragraph 7(a), except that no such consent to or
approval of a relinquishment for cash shall be required under the
following circumstances. Each Optionee who is subject to the short-swing
profits recapture provisions of Section 16(b) of the Exchange Act
("Covered Optionee") shall be entitled to receive payment only in cash
when options are relinquished during any window period commencing on the
third business day following the Company's release of a quarterly or
annual summary statement of sales and earnings and ending on the twelfth
business day following such release ("Window Period"); provided,
however, that payment shall be so made in cash only in respect of 50% of
the options covered by any stock option agreement. A Covered Optionee
shall be entitled to receive payment only in shares of Common Stock upon
(a) the relinquishment of options outside a Window Period and (b) the
relinquishment of options during a Window Period once such Optionee has
received payment in cash for the relinquishment of 50% of the options
covered by any stock option agreement.
(c) The Committee, in granting options hereunder, shall have
discretion to determine the terms upon which such options shall be
relinquishable, subject to the applicable provisions of this Plan, and
including such provisions as are deemed advisable to permit the
exemption from the operation from Section 16(b) of the Exchange Act of
any such relinquishment transaction, and options outstanding, and option
agreements evidencing such options, may be amended, if necessary, to
permit such exemption. If an option is relinquished, such option shall
be deemed to have been exercised to the extent of the number of shares
of Common Stock covered by the option or part thereof which is
relinquished, and no further options may be granted covering such shares
of Common Stock.
(d) Neither any option nor any right to relinquish the same to
the Company as contemplated by this Section 7 shall be assignable or
otherwise transferable except by will or the laws of descent and
distribution.
(e) Except as provided in Paragraph 7(f) below, no right of
relinquishment may be exercised within the first six months after the
initial award of any Option containing, or the amendment or
supplementation of any existing option agreement adding, the right of
relinquishment.
(f) No right of relinquishment may be exercised after the initial
award of any option containing, or the amendment or supplementation of
any existing option agreement
-9-
adding the right of relinquishment, unless such right of relinquishment
is effective upon the Optionee's death, disability or termination of his
relationship with the Company and the payment upon the exercise of such
right is only in cash.
SECTION 8. AMENDMENTS OR TERMINATION. The Board may amend, alter or
discontinue the Plan, but no amendment or alteration shall be made which would
impair the rights of any Optionee, without his consent, under any option
theretofore granted, or which, without the approval of the stockholders, would:
(i) except as is provided in Paragraph 6(k) of the Plan, increase the total
number of shares reserved for the purposes of the Plan, (ii) change the class of
persons eligible to participate in the Plan as provided in Section 4 of the
Plan, (iii) extend the applicable maximum option period provided for in
Paragraph 6(a) of the Plan, (iv) extend the expiration date of this Plan set
forth in Section 15 of the Plan, (v) except as provided in Paragraph 6(k) of the
Plan, decrease to any extent the option price of any option granted under the
Plan or (vi) withdraw the administration of the Plan from the Committee.
SECTION 9. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and exercise of options thereunder, and the obligation of the Company to
sell and deliver shares under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
governmental or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to the com pletion of any registration or qualification of such shares under any
federal or state law or issuance of any ruling or regulation of any government
body which the Company shall, in its sole discretion, determine to be necessary
or advisable. Any adjustments provided for in paragraphs 6(j), (k) and (l) shall
be subject to any shareholder action required by Delaware corporate law.
SECTION 10. PURCHASE FOR INVESTMENT. Unless the options and shares of
Common Stock covered by this Plan have been registered under the Securities Act
of 1933, as amended, or the Company has determined that such registration is
unnecessary, each person exercising an option under this Plan may be required by
the Company to give a representation in writing that he is acquiring such shares
for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
SECTION 11. TAXES.
(a) The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with any options granted under this Plan.
(b) Notwithstanding the terms of Paragraph 11(a), any Optionee
may pay all or any portion of the taxes required to be withheld by the
Company or paid by him in connection with the exercise of a nonqualified
option by electing to have the Company withhold shares of Common Stock,
or by delivering previously owned shares of Common
-10-
Stock, having a fair market value, determined in accordance with
Paragraph 6(b), equal to the amount required to be withheld or paid. An
Optionee must make the foregoing election on or before the date that the
amount of tax to be withheld is determined ("Tax Date"). All such
elections are irrevocable and subject to disapproval by the Committee.
SECTION 12. REPLACEMENT OF OPTIONS. The Committee from time to time may
permit an Optionee under the Plan to surrender for cancellation any unexercised
outstanding option and receive from the Company in exchange an option for such
number of shares of Common Stock as may be designated by the Committee. The
Committee may, with the consent of the person entitled to exercise any
outstanding option, amend such option, including reducing the exercise price of
any option to not less than the fair market value of the Common Stock at the
time of the amendment and extending the term thereof.
SECTION 13. NO RIGHT TO COMPANY EMPLOYMENT. Nothing in this Plan or as a
result of any option granted pursuant to this Plan shall confer on any
individual any right to continue in the employ of the Company or interfere in
any way with the right of the Company to terminate an individual's employment at
any time. The option agreements may contain such provisions as the Committee may
approve with reference to the effect of approved leaves of absence.
SECTION 14. LIABILITY OF COMPANY. The Company and any Affiliate which is
in existence or hereafter comes into existence shall not be liable to an
Optionee or other persons as to:
(a) THE NON-ISSUANCE OF SHARES. The non-issuance or sale of
shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
shares hereunder; and
(b) TAX CONSEQUENCES. Any tax consequence expected, but not
realized, by any Optionee or other person due to the exercise of any
option granted hereunder.
SECTION 15. EFFECTIVENESS AND EXPIRATION OF PLAN. The Plan shall be
effective on ________________, 1996. If the stockholders of the Company fail to
approve the Plan within twelve months of the date the Board approved the Plan,
the Plan shall terminate and all options pre viously granted under the Plan
shall become void and of no effect. The Plan shall expire ten years after the
date the Board approves the Plan and thereafter no option shall be granted
pursuant to the Plan.
SECTION 16. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including without limitation, the granting of restricted stock or stock options
-11-
otherwise than under the Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
SECTION 17. GOVERNING LAW. This Plan and any agreements hereunder shall
be interpreted and construed in accordance with the laws of the State of
Delaware and applicable federal law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing by directors of the Company, Texas Petrochemical Holdings, Inc. has
caused these presents to be duly executed in its name and behalf by its proper
officers thereunto duly authorized as of this ____ day of _____________, 1996.
TEXAS PETROCHEMICAL HOLDINGS, INC.
By:
Name:
Title:
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EXHIBIT 10.2
TPC FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
to be renamed
TEXAS PETROCHEMICALS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
Page Number
ARTICLE I
DEFINITIONS................................2
ARTICLE II
ADMINISTRATION..............................12
2.1 ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY................12
2.2 ALLOCATION AND DELEGATION OF RESPONSIBILITIES.........................12
2.3 POWERS AND DUTIES OF THE ADMINISTRATOR................................13
2.4 RECORDS AND REPORTS...................................................14
2.5 AUDIT.................................................................14
2.6 APPOINTMENT OF ADVISORS...............................................15
2.7 INFORMATION FROM EMPLOYER.............................................15
2.8 PAYMENT OF EXPENSES...................................................15
2.9 ACTIONS BY ADMINISTRATOR..............................................15
2.10 CLAIMS PROCEDURE......................................................16
2.11 CLAIMS REVIEW PROCEDURE...............................................16
ARTICLE III
ELIGIBILITY..............................17
3.1 CONDITIONS OF ELIGIBILITY.............................................17
3.2 EFFECT OF PARTICIPATION UPON THE ACCEPTANCE OF ANY
BENEFITS UNDER THIS PLAN..............................................17
3.3 DETERMINATION OF ELIGIBILITY..........................................17
3.4 TERMINATION OF ELIGIBILITY............................................17
3.5 OMISSION OF ELIGIBLE EMPLOYEE.........................................17
3.6 INCLUSION OF INELIGIBLE EMPLOYEE......................................18
ARTICLE IV
CONTRIBUTION AND ALLOCATION.......................19
4.1 EMPLOYER'S CONTRIBUTION...............................................19
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION............................19
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS..................19
4.4 MAXIMUM ANNUAL ADDITIONS..............................................23
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS.............................27
4.6 DIRECTED INVESTMENT ACCOUNT...........................................28
4.7 SUSPENSE ACCOUNT......................................................29
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ARTICLE V
FUNDING AND INVESTMENT POLICY......................30
5.1 INVESTMENT POLICY.....................................................30
5.2 APPLICATION OF CASH...................................................30
5.3 TRANSACTIONS INVOLVING COMPANY STOCK..................................30
5.4 LOANS TO THE TRUST....................................................31
ARTICLE VI
VALUATIONS................................33
6.1 VALUATION OF THE TRUST FUND...........................................33
6.2 METHOD OF VALUATION...................................................33
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS................34
7.1 BENEFITS UPON RETIREMENT..............................................34
7.2 BENEFITS UPON DEATH...................................................34
7.3 BENEFITS UPON DISABILITY..............................................35
7.4 BENEFITS UPON TERMINATION.............................................35
7.5 DISTRIBUTION OF BENEFITS..............................................37
7.6 HOW PLAN BENEFITS WILL BE DISTRIBUTED.................................40
7.7 DISTRIBUTION FOR MINOR BENEFICIARY....................................42
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN........................42
7.9 RIGHT OF FIRST REFUSAL................................................42
7.10 STOCK CERTIFICATE LEGEND..............................................43
7.11 PUT OPTION............................................................44
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS..................................45
7.13 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS.............................45
7.14 PAYMENT OF DISTRIBUTION DIRECTLY TO ELIGIBLE RETIREMENT
PLAN..................................................................46
ARTICLE VIII
TRUSTEE.................................47
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE.................................47
8.2 VOTING COMPANY STOCK..................................................47
ARTICLE IX
AMENDMENT, TERMINATIONS, AND MERGERS...................49
9.1 AMENDMENT.............................................................49
9.2 TERMINATION...........................................................49
9.3 MERGER OR CONSOLIDATION...............................................50
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ARTICLE X
MISCELLANEOUS..............................51
10.1 PARTICIPANT'S RIGHTS..................................................51
10.2 ALIENATION............................................................51
10.3 CONSTRUCTION OF PLAN..................................................51
10.4 GENDER AND NUMBER.....................................................51
10.5 LEGAL ACTION..........................................................52
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS................................52
10.7 BONDING...............................................................52
10.8 RECEIPT AND RELEASE FOR PAYMENTS......................................52
10.9 ACTION BY THE EMPLOYER................................................53
10.10 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY....................53
10.11 HEADINGS..............................................................53
10.12 APPROVAL BY INTERNAL REVENUE SERVICE..................................53
10.13 UNIFORMITY............................................................54
10.14 SECURITIES AND EXCHANGE COMMISSION APPROVAL...........................54
10.15 INDEMNIFICATION.......................................................54
10.16 CONTROLLING LAW.......................................................54
ARTICLE XI
PARTICIPATING EMPLOYERS.........................55
11.1 ADOPTION BY OTHER EMPLOYERS...........................................55
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS...............................55
11.3 DESIGNATION OF AGENT..................................................56
11.4 EMPLOYEE TRANSFERS....................................................56
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION.................................56
11.6 AMENDMENT.............................................................56
11.7 DISCONTINUANCE OF PARTICIPATION.......................................56
11.8 ADMINISTRATOR'S AUTHORITY.............................................57
11.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE.....................57
ARTICLE XII
TOP-HEAVY STATUS.............................58
12.1 ARTICLE CONTROLS......................................................58
12.2 DEFINITIONS...........................................................58
12.3 TOP-HEAVY STATUS......................................................59
12.4 TERMINATION OF TOP-HEAVY STATUS.......................................60
12.5 EFFECT OF ARTICLE.....................................................60
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TPC FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
to be renamed
TEXAS PETROCHEMICALS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
W I T N E S S E T H:
WHEREAS, TPC Finance Corp. (the "Employer") desires to establish an
Employee Stock Ownership Plan so as to enable its eligible employees to acquire
a proprietary interest in capital stock of the Employer; and
WHEREAS, the Employer desires to recognize the contributions employees
will make to its successful operation and to reward such contribution by means
of an Employee Stock Ownership Plan for those employees who shall qualify as
Participants hereunder; and
WHEREAS, contributions to the Plan will be made by the Employer and such
contributions made to the trust will be invested primarily in the capital stock
of the Employer (or a corporation which is a member of the same controlled
group); and
WHEREAS, effective July 1, 1996 (hereinafter called the "Effective Date"),
the Employer establishes this Employee Stock Ownership Plan ("ESOP") (which plan
is hereinafter called the "Plan") for the exclusive benefit of the Participants
and their Beneficiaries, which is intended to qualify as an ESOP; and
WHEREAS, it is anticipated that soon after the Effective Date, TPC Holding
Corp. will purchase all outstanding capital stock of Texas Olefins Company and
its subsidiaries, including Texas Petrochemicals Corporation (the
"Acquisition"), and that concurrently with the consummation of the closing of
the Acquisition, the Employer and Texas Olefins Company will merge with Texas
Petrochemicals Corporation (the "Merger") and the surviving entity will be named
Texas Petrochemicals Corporation; and
WHEREAS, upon the completion of the Merger, the Plan shall be renamed the
Texas Petrochemicals Corporation Employee Stock Ownership Plan.
NOW THEREFORE, as of the Effective Date, the Employer hereby establishes
this ESOP for the exclusive benefit of its participants and their beneficiaries
under the following terms:
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ARTICLE I
DEFINITIONS
1.1 "ACT" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "ACQUISITION DATE" means the date on which TPC Holding Corp. acquires
all of the outstanding capital stock of Texas Olefins Company and its
subsidiaries, including Texas Petrochemicals Corporation.
1.3 "ADMINISTRATOR" means the person designated by the Employer pursuant
to Section 2.1 to administer the Plan on behalf of the Employer.
1.4 "AFFILIATED EMPLOYER" means the Employer and any Corporation which is
a member of a controlled group of corporations (as defined in Code Section
414(b)) which include the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to Regulations under Code Section 414(o).
1.5 "ANNIVERSARY DATE" means June 30.
1.6 "BENEFICIARY" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
7.2 and 7.6.
1.7 "BENEFIT COMMENCEMENT DATE" means with respect to each Participant or
Beneficiary, the date such Participant's or Beneficiary's benefit is paid to him
from the Trust Fund.
1.8 "CODE" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.9 "COMPANY STOCK" means common stock issued by the Employer (or by a
corporation which is a member of the controlled group of corporations of which
the Employer is a member) which is readily tradeable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Common Stock" means common stock issued by the Employer
(or by a corporation which is a member of the same controlled group) having a
combination of voting power and dividend rights equal to or in excess of: (A)
that class of common stock of the Employer (or of any other such corporation)
having the greatest voting power, and (B) that class of stock of the Employer
(or of any other such corporation) having the greatest dividend rights.
Preferred Stock shall be deemed to be "Company Stock" if such stock is
convertible at any time into stock which constitutes "Company Stock" hereunder
and if such conversion is at a conversion price which (as of the date of the
acquisition by the Trust) is reasonable.
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1.10 "COMPANY STOCK ACCOUNT" means the account of a Participant which is
credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund.
1.11 "COMPENSATION" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of
Compensation with respect to any Participant shall include Compensation for the
entire twelve month period ending on the last day of such Plan Year, except that
Compensation shall be recognized only for that portion of the Plan Year during
which an Employee was a Participant in the Plan. Amounts contributed pursuant to
a salary reduction agreement that are not includable in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated as
Employer contributions shall also be considered as Compensation. Compensation
shall not include tuition assistance, special awards or any amounts received or
to be received under the TPC Cash Bonus Plan or the TPC Bonus and Profit Sharing
Plan.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, the annual
Compensation of each Employee taken into account under the Plan shall not exceed
the "OBRA '93 Annual Compensation Limit." The "OBRA '93 Annual Compensation
Limit" is $150,000, as adjusted for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined ("Determination Period") beginning in such
calendar year. If a Determination Period consists of fewer than 12 months, the
"OBRA '93 Annual Compensation Limit" will be multiplied by a fraction, the
numerator of which is the number of months in the Determination Period, and the
denominator of which is 12.
Any reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the "OBRA '93 Annual Compensation Limit" set forth in this Section.
If Compensation for any prior Determination Period is taken into account
in determining a Participant's benefits accruing in the current Plan Year, the
Compensation for that prior Determination Period is subject to the "OBRA '93
Annual Compensation Limit" in effect for that prior Determination Period. For
this purpose, for Determination Periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the "OBRA '93 Annual
Compensation Limit" is $150,000.
For a Participant's initial year of participation, Compensation shall be
recognized for the entire Plan Year.
1.12 "CURRENT OBLIGATIONS" means Trust obligations arising from extension
of credit to the Trust and payable in cash within (1) year from the date an
Employer contribution is due. Trust obligations shall include the liability for
payment of taxes imposed by Code Section 2001 which liability is incurred
pursuant to Code Section 2210(b).
-3-
1.13 "EFFECTIVE DATE" means July 1, 1996.
1.14 "ELIGIBLE EMPLOYEE" means any Employee who is not a Leased Employee
and who has satisfied the provisions of Section 3.1.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties, unless such agreement
expressly provides for such coverage in this Plan, will not be eligible to
participate in this Plan.
1.15 "EMPLOYEE" means any person who is employed by the Employer, but
excludes any person who is employed as an independent contractor. Employee shall
include Leased Employees.
1.16 "EMPLOYER" means TPC Finance Corp. and any Participating Employer (as
defined in Section 11.1) which shall adopt this Plan; and any successor which
shall maintain this Plan, including, but not limited to, Texas Petrochemicals
Corporation after the consummation of the Merger.
1.17 "EMPLOYER CONTRIBUTIONS" means the Employer's contributions to the
Plan pursuant to Section 4.1(a).
1.18 "ESOP" means an employee stock ownership plan that meets the
requirements of Code Section 4975(e)(7) and Regulation 54.4975-11. This Plan is
intended to be an ESOP.
1.19 "EXEMPT LOAN" means a loan made to the Plan by a disqualified person
or a loan to the Plan which is guaranteed by a disqualified person and which
satisfies the requirements of Section 2550.408b-3 of the Department of Labor
Regulations, Section 54.4975-7(b) of the Treasury regulations and Section 5.4
hereof.
1.20 "FAMILY MEMBER" means an individual described in Code Section
414(q)(6)(B).
1.21 "FIDUCIARY" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan.
1.22 "FISCAL YEAR" means the Employer's accounting year of 12 months
commencing on July 1 of each year and ending the following June 30.
1.23 "FORFEITURE" means that portion of a Participant's Account that is
not Vested in accordance with the provisions of Section 7.4, on account of the
Participant's termination of employment before full vesting.
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1.24 "FORMER PARTICIPANT" means a person who has been a Participant, but
who has ceased to be a Participant for any reason. For purposes of Section 1.28,
a "Former Participant" shall be treated as a Highly Compensated Participant if
such "Former Participant" was a Highly Compensated Participant when he separated
from service with the Employer or was a Highly Compensated Participant at any
time after attaining age 55.
1.25 "415 COMPENSATION" means compensation as defined in Section 4.4(e).
1.26 "HIGHLY COMPENSATED EMPLOYEE" means any Employee or former Employee
who is a highly compensated employee as defined in Code Section 414(q) and the
Regulations thereunder. Generally, any Employee or former Employee is considered
a Highly Compensated Employee if such Employee or former Employee performed
services for the Employer during the "determination year" and is one or more of
the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section 1.30(c).
(b) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $75,000. In determining whether an
individual has "415 Compensation" of more than $75,000, "415 Compensation"
from each employer required to be aggregated under Code Sections 414(b),
(c), (m) and (o) shall be taken into account.
(c) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $50,000 and were in the top-paid
group of Employees for the Plan Year. An Employee is in the top-paid group
of Employees for any Plan Year if such Employee is in the group consisting
of the top twenty (20%) percent of the Employees when ranked on the basis
of "415 Compensation" paid during the Plan Year. In determining whether an
individual has "415 Compensation" of more than $50,000, "415 Compensation"
from each employer required to be aggregated under Code Section 414(b),
(c), (m) and (o) shall be taken into account.
(d) Employees who during the "look-back year" were officers as
defined in Section 1.30(a) and received "415 Compensation" during the
"look-back year" from the Employer greater than 50 percent of the limit in
effect under Code Section 415(b)(1)(A) for any such Plan Year. The number
of officers shall be limited to the lesser of (i) 50 employees; or (ii)
the greater of 3 employees or 10 percent of all employees. For the purpose
of determining the number of officers, the following Employees shall be
excluded:
(1) Employees with less than six (6) months of service;
(2) Employees who normally work less than 17 1/2 hours per
week;
(3) Employees who normally work less than six (6) months
during a year; and
-5-
(4) Employees who have not yet attained age 21.
However, such Employees shall still be considered for the purpose of
identifying the particular Employees who are officers. If the Employer
does not have at least one officer whose annual "415 Compensation" is in
excess of 50 percent of the Code Section 415(b)(1)(A) limit, then the
highest paid officer of the Employer will be treated as a Highly
Compensated Employee.
(e) Employees who are in the group consisting of the 100 Employees
paid the greatest "415 Compensation" during the "determination year" and
are also described in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for "look-back year."
The "look-back year" shall be the calendar year ending with or within the
Plan Year for which testing is being performed, and the "determination year" (if
applicable) shall be the period of time, if any, that extends beyond the
"look-back year" and ends on the last day of the Plan Year for which testing is
being performed (the "lag period"). If the "lag period" is less than twelve
months long, the threshold amounts specified in (b), (c), and (d) above shall be
prorated based upon the number of months in the "lag period."
For purposes of this Section, the determination of "415 Compensation"
shall be based only on "415 Compensation" which is actually paid and shall be
made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated as
Employer contributions. Additionally, the dollar threshold amounts specified in
(b) and (c) above shall be adjusted at such time and in such manner as is
provided in Regulations. In the case of such an adjustment, the dollar limits
which shall be applied are those for the calendar year in which the
"determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans
1.27 "HIGHLY COMPENSATED PARTICIPANT" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.28 "HOUR OF SERVICE" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the
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applicable computation period; (2) each hour for which an Employee is directly
or indirectly compensated or entitled to compensation by the Employer
(irrespective of whether the employment relationship has terminated) for reasons
other than performance of duties (such as vacation, holidays, sickness, jury
duty, disability, lay-off, military duty, or leave of absence) during the
applicable computation period; and (3) each hour for which back pay is awarded
or agreed to by the Employer without regard to mitigation of damages.
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year
of Service, a year of participation for purposes of accrued benefits, a 1-Year
Break in Service, and employment commencement date (or reemployment commencement
date). The provisions of Department of Labor regulations 2530.200b-2(b) and (c)
are incorporated herein by reference.
1.29 "INVESTMENT MANAGER" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.30 "KEY EMPLOYEE" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or Former Employee (as
well as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year or any of the preceding four (4) Plan Years, has been
included in one of the following categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year;
(b) one of the ten Employees having annual "415 Compensation" from
the Employer for a Plan Year greater than the dollar limitation in effect
under Code Section
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415(c)(1)(A) for the calendar year in which such Plan Year ends and owning
(or considered as owning within the meaning of Code Section 318) both more
than one-half percent interest and the largest interests in the Employer;
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than five percent (5%) of the outstanding stock
of the Employer or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Employer, or, in the case
of an unincorporated business, any person who owns more than five percent
(5%) of the capital or profits interest in the Employer. In determining
percentage ownership here under, Employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated
as separate employers; or
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than one percent (1%) of the outstanding stock
of the Employer or stock possessing more than one percent (1%) of the
total combined voting power of all stock of the Employer, or, in the case
of an unincorporated business, any person who owns more than one percent
(1%) of the capital or profits interest in the Employer. In determining
percentage ownership hereunder, Employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated
as separate Employers. However, in determining whether an individual has
"415 Compensation" of more than $150,000, "415 Compensation" from each
employer required to be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be based only on "415 Compensation" which is actually paid and shall be
made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2) that are treated as
Employer contributions.
1.31 "LATE RETIREMENT DATE" means the first day of the month coinciding
with or next following a Participant's actual retirement date after having
reached his Normal Retirement Date.
1.32 "LEASED EMPLOYEE" means any Employee who would be within the meaning
of Code Section 414(n)(2) unless such Leased Employee is covered by a plan
described in Code Section 414(n)(5) and such Leased Employee does not constitute
more than 20% of the recipient's nonhighly compensated work force.
1.33 "MERGER" means the consummation of the merger of Texas Olefins
Company and TPC Finance Corp. with Texas Petrochemicals Corporation.
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1.34 "NON-HIGHLY COMPENSATED EMPLOYEE" means any Employee or former
Employee who is not a Highly Compensated Employee nor a Family Member.
1.35 "NON-HIGHLY COMPENSATED PARTICIPANT" means any Participant or Former
Participant who is neither a Highly Compensated Participant nor a Family Member.
1.36 "NON-KEY EMPLOYEE" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.37 "NORMAL RETIREMENT DATE" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age (65th birthday).
A Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.38 "1-YEAR BREAK IN SERVICE" means the applicable computation period of
12 consecutive months during which an Employee fails to complete more than 500
Hours of Service. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence."
An Employee shall not be deemed to have incurred a 1-Year Break in Service
if he completes an Hour of Service within 12 months following the last day of
the month during which his employment terminated.
"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means an absence from work for
any period by reason of the Employee's pregnancy, birth of the Employee's child,
placement of a child with the Employee in connection with the adoption of such
child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement. For this purpose, Hours of
Service shall be credited for the computation period in which the absence from
work begins, only if credit therefore is necessary to prevent the Employees from
incurring a 1-Year Break in Service, or, in any other case, in the immediately
following computation period.
1.39 "OTHER INVESTMENTS ACCOUNT" means the account of a Participant which
is credited with his share of the net gain (or loss) of the Plan, Forfeitures
and Employer Contributions in other than Company Stock and which is debited with
payments made to pay for Company Stock. No Company Stock shall be allocated to
or held in the Other Investments Account.
1.40 "PARTICIPANT" means any Eligible Employee who participants in the
Plan pursuant to Section 3.1.
1.41 "PARTICIPANT'S ACCOUNTS" means the accounts established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting
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from Employer Contributions, which shall include but not be limited to the
Company Stock Account, the Other Investment Account and the Directed Investment
Account.
1.42 "PLAN" means this instrument, including all amendments thereto.
1.43 "PLAN YEAR" means the Plan's accounting year of twelve (12) months
commencing on July 1of each year and ending the following June 30.
1.44 "REGULATION" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.45 "RETIRED PARTICIPANT" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.46 "TERMINATED PARTICIPANT" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
1.47 "TOP HEAVY PLAN" means a plan described in Article XII.
1.48 "TOP HEAVY PLAN YEAR" means a Plan Year during which the Plan is a
Top Heavy Plan.
1.49 "TOTAL AND PERMANENT DISABILITY" means the complete inability to work
in any position for which the Employee is reasonably fit by education, training
or experience, which condition continues for an extended period of time.
1.50 "TRUST" means the trust established under the Trust Agreement to hold
and invest contributions made under the Plan and from which the Plan benefits
will be distributed.
1.51 "TRUST AGREEMENT" means the agreement entered into between the
Employer and the Trustee establishing a trust to hold and invest contributions
made under the Plan and from which benefits will be distributed.
1.52 "TRUST FUND" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.53 "TRUSTEE" means the person or entity named as trustee herein or in
any separate trust forming a part of this Plan, and any successors.
1.54 "UNALLOCATED COMPANY STOCK SUSPENSE ACCOUNT" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and which
has not been released from such account and allocated to the Participants'
Company Stock Accounts.
1.55 "VALUATION DATE" means the last day of the Plan Year or any other
date as determined by the Administrator.
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1.56 "VESTED" means the portion of a Participant's Account that is
nonforfeitable.
1.57 "YEAR OF SERVICE" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least
1,000 Hours of Service.
(a) for purposes of determining an Employee's eligibility to
participate in the Plan, the computation period shall be the twelve
consecutive month period beginning on the date the Employee first performs
an Hour of Service for the Employer.
(b) for purposes of determining a Participant's vested percentage
under Section 7.4, the computation period shall be the Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the determination
of whether an Employee has completed a Year of Service shall be made in
accordance with Department of Labor regulation 2530.203-2(c). No service
with the Employer prior to the Effective Date shall be recognized for the
purpose of calculating a Participant's vested percentage under Section
7.4.
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ARTICLE II
ADMINISTRATION
2.1 ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY
(a) The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer,
shall be eligible to serve as an Administrator. Any person so appointed
shall signify his acceptance by filing written acceptance with the
Employer. An Administrator may resign by delivering his written
resignation to the Employer or be removed by the Employer by delivery of
written notice of removal, to take effect at a date specified therein, or
upon delivery to the Administrator if no date is specified.
(b) The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to this
position. If the Employer does not appoint an Administrator, the Employer
will function as the Administrator.
(c) The Employer shall be empowered to appoint and remove the
Administrator from time to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is being operated for
the exclusive benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code, and the Act.
(d) The Employer shall periodically review the performance of any
the Administrator or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through any other appropriate method.
(e) The Employer will furnish Plan Fiduciaries and Participants with
notices and information statements when voting rights must be exercised
pursuant to Section 8.2.
2.2 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the Employer may
designate the responsibilities of each Administrator as may be specified by the
Employer and accepted in writing by each Administrator. In the event that no
such delegation is made by the Employer, the Ad ministrators may allocate the
responsibilities among themselves, in which event the Administrators shall
notify the Employer and the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter shall accept and
rely upon any documents executed by the appropriate Administrator until such
time as the Employer or the Administrators file with the Trustee a written
revocation of such designation.
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2.3 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan. The Administrator shall administer the Plan
in accordance with its terms and shall have the power to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of the Plan; provided, however, that any procedure, discretionary
act, interpretation or construction shall be done in a nondiscriminatory manner
based upon uniform principles consistently applied and shall be consistent with
the intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) to determine all questions relating to the eligibility of
Employees to participate or remain a Participant hereunder;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
disbursements from the Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any contract to be purchased
from any insurer, and to designate the insurer from which such contract
shall be purchased;
(g) to compute and certify to the Employer from time to time the
sums of money necessary or desirable to be contributed to the Trust Fund;
(h) to establish a "funding policy and method", i.e., it shall
consult with the Employer, and it shall determine whether the Plan has a
short range need for liquidity (e.g., to pay benefits) or whether
liquidity is a long range goal and investment growth (and stability of
same) is a more current need, or shall appoint a qualified person to do
so. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of the Act;
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(i) to establish and communicate to Participants a procedure and
method to insure that each Participant will vote Company Stock allocated
to such Participant's Company Stock Account pursuant to Section 8.2;
(j) to enter into a written agreement with regard to the payment of
federal estate tax pursuant to Code Section 2210(b);
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.4 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.5 AUDIT
(a) If an audit of the Plan's records shall be required by the Act
and the regulations thereunder for any Plan Year, the Administrator shall
appoint an independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a reasonable
period after the close of the Plan Year, furnish to the Administrator and
the Trustee a report of his audit setting forth his opinion as to whether
each of the following statements, schedules or lists, or any others that
are required by Section 103 of the Act or the Secretary of Labor to be
filed with the Plan's annual report, are presented fairly and in
conformity with generally accepted accounting principles applied
consistently:
(1) statement of the assets and liabilities of the Plan;
(2) statement of changes in net assets available to the
Plan;
(3) statement of receipts and disbursements, a schedule of all
assets held for investment purposes, a schedule of all loans or
fixed income obligations in default at the close of the Plan Year;
(4) a list of all leases in default or uncollectible during
the Plan Year;
(5) the most recent annual statement of assets and liabilities
of any bank common or collective trust fund in which Plan assets are
invested or such information regarding separate accounts or trusts
with a bank or insurance company as the Administrator deems
necessary; and
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(6) a schedule of each transaction or series of transactions
involving an amount in excess of five percent (5%) of Plan assets.
All auditing and accounting fees shall be an expense of and may, at
the election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Section 103 of the Act is maintained by a
bank, insurance company, or similar institution, regulated and supervised
and subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the Administrator
as provided in Section 103(b) of the Act within one hundred twenty (120)
days after the end of the Plan Year or such other date as may be
prescribed under regulations of the Secretary of Labor.
2.6 APPOINTMENT OF ADVISORS
The Administrator may appoint counsel, specialists, advisors, and other
persons as the Administrator deems necessary or desirable in connection with the
administration of this Plan.
2.7 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.8 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, the Trustee and other specialists and their agents, and
other costs of administering the Plan and/or the Trust. Until paid, the expenses
shall constitute a liability of the Trust Fund. However, the Employer may
reimburse the Trust Fund for any administration expense incurred. Any
administration expense paid to the Trust Fund as a reimbursement shall not be
considered an Employer contribution.
2.9 ACTIONS BY ADMINISTRATOR
The Administrator shall hold meetings upon such notice and at such time
and places as it may from time to time determine. Notice to a member shall not
be required if waived in writing by that member. A majority of the members of
the Administrator duly appointed shall constitute a quorum for the transaction
of business. All resolutions or other actions taken by the Administrator at any
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meeting where a quorum is present shall be by vote of a majority of those
present at such meeting and entitled to vote. Resolutions may be adopted or
other action taken without a meeting upon written consent signed by all of the
Administrators.
2.10 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with the Administrator on
forms supplied by the Employer. Written notice of the disposition of a claim
shall be furnished to the claimant within 90 days after the application is
filed. In the event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be understood by
the claimant, pertinent provisions of the Plan shall be cited, and, where
appropriate, an explanation as to how the claimant can perfect the claim will be
provided. In addition, the claimant shall be furnished with an explanation of
the Plan's claims review procedure.
2.11 CLAIMS REVIEW PROCEDURE
Any Employee, Former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.10
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.10. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who performs an Hour of Service on the Acquisition
Date and has attained the age of twenty one (21) years shall participate in the
Plan commencing on the Acquisition Date. Any Eligible Employee who begins
employment with the Employer on or after the Acquisition Date and prior to
October 1, 1996 and has attained the age of twenty one (21) years shall
participate in the Plan commencing on such Eligible Employee's first day of
employment with the Employer. All other Eligible Employees shall become
Participants as of the January 1 or July 1 coincident with or next following
their completion of one (1) Year of Service or their attaining the age of twenty
one (21) years, whichever is later.
3.2 EFFECT OF PARTICIPATION UPON THE ACCEPTANCE OF ANY BENEFITS
UNDER THIS PLAN
An Eligible Employee shall automatically be bound by the terms and
conditions of the Plan and all amendments hereto.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review as provided for in Section 2.8 and 2.9.
3.4 TERMINATION OF ELIGIBILITY
In the event a Participant shall go from a classification of an Eligible
Employee to a noneligible Employee, such Former Participant shall continue to
vest in his interest in the Plan for each Year of Service completed while a
noneligible Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings of the Trust Fund.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Fiscal Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the Employer would have contributed with respect to
him had he not been omitted. Such contribution shall be made regardless of
whether or not it is deductible in whole or in part in any taxable year under
applicable provisions of the Code.
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3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Fiscal Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a Forfeiture for the Fiscal Year in
which the discovery is made.
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ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 EMPLOYER'S CONTRIBUTION
(a) For each Plan Year, the Employer shall contribute to the Plan an
amount as may be determined by its Board of Directors or its delegatees.
(b) The Employer Contribution for any Plan Year shall not exceed the
maximum amount allowable as a deduction to the Employer under the
provisions of Code Section 404.
(c) However, to the extent necessary to provide the top heavy
minimum allocations, the Employer shall make a contribution even if it
exceeds the amount which is deductible under Code Section 404.
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Employer Contributions will be paid in cash, Company Stock or other
property as the Employer's Board of Directors or its delegatees may from time to
time determine. Company Stock and other property will be valued at their then
fair market value. The Employer Contribution will be paid to the Plan on or
before the date required to make such contribution a deduction on the Employer's
federal income tax return for the year.
Notwithstanding the above, to the extent that the Plan has Current
Obligations, the Employer Contribution will be paid to the Plan in cash.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of
each Anniversary Date all amounts allocated to each such Participant as
set forth herein. However, the Administrator may separately account for
that portion of each Participant's Account attributable to Top Heavy Plan
Years.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of
the Employer Contribution for each Plan Year. Within 45 days after the
date of receipt by the Administrator for such information, the
Administrator shall, with respect to the Employer Contribution pursuant to
4.1(a), allocate such Contribution to each Participant's Account in the
same proportion that each such Participant's Compensation for the year
bears to the total Compensation of all Participants for such year.
A Participant who is not an Employee on the last day of the Plan
Year shall not share in the Employer Contribution for that year, unless
required pursuant to Section 4.3(i) or
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4.3(n). A Participant who performs less than a Year of Service shall not
share in the Employer Contribution for that year, unless required pursuant
to Section 4.3(i) or 4.3(n).
(c) The Company Stock Account of each Participant shall be credited
as of each Anniversary Date with Forfeitures of Company Stock and his
allocable share of Company Stock (including fractional shares) purchased
and paid for by the Plan or contributed in kind by the Employer. Stock
dividends on Company Stock held in his Company Stock Account shall be
credited to his Company Stock Account when paid. Cash dividends on Company
Stock held in his Company Stock Account shall be used to repay an Exempt
Loan, so long as one exists and may then, in the sole discretion of the
Administrator, be credited to his Participants Other Investments Account.
Company Stock acquired by the Plan with the proceeds of an Exempt
Loan shall only be allocated to each Participant's Company Stock Account
upon release from the Unallocated Company Stock Suspense Account as
provided in Section 4.3(g) herein. Company Stock acquired with the
proceeds of an Exempt Loan shall be an asset of the Trust Fund and
maintained in the Unallocated Company Stock Suspense Account.
Company Stock received by the Trust during a Plan Year with respect
to a contribution by the Employer for the preceding Plan Year shall be
allocated to the accounts of Participants as of the Anniversary Date at
the end of such preceding Plan Year.
(d) As of each Anniversary Date or as of the Valuation Date, before
allocation of Employer Contributions and Forfeitures, any earnings or
losses (net appreciation or net depreciation) of the Trust Fund shall be
allocated in the same proportion that each Participant's and Former
Participant's Other Investment Accounts (other than each Participant's
Company Stock Account) bear to the total of all Participants' and Former
Participants' Other Investment Accounts (other than participants' Company
Stock Accounts) as of such date. Cash dividends on Company Stock allocated
to each Participant's or Former Participant's Other Investment Accounts
after the first month of the Plan Year shall not share in any earnings or
losses of the Trust Fund for such year. Earnings or losses include the
increase (or decrease) in the fair market value of assets of the Trust
Fund (other than Company Stock in the participants' Company Stock
Accounts) since the preceding Anniversary Date.
Earnings or losses do not include the interest paid under any
installment contract for the purchase of Company Stock by the Trust Fund
or on any loan used by the Trust Fund to purchase Company Stock, nor does
it include income received by the Trust Fund with respect to Company Stock
acquired with the proceeds of an Exempt Loan to the extent such income is
used to repay the loan; all income received by the Trust Fund from Company
Stock acquired with the proceeds of an Exempt Loan shall be used to repay
such loan.
(e) The Administrator shall establish accounting procedures for the
purpose of making the allocations, valuations and adjustments to
Participants' Accounts provided for in this Section. Should the
Administrator determine that the strict application of its
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accounting procedures shall not result in an equitable and
nondiscriminatory allocation among the Participants' Accounts, it may
modify its procedures for the purpose of achieving an equitable and
nondiscriminatory allocation in accordance with the general concepts of
the Plan and the provisions of this Section, provided, however, that such
adjustments to achieve equity shall not reduce the Vested portion of a
Participant's Account.
(f) Separate accounts shall be maintained for all inactive
Participants who have a Vested interest in the Plan. Such separate
accounts shall not require a segregation of the Plan assets and no
Participant shall acquire any right to or interest in any specific asset
of the Trust as a result of the allocations provided for in the Plan. All
allocations shall be made as of the Anniversary Date referred to in this
Section.
(g) All Company Stock acquired by the Plan with the proceeds of an
Exempt Loan must be added to and maintained in the Unallocated Company
Stock Suspense Account. Such Company Stock shall be released and withdrawn
from that account as if all Company Stock in that account were encumbered.
For each Plan Year during the duration of the loan, the number of shares
of Company Stock released shall equal the number of encumbered shares held
immediately before release for the current Plan Year multiplied by a
fraction, the numerator of which is the amount of principal paid for the
Plan Year and the denominator of which is the sum of the numerator plus
the principal to be paid for all future Plan Years. As of each Anniversary
Date, the Plan must consistently allocate to each Participant's Account
pursuant to Section 4.3(b), non-monetary units (shares and fractional
shares of Company Stock) representing each Participant's interest in
assets withdrawn from the Unallocated Company Stock Suspense Account.
Income earned with respect to Company Stock in the Unallocated Company
Stock Suspense Account shall be used to repay the Exempt Loan or used to
purchase such Company Stock. Any income which is not so used must be
allocated as income of the Plan.
(h) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to reinstate
previously forfeited account balances of Former Participants, if any. The
remaining Forfeitures, if any, shall be allocated among the Participants'
Accounts in the same proportion that each such Participant's Compensation
for the year bears to the total Compensation of all Participants for the
year. In the event the allocation of Forfeitures provided herein shall
cause the "annual addition" (as defined in Section 4.4) to any
Participant's Account to exceed the amount allowable by the Code, the
excess shall be reallocated in accordance with Section 4.5. However, a
Participant who performs less than a Year of Service during any Plan Year
or who does not perform an Hour of Service on the last day of any Plan
Year shall not share in the Plan Forfeitures for that year, unless
required pursuant to Section 4.3(i).
(i) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer Contributions and Forfeitures allocated to the Participant's
Account for each Non-Key Employee shall be equal to at least three percent
(3%) of such Non-Key Employee's "415 Compensation" (reduced by
contributions and forfeitures, if any, allocated to each Non-Key Employee
in any defined
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contribution plan included with this plan in a Required Aggregation
Group). However, if (i) the sum of the Employer Contributions and
Forfeitures allocated to the Participant's Account of each Key Employee
for such Top Heavy Plan Year is less than three percent (3%) of each Key
Employee's "415 Compensation" and (ii) this Plan is not required to be
included in an Aggregation Group to enable a defined benefit plan to meet
the requirements of Code Section 401(a)(4) of 410, the sum of the Employer
Contributions and Forfeitures allocated to the Participant's Account of
each Non-Key Employee shall be equal to the largest percentage allocated
to the Participant's Account of any Key Employee.
Except, however, no such minimum allocation shall be required in
this Plan for any Non-Key Employee who participates in another defined
contribution plan subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation Group.
(j) For purposes of the minimum allocations set forth above the
percentage allocated to the Participant's Account of any Key Employee
shall be equal to the ratio of the sum of the Employer Contributions and
Forfeitures allocated on behalf of such Key Employee divided by the "415
Compensation" for such Key Employee.
(k) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Account of all Non-Key
Employees who are Participants and who are employed by the Employer on the
last day of the Plan Year, including Non-Key Employees who have (1) failed
to complete a Year of Service; (2) declined to make mandatory
contributions (if required) or elective deferrals to the Plan; and (3)
been excluded from participation because of their level of Compensation.
(l) In lieu of the above, in any Plan Year in which a Non-Key
Employee is a Participant in both this Plan and a defined benefit pension
plan included in a Required Aggregation Group which is top heavy, the
Employer shall not be required to provide such Non-Key Employee with both
the full separate defined benefit plan minimum benefit and the full
separate defined contribution plan minimum allocation.
Therefore, for any Plan Year when the Plan is a Top Heavy Plan,
Non-Key Employees who are participating in this Plan and a defined benefit
plan maintained by the Employer shall receive a minimum monthly accrued
benefit in the defined benefit plan equal to the product of (1)
one-twelfth (1/12th) of "415 Compensation" averaged over a five (5)
consecutive "limitation years" (or actual "limitation years" if less)
which produce the highest average and (2) the lesser of (i) two percent
(2%) multiplied by Years of Service when the plan is top heavy or (ii)
twenty percent (20%).
(m) For the purposes of this Section, "415 Compensation" shall be as
defined in Section 4.4(e), and shall be limited to $150,000 in all Plan
Years (unless adjusted in such manner as permitted under Code Section
401(a)(17).
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(n) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death, Total and Permanent Disability or
retirement shall share in the allocations of contributions and Forfeitures
provided for in this Section regardless of whether they completed a Year
of Service during the Plan Year.
(o) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to
pre-break
service; and
(2) one account representing his status in the Plan
attributable to post-
break service.
4.4 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall equal
the lesser of: (1) $30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b)(1)(A)) or (2) twenty-five
percent (25%) of the Participant's "415 Compensation" for such "limitation
year".
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer Contributions, (2) Employee
contributions, (3) Forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit plan (as defined in Code Section 419(e)) maintained by the
Employer. Except, however, the "415 Compensation" percentage limitation
referred to in paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition", or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(l)(1).
(c) For purposes of applying the limitations of Code Section 415,
the transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions for
the purposes of Section 4.4(b)(2): (1) rollover contributions (as defined
in Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Participant from the Plan; (3) repayments of
distributions received by an Employee pursuant to Code Section
411(a)(7)(B) (cash-outs); (4) repayments of distributions received by an
Employee pursuant to Code Section 411(a)(3)(D) (mandatory
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contributions); and (5) Employee contributions to a simplified employee
pension excludable from gross income under Code Section 408(k)(6).
(d) If no more than one-third of the Employer Contributions to this
Plan for a Plan Year which are deductible under Code Section 404(a)(9) are
allocated to Highly Compensated Employees, the limitations of paragraph
(a) shall not apply to:
(1) Forfeitures of Company Stock which were acquired with
the proceeds of an Exempt Loan, or
(2) Employer Contributions to this Plan which are deductible
under Code Section 404(a)(9)(B) and charged against the
Participant's accounts.
(e) For purposes of applying the limitations of Code Section 415,
"415 Compensation" shall include the Participant's wages, salaries, fees
for professional services, and other amounts received for personal
services actually rendered in the course of employment with an Employer
maintaining the Plan (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a
nonaccountable plan (as described in Regulation 1.62-2(c)) for a Plan
Year.
"415 Compensation" shall exclude (1)(A) contributions made by the
Employer to a plan of deferred compensation to the extent that, before the
application of the Code Section 415 limitations to the Plan, the
contributions are not includable in the gross income of the Employee for
the taxable year in which contributed, (B) Employer contributions made on
behalf of an Employee to a simplified employee pension plan described in
Code Section 408(k) to the extent such contributions are excludable from
the Employee's gross income, (C) any distributions from a plan of deferred
compensation, including the TPC Cash Bonus Plan and the TPC Bonus and
Profit Sharing Plan; (2) amounts realized from the exercise of a
non-qualified stock option or when restricted stock (or property) held by
an Employee either becomes freely transferable or is no longer subject to
a substantial risk of forfeiture; (3) amounts realized from the sale,
exchange, or other disposition of stock acquired under a qualified stock
option; and (4) other amounts that receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not in cludable in the gross income of the Employee), or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of any annuity contract
described in Code Section 403(b) (whether or not the contributions are
excludable from the gross income of the Employee). "415 Compensation"
shall be limited to $150,000 (unless adjusted in the same manner as
permitted under Code Section 415(d)).
(f) For purposes of applying the limitations of Code Section 415,
the "limitation year" shall be the Plan Year.
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(g) The dollar limitation under Code Section 415(b)(1)(A) stated in
paragraph (a)(1) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(h) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined benefit plan, and all qualified defined
contribution plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined contribution plan.
(i) For the purpose of this Section, if the Employer is a member of
a controlled group of corporations, trades or businesses under common
control (as defined by Code Section 1563(a) or Code Section 414(b) and (c)
as modified by Code Section 415(h)), is a member of an affiliated service
group (as defined by Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to Regulations under Code
Section 414(o), all Employees of such Employers shall be considered to be
employed by a single Employer.
(j) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, all Employers of a Participant who maintain this Plan will be
considered to be a single Employer.
(k) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan
shall equal the maximum "annual additions" for the "limitation year"
minus any "annual additions" previously credited to such
Participant's accounts during the "limitation year."
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, "annual additions"
will be credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the defined
contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the product of (A) the
maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited under subparagraphs (1) or
(2) above, multiplied by (B) a fraction (i) the numerator of which
is the "annual additions" which would be credited to such
Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which is
such "annual additions" for all plans described in this
subparagraph.
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(l) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any "limitation year" may
not exceed 1.0.
(m) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is
the lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of the
highest average compensation, including any adjustments under Code Section
415(b).
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first "limitation year" beginning after December
31, 1986, in one or more defined benefit plans maintained by the Employer
which were in existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual benefits under
such plans which the Participant had accrued as of the close of the last
"limitation year" beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually
and in the aggregate satisfied the requirements of Code Section 415 for
all "limitation years" beginning before January 1, 1987.
(n) The defined contribution plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the annual additions
to the Participant's Account under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the current and
all prior "limitation years" (including the annual additions attributable
to the Participant's nondeductible Employee contributions to all defined
benefit plans, whether or not terminated, maintained by the Employer, and
the annual additions attributable to all welfare benefit funds, as defined
in Code Section 419(e), and individual medical accounts, as defined in
Code Section 415(l)(2), maintained by the Employer), and the denominator
of which is the sum of the maximum aggregate amounts for the current and
all prior "limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code Sections 415(b) and
(d) in effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of
the first "limitation year" beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the end
of the
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last "limitation year" beginning before January 1, 1987, and disregarding
any changes in the terms and conditions of the Plan made after May 5,
1986, but using the Code Section 415 limitation applicable to the first
"limitation year" beginning on or after January 1, 1987. The annual
addition for any "limitation year" beginning before January 1, 1987 shall
not be recomputed to treat all Employee contributions as annual additions.
(o) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be substituted for
125 percent in paragraph (l) and (m) unless the extra minimum allocation
is being provided pursuant to Section 4.3(i). However, for any "limitation
year" in which the Plan is a Super Top Heavy Plan, 100 percent shall be
substituted for 125 percent in any event.
(p) If the sum of the defined benefit plan fraction and the defined
contribution plan fraction shall exceed 1.0 in any "limitation year" for
any Participant in this Plan, the Administrator shall limit, to the extent
necessary, the "annual additions" to such Participant's accounts for such
"limitation year." If, after limiting the "annual additions" to such
Participant's accounts for the "limitation year," the sum of the defined
benefit plan fraction and the defined contribution plan fraction still
exceed 1.0, the Administrator shall then adjust the numerator of the
defined benefit plan fraction so that the sum of both fractions shall not
exceed 1.0 in any "limitation year" for such Participant.
(q) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed
in this Section shall at all times comply with the provisions of Code
Section 415 and the Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures a reasonable
error in estimating a Participant's Compensation or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the
"annual additions" under this Plan would cause the maximum "annual
additions" to be exceeded for any Participant, the Administrator shall (1)
hold any "excess amount" remaining after the return of any voluntary
Employee contributions in a "Section 415 suspense account" (2) allocate
and reallocate the "Section 415 suspense account" in the next "limitation
year" (and succeeding "limitation years" if necessary) to all Participants
in the Plan before any Employer or Employee contributions which would
constitute "annual additions" are made to the Plan for such "limitation
year" or (3) reduce Employer Contributions to the Plan for such
"limitation year" by the amount of the "Section 415 suspense account"
allocated and reallocated during such "limitation year".
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of (1)
the "annual additions" which would be credited to his account under the
terms of the Plan without regard to the limitations of Code Section 415
over (2) the maximum "annual additions" determined pursuant to Section
415.
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(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amounts" for
all Participants in the Plan during the "limitation year". The "Section
415 suspense account" shall not share in any earnings or losses of the
Trust Fund.
(d) The Plan may not distribute "excess amounts" to Participants
or Former Participants.
4.6 DIRECTED INVESTMENT ACCOUNT
(a) Each "Qualified Participant" may elect within ninety (90) days
after the close of each Plan Year during the "Qualified Election Period"
to direct the Administrator in writing as to the investment of at least 25
percent of the Participant's Company Stock Account (to the extent such
portion exceeds the amount to which a prior election under this
subparagraph applies). In the case of the election year in which the
Participant can make his last election, the preceding sentence shall be
applied by substituting "50 percent" for "25 percent". If the "Qualified
Participant" elects to direct the Administrator as to the investment of
his Company Stock Account, such direction shall be effective no later than
180 days after the close of the Plan Year to which such direction applies.
In lieu of directing the Administrator as to the investment of his Company
Stock Account, the "Qualified Participant" may elect a distribution in
cash or Company Stock of the portion of his Company Stock Account covered
by the election within ninety (90) days after the last day of the period
during which the election can be made. Any such distribution of Company
Stock shall be subject to Section 7.11.
(b) For the purposes of this Section the following definitions
shall apply:
(1) "Qualified Participant" means any Participant or Former
Participant who has completed ten (10) Years of Service as a
Participant and has attained age 55.
(2) "Qualified Election Period" means the five (5) Plan Year
period beginning with the Plan Year after the Plan Year in which the
Participant attains age 55 (or, if later, beginning with the Plan
Year after the first Plan Year in which the Participant first became
a "Qualified Participant").
(c) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and his Directed Investment Account shall be
charged and credited as the case may be to each account. The Directed
Investment Account shall not share in Trust Fund earnings, but it shall be
charged or credited as appropriate with the net earnings, gains, losses
and expenses as well as any appreciation or depreciation in market value
during each Plan Year attributable to such account. To the extent so
directed, the Administrators are relieved of their fiduciary
responsibilities as provided in Section 404 of the Act.
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(d) Each Qualified Participant may direct the Administrator to
separate and keep separate all or a portion of his share of his Company
Stock Account; and further each Qualified Participant is authorized and
empowered, in his sole and absolute discretion, to give directions to the
Administrator in such form as the Administrator may require concerning the
investment of the Participant's Directed Investment Account, which
directions must be followed by the Administrator. The Administrator shall
be under any duty to question any such direction of the Participant or to
review any securities or other property, real or personal, or to make any
suggestions to the Participant in connection therewith, and the Trustee
shall comply as promptly as practicable with directions given by the
Qualified Participant hereunder. Any such direction may be of a continuing
nature or otherwise and may be revoked by the Participant at any time in
such form as the Administrator may require. The Administrator shall not be
responsible or liable for any loss or expense which may arise from or
result from compliance with any directions from the Participant nor shall
the Administrator be responsible for, or liable for any loss or expense
which may result from the Administrator's refusal or failure to comply
with any directions from the Participant. Any costs and expenses related
to compliance with the Qualified Participant's directions shall be borne
by the Participant's Directed Investment Account.
4.7 SUSPENSE ACCOUNT
All Employer Contributions, Forfeitures and net income (or net loss) of
the Trust Fund shall be held in a suspense account until allocated to the
applicable Participants' Accounts.
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ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY
(a) The Plan is designed to invest primarily in Company Stock.
(b) With due regard to subparagraph (a) above, the Administrator may
direct the Trustee to invest funds under the Plan in other property as
described in the Trust Agreement or direct the Trustee to hold such funds
in cash or cash equivalents.
(c) The Plan may not obligate itself to acquire Company Stock from a
particular holder thereof at an indefinite time determined upon the
happening of an event such as the death of the holder.
(d) The Plan may not obligate itself to acquire Company Stock under
a put option binding upon the Plan. However, at the time a put option is
exercised, the Plan may be given an option to assume the rights and
obligations of the Employer under a put option binding upon the Employer.
(e) All purchases or sales of Company Stock and the price of such
purchases or sales shall be made as the Administrator instructs the
Trustee. All purchases of Company Stock shall be made at a price which, in
the judgment of the Administrator, does not exceed the fair market value
thereof. All sales of Company Stock shall be made at a price which, in the
judgment of the Administrator, is not less than the fair market value
thereof. The valuation rules set forth in Article VI shall be applicable.
5.2 APPLICATION OF CASH
Employer Contributions received by the Trust Fund shall first be applied
to pay any Current Obligations of the Trust Fund.
5.3 TRANSACTIONS INVOLVING COMPANY STOCK
(a) No portion of the Trust Fund attributable to (or allocable in
lieu of) Company Stock acquired by the Plan in a sale to which Code
Section 1042 or Code Section 2057 applies may accrue or be allocated
directly or indirectly under any plan maintained by the Employer meeting
the requirements of Code Section 401(a):
(1) during the "Nonallocation Period", for the benefit of;
(i)any taxpayer who makes an election under Code Section
1042(a) with respect to Company Stock or any decedent if the
executor of the estate of the decedent makes a qualified sale
to which Code Section 2057 applies,
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(ii)any individual who is related to the taxpayer or the
decedent (within the meaning of Code Section 267(b)), or
(2) for the benefit of any other person who owns
(after application of Code Section 318(a)) more than 25 percent of;
(i)any class of outstanding stock of the Employer which
issued such Company Stock, or
(ii)the total value of any class of outstanding stock of
the Employer.
(b) Except, however, subparagraph (a)(1)(ii) above shall not apply
to lineal descendants of the taxpayer, provided that, the aggregate amount
allocated to the benefit of all such lineal descendants during the
"Nonallocation Period" does not exceed more than five (5) percent of the
Company Stock (or amounts allocated in lieu thereof) held by the Plan
which are attributable to a sale to the Plan by any person related to such
descendants (within the meaning of Code Section 267(c)(4)) in a
transaction to which Code Section 1042 applied.
(c) A person shall be treated as failing to meet the stock ownership
limitation under paragraph (a)(2) above if such person fails such
limitation:
(1) at any time during the one (1) year period ending on the
date of sale of Company Stock to the Plan, or
(2) on the date as of which Company Stock is allocated to
Participants in the Plan.
(d) For purposes of this Section, "Nonallocation Period" means the
ten (10) year period beginning on the later of:
(1) the date of the sale of the Company Stock, or
(2) the date of the Plan allocation attributable to the final
payment of the Exempt Loan incurred in connection with such sale.
5.4 LOANS TO THE TRUST
(a) The Plan may, but only upon the direction of the Administrator,
borrow money for any lawful purpose, provided, the proceeds of an Exempt
Loan are used within a reasonable time after receipt only for any or all
of the following purposes:
(1) To acquire Company Stock.
(2) To repay such loan.
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(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or guaranteed by a
disqualified person must satisfy all requirements applicable to Exempt
Loans including but not limited to the following:
(1) The loan must be at a reasonable rate of interest;
(2) Any collateral pledged to the creditor by the Plan shall
consist only of the Company Stock purchased with the borrower funds;
(3) Under the terms of the loan, any pledge of Company Stock
shall provide for the release of shares so pledged on a pro-rata
basis pursuant to Section 4.3(g);
(4) Under the terms of the loan, the creditor shall have no
recourse against the Plan except with respect to such collateral,
earnings attributable to such collateral, Employer Contributions
(other than contributions of Company Stock) that are made to meet
Current Obligations and earnings attributable to such contributions;
(5) The loan must be for a specific term and may not be
payable at the demand of any person, except in the cause of a
default.
(6) In the event of default upon an Exempt Loan, the value of
the Trust Fund transferred in satisfaction of the Exempt Loan shall
not exceed the amount of default. If the lender is a disqualified
person, an Exempt Loan shall provide for a transfer of Trust Funds
upon default only upon and to the extent of the failure of the Plan
to meet the payment schedule of the Exempt Loan;
(7) Exempt Loan payments during a Plan Year must not exceed an
amount equal to: (A) the sum, over all Plan Years, of all Employer
Contributions made by the Employer to the Plan with respect to such
Exempt Loan and earnings on such Employer Contributions, less (B)
the sum of the Exempt Loan payments in all preceding Plan Years. A
separate accounting shall be maintained for such Employer
Contributions and earnings until the Exempt Loan is repaid.
(c) The term "disqualified person" means a person who is a
Fiduciary, a person providing services to the Plan, an Employer, any of
whose Employees are covered by the Plan, an employee organization any of
whose members are covered by the Plan, an owner, direct or indirect, of
50% or more of the total combined voting power of all classes of voting
stock, or an officer, director, 10% or more shareholder, or a Highly
Compensated Employee.
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ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date", to determine the net worth of the assets comprising the
Trust Fund, other than Company Stock, as it exists on the "valuation date" prior
to taking into consideration any contribution to be allocated for that Plan
Year. In determining such net worth, the Trustee shall value the assets
comprising the Trust Fund, other than Company Stock, at their fair market value
as of the "valuation date" and shall deduct all expenses for which the Trustee
has not yet obtained reimbursement from the Employer or the Trust Fund. The
Administrator shall have the duty of determining the fair market value of
Company Stock.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all relevant factors
for determining the fair market value of securities. In the case of a
transaction between a Plan and a disqualified person, value must be determined
as of the date of the transaction. For all other Plan purposes, value must be
determined as of the most recent valuation date under the Plan. An independent
appraisal will not in itself be a good faith determination of value in the case
of a transaction between the Plan and a disqualified person. However, in other
cases, a determination of fair market value based on at least an annual
appraisal independently arrived at by a person who customarily makes such
appraisals and who is independent of any party to the transaction will be deemed
to be a good faith determination of value. Company Stock not readily tradeable
on an established securities market shall be valued by an independent appraiser
appointed by the Administrator meeting requirements similar to the requirements
of the Regulations prescribed under Code Section 170(a)(1).
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ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 BENEFITS UPON RETIREMENT
A Participant who terminates his employment on or after his Normal
Retirement Date shall be distributed a benefit in accordance with Section 7.5
equal in value to the balance in the Participant's Accounts as of his Benefit
Commencement Date, such balance to be determined as of the Valuation Date
immediately preceding the Participant's Benefit Commencement Date.
7.2 BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Normal Retirement
Date or other termination of his employment, the Participant's Beneficiary
shall be distributed a benefit in accordance with Section 7.5 equal in
value to the balance in the Participant's Accounts as of the Benefit
Commencement Date to the Beneficiary, such balance to be determined as of
the Valuation Date immediately preceding such Benefit Commencement Date.
(b) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the value
of the account of a deceased Participant as the Administrator may deem
desirable. The Administrator's determination of death and of the right of
any person to receive payment shall be conclusive.
(c) The Beneficiary of the death benefit payable pursuant to this
Section shall be the Participant's spouse; provided, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived her right to be the Participant's
Beneficiary, or
(2) the Participant has no spouse, or
(3) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a
form satisfactory to the Administrator. A Participant may at any time
revoke his designation of a Beneficiary or change his Beneficiary by
filing written notice of such revocation or change with the Administrator.
However, the Participant's spouse must again consent in writing to any
such change or revocation unless the original consent acknowledged that
the spouse had the right to limit consent only to a specific Beneficiary
and that the spouse voluntarily elected to relinquish such right. In the
event no valid designation of Beneficiary exists at the time of the
Participant's death, the death benefit shall be payable to his estate.
(d) Any consent by the Participant's spouse to waive any rights to
the death benefit must be in writing, must acknowledge the effect of such
waiver, and be witnessed by
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a Plan representative or a notary public. Further, the spouse's consent
must be irrevocable and must acknowledge the specific nonspouse
Beneficiary.
7.3 BENEFITS UPON DISABILITY
In the event a Participant's employment is terminated due to a Total and
Permanent Disability prior to his Normal Retirement Date or other termination of
his employment, such Participant shall be distributed a benefit in accordance
with Section 7.5 equal in value to the balance in the Participant's Accounts as
of his Benefit Commencement Date, such balance to be determined as of the
Valuation Date immediately preceding his Benefit Commencement Date.
7.4 BENEFITS UPON TERMINATION
(a) Each Participant whose employment is terminated for any reason
other than Total and Permanent Disability, retirement or death shall be
distributed a benefit in accordance with Section 7.5 equal in value to the
sum of his Vested interest in the balance of his Participant's Accounts as
of his Benefit Commencement Date, such balance to be determined as of the
Valuation Date immediately preceding his Benefit Commencement Date.
(b) For purposes of this Section, a Participant's Vested interest in
Participant's Accounts shall be determined by such Participant's years of
Vesting Service in accordance with the following schedule:
YEARS OF VESTING SERVICE VESTED INTEREST
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years 100%
If a portion of a Participant's Account is forfeited, Company Stock
allocated to the Participant's Company Stock Account must be forfeited
only after the Participant's Other Investments Account has been depleted.
If interest in more than one class of Company Stock has been allocated to
a Participant's Account, the Participant must be treated as forfeiting the
same proportion of each such class.
(c) The computation of a Participant's nonforfeitable percentage of
his interest in the Plan shall not be reduced as the result of any direct
or indirect amendment to this Article. In the event that the Plan is
amended to change or modify any vesting schedule, a Participant with a
least three (3) Years of Service as of the expiration date of the election
period may elect to have his nonforfeitable percentage computed under the
Plan without regard to such amendment. If a Participant fails to make such
election, then such Participant
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shall be subject to the new vesting schedule. The Participant's election
period shall commence on the adoption date of the amendment and shall end
60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(d) Paragraph (b) above not withstanding, a Participant shall have a
100% Vested interest in his Participant's Accounts upon attainment of his
Normal Retirement Date.
(e) (1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue
to participate in the Plan in the same manner as if such termination
had not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service, and
such Former Participant had received a distribution of his entire
Vested interest prior to his reemployment, his forfeited account
shall be reinstated only if he repays the full amount distributed to
him before the earlier of five (5) years after the first date on
which the Participant is subsequently reemployed by the Employer or
the close of the first period of 5 consecutive 1-Year Breaks in
Service commencing after the distribution. In the event the Former
Participant does repay the full amount distributed to him, the
undistributed portion of the Participant's Account must be restored
in full, unadjusted by any gains or losses occurring subsequent to
the Anniversary Date or other valuation date preceding his
termination.
(3) If any Former Participant is reemployed after a 1-Year
Break in Service has occurred, Years of Service shall include Years
of Service prior to his 1-Year Break in Service subject to the
following rules:
(i) If a Former Participant has a 1-Year Break in
Service, his pre- break and post-break service shall be used
for computing Years of Service for eligibility and for vesting
purposes only after he has been employed for one (1) Year of
Service following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan
resulting from Employer Contributions shall lose credits
otherwise allowable under (i) above if his consecutive 1-Year
Breaks in Service equal or exceed the greater of (A) five (5)
or (B) the aggregate number of his pre-break Years of Service;
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(iii) After five (5) consecutive 1-Year Breaks in
Service, a Former Participant's Vested Account balance
attributable to pre-break service shall not be increased as a
result of post-break service;
(iv) If a Former Participant who has not had his Years
of Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively from
his date of reemployment;
(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded pursuant
to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer (a 1-Year Break in Service previously occurred, but
employment had not terminated), he shall participate in the
Plan retroactively from his reemployment commencement date.
7.5 DISTRIBUTION OF BENEFITS
(a) Except as provided in paragraph (c) below, payment of
Participant's benefit hereunder shall be made as soon as administratively
feasible after the Valuation Date coincident or next succeeding the date
the Participant or his Beneficiary becomes entitled to a benefit pursuant
to Sections 7.1, 7.2, 7.3 or 7.4.
(b) The Administrator, pursuant to the election of the Participant
(or if no election has been made prior to the Participant's death, by his
Beneficiary), shall direct the Trustee to distribute to a Participant or
his Beneficiary any amount to which he is entitled under the Plan in one
or more of the following methods:
(1) One lump-sum payment;
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual installments. The period over which such
payment is to be made shall not extend beyond the earlier of the
Participant's life expectancy (or the life expectancy of the
Participant and his designated Beneficiary) or the limited
distribution period provided for in Section 7.5(c).
(c) Notwithstanding the above, the Administrator may, unless the
Participant elects (with the consent of the Participant's spouse) in
writing a longer distribution period, distribute to a Participant or his
Beneficiary Company Stock in substantially equal monthly, quarterly,
semiannual, or annual installments over a period not longer than five (5)
years. In the case of a Participant with an account balance in the Plan in
excess of $500,000, the five (5) year period shall be extended one (1)
additional year (but not more than five (5) addi tional years) for each
$100,000 or fraction thereof by which such balance exceeds $500,000. The
dollar limits shall be adjusted at the same time and in the same manner as
provided in
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Code Section 415(d). Notwithstanding the above, the Administrator may,
unless Participant elects (with the consent of the Participant's spouse) a
later distribution date, commence distribution of the Participant's
Company Stock Account balance not later than one year after the close of
the Plan Year (i) in which the Participant separates from service on
account of retirement, Total and Permanent Disability or death, or (ii)
which is the fifth Plan Year following the Plan Year in which the
Participant otherwise separates from service; provided, however, any
Company Stock allocated to a Participant's Company Stock Account purchased
by means of an Exempt Loan may not be distributed until after such Exempt
Loan is repaid in full.
(d) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such distribution
commences prior to the later of his Normal Retirement Age or age 62.
With regard to this required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent, it
shall be deemed an election to defer the commencement of payment of
any benefit. However, any election to defer the receipt of benefits
shall not apply with respect to distributions which are required
under Section 7.5(h).
(2) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days before the
first day on which all events have occurred which entitle the
Participant to such benefit.
(3) Written consent of the Participant to the distribution
must not be made before the Participant receives the notice and must
not be made more than 90 days before the first day on which all
events have occurred which entitle the Participant to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to
the distribution.
If the value of a Participant's benefit does not exceed $3,500 and
has never exceeded $3,500 at the time of any prior distribution, the
Administrator may direct the Trustee to cause the entire benefit to be
paid to such Participant without regard to Participant's election or the
consent of the spouse.
(e) Notwithstanding anything herein to the contrary, cash dividends
on shares of Company Stock allocated to Participants' Accounts may be paid
to Participants or their Beneficiaries, as determined in the sole
discretion of the Administrator, within 90 days after the close of the
Plan Year in which the dividend is paid.
(f) Except as limited by Sections 7.5 and 7.6, whenever the Trustee
is to make a distribution or to commence a series of payments on or before
an Anniversary Date, the
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distribution or series of payments may be made or begun on such date or as
soon thereafter as is practicable, but in no event later than 180 days
after the Anniversary Date. Except, however, unless a Former Participant
elects in writing to defer the receipt of benefits (such election may not
result in a death benefit that is more than incidental), the payment of
benefits shall begin not later than the 60th day after the close of the
Plan Year in which the latest of the following events occurs:
(1) the date on which the Participant attains the Normal
Retirement Age specified herein,
(2) the 10th anniversary of the year in which the
Participant commenced participation in the Plan, or
(3) the date the Participant terminates his service with
the Employer.
(g) Any part of a Participant's benefit which is retained in the
Plan after the Anniversary Date on which his participation ends will
continue to be treated as a Company Stock Account or as an Other
Investments Account as provided in Article IV. However, neither account
will be credited with any further Employer Contributions or Forfeitures.
(h) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits shall be made in accordance with
the following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder (inclu ding Regulation Section
1.401(a)(9)-2), the provisions of which are incorporated herein by
reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later of (i)
the calendar year in which the Participant attains age 70 1/2 or
(ii) the calendar year in which the Participant retires, provided,
however, that this clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at any time during the
five (5) Plan Year period ending in the calendar year in which he
attains age 70 1/2 or, in the case of a Participant who becomes a
"five (5) percent owner" during any subsequent Plan Year, clause
(ii) shall no longer apply and the required beginning date shall be
the April 1st of the calendar year following the calendar year in
which such subsequent Plan Year ends. Alternatively, distributions
to a Participant must begin no later than the applicable April 1st
as determined under the preceding sentence and must be made over a
period certain measured by the life expectancy of the Participant
(or the life expectancies of the Participant and his designated
Beneficiary) in accordance with Regulations. Notwithstanding the
foregoing, clause (ii) above shall not apply to any Participant
unless the Participant had attained age 70 1/2 before January 1,
1988 and was not a "five (5) percent owner" at any time during the
Plan Year ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent Plan Year.
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(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
(i) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the
Participant or the Participant's spouse, be redetermined in accordance
with Regulations. The election, once made, shall be irrevocable. If no
election is made by the time distributions must commence, then the life
expectancy of the Participant and the Participant's spouse shall not be
subject to recalculation. Life expectancy and joint and last survivor
expectancy shall be computed using the return multiples in Tables V and VI
of Regulation 1.72-9.
7.6 HOW PLAN BENEFITS WILL BE DISTRIBUTED
(a) Distribution of a Participant's benefit may be made in cash or
Company Stock or both, provided, however, that if a Participant or
Beneficiary so demands, such benefit shall be distributed only in the form
of Company Stock. Prior to making a distribution of benefits, the
Administrator shall advise the Participant or his Beneficiary, in writing,
of the right to demand that benefits be distributed solely in Company
Stock. If the Participant or his Beneficiary fails to make such demand in
writing within 90 days after receipt of such written notice, the
Administrator shall direct the Trustee to make such distribution in such
form as the Administrator, in his sole discretion, shall determine.
Any distributions of cash hereunder shall be equal to Company Stock
held in the Participant's Company Stock Account on the Anniversary Date
subsequent to the event triggering a distribution, valued at the fair
market price per share of Company Stock as determined in accordance with
Article VI as of the Anniversary Date immediately prior to the
distribution. For purposes of this Section, an "event triggering a
distribution" shall include but not be limited to retirement, death,
disability, termination of service and the election to commence receiving
benefits hereunder pursuant to Section 7.5.
(b) If a Participant or Beneficiary demands that benefits be
distributed solely in Company Stock, distribution of a Participant's
benefit will be made entirely in whole shares or other units of Company
Stock. Any balance in a Participant's Other Investments Account will be
applied to acquire for distribution the maximum number of whole shares or
other units of Company Stock at the then fair market value. Any fractional
unit value unexpended will be distributed in cash. If Company Stock is not
available for purchase by the Trustee, then the Trustee shall hold such
balance until Company Stock is acquired and then make such distribution,
subject to Sections 7.5.
(c) The Trustee will make distribution from the Trust only on
instructions from the Administrator.
(d) Notwithstanding anything contained herein to the contrary, if
the Employer's charter or by-laws restrict ownership of substantially all
shares of Company Stock to
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Employees and the Trust Fund, as described in Code Section 409(h)(2), the
Administrator, in his sole discretion, may distribute a Participant's
Account entirely in cash without granting the Participant the right to
demand distribution in shares of Company Stock or distribute entirely in
Company Stock subject to a requirement that such Company Stock may be
resold to the Employer pursuant to Section 7.11.
(e) Except as otherwise provided herein, Company Stock distributed
by the Trustee may be restricted as to sale or transfer by the by-laws or
articles of incorporation of the Employer, provided restrictions are
applicable to all Company Stock of the same class. If a Participant is
required to offer the sale of his Company Stock to the Employer before
offering to sell his Company Stock to a third party, in no event may the
Employer pay a price less than that offered to the distributee by another
potential buyer making a bona fide offer and in no event shall the Trustee
pay a price less than the fair market value of the Company Stock.
(f) Except as otherwise provided in this Article, a Participant is
not entitled to any payment, withdrawal or distribution under the Plan
during his participation. If any such partial distribution is made, the
Participant's benefit when computed will be reduced by the amount of any
such advance.
(g) If Company Stock acquired with the proceeds of an Exempt Loan
(described in Section 5.4 hereof) is available for distribution and
consists of more than one class, a Participant or his Beneficiary must
receive substantially the same proportion of each such class.
(h) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Regulations thereunder. If it is determined,
pursuant to Regulations, that the distribution of a Participant's interest
has begun and the Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of distribution
selected pursuant to Section 7.5 as of his date of death. If a Participant
dies before he has begun to receive any distributions of his interest
under the Plan or before distributions are deemed to have begun pursuant
to Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse (determined as
of the date of the Participant's death) is his Beneficiary, then in lieu
of the preceding rules, distributions must be made over a period not
extending beyond the life expectancy of the spouse and must commence on or
before the later of (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died; or (2) December
31st of the calendar year in which the Participant would have attained 70
1/2. If the surviving spouse dies before distributions to such spouse
begin, then the 5-year distribution requirement of this section shall
apply as if the spouse was the Participant.
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(i) For purposes of this Section, the life expectancy of a
Participant and a Par ticipant's spouse may, at the election of the
Participant or the Participant's spouse, be redetermined in accordance
with Regulations. The election, once made, shall be irrevocable. If no
election is made by the time distributions must commence, then the life
expectancy of the Participant and the Participant's spouse shall not be
subject to recalculation. Life expectancy and joint and last survivor
expectancy shall be computed using the return multiples in Tables V and VI
of Regulation 1.72-9.
7.7 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary, or to the custodian for such
Beneficiary under the Uniform Gift to Minors Act or Gift to Minors act, if such
is permitted by the laws of the state in which said Beneficiary resides. Such a
payment to the legal guardian, custodian or parent of a minor Beneficiary shall
fully discharge the Trustee, Employer, and Plan from further liability on
account thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the expiration of five (5)
years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his Beneficiary, the amount
so distributable shall be treated as a Forfeiture pursuant to the Plan. In the
event a Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.
7.9 RIGHT OF FIRST REFUSAL
(a) If any Participant, his Beneficiary or any other person to whom
shares of Company Stock are distributed from the Plan (the "Selling
Participant") shall, at any time, desire to sell some or all of such
shares (the "Offered Shares") to a third party (the "Third Party"), the
Selling Participant shall give written notice of such desire to the
Administrator and the Employer, which notice shall contain the number of
shares offered for sale, the proposed terms of the sale and the names and
addresses of both the Selling Participant and Third Party. Both the Trust
Fund and the Employer shall each have the right of first refusal for a
period of fourteen (14) days from the date the Selling Participant gives
such written notice to the Employer and the Administrator (such fourteen
(14) day period to run concurrently against the Trust Fund and the
Employer) to acquire the Offered Shares. As between the Trust Fund and the
Employer, the Trust Fund shall have priority to acquire the shares
pursuant to the right of first refusal. The selling price and terms shall
be the same as offered by the Third Party.
(b) If the Trust Fund and the Employer do not exercise their right
of first refusal within the required fourteen (14) day period provided
above, the Selling Participant shall
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have the right, at any time following the expiration of such fourteen (14)
day period, to dispose of the Offered Shares to the third Party' provided,
however, that (i) no disposition shall be made to the Third Party on terms
more favorable to the Third Party than those set forth in the written
notice delivered by the Selling Participant above, and (ii) if such
disposition shall not be made to a third party on the terms offered to the
Employer and the Trust Fund, the offered Shares shall again be subject to
the right of first refusal set forth above.
(c) The closing pursuant to the exercise of the right of first
refusal under Section 7.9(a) above shall take place at such place agreed
upon between the Administrator and the Selling Participant, but not later
than ten (10) days after the Employer or the Trust Fund shall have
notified the Selling Participant of the exercise of the right of first
refusal. At such closing, the Selling Participant shall deliver
certificates representing the Offered Shares duly endorsed in blank for
transfer, or with stock powers attached duly executed in blank with all
required transfer tax stamps attached or provided for, and the Employer or
the Trust Fund shall deliver the purchase price, or an appropriate portion
thereof, to the Selling Participant.
(d) Except as provided in this Paragraph (d), no Company Stock
acquired with the proceeds of an Exempt Loan complying with the
requirements of Section 5.4 hereof shall be subject to a right of first
refusal. Company Stock, which is acquired with the proceeds of an Exempt
Loan which is distributed to a Participant or Beneficiary shall be subject
to the right of first refusal, provided for in Paragraph (a) of this
Section only so long as the Company Stock is not publicly traded. The term
"publicly traded" refers to a securities exchange registered under section
6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or that is quoted
on a system sponsored by a national securities association registered
under Section 15A(b) of the Securities Exchange Act (15 U.S.C. 780). In
addition, in the case of Company Stock which was acquired with the
proceeds of a loan described in Section 5.4, the selling price and other
terms under the right must not be less favorable to the seller than the
greater of the value of the security determined under Regulation
54.4975-11(d)(5), or the purchase price and other terms offered by a buyer
(other than the Employer or the Trust Fund), making a good faith offer to
purchase the security. The right of first refusal must lapse no later than
fourteen (14) days after the security holder gives notice to the holder of
the right that an offer by a third party to purchase the security has been
made. The right of first refusal shall comply with the provisions of
Paragraphs (a), (b) and (c) of this Section, except to the extent those
provisions may conflict with the provisions of this paragraph.
7.10 STOCK CERTIFICATE LEGEND
Certificates for shares distributed pursuant to the Plan shall contain the
following legend:
"The shares represented by this certificate are transferable only upon
compliance with the terms of the TPC FINANCE CORP. EMPLOYEE STOCK
OWNERSHIP PLAN (to be renamed TEXAS PETROCHEMICALS CORPORATION EMPLOYEE
STOCK
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OWNERSHIP PLAN) originally effective as of July 1, 1996, a copy of said
Plan being on file in the office of the Company."
7.11 PUT OPTION
(a) If Company Stock which was not acquired with the proceeds of an
Exempt Loan is distributed to a Participant and such Company Stock is not
readily tradeable on an established securities market, a Participant has a
right to require the Employer to repurchase the Company Stock distributed
to such Participant under a fair valuation formula. Such Stock shall be
subject to the provisions of Section 7.11(c).
(b) Company Stock which is acquired with the proceeds of an Exempt
Loan and which is not publicly traded when distributed, or if it is
subject to a trading limitation when distributed, must be subject to a put
option. For purposes of this paragraph, a "trading limitation" on a
Company Stock is a restriction under any Federal or State securities law
or any regulation thereunder, or an agreement (not prohibited by Section
7.12) affecting the Company Stock which would make the Company Stock not
as freely tradeable as stock not subject to such restriction.
(c) The put option must be exercisable only by a Participant, by the
Participant's donees, or by a person (including an estate or its
distributee) to whom the Company Stock passes by reason of a Participant's
death. (Under this paragraph Participant or Former Participant means a
Participant or Former Participant and the beneficiaries of the Participant
or Former Participant under the Plan.) The put option must permit a
Participant to put the Company Stock to the Employer. Under no
circumstances may the put option bind the Plan. However, it shall grant
the Plan an option to assume the rights and obligations of the Employer at
the time that the put option is exercised. If it is known at the time a
loan is made that Federal or state law will be violated by the Employer's
honoring such put option, the put option must permit the Company Stock to
be put, in a manner consistent with such law, to a third party (E.G., an
affiliate of the Employer or a shareholder other than the Plan) that has
substantial net worth at the time the loan is made and whose net worth is
reasonably expected to remain substantial.
The put option shall commence as of the day following the date the
Company Stock is distributed to the former Participant and end 60 days
thereafter and if not exercised within such 60-day period, an additional
60-day option shall commence one year after the date the stock was
distributed to the Former Participant (or such other 60-day period as
provided in regulations promulgated by the Secretary of the Treasury).
However, in the case of Company Stock that is publicly traded without
restrictions when distributed but ceases to be so traded within either of
the 60-day periods described herein after distribution, the Employer must
notify each holder of such Company Stock in writing on or before the tenth
day after the date the Company Stock ceases to be so traded that for the
remainder of the applicable 60-day period the Company Stock is subject to
the put option. The number of days between the tenth day and the date on
which notice is actually given, if later than the tenth day, must be added
to the duration of the put option. The notice must inform distributees of
the terms
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of the put options that they are to hold. The terms must satisfy the
requirements of this paragraph.
The put option is exercised by the holder notifying the Employer in
writing that the put option is being exercised; the notice shall state the
name and address of the holder and the number of shares to be sold. The
period during which a put option is exercisable does not include any time
when a distributee is unable to exercise it because the party bound by the
put option is prohibited from honoring it by applicable Federal or state
law. The price at which a put option must be exercisable is the value of
the Company Stock determined in accordance with Section 6.2. Payment under
the put option involving a "Total Distribution" shall be paid in
substantially equal monthly, quarterly, semiannual or annual installments
over a period certain beginning not later than thirty (30) days after the
exercise of the put option and not extending beyond (5) years. The
deferral of payment is reasonable if adequate security and a reasonable
interest rate on the unpaid amounts are provided. The amount to be paid
under the put option involving installment distributions must be paid not
later than thirty (30) days after the exercise of the put option. Payment
under a put option must not be restricted by the provisions of a loan or
any other arrangement, including the terms of the employer's articles of
incorporation, unless so required by applicable state law.
For purposes of this Section, "Total Distribution" means a
distribution to a Participant or Former Participant within one taxable
year of the entire Vested Participant's Account.
(d) An arrangement involving the Plan that creates a put option must
not provide for the issuance of put options other than as provided under
this Section. The Plan (and the Trust Fund) must not otherwise obligate
itself to acquire Company Stock from a particular holder thereof at an
indefinite time determined upon the happening of an event such as the
death of the holder.
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS
No Company Stock, except as provided in Section 7.9(d) and Section
7.11(b), acquired with the proceeds of a loan described in Section 5.4 hereof
may be subject to a put, call, or other option, or buy-sell or similar
arrangement when held by and when distributed from the Trust Fund, whether or
not the Plan is then an ESOP. The protections and rights granted in this Section
are nonterminable, and such protections and rights shall continue to exist under
the terms of this Plan so long as any Company Stock acquired with the proceeds
of a loan described in Section 5.4 hereof is held by the Trust Fund or by a
Participant or other person for whose benefit such protections and rights have
been created, and neither the repayment of such loan nor the failure of the Plan
to be an ESOP, nor an amendment of the Plan shall cause a termination of said
protections and rights.
7.13 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant in
this plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is
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authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For purposes of this Section, "alternate payee,"
"qualified domestic relations order" and "earliest retirement age" shall have
the meaning set forth under Code Section 414(p).
7.14 PAYMENT OF DISTRIBUTION DIRECTLY TO ELIGIBLE RETIREMENT
PLAN
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section, a
Distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee
in a Direct Rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) "Eligible Rollover Distribution": An Eligible Rollover
Distribution is any distribution of all or any portion of the
balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary, or for
a specified period of ten years or more; any distribution to the
extent such distribution is required under Section 401(a)(9) of the
Code; and the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(2) "Eligible Retirement Plan": An Eligible Retirement Plan is
an individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b)
of the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
(3) "Distributee": A Distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
Distributees with regard to the interest of the spouse or former
spouse.
(4) "Direct Rollover": A Direct Rollover is a payment by the
Plan to the Eligible Retirement Plan specified by the Distributee.
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ARTICLE VIII
TRUSTEE
8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) With respect to Company Stock, the Company Stock Account, or
an Exempt Loan, except as directed solely by the Administrator,
(1) the Trustee shall not sell, acquire or dispose of
Company Stock or
(2) enter into any Exempt Loan.
Upon direction of the Administrator, up to one hundred percent
(100%) of the Trust Fund may be invested in Company Stock.
(b) With respect to the Other Investments Account and Directed
Investment Account, the Trustee shall invest such Participant's Accounts
as directed by the Administrator.
(c) At the direction of the Administrator, the Trustee shall pay
benefits required under the Plan to be paid to Participants, or, in the
event of their death, to their Beneficiaries.
(d) The Trustee shall maintain records of receipts and
disbursements, and furnish to the Employer and/or Administrator for each
Plan Year a written annual report according to Section 3.2 of this Trust
Agreement.
(e) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
8.2 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as part of the Plan
assets at such time and in such manner as the Administrator shall direct.
Provided, however, that if any agreement entered into by the Trustee, upon the
direction of the Administrator, provides for voting of any shares of Company
Stock pledged as security for any obligation of the Plan, then such shares of
Company Stock shall be voted in accordance with such agreement. If the
Administrator fails or refuses to give the Trustee timely instructions as to how
to vote any Company Stock held by the Trustee and which the Administrator
otherwise has the right to vote, the Trustee shall not vote such Company Stock
and shall consider the Administrator's failure or refusal to give timely
instructions as an exercise of the Administrator's rights and a directive to the
Trustee not to vote said Company Stock. The Trustee shall not vote Company Stock
when a Participant or Beneficiary, pursuant to this Section, fails to exercise a
right to vote Company Stock.
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Notwithstanding the foregoing, if the Employer has a registration-type
class of securities, each Participant or Beneficiary shall be entitled, in lieu
of the Administrator, to direct the Trustee as to the manner in which the
Company Stock allocated to the Company Stock Account of such Participant or
Beneficiary is to be voted. If the Employer does not have a registration-type
class of securities, each Participant or Beneficiary in the Plan shall be
entitled, in lieu of the Administrator, to direct the Trustee as to the manner
in which voting rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to be exercised
with respect to any corporate matter which involves the voting of such shares
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 prescribed in Regulations. For purposes of this Section the term
"registration-type class of securities" means" (A) a class of securities
required to be registered under Section 12 of the Securities Exchange Act of
1934; and (B) a class of securities which would be required to be so registered
except for the exemption from registration provided in subsection (g)(2)(H) of
such Section 12.
The Trustee shall notify each Participant or Beneficiary of each tender or
exchange offer and utilize its best efforts to distribute or cause to be
distributed to such Participant or Beneficiary in a timely manner all
information received by the Trustee as a recordholder of shares of Company Stock
in connection with any such tender or exchange offer. Each Participant or
Beneficiary shall have the right from time to time with respect to the shares of
Company stock allocated to his account, to instruct the Trustee in writing as to
the manner in which to respond to any tender or exchange offer which shall be
pending or which may be made in the future for all shares of Company Stock or
any portion thereof. A Participant's or Beneficiary's instructions shall remain
in force until superseded in writing by the Participant or Beneficiary. The
Trustee shall tender or exchange such shares of Company Stock as and to the
extent so instructed. Unless and until shares of Company Stock are tendered or
exchanged, the individual instructions received by the Trustee from Participant
or Beneficiaries shall be held in strict confidence by the Trustee and shall not
be divulged or released to any person, including, but not limited to officers or
Employees of the Employer, or of any other Participating Employer; provided,
however, that the Trustee shall advise the Employer, at any time upon request,
of the total number of shares not subject to instructions to tender or exchange.
The Trustee shall not make recommendations to Participants or Beneficiaries on
whether to instruct the Trustee to tender or exchange.
The Trustee shall not vote, sell, convey or transfer any allocated shares
of Company Stock for which no directions are timely received from Participants
or Beneficiaries pursuant to the immediately preceding paragraph, and shares of
Company Stock held by the Trustee which are not allocated to Participants'
Company Stock Accounts shall be voted by the Trustee only in the manner directed
by the Administrator.
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ARTICLE IX
AMENDMENT, TERMINATIONS, AND MERGERS
9.1 AMENDMENT
The Employer shall have the right at any time to amend the Plan. However,
no such amendment shall authorize or permit any part of the Trust Fund (other
than such part as is required to pay taxes and administration expenses) to be
used for or diverted to purposes other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; no such amendment shall cause
any reduction in the amount credited to the account of any Participant or cause
or permit any portion of the Trust Fund to revert to or become the property of
the Employer; and no such amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may be made without the
Trustee's and Administrator's written consent. The Trustee shall not be required
to execute any such amendment unless the Trust provisions contained herein are
as part of the Plan and the amendment affects the duties of the Trustee
hereunder.
In addition, no such amendment shall have the effect of terminating the
protections and rights set forth in Section 7.12, unless such termination shall
then be permitted under the applicable provisions of the Code and Regulations;
such a termination is currently expressly prohibited by Regulation
54.4975-11(a)(3)(ii).
For the purposes of this Section, a Plan amendment which has the effect of
(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy, (2) eliminating an optional form of benefit (as provided in
Regulations) or (3) restricting, directly or indirectly, the benefit provided to
any Participant prior to the amendment shall be treated as reducing the amount
credited to the account of a Participant except that an amendment described in
clause (2) above (other than an amendment having an effect described in clause
(1) above) shall not be treated as reducing the amount credited to the account
of a Participant to the extent so provided in Regulations. Any Plan amendment
which modifies distribution options in a nondiscriminatory manner shall not be
treated as reducing the amount credited to the account of a Participant.
9.2 TERMINATION
The Employer shall have the right at any time to terminate the Plan by
delivering to the Trustee and Administrator written notice of such termination.
A complete discontinuance of the Employer Contributions to the Plan shall be
deemed to constitute a termination. Upon any termination (full or partial) or
complete discontinuance of contributions, all amounts credited to the affected
Participants' Accounts shall become 100% Vested and shall not thereafter be
subject to forfeiture and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof. Upon such
termination of the Plan, the Employer, by written notice to the Trustee and
Administrator, may direct either:
(a) complete distribution of the assets in the Trust Fund to the
Participants, in cash or in kind, in a manner consistent with the
requirements of Sections 7.5 and 7.6; or
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(b) continuation of the Trust created by this agreement and the
distribution of benefits at such time and in such manner as though the
Plan had not been terminated.
9.3 MERGER OR CONSOLIDATION
This Plan may be merged or consolidated with, or its assets and/or
liabilities maybe transferred to any other Plan and Trust only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the Plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation.
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ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
10.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable out of the Trust Fund to any person (including a Participant or
his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge,
and any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge the same shall be void; and no such benefit shall be
in any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any such person, nor shall it be
subject to attachment or legal process for or against such person, and the
same shall not be recognized by the Trustee, except to such extent as may
be required by law.
(b) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other domestic
relations orders permitted to be so treated by the Administrator under the
provisions of the Retirement Equity Act of 1984. The Administrator shall
establish a written procedure to determine the qualified status of
domestic relations orders and to administer distributions under such
qualified orders. Further, to the extent provided under a "qualified
domestic relations order", a Former spouse of a Participant shall be
treated as the spouse or surviving spouse for all purposes under the Plan.
10.3 CONSTRUCTION OF PLAN
This Plan shall be construed and enforced according to the Act and the
laws of the State of Delaware, other than its laws respecting choice of law, to
the extent not preempted by the Act.
10.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
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10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party, and such claim suit, or proceeding is resolved in favor of the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power or revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Section 403(c)(2)(A) of the Act, the
Employer may demand repayment of such excessive contribution at any time
within one (1) year following the time of payment and the Trustees shall
return such amount to the Employer within the one (1) year period.
Earnings of the Plan attributable to the excess contributions may not be
returned to the Employer but any losses attributable thereto must reduce
the amount so returned.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Section 412(a)(2) of the Act), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
10.8 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
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guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
10.9 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
10.10 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are the Employer and the
Administrator. The named Fiduciaries shall have only those specific powers,
duties, responsibilities, and obligations as are specifically given them under
the Plan. In general, the Employer shall have the sole responsibility for making
the contributions provided for under Section 4.1; and shall have the sole
authority to appoint and remove the Trustee and the Administrator; to formulate
the Plan's "funding policy and method"; and to amend or terminate, in whole or
in part, the Plan. The Administrator shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described in
the Plan, including the acquisition, holding and/or disposition of Company Stock
and the entering into any Exempt Loans. The Administrator shall also have the
sole responsibility of management of the assets of the Other Investments Account
and Directed Investment Account held under the Trust, except those assets in
such accounts, the management of which has been assigned to an Investment
Manager, who shall be solely responsible for the management of the assets
assigned to it, all as specifically provided in the Plan.
10.11 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
10.12 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions
to this Plan are conditioned upon the initial qualification of the Plan
under Code Section 401. If the Plan receives an adverse determination with
respect to its initial qualification, then the Plan may return such
contributions to the Employer within one year after such determination,
provided the application for the determination is made by the time
prescribed by law for filing the Employer's return for the taxable year in
which the Plan was adopted, or such later date as the Secretary of the
Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except Sections
3.6 and 4.3(d), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer
under the Code and, to the extent any such deduction is disallowed, the
Employer may, within one (1) year following the disallowance of the
deduction, demand repayment of such disallowed contribution and the
trustee shall
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return such contribution within one (1) year following the disallowance of
the deduction, demand repayment of such disallowed contribution and the
Trustee shall return such contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the excess contribution
may not be returned to the Employer, but any losses attributable thereto
must reduce the amount so returned.
10.13 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner.
10.14 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Company may request an interpretative letter from the Securities and
Exchange Commission stating that the transfer of Company Stock contemplated
hereunder does not involve transactions requiring a registration of such Company
Stock under the Securities Act of 1933. In the event that a favorable
interpretative letter is not obtained, the Employer reserves the right to amend
the Plan and Trust retroactively to their Effective Dates in order to obtain a
favorable interpretative letter or to terminate the Plan.
10.15 INDEMNIFICATION
Neither the Employer, any of its officers or directors, nor the
Administrator shall be personally liable for any action or inaction with respect
to any duty or responsibility imposed upon such person by the terms of the Plan,
unless such action or inaction is judicially determined to be a breach of that
person's fiduciary responsibility with respect to the Plan under any applicable
law. The Employer may indemnify or purchase insurance to underwrite indemnity
for the Administrator and/or the Employer's board of directors against any
personal liability or expense except for their own gross negligence.
10.16 CONTROLLING LAW
All legal questions pertaining to the Plan, all construction and all
Regulations shall be determined in accordance with the laws of the State of
Delaware and the United States. All contributions shall be deemed to have been
made under such laws. Notwithstanding anything in this Agreement to the
contrary, the effective dates provided for herein for the application of any
Code Section to this Plan shall be extended in accordance with any act of
Congress or any effective Regulation, Ruling or other measure of like import.
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ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(b) The Trustee, unless directed otherwise by the Administrator,
shall commingle and hold as one Trust Fund all contributions made by
Participating Employers.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or a
Participating Employer, shall not affect such Participant's rights under
the Plan, and all amounts credited to such Participant's Account as well
as his accumulated service time with the transferor or predecessor, and
his length of participation in the Plan, shall continue to his credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Employee-Participants of the
Participating Employer by which the forfeiting Participant was employed,
except if the Forfeiture is for an Employee whose Employer is a member of
an affiliated or controlled group, then said Forfeiture shall be
allocated, based on Compensation to all Participant Accounts of
Participating Employers who are members of the affiliated or controlled
group. Should an Employee of one ("First") Employer be transferred to an
associated ("Second") Employer (the Employer, an affiliate or subsidiary),
such transfer shall not cause his Account balance (generated while an
Employee of "First" Employer) in any manner or by any amount to be
forfeited. Such Employee's Participant Account balance for all purposes of
the Plan, including length of service, shall be considered as though he
had always been employed by the "Second" Employer and as such had received
contributions, forfeitures, earnings of losses, and appre ciation or
depreciation in value of assets totaling amount so transferred.
(e) Any expenses of the Trust which are to be paid by the Employer
or borne by the Trust Fund shall be paid by each Participating Employer in
the same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to the
credit of all Participants.
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11.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
11.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
11.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution or Forfeiture subject to allocation during each Plan Year
shall be allocated among all Participants of all Participating Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer. The
Trustee may, but need not, register Contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Trustee thereof.
11.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
11.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable conditions imposed shall be
delivered to the Trustee. The Trustee shall thereafter transfer, deliver and
assign Trust Fund assets allocable to the Participants of such Participating
Employer or to such new Trustee as shall have been designated by such
Participating Employer, in the event that it has established a separate pension
plan for its Employees. If no successor is designated, the Trustee shall retain
such assets for the Employees of said Participating Employer pursuant to the
provisions of Article VII hereof. In no such event shall any part of the corpus
or
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income of the Trust as it relates to such Participating Employer be used for or
diverted for purposes other than for the exclusive benefit of the Employees of
such Participating Employer.
11.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary rules
or regulations, binding upon all Participating Employers and all Participants,
to effectuate the purpose of this Article.
11.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE
If any Participating Employer is prevented in whole or in part from making
a contribution to the Trust Fund which it would otherwise have made under the
Plan by reason of having no current or accumulated earnings or profits, or
because such earnings or profits are less than the contribution which it would
otherwise have made, then, pursuant to Code Section 404(a)(3)(B), so much of the
contribution which such Participating Employer was so prevented from making may
be made, for the benefit of the participating employees of such Participating
Employer, by the other Participating Employers who are members of the same
affiliated group within the meaning of Code Section 1504 to the extent of their
current or accumulated earnings or profits, except that such contribution by
each such other Participating Employer shall be limited to the proportion of its
total current and accumulated earnings or profits remaining after adjustment for
its contribution to the Plan made without regard to this paragraph which the
total prevented contribution bears to the total current and accumulated earnings
or profits of all the Participating Employers remaining after adjustment for all
contributions made to the Plan without regard to this paragraph.
A Participating Employer on behalf of whose employees a contribution is
made under this paragraph shall not reimburse the contributing Participating
Employers.
This Agreement may be executed in two or more counterparts which together
shall constitute a single agreement.
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ARTICLE XII
TOP-HEAVY STATUS
12.1 ARTICLE CONTROLS
Any Plan provisions to the contrary notwithstanding, the provisions of
this Article shall control to the extent required to cause the Plan to comply
with the requirements imposed under Code Section 416.
12.2 DEFINITIONS
For purposes of this Article, the following terms and phrases shall have
these respective meanings:
(a) ACCOUNT BALANCE: As of any Valuation Date, the aggregate amount
credited to an individual's account or accounts under a qualified defined
contribution plan maintained by the Employer or an Affiliated Employer
(excluding employee contributions which were deductible within the meaning
of section 219 of the Code and rollover or transfer contributions made
after December 31, 1983 by or on behalf of such individual to such plan
from another qualified plan sponsored by an entity other than the Employer
or an Affiliated Employer), increased by (1) the aggregate distributions
made to such individual from such plan during a five-year period ending on
the Determination Date and (2) the amount of any contributions due as of
the Determination Date immediately following such Valuation Date.
(b) ACCRUED BENEFIT: As of any Valuation Date, the present value
(computed on the basis of the Assumptions) of the cumulative accrued
benefit (excluding the portion thereof which is attributable to employee
contributions which were deductible pursuant to section 219 of the Code,
to rollover or transfer contributions made after December 31, 1983 by or
on behalf of such individual to such plan from another qualified plan
sponsored by an entity other than the Employer or an Affiliated Employer,
to proportional subsidies or to ancillary benefits) of an individual under
a qualified defined benefit plan maintained by the Employer or an
Affiliated Employer increased by (1) the aggregate distributions made to
such individual from such plan during a five-year period ending on the
Determination Date and (2) the estimated benefit accrued by such
individual between such Valuation Date and the Determination Date
immediately following such Valuation Date. Solely for the purpose of
determining top-heavy status, the Accrued Benefit of an individual shall
be determined under (1) the method, if any, that uniformly applies for
accrual purposes under all qualified defined benefit plans maintained by
the Employer or an Affiliated Employer, or (2) if there is no such method,
as if such benefit accrued not more rapidly than under the slowest accrual
rate permitted under section 411(b)(1)(C) of the Code.
(c) AGGREGATION GROUP: The group of qualified plans maintained by
the Employer and each Affiliated Employer consisting of (1) each plan in
which a Key Employee participates and each other plan which enables a plan
in which a Key Employee participates to meet the requirements of sections
401(a)(4) or 410 of the Code, or (2) each
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plan in which a Key Employee participates, each other plan which enables a
plan in which a Key Employee participates to meet the requirements of
sections 401(a)(4) or 410 of the Code and any other plan which the
Employer elects to include as a part of such group; provided, however,
that the Employer may not elect to include a plan in such group if its
inclusion would cause the group to fail to meet the requirements of
sections 401(a)(4) or 410 of the Code.
(d) ASSUMPTIONS: The interest rate and mortality assumptions
specified for top-heavy status determination purposes in any defined
benefit plan included in the Aggregation Group including the Plan.
(e) DETERMINATION DATE: For the first Plan Year of any plan, the
last day of such Plan Year and for each subsequent Plan Year of such plan,
the last day of the preceding Plan Year.
(f) KEY EMPLOYEE: A "key employee" as defined in section 416(i)
of the Code and the Treasury Regulations thereunder.
(g) PLAN YEAR: With respect to any plan, the annual accounting
period used by such plan for annual reporting purposes.
(h) REMUNERATION: Compensation within the meaning of section
415(c)(3) of the Code, as limited by section 401(a)(17) of the Code for
Plan Years beginning after December 31, 1988.
(i) VALUATION DATE: With respect to any Plan Year of any defined
contribution plan, the most recent date within the twelve-month period
ending on a Determination Date as of which the trust fund established
under such plan was valued and the net income (or loss) thereof allocated
to participants' accounts. With respect to any Plan Year of any defined
benefit plan, the most recent date within a twelve-month period ending on
a Determination Date as of which the plan assets were valued for purposes
of computing plan costs for purposes of the requirements imposed under
section 412 of the Code.
12.3 TOP-HEAVY STATUS
(a) The Plan shall be deemed to be top-heavy for a Plan Year, if, as
of the Determination Date for such Plan Year, (1) the sum of Account
Balances of Participants who are Key Employees exceeds 60% of the sum of
Account Balances of all Participants unless an Aggregation Group including
the Plan is not top-heavy or (2) an Aggregation Group including the Plan
is top-heavy. An Aggregation Group shall be deemed to be top-heavy as of a
Determination Date if the sum (computed in accordance with section
416(g)(2)(B) of the Code and the Treasury Regulations promulgated
thereunder) of (1) the Account Balances of Key Employees under all defined
contribution plans included in the Aggregation Group and (2) the Accrued
Benefits of Key Employees under all defined benefit plans included in the
Aggregation Group exceeds 60% of the sum of the Account Balances and the
Accrued
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Benefits of all individuals under such plans. Notwithstanding the
foregoing, the Account Balances and Accrued Benefits of individuals who
are not Key Employees in any Plan Year but who were Key Employees in any
prior Plan Year shall not be considered in determining the top-heavy
status of the Plan for such Plan Year. Further, notwithstanding the
foregoing, the Account Balances and Accrued Benefits of individuals who
have not performed services for the Employer at any time during the
five-year period ending on the applicable Determination Date shall not be
considered.
12.4 TERMINATION OF TOP-HEAVY STATUS
If the Plan has been deemed to be top-heavy for one or more Plan Years and
thereafter ceases to be top-heavy, the provisions of this Article shall cease to
apply to the Plan effective as of the Determination Date on which it is
determined to no longer be top-heavy.
12.5 EFFECT OF ARTICLE
Notwithstanding anything contained herein to the contrary, the provisions
of this Article shall automatically become inoperative and of no effect to the
extent not required by the Code or the Act.
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IN WITNESS WHEREOF, this Plan has been executed this ___ day of
___________, 1996 effective as of the day and year first above written.
"EMPLOYER"
TPC FINANCE CORP.
By:
Name:
Title:
EXECUTION PAGE TO THE
TPC FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
to be renamed
TEXAS PETROCHEMICALS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
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EXHIBIT 10.3
TPC FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
to be renamed
TEXAS PETROCHEMICALS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1.
TITLE AND DEFINITIONS.....................2
1.1 TITLE..................................................................2
1.2 DEFINITIONS............................................................2
1.3 TRUST FUND.............................................................2
1.4 CONFLICT BETWEEN PLAN AND TRUST........................................2
1.5 ADMINISTRATOR..........................................................2
1.6 ACTION BY EMPLOYER OR ADMINISTRATOR....................................2
1.7 FIDUCIARY RESPONSIBILITY...............................................2
ARTICLE 2.
RESPONSIBILITIES AND POWERS OF THE TRUSTEE...........4
2.1 BASIC RESPONSIBILITIES OF THE TRUSTEE..................................4
2.2 INVESTMENT POWERS OF THE TRUSTEE.......................................4
2.3 OTHER POWERS OF THE TRUSTEE............................................5
2.4 PROHIBITED TRANSACTIONS................................................8
2.5 INVESTMENT MANAGERS....................................................8
2.6 VOTING COMPANY STOCK HELD IN THE TRUST FUND............................8
ARTICLE 3.
DUTIES OF THE TRUSTEE....................10
3.1 DUTIES OF THE TRUSTEE REGARDING PAYMENTS..............................10
3.2 ANNUAL REPORT OF THE TRUSTEE..........................................10
3.3 AUDIT.................................................................11
ARTICLE 4.
MISCELLANEOUS........................13
4.1 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES.........................13
4.2 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE........................13
4.3 INDEMNIFICATION.......................................................14
4.4 LIMITATION OF LIABILITY OF TRUSTEE....................................14
4.5 MERGER OR CONSOLIDATION INVOLVING CORPORATE TRUSTEE...................15
4.6 LIMITATION ON PARTICIPANTS' RIGHTS....................................16
4.7 NO REVERSION IN EMPLOYER..............................................16
4.8 RECEIPT OR RELEASE....................................................16
4.9 GOVERNING LAW.........................................................16
-i-
4.10 MULTIPLE COUNTERPARTS.................................................16
4.11 AMENDMENT.............................................................17
4.12 BOND OF TRUSTEE.......................................................17
4.13 SUCCESSORS AND ASSIGNS................................................17
4.14 GENDER DESIGNATION....................................................17
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TPC FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
to be renamed
TEXAS PETROCHEMICALS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into by and between TPC Finance
Corp., a Delaware corporation (the "Employer") and Boatmen's Trust Company of
Texas (the "Trustee"), and evidences the terms of a Trust for the benefit of
Participants in the TPC Finance Corp. Employee Stock Ownership Plan.
WITNESSETH:
WHEREAS, effective as of July 1, 1996, the Employer intends to
maintain the TPC Finance Corp. Employee Stock Ownership Plan (the "Plan") and a
trust (the "Trust") for the purpose of funding the benefits provided for by the
Plan;
WHEREAS, the parties hereto desire to execute a separate trust
agreement which sets forth the rights and duties of the Trustee, and the terms
and conditions under which the trust is to be established and administered.
NOW, THEREFORE, it is mutually understood and agreed as follows:
-1-
ARTICLE 1.
TITLE AND DEFINITIONS
1.1 TITLE
This Trust Agreement shall be known as the TPC Finance Corp. Employee
Stock Ownership Plan Trust Agreement; provided, however, that subsequent to the
Acquisition (as defined in the Plan) this Trust Agreement shall be known as the
Texas Petrochemical Corporation Employee Stock Ownership Plan Trust Agreement.
1.2 DEFINITIONS
All of the terms used herein shall have the same meaning as set forth in
Article 1 of the Plan, to the extent defined therein.
1.3 TRUST FUND
The "Trust Fund" as of any date shall mean all property then held by the
Trustee under this Trust Agreement, and the "Trust Fund" shall be known as the
TPC Finance Corp. Employee Stock Ownership Trust; provided, however, that
subsequent to the Acquisition, this "Trust Fund" shall be known as the Texas
Petrochemicals Corporation Employee Stock Ownership Trust.
1.4 CONFLICT BETWEEN PLAN AND TRUST
If there is a conflict between the terms of the Plan and this Trust
Agreement, the terms of the Trust Agreement shall be controlling with respect to
the Trustee's powers, rights, duties, and liabilities.
1.5 ADMINISTRATOR
The Plan is administered by a plan administrator (the "Administrator"),
appointed by the Employer pursuant to the Plan. If no Administrator is appointed
by the Employer, the Employer shall serve as the Administrator. The Secretary of
the Employer will certify to the Trustee from time to time the person or persons
appointed as Administrator. The Trustee may rely on the latest certificate
received without further inquiry or verification.
1.6 ACTION BY EMPLOYER OR ADMINISTRATOR
Any action required or permitted to be taken by the Employer or the
Administrator under the Trust Agreement shall be by resolution by the Board of
Directors of the Employer, resolution by the Administrator, or shall be by a
person or persons authorized by resolution of the Employer's Board of Directors
or by resolution by the Administrator to take such action.
-2-
1.7 FIDUCIARY RESPONSIBILITY
The Employer, the Administrator, any Investment Manager appointed
pursuant to Section 2.5, and any other fiduciaries with respect to the Plan or
Trust shall discharge their duties thereunder solely in the interest of the
Participants and Beneficiaries, for the exclusive purpose of providing their
benefits and defraying reasonable expenses of the Plan and Trust administration,
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character with like
aims.
Notwithstanding anything in the Plan or this Trust Agreement to the
contrary, Boatmen's Trust Company of Texas shall possess no powers or authority
with respect to the Plan or Trust that would make Boatmen's Trust Company of
Texas a "fiduciary", within the meaning of Section 3(21) of the Act, with
respect to the Plan or Trust.
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ARTICLE 2.
RESPONSIBILITIES AND POWERS OF THE TRUSTEE
2.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) With respect to Company Stock, the Company Stock Account, or
an Exempt Loan, except as directed solely by the Administrator,
(1) the Trustee shall not sell, acquire or dispose of
Company Stock or
(2) enter into any Exempt Loan.
Upon direction of the Administrator, up to one hundred percent (100%) of
the Trust Fund may be invested in Company Stock.
(b) With respect to the Other Investments Account and Directed
Investment Account, the Trustee shall invest such Participant's Accounts
as directed by the Administrator.
(c) At the direction of the Administrator, the Trustee shall pay
benefits required under the Plan to be paid to Participants, or, in the
event of their death, to their Beneficiaries.
(d) The Trustee shall maintain records of receipts and
disbursements, and furnish to the Employer and/or Administrator for each
Plan Year a written annual report according to Section 3.2 of this Trust
Agreement.
(e) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
2.2 INVESTMENT POWERS OF THE TRUSTEE
Subject to the limitations set forth in Section 2.1(a) and 2.1(b),
except to the extent that authority to direct investments has been allocated to
one or more Investment Managers pursuant to Section 2.5 and as further provided
in this Trust Agreement, the Trustee shall make investments as set forth below
only as directed by the Administrator.
(a) The Trustee shall invest and reinvest the Trust Fund to keep
it invested without distinction between principal and income as directed
by the Administrator. Also, the Trustee shall invest the Trust Fund in
such securities or property, real or personal, wherever situated, as the
Administrator shall direct the Trustee, including, but not limited to,
stocks, common or preferred, bonds and other evidences of indebtedness
or ownership, and real estate or any interest therein. The investments
shall not be restricted to securities
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or other property of the character expressly authorized by the
applicable law for trust investments; however, the Administrator shall
give due regard to any limitations imposed by the Internal Revenue Code
of 1986, as amended (the "Code") or the Employee Retirement Income
Security Act of 1974, as amended (the "Act") so that at all times the
Plan and this Trust Agreement may be qualified under Sections 401(a) and
501(a) of the Code.
(b) The Trustee shall from time to time at the direction of the
Administrator transfer to a common, collective, or pooled trust fund
maintained by any corporate Trustee hereunder (other than Boatmen's
Trust Company of Texas or an affiliate), including any one or more of
the Trustee's (other than Boatmen's Trust Company of Texas's or an
affiliate's) funds, all or such part of the Trust Fund as the
Administrator may direct, and such part or all of the Trust Fund so
transferred shall be subject to all the terms and provisions of the
common, collective, or pooled trust fund which contemplate the
commingling for investment purposes of such trust assets with trust
assets of other trusts. To the extent required by Revenue Ruling 81-100,
and further to the extent consistent with the Trust Agreement, the
instrument creating any such trust fund, is hereby incorporated and made
a part of this Trust Agreement. From time to time at the direction of
the Administrator, the Trustee shall withdraw from such common,
collective, or pooled trust fund all or such part of the Trust Fund as
the Administrator may direct.
(c) The Trustee, at the direction of the Administrator, shall
employ a bank or trust company pursuant to the terms of its usual and
customary bank agency agreement, under which the duties of such bank or
trust company shall be of a custodial, clerical, and record-keeping
nature.
(d) In the event the Trustee invests any part of the Trust Fund,
pursuant to the directions of the Administrator in any shares of stock
issued by the Employer, and the Administrator thereafter directs the
Trustee to dispose of such investment, or any part thereof, under
circumstances that, in the opinion of counsel for the Trustee, require
registration of the securities under the Securities Act of 1933 and/or
qualification of the securities under the Blue Sky laws of any state or
states, then the Employer at its own expense, will take or cause to be
taken any and all such action as may be necessary or appropriate to
effect such registration and/or qualification.
2.3 OTHER POWERS OF THE TRUSTEE
Subject to the other provisions of this Agreement, the Trustee, in
addition to all powers and authorities under common law, statutory authority,
including the Act, and other provisions of the Plan, shall have the following
powers and authorities, except to the extent that authority to direct
investments has been allocated to one or more Investment Managers pursuant to
Section 2.5, to be exercised only as directed by the Administrator:
-5-
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition, with or without advertisement;
(c) Except as provided in Section 2.6, to vote upon any stocks,
bonds, or other securities; to give general or special proxies or powers
of attorney with or without power of substitution; to exercise any
conversion privileges, subscription rights or other options, and to make
any payments incidental thereto; to oppose, or to consent to, or
otherwise participate in, corporate reorganizations or other changes
affecting corporate securities, and to delegate discretionary powers,
and to pay any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with respect to
stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered
in the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments
are part of the Trust;
(e) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(f) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(g) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(h) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(i) To invest the Trust Funds in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's (other
than Boatmen's Trust Company of Texas's or an affiliate's) bank;
-6-
(j) To invest in Treasury Bills and other forms of United States
government obligations;
(k) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(l) To consent to or otherwise participate in reorganizations,
recapitalizations, consolidations, mergers, and similar transactions
with respect to other securities held in the Trust Fund other than
qualifying employer securities and to pay any assessments or charges in
connection therewith;
(m) To pool all or any of the Trust Fund with assets belonging
to any other qualified employee pension benefit trust created by the
Employer or an affiliated company of the Employer, and to commingle such
assets and make joint or common investments and carry joint accounts on
behalf of this Plan and such other trust or trusts, allocating undivided
shares or interests in such investments or accounts or any pooled assets
of the two or more trusts in accordance with their respective interests;
(n) To invest and reinvest the Trust Fund in any kind of real or
personal property including, but not limited to, securities of any
open-end or closed-end management type investment company or investment
trust registered under the Federal Investment Company Act of 1940 which
would be regarded by prudent businessmen as a safe investment. The fact
that the Trustee, any affiliate of the Trustee or any affiliate of
Boatmen's Trust Company of Texas is providing services to and receiving
remuneration from the foregoing investment company or trust as
investment advisor, custodian, transfer agent, registrar, or otherwise,
shall not preclude the Trustee from investing in the securities of such
investment company or investment trust, so long as the other conditions
of the exemption contained in Prohibited Transaction Class Exemption
77-4 are met; and
(o) To exercise all the rights, powers, options, and privileges
now or hereinafter granted to the Trustee under the laws of the State of
Texas, except such as conflict with the terms of this Trust Agreement or
the Act. The Trustee shall have, hold, manage, control, use, invest and
reinvest, disburse, and dispose of the Trust Fund as if the Trustee were
the owner thereof in fee simple instead of in trust, subject only to
such limitations as are contained herein, or such of the laws of the
State of Texas as cannot be waived, and always as subject to the Act.
In particular, but not in limitation thereof, the Trustee shall have no
authority, discretion or control with respect to the acquisition, holding and/or
disposition of Company Stock or any other asset of the Plan or the entering into
an Exempt Loan or the terms thereof or the application of payments made
thereunder, but shall have the power to acquire, hold or dispose of Company
Stock and any other asset of the Plan or enter into an Exempt Loan or transact
such related matters only upon the express direction of the Administrator.
-7-
2.4 PROHIBITED TRANSACTIONS
Notwithstanding anything in Section 2.3 to the contrary, unless prior
approval is obtained from the Secretary of Labor, the Trustee shall not engage
in any transaction prohibited by Section 406 of the Act, or which is subject to
tax under Section 4975 of the Code.
2.5 INVESTMENT MANAGERS
The Employer and/or Administrator may appoint one or more Investment
Managers to direct the investments to be made by the Trustee with any part or
all of the assets of the Trust Fund. Except as otherwise provided by law, the
Trustee shall have no obligation for investment of any assets of the Trust Fund
which are subject to investment directions from any Investment Manager.
Appointment of any Investment Manager shall be made by written notice to the
Investment Manager and the Trustee, which notice shall specify those powers,
rights and duties of the Trustee under this Trust Agreement that are allocated
to the Investment Manager and that portion of the assets of the Trust Fund
subject to investment direction. An Investment Manager so appointed pursuant to
this Section shall be either a registered investment adviser under the
Investment Advisers Act of 1940, a bank, as defined in said Act, or an insurance
company qualified to manage, acquire and dispose of the Trust Fund under the
laws of more than one state of the United States. Any such Investment Manager
shall acknowledge to the Trustee in writing that it has accepted such
appointment and that it is a fiduciary with respect to the Plan and this Trust
Agreement. The Trustee shall follow the directions of an Investment Manager
regarding the investment, sale and reinvestment of any portion of the Trust Fund
as shall be subject to investment direction by an Investment Manager under the
provisions of this Section 2.5. The Trustee shall be under no duty or obligation
to review any investment decision pursuant to the direction of an Investment
Manager under this Section 2.5, nor shall the Trustee make any recommendation
with respect to the disposition or continued retention of any such investment.
In connection with the investment of the Trust Fund, the Trustee shall have no
responsibility or liability for the acts of any Investment Manager or for acting
without question on the direction of, or failing to act in the absence of any
direction from such Investment Manager. An Investment Manager may resign at any
time upon written notice to the Employer and/or Plan Administrator and the
Trustee. The Employer and/or Plan Administrator may remove an Investment Manager
at any time by written notice to the Investment Manager.
2.6 VOTING COMPANY STOCK HELD IN THE TRUST FUND
The Trustee shall vote all Company Stock held by it as part of the Plan
assets at such time and in such manner as the Administrator shall direct.
Provided, however, that if any agreement entered into by the Trustee, upon the
direction of the Administrator, provides for voting of any shares of Company
Stock pledged as security for any obligation of the Plan, then such shares of
Company Stock shall be voted in accordance with such agreement. If the
Administrator fails or refuses to give the Trustee timely instructions as to how
to vote any Company Stock held by the Trustee and which the Administrator
otherwise has the right to vote, the Trustee shall not vote such Company Stock
and shall consider the Administrator's failure or refusal to give timely
instructions as an exercise of the Administrator's rights and a directive to the
Trustee not to vote said Company
-8-
Stock. The Trustee shall not vote Company Stock when a Participant or
Beneficiary, pursuant to this Section, fails to exercise a right to vote Company
Stock.
Notwithstanding the foregoing, if the Employer has a registration-type
class of securities, each Participant or Beneficiary shall be entitled, in lieu
of the Administrator, to direct the Trustee as to the manner in which the
Company Stock allocated to the Company Stock Account of such Participant or
Beneficiary is to be voted. If the Employer does not have a registration-type
class of securities, each Participant or Beneficiary in the Plan shall be
entitled, in lieu of the Administrator, to direct the Trustee as to the manner
in which voting rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to be exercised
with respect to any corporate matter which involves the voting of such shares
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 prescribed in Regulations. For purposes of this Section the term
"registration-type class of securities" means (A) a class of securities required
to be registered under Section 12 of the Securities Exchange Act of 1934; and
(B) a class of securities which would be required to be so registered except for
the exemption from registration provided in subsection (g)(2)(H) of such Section
12.
The Trustee shall notify each Participant or Beneficiary of each tender
or exchange offer and utilize its best efforts to distribute or cause to be
distributed to such Participant or Beneficiary in a timely manner all
information received by the Trustee as a record holder of shares of Company
Stock in connection with any such tender or exchange offer. Each Participant or
Beneficiary shall have the right from time to time with respect to the shares of
Company stock allocated to his account, to instruct the Trustee in writing as to
the manner in which to respond to any tender or exchange offer which shall be
pending or which may be made in the future for all shares of Company Stock or
any portion thereof. A Participant's or Beneficiary's instructions shall remain
in force until superseded in writing by the Participant or Beneficiary. The
Trustee shall tender or exchange such shares of Company Stock as and to the
extent so instructed. Unless and until shares of Company Stock are tendered or
exchanged, the individual instructions received by the Trustee from Participant
or Beneficiaries shall be held in strict confidence by the Trustee and shall not
be divulged or released to any person, including, but not limited to officers or
Employees of the Employer, or of any other Participating Employer; provided,
however, that the Trustee shall advise the Employer, at any time upon request,
of the total number of shares not subject to instructions to tender or exchange.
The Trustee shall not make recommendations to Participants or Beneficiaries on
whether to instruct the Trustee to tender or exchange.
The Trustee shall not vote, sell, convey or transfer any allocated
shares of Company Stock for which no directions are timely received from
Participants or Beneficiaries pursuant to the immediately preceding paragraph,
and shares of Company Stock held by the Trustee which are not allocated to
Participants' Company Stock Accounts shall be voted by the Trustee only in the
manner directed by the Administrator.
-9-
ARTICLE 3.
DUTIES OF THE TRUSTEE
3.1 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
(a) The Trustee shall make distributions from the Trust Fund at
such times and in such numbers of shares or other units of Company Stock
and amounts of cash to or for the benefit of the person entitled thereto
under the Plan as the Administrator directs in writing. Any
undistributed part of a Participant's interest in his accounts shall be
retained in the Trust Fund until the Administrator directs its
distribution. Where distribution is directed in Company Stock, the
Trustee shall cause an appropriate certificate to be issued to the
person entitled thereto and mailed to the address furnished by the
Administrator. Any portion of a Participant's account under the Plan to
be distributed in cash shall be paid by the Trustee mailing a check to
the designated person at his or her latest known address. If a dispute
arises as to who is entitled to or should receive any benefit or
payment, the Trustee may withhold or cause to be withheld such payment
until the dispute has been resolved.
(b) As directed by the Administrator, the Trustee shall make
payments out of the Trust Fund. Such directions or instructions need not
specify the purpose of the payments so directed and the Trustee shall
not be responsible in any way respecting the purpose or propriety of
such payments except as mandated by the Act.
(c) In the event that any distribution or payment directed by
the Administrator shall be mailed by the Trustee to the person specified
in such direction at the latest address of such person filed with the
Administrator, and shall be returned to the Trustee because such person
cannot be located at such address, the Trustee shall promptly notify the
Administrator of such return. Upon the expiration of sixty (60) days
after such notification, such direction shall become void and unless and
until a further direction by the Administrator is received by the
Trustee with respect to such distribution or payment, the Trustee shall
thereafter con tinue to administer the Trust Fund as if such direction
had not been made by the Administrator. The Trustee shall not be
obligated to search for or ascertain the whereabouts of any such person.
3.2 ANNUAL REPORT OF THE TRUSTEE
Within sixty (60) days after the later of the Anniversary Date or
receipt of the Employer's final contribution for each Plan Year, the Trustee
shall furnish to the Employer and/or Administrator a written statement of
account with respect to the Plan Year setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales
or other disposition of the assets;
-10-
(c) the increase, or decrease, in the value of the Trust Fund,
other than Company Stock;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate.
3.3 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee on behalf of all Participants to engage an
independent qualified public accountant selected by the Administrator
for that purpose. After an audit of the books and records of the Trust
Fund in accordance with generally accepted auditing standards, such
accountant shall, within a reasonable period after the close of the Plan
Year, furnish to the Administrator and the Trustee a report of his audit
setting forth his opinion as to whether each of the following
statements, schedules or lists, or any others that are required by
Section 103 of the Act or the Secretary of Labor to be filed with the
Plan's annual report, are presented fairly and in conformity with
generally accepted accounting principles applied consistently:
(1) statement of the assets and liabilities of the Trust
Fund;
(2) statement of changes in net assets available to the
Trust Fund;
(3) statement of receipts and disbursements, a schedule
of all assets held for investment purposes, a schedule of all
loans or fixed income obligations in default at the close of the
Plan Year;
(4) a list of all leases in default or uncollectible
during the Plan Year;
(5) the most recent annual statement of assets and
liabilities of any bank common or collective trust fund in which
the Trust Fund is invested or such infor mation regarding
separate accounts or trusts with a bank or insurance company as
the Trustee and/or Administrator deem necessary; and
(6) a schedule of each transaction or series of
transactions involving an amount in excess of five percent (5%)
of the Trust Fund as specified in appropriate governmental
regulations.
All auditing and accounting fees shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund.
-11-
(b) If some or all of the information necessary to enable the
Administrator to comply with Section 103 of the Act is maintained by a
bank, insurance company, or similar institution, regulated and
supervised and subject to periodic examination by a state or federal
agency, it shall transmit and certify the accuracy of that information
to the Administrator as provided in Section 103(b) of the Act within one
hundred twenty (120) days after the end of the Plan Year or such other
date as may be prescribed under regulations of the Secretary of Labor.
-12-
ARTICLE 4.
MISCELLANEOUS
4.1 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and/or Administrator and
the Trustee. An individual serving as Trustee who already receives full-time pay
from the Employer shall not receive compensation under this Trust Agreement. In
addition, the Trustee shall be reimbursed for any reasonable expenses,
including, but not limited to reasonable counsel, accounting, actuarial, and
consulting fees incurred by it as Trustee. Such compensation and expenses shall
be paid from the Trust Fund unless paid or advanced by the Employer. All taxes
of any kind and all kinds whatsoever that may be levied or assessed under
existing or future laws upon, or in respect of, the Trust Fund or the income
thereof, shall be paid from the Trust Fund. It is understood by the parties
hereto that the Employer shall pay for the Trustee's compensation and expenses
hereunder.
4.2 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written
notice of his resignation.
(b) The Employer may remove the Trustee by mailing written
notice of its removal by registered or certified mail, addressed to such
Trustee at the Trustee's last known address, at least thirty (30) days
before the notice's effective date.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer, and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with all
the estate, rights, powers, discretions, and duties of his predecessor
with like respect as if it were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan. In the
event that no successor Trustee is appointed, the Trustee may apply to a
court of competent jurisdiction for the appointment of a successor
Trustee or for instructions. Any expenses incurred by the Trustee in
connection with the said application shall be paid from the Trust Fund
as an expense of administration.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of its
predecessor with the like effect as if such person or entity were
originally named as Trustee herein immediately upon the death,
resignation, incapacity, or removal of his predecessor.
-13-
(e) Whenever any Trustee hereunder ceases to serve as such, it
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which such
person or entity served as Trustee. This statement shall be either (i)
included as part of the annual statement of account for the Plan Year
required under Section 3.2 of this Trust Agreement or (ii) set forth in
a special statement. Any such special statement of account should be
rendered to the Employer no later than the due date of the annual
statement of account for the Plan Year.
(f) Upon settlement of the Trustee's account, the Trustee shall
transfer to the successor Trustee the Trust as it is then constituted
and true copies of its records relating to the Trust Fund. Upon the
completion of this transfer, the Trustee's responsibilities under the
Trust Agreement shall cease and the Trustee shall be discharged from
further accountability for all matters embraced in its settlement;
provided, however, that the Trustee executes and delivers all documents
and written instruments that are necessary to transfer and convey the
right, title and interest in the Trust Fund, and all rights and
privileges with respect to the Trust Fund, to the successor Trustee.
4.3 INDEMNIFICATION
From time to time, the Employer shall certify to the Trustee the names
of the persons authorized to act on behalf of the Administrator. All directions
to the Trustee by the Administrator shall be in writing, properly certified by a
designated representative thereof. To the maximum extent permitted by law, the
Trustee shall not be liable and the Employer shall indemnify the Trustee and
agree to hold the Trustee harmless from all liabilities and claims (including
reasonable attorney's fees and expenses in defending against such liabilities
and claims) against the Trustee arising from (i) any actions or omissions taken
by the Trustee pursuant to the written instructions of the Administrator or (ii)
any actions or omissions taken by the Trustee in the absence of such written
instructions where specifically permitted by the terms of this Plan, unless such
liability or expense results from negligence, reckless, or willful acts of
commission or omission by the Trustee. The foregoing indemnification shall also
apply to liabilities and claims against the Trustee arising from any breach of
fiduciary responsibility by a fiduciary with respect to the Plan, unless the
Trustee is determined to be a co-fiduciary to the Plan under the Act and (i)
participates knowingly in or knowingly undertakes to conceal such breach, (ii)
has enabled such fiduciary to commit such breach by the Trustee's failure to
discharge its fiduciary duties or (iii) has actual knowledge of such breach and
fails to take reasonable action to remedy such breach. The Trustee shall be
entitled to collect on the Employer's indemnity under this Section only from the
Employer and shall not be entitled to payment directly or indirectly from the
Trust Fund.
4.4 LIMITATION OF LIABILITY OF TRUSTEE
(a) If the Trustee makes a written request for directions from
the Administrator, concerning a matter for which the Administrator is
responsible in accordance with the terms of the Plan, the Trustee shall
await such directions without incurring liability. The Trustee has no
authority to act in the absence of such requested directions.
-14-
(b) The Trustee shall not be liable to any person for making any
distribution, failing to make any distribution, or discontinuing any
distribution on the direction of the Administrator, or for failing to
make any distribution by reason of the Administrator's failure to direct
that such distribution be made, concerning a matter for which the
Administrator is responsible in accordance with the terms of the Plan.
The Trustee has no duty to inquire whether any direction or absence of
direction is in conformity with the provisions of the Plan. The Trustee
has no duty to enforce or collect Employer contributions.
(c) The Trustee is not responsible for determining the adequacy
of the Trust Fund to meet liabilities under the Plan, and is not liable
for any obligations of the Plan or the Trust Fund in excess of the
assets of the Trust Fund.
(d) The Trustee shall not be liable for the acts or omissions of
any fiduciary or other person with respect to the Plan or the Trust Fund
except to the extent required under Section 405(a) of the Act, if
applicable.
(e) The Trustee is not responsible for any matter affecting the
administration of the Plan by the Employer, the Administrator, or any
other person or persons to whom responsibility for administration of the
Plan is delegated pursuant to the terms of the Plan.
(f) The Trustee may seek judicial protection by any action or
proceeding it deems necessary to settle the account of the Trustee, or a
judicial determination or a declaratory judgment as to a question of
construction of the Trust, or instruction as to action under this Trust
Agreement, provided the Trustee has first satisfied the procedures set
forth in Section 4.4(a). The Trustee need join only the Plan
Administrator and the Employer as party's defendant although the Trustee
may join other parties.
(g) The Trustee shall be fully protected, to the maximum extent
provided by law, in relying upon and following all directives and
instructions from the Employer, Administrator, Participants and
Beneficiaries, including, without limitation, such directives and
instructions with respect to the making of Exempt Loans, the
acquisition, holding and disposition of Company Stock and the voting of
the same.
4.5 MERGER OR CONSOLIDATION INVOLVING CORPORATE TRUSTEE
Any corporation or association into which a corporation or association
acting as Trustee hereunder may be merged or with which it may be consolidated,
or any corporation resulting from any merger, reorganization or consolidation to
which such Trustee may be a party, shall be the successor of the Trustee
hereunder without the necessity of any appointment or other action, provided it
does not resign and is not removed.
-15-
4.6 LIMITATION ON PARTICIPANTS' RIGHTS
Participation in this Trust Fund shall not give any employee of the
Employer the right to be retained in the Employer's employ or any right to an
interest in this Trust Fund other than as herein provided. All benefits payable
hereunder shall be provided solely from the Trust Fund.
4.7 NO REVERSION IN EMPLOYER
The Employer shall have no right, title or interest in the Trust Fund,
nor shall any part of the Trust Fund revert to the Employer, directly or
indirectly, unless:
(a) A contribution is made by the Employer by mistake of fact
and such contribution is returned to the Employer within one year after
payment to the Trustee; or
(b) A contribution conditioned on the deductibility thereof is
disallowed as an expense for federal income tax purposes and such
contribution (to the extent disallowed) is returned to the Employer
within one year after the disallowance of the deduction.
The amount of any contribution that may be returned to the Employer
pursuant to subparagraph (a) or (b) above must be reduced by any losses of the
Trust Fund allocable thereto.
4.8 RECEIPT OR RELEASE
Any payment to any Participant or his Beneficiary in accordance with the
provisions of this Trust Agreement shall, to the extent thereof, be in full
satisfaction of all claims against the Trustee, the Administrator and the
Employer, and the Administrator may require such Participant or Beneficiary to
execute a receipt and release to such effect as a condition precedent to such
payment.
4.9 GOVERNING LAW
This Trust Agreement shall be construed, administered and governed in
all respects under applicable federal law and to the extent that federal law is
inapplicable, under the laws of the State of Texas; provided, however, that if
any provision is susceptible to more than one interpretation, such
interpretation shall be given thereto as is consistent with the Trust Fund being
a qualified trust within the meaning of Sections 401(a) and 501(a) of the Code.
If any provision of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
4.10 MULTIPLE COUNTERPARTS
This Trust Agreement may have been executed in multiple counterparts,
each of which shall be deemed an original. Said counterparts shall constitute
the same instruments, which may be sufficiently evidenced by any one
counterpart.
-16-
4.11 AMENDMENT
This Trust Agreement may be amended from time to time by the Employer,
except as follows:
(a) The duties and liabilities of the Trustee cannot be changed
without the Trustee's consent; and
(b) Except as provided in Section 4.7, under no condition shall
an amendment result in the return or repayment to the Employer of any
part of the Trust Fund or the income from it or result in the
distribution of the Trust Fund for the benefit of anyone other than
persons entitled to benefits under the Plan.
4.12 BOND OF TRUSTEE
The Trustee shall not be required to give any bond or other security for
faithful performance of its services and duties, or for any other purpose except
as may be required by the Act.
4.13 SUCCESSORS AND ASSIGNS
This Trust Agreement shall inure to the benefit of, and be binding upon,
the parties hereto, and their successors and assigns.
4.14 GENDER DESIGNATION
As used in this Trust Agreement, the masculine gender shall include the
feminine and neuter genders.
-17-
IN WITNESS WHEREOF, the undersigned have executed this Trust Agreement
the day of , 1996, effective as of July 1, 1996.
TPC FINANCE CORP.
By:
Name:
Title:
BOATMEN'S TRUST COMPANY OF TEXAS
By:
Name:
Title:
EXECUTION PAGE TO THE
TPC FINANCE CORP.
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
to be renamed
TEXAS PETROCHEMICALS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
-18-
EXHIBIT 10.4
ANNEX VI
TPC CASH BONUS PLAN
THE STATE OF TEXAS SS.
SS.
COUNTY OF HARRIS SS.
TEXAS PETROCHEMICALS CORPORATION, a Texas corporation (hereinafter called
"TPC" or the "Company"), does hereby establish and create the hereinafter
described TPC Cash Bonus Plan:
W I T N E S S E T H:
WHEREAS, the employees of TPC, identified on Exhibit "A" attached hereto
and made a part hereof, being all present employees employed by TPC as of the
"Effective Date," as defined below (such employees who are employed by TPC on
the Eligibility Date being hereinafter called "Present Employees"), have
contributed to the success of the Company by their ability, industry, loyalty,
and exceptional service; and
WHEREAS, certain third-party contractors, as identified on Exhibit "B",
attached hereto and made a part hereof, hereinafter called "Third-Party
Contractors", have, through their employees identified on Exhibit "B" attached
hereto, who have been assigned by such Third-Party Contractors to provide
services for the Company (such employees so assigned as of the Eligibility Date
being hereinafter called "Present Contractors' Employees") contributed to the
success of the Company by their ability, industry, loyalty, and exceptional
service; and
WHEREAS, the Board of Directors of the Company, hereinafter called
"Board", has determined that it is in the best interests of the Company and its
shareholders (including Texas Olefins Company) to assure that the Company will
have the continued dedication of the Present Employees, the Third-Party
Contractors and the Present Contractors' Employees, notwithstanding the
possibility, threat, or occurrence of a Change in Control (as defined in Section
2 hereof); and
WHEREAS, the Board believes it is imperative (i) to diminish the
inevitable and significant distractions of the Present Employees, the
Third-Party Contractors and the Present Contractors' Employees by virtue of the
personal uncertainties and risks created by a pending or threatened Change in
Control, (ii) to encourage the Present Employees', the Third-Party Contractors'
and the Present Contractors' Employees' full attention and dedication to the
Company currently and in the event of any threatened or pending Change in
Control, and (iii) to encourage the Present Employees to remain employees of the
Company or its successor, the Third-Party Contractors to remain third-party
contractors of the Company or its successor and the Present Contractors'
Employees to continue to provide services to the Company or its successor on
behalf of the Third Party Contractors, after a Change in Control, giving full
attention and dedication to the Company or its successor; and
WHEREAS, in order to accomplish the objectives described in the preceding
paragraphs, the Company desires to provide to each Present Employee and through
the Third-Party Contractors, each Present Contractors' Employee, a cash bonus
upon the terms and conditions hereinafter set forth.
-2-
NOW, THEREFORE, for and in consideration of the mutual benefits to be
gained by the performance hereof, TPC does hereby establish the TPC Cash Bonus
Plan (the "Plan"):
1. TRIGGERING EVENT.
In the event of a Change in Control of TPC on or before September 30,
1996, then, in such event, upon the occurrence of a Change in Control, each
Present Employee and each Third-Party Contractor, for the benefit of each
Present Contractors' Employee, shall be entitled to receive a cash bonus upon
the terms and conditions as hereinafter set forth, subject to and on the terms
and conditions stated herein.
2. CHANGE IN CONTROL.
"Change in Control" is hereby defined to mean the sale of substantially
all of the assets of the Company to an unrelated third party or parties or the
acquisition by an unrelated third party or parties (other than a shareholder or
shareholders of TPC on the date hereof) directly or indirectly, by the
acquisition of the outstanding stock of TCP's parent corporation or otherwise,
of more than 50% of the outstanding shares of the Company's common stock as a
result of any cash tender offer, exchange offer, merger, third-party private
purchase, or other means of acquisition, other than one made by the Company.
3. AMOUNT OF BONUS.
The aggregate amount of bonus to be calculated as of the dates set forth
on Exhibit C and paid within 15 days thereafter to the Present Employees and in
accordance with Section 4 below on a quarterly basis (the "Present Employee
Quarterly Amount") shall be as set forth on Exhibit C under the caption
"Employee Plan".
-3-
The aggregate amount of bonus to be calculated as of the dates set forth
on Exhibit C and paid within 15 days thereafter to the Third-Party Contractors
for distribution to the Present Contractors' Employees in accordance with
Section 5 below on a quarterly basis (the "Third-Party Contractor Quarterly
Amount") shall be as set forth on Exhibit C under the caption "Contractor Plan"
Notwithstanding the foregoing, if the "Total Enterprise Value" is less
than $372,800,360, (a) the total of the Aggregate Base Amount for the Employee
Plan and the Aggregate Base Amount for the Contractor Plan as used on Exhibit C
shall be reduced by the lesser of (i) $3 million or (ii) the difference between
$372,800,360 and such Total Enterprise Value, (b) the Aggregate Base Amount for
the Employee Plan shall be reduced to equal 32/35 of such total, (c) the
Aggregate Base Amount for the Contractor Plan shall be reduced to 3/35 of such
total, and (d) each Quarterly Base Amount, Interest Factor and Quarterly Amount
as used on Exhibit C shall be correspondingly reduced. The term "Total
Enterprise Value" means the imputed value of the Company and its parent
corporation and their subsidiaries based on the consideration paid in the Change
in Control transaction by the unrelated third party or parties. In the event of
any dispute regarding the Total Enterprise Value, the determination of the Board
shall be final and binding for all purposes.
4. AMOUNT AND PAYMENT OF PRESENT EMPLOYEE CASH BONUS.
a) Upon the occurrence of a Change in Control, as hereinabove
described, thirty (30) days thereafter (the "Initial Calculation
Date"), each Present Employee who was employed on the Eligibility
Date or his or her beneficiary or his or her estate, as the case may
be, shall be entitled to be paid in cash a portion of the Present
Employee
-4-
Quarterly Amount (as more fully described on Exhibit C) to be paid
within 15 days of the Initial Calculation Date as set forth on
Exhibit C calculated as set forth on Exhibit D attached hereto and
made a part hereof;
b) Within 15 days of each of the calculation dates following the
Initial Calculation Date set forth on Exhibit C, each Present
Employee, his or her beneficiary, or his or her estate, as the case
may be, shall be paid in cash a portion of the Present Employee
Quarterly Amount (as more fully described on Exhibit C) calculated
as set forth in Exhibit D, provided that no Present Employee shall
receive a payment under this paragraph unless the Present Employee
is an employee of the Company or any Company Affiliate (as defined
in Section 8 hereof) or the entity who is the successor and assignee
of the Company as described in Section 8 ("Successor Company") or
any Successor Company Affiliate (as defined in Section 8 hereof)
(except in the case of death, retirement, disability or termination
without Cause as described below) on the calculation date for which
such cash bonus is to be paid under this paragraph.
Notwithstanding anything herein contained to the contrary, the requirement
that a Present Employee be an employee of the Company or a Company Affiliate or
the Successor Company or a Successor Company Affiliate on the calculation date
for which a cash bonus is to be paid shall not apply to any Present Employee who
after the Eligibility Date:
a) dies while an employee of the Company or a Company Affiliate or the
Successor Company or a Successor Company Affiliate;
-5-
b) voluntarily retires from employment with the Company or a Company
Affiliate or a Successor Company or a Successor Company Affiliate on
or after attaining age 62, or is deemed to have retired for purposes
hereof by special exception granted by the Board or the Board of
Directors of the Successor Company or the Compensation Committee of
the Board or the Board of Directors of the Successor Company; or
c) becomes continuously disabled while employed by the Company or a
Company Affiliate or a Successor Company or a Successor Company
Affiliate for a period of at least one-hundred twenty (120) days and
is determined to be permanently disabled and unable to perform the
duties of his or her regular occupation (the determination that the
Present Employee is totally disabled and unable to perform the
duties of his or her regular occupation shall be made by a fair and
impartial physician agreed upon by the Company or Successor Company
and the Present Employee or his or her representative, or if a
physician cannot be agreed upon, then unless such parties agree
otherwise, a court of competent jurisdiction shall determine whether
the Present Employee is totally disabled and unable to perform the
duties of his or her regular occupation).
d) is terminated as an employee by the Company or a Company Affiliate
or the Successor Company or a Successor Company Affiliate without
Cause. For purposes hereof, the term "Cause" shall mean (i)
violation of any rules, regulations, practices or policies of the
employer, or any provision of any employment agreement with the
-6-
employer; (ii) failure to follow reasonable written instructions or
directions from any person authorized by the employer to give
instructions; (iii) failure substantially to perform the services
required of employee as part of his or her employment; or (iv) gross
neglect of duties, fraud or dishonesty, or conviction of a felony.
5. AMOUNT AND PAYMENT OF THIRD-PARTY CONTRACTOR CASH BONUS.
a) Upon the occurrence of a Change in Control, as hereinabove
described, on the Initial Calculation Date each Third-Party
Contractor who employed any of the Present Contractors' Employees
and who was providing services to the Company or a Company Affiliate
on the Eligibility Date shall be entitled to be paid in cash a
portion of the Third-Party Contractor Quarterly Amount (as more
fully described on Exhibit C), to be paid within 15 days of the
Initial Calculation Date as set forth on Exhibit C calculated as set
forth on Exhibit D for distribution to each Present Contractors'
Employee who was employed by such Third-Party Contractor and
rendering services to the Company or a Company Affiliate on its
behalf on the Eligibility Date or his or her beneficiary or his or
her estate, as the case may be, calculated as set forth on Exhibit
D; provided that each such Third-Party Contractor shall have
delivered to the Company a written commitment, in form satisfactory
to the Board, to distribute all bonuses received by it hereunder to
the Present Contractors' Employees (or his or her beneficiary or his
or her estate) employed by such Third-Party Contractor as set forth
on Exhibit D.
-7-
b) Within 15 days of each of the calculation dates following the
Initial Calculation Date set forth on Exhibit C, each Third-Party
Contractor who shall have delivered to the Company a written
commitment as described in paragraph a) above shall be paid in cash
a portion of the Third-Party Contractor Quarterly Amount (as more
fully described on Exhibit C) for distribution to each Present
Contractors' Employee who was employed by such Third-Party
Contractor and rendering services to the Company on its behalf on
the date of the Change in Control or his or her beneficiary or his
or her estate, as the case may be, calculated as set forth on
Exhibit D; provided that no Third-Party Contractor shall receive any
payment under this paragraph for distribution to any Present
Contractor's Employee unless the Third-Party Contractor is providing
services to the Company or a Company Affiliate or the Successor
Company or a Successor Company Affiliate on the calculation date for
which a cash bonus is to be paid under this paragraph; and provided
further, that any such payment otherwise payable to a Third-Party
Contractor under this paragraph shall be reduced to the extent
attributable to any Present Contractors' Employee of such
Third-Party Contractor who is not employed by such Third-Party
Contractor and rendering services to the Company or a Company
Affiliate or the Successor Company or a Successor Company Affiliate
on its behalf (except in case of death, retirement, disability or
termination without Cause as described below) on the calculation
date for which a cash bonus is to be paid under this paragraph.
-8-
Notwithstanding anything herein contained to the contrary the requirement
that a Present Contractors' Employee be an employee of the Third-Party
Contractor and rendering services on its behalf to the Company or a Company
Affiliate or a Successor Company or a Successor Company Affiliate on the
calculation date for which a cash bonus is to be paid shall not apply to any
Present Contractors' Employee who after the Eligibility Date:
a) dies while an employee of the Third-Party Contractor if such
employee was rendering services to the Company or a Company
Affiliate or a Successor Company or a Successor Company Affiliate on
behalf of the Third Party Contractor as of the date of death;
b) voluntarily retires from employment with the Third-Party Contractor
on or after attaining age 62 if such employment involved rendering
services to the Company or a Company Affiliate or a Successor
Company or a Successor Company Affiliate on behalf of the Third
Party Contractor immediately prior to retirement;
c) becomes continuously disabled while employed by the Third Party
Contractor and rendering services to the Company or a Company
Affiliate or a Successor Company or a Successor Company Affiliate on
behalf of the Third Party Contractor for a period of at least
one-hundred twenty(120) days and is determined to be permanently
disabled and unable to perform the duties of his or her regular
occupation (the determination that the Present Contractors' Employee
is totally disabled and unable to perform the duties of his or her
regular occupation shall be made by a fair and
-9-
impartial physician agreed upon by the Company or Successor Company
and the Third-Party Contractor, or if a physician cannot be agreed
upon, then unless such parties agree otherwise, a court of competent
jurisdiction shall determine whether the Present Contractors'
Employee is totally disabled and unable to perform the duties of his
or her regular occupation); or
(d) is terminated as an employee by a Third-Party Contractor without
Cause.
6. PAYMENT REDUCTIONS.
Notwithstanding anything to the contrary in this Plan, any payment to
Present Employees, Third-Party Contractors and Present Contractors' Employees
pursuant to Sections 4 and 5 above shall be reduced if and to the extent that
such payment, when added to any payments and benefits provided by the Company or
the Successor Company other than under this Plan would subject the Present
Employee, or his or her beneficiary, or his or her estate, to any excise tax
pursuant to the golden parachute payment provisions of Section 280G or Section
4999 of the Internal Revenue Code of 1986, as amended. Any reductions in
payments to Present Employees, Third-Party Contractors or Present Contractors'
Employees pursuant to this Section shall be reallocated in accordance with
Exhibit D to those Present Employees, Third-Party Contractors and Present
Contractors' Employees whose payment amounts are not reduced in accordance with
this Section.
-10-
7. ASSIGNMENT.
No Present Employee, nor his or her beneficiary, nor his or her estate,
nor any Third-Party Contractor nor any Present Contractors' Employee nor his or
her beneficiaries, nor his or her estate shall have any right to assign,
encumber, or dispose of the right to receive his or her or its share of the cash
bonuses provided to Present Employees, Third-Party Contractors and Present
Contractors' Employees under this Plan. The payment of the cash bonuses provided
hereby and the right to receive them are unassignable and non-transferable other
than a transfer which is incident to a divorce. The Company or Successor Company
shall be relieved from any liability if any Present Employee, his or her
beneficiary, or his or her estate, or any Third-Party Contractor or any Present
Contractors' Employee, his or her beneficiary, or his or her estate attempts to
assign or transfer such rights in violation of this Section.
8. SUCCESSOR COMPANY.
This Plan shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any corporation,
entity, individual or other person who is the successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization, or otherwise) to
all or substantially all the business or the assets of the Company to expressly
assume and agree to perform, by a written agreement in the form and substance
satisfactory to the Company, all of the obligations of the Company under this
Plan. As used in this Plan, the term Company shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Plan by operation of law,
written agreement or
-11-
otherwise ("Successor Company"). As used in this Plan, (a) the term Company
Affiliate shall mean any corporation or other legal entity Controlling,
Controlled By or Under Common Control With the Company; (b) the term Successor
Company Affiliate shall mean any corporation or other legal entity Controlling,
Controlled By or Under Common Control With the Successor Company; and (c) the
term "Control" (including, with correlative meanings, the terms "Controlling",
"Controlled By" and "Under Common Control With") shall mean, with respect to any
person or entity, the possession by another person or entity, directly or
indirectly, of the power to direct or cause the direction of management or
policies of such person or entity, whether through ownership of voting
interests, by agreement or otherwise.
9. WITHHOLDING.
The Company or Successor Company may withhold from any amounts payable
under this Plan such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
10. RESOLUTION AUTHORIZING PLAN.
The Board has adopted a resolution authorizing the creation of this Plan
for the benefit of its Present Employees, the Third-Party Contractors and the
Present Contractors' Employees.
11. DESIGNATED BENEFICIARY.
Each Present Employee and each Present Contractors' Employee shall
designate, on a form provided by TPC, a beneficiary entitled to receive his or
her portion of the cash bonus in the event of his or her death. If a Present
Employee dies before having received all of his or her share of the
-12-
cash bonuses provided hereby, the Company or Successor Company shall pay the
portion of deceased's cash bonus to his or her designated beneficiary as it
becomes payable in accordance with Section 4 or if a Present Contractors'
Employee dies before they received all of his or her share of the cash bonuses
provided hereby, the Company or the Successor Company shall pay the portion of
the deceased's cash bonus to the appropriate Third-Party Contractor for
distribution to his or her designated beneficiary as it becomes payable in
accordance with Section 5.
12. CHANGE OF BENEFICIARY.
The beneficiary referred to in this Plan may be designated or changed by
the Present Employee or any Present Contractors' Employee (without the consent
of any prior beneficiary) on a form provided by the Company or Successor Company
and delivered to the Company or Successor Company before his or her death. If no
such beneficiary shall have been designated, or if no designated beneficiary
shall survive the Present Employee or the Present Contractors' Employee, any
unpaid cash bonus payable to such Present Employee or to any Third-Party
Contractor for distribution to the Present Contractors' Employee shall be
payable to the deceased's estate.
13. NO TRUST.
Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a trust of any
kind or a fiduciary relationship between the Company or Successor Company and
its Present Employees, the Third-Party Contractors, the Present Contractors'
Employees, the designated beneficiary of any Present Employee or Present
Contractors' Employee, or any other person.
-13-
14. INCAPACITY OF BENEFICIARY.
If the Company or Successor Company shall receive an order of a court of
competent jurisdiction appointing a guardian or other legal representative for
any person to whom any payment is payable under this Plan, any payment due to
such person hereunder shall be made in accordance with such court order. Any
such payment shall be a complete discharge of the Company or Successor Company's
liability under this Plan.
15. BINDING EFFECT.
This Plan shall be binding upon and inure to the benefit of TPC, its
successors and assigns, the Present Employees, and the Present Contractors'
Employees and the Third-Party Contractors and their heirs, executors,
administrators, and legal representatives, and permitted successors and assigns.
16. GOVERNING LAW.
This Plan shall be construed in accordance with, and governed by, the laws
of the State of Texas without regard to conflicts of law or principles requiring
the application of the laws of any other jurisdiction.
17. AMENDMENT OR TERMINATION.
The Board reserves the right at any time prior to the first Change in
Control after the adoption hereof to make such changes in the Plan as it may
consider desirable or may discontinue or dissolve the Plan at any time prior to
a Change in Control.
-14-
18. TERMINATION OF EMPLOYMENT.
This Plan does not create a contract of employment between TPC and any
Present Employee or any Present Contractors' Employee or a contract for goods or
services with any Third-Party Contractor or any Present Contractors' Employee.
This Plan does not limit the right of the Company or Successor Company to
discharge or terminate any Present Employee for any reason or for no reason or
to terminate the services of any Third-Party Contractor for any reason or for no
reason.
19. EFFECTIVE DATE; ELIGIBILITY DATE.
The Plan shall become effective on June 30, 1996 (the "Effective Date").
The term "Eligibility Date" shall mean July 2, 1996.
20. ENFORCEMENT OF RIGHTS.
Each Present Employee, each Third-Party Contractor and each Present
Contractors' Employee shall have the right to maintain an action against TPC or
Successor Company to collect his, her, or its share of the cash bonus, and, in
the event TPC or Successor Company wrongfully withholds payment, the Present
Employee, Third-Party Contractor or Present Contractors' Employee shall be
entitled to recover reasonable attorney's fees and expenses.
21. DISCLAIMER. TPC hereby disclaims any interest in the cash bonuses
paid pursuant hereto.
-15-
IN WITNESS WHEREOF, the Board of Directors of TPC has caused this Plan to
be executed by its duly authorized officers as of the ____ day of
________________, 1996.
TEXAS PETROCHEMICALS CORPORATION
ATTEST: By:
Bill W. Waycaster, President
La Nell Cooke, Secretary
-16-
EXHIBIT "A"
PRESENT EMPLOYEES
-17-
EXHIBIT "B"
Third-Party Contractors
Present Contractors' Employees
Name of Employing Third-Party Contractor Name of Present Contractors' Employe
________________________________________ ____________________________________
________________________________________ ____________________________________
-18-
Exhibit "C"
Employee Plan
Aggregate Base Amount: $32,000,0001
EMPLOYEE PLAN
Quarterly Present Employee
CALCULATION DATE Base Interest Quarterly
AMOUNT2 FACTOR2, 3 AMOUNT2, 3
Thirty days after Change in
Control .......................... 3,200,000 -- 3,200,000
Three months after Change of
Control .......................... 1,800,000 337,500 2,137,500
Six months after Change in
Control .......................... 1,800,000 316,406 2,116,406
Nine months after Change of
Control .......................... 1,800,000 295,313 2,095,313
First Anniversary of Change
of Control ....................... 1,800,000 274,219 2,074,219
Three months after First
Anniversary of Change of
Control .......................... 1,800,000 253,125 2,053,125
Six months after First
Anniversary of Change of
Control .......................... 1,800,000 232,031 2,032,031
Nine months after First
Anniversary of Change of
Control .......................... 1,800,000 210,938 2,010,938
Second Anniversary of
Change of Control ................ 1,800,000 189,844 1,989,844
Three months after Second
Anniversary of Change of
Control .......................... 1,800,000 168,750 1,968,750
Six months after Second
Anniversary of Change of
Control ......................... 1,800,000 147,656 1,947,656
-19-
Nine months after Second
Anniversary of Change of
Control .......................... 1,800,000 126,563 1,926,563
Third Anniversary of Change
of Control ....................... 1,800,000 105,469 1,905,469
Three months after Third
Anniversary of Change of
Control ....................... 1,800,000 84,375 1,884,375
Six months after Third
Anniversary of Change of
Control ........................ 1,800,000 63,281 1,863,281
Nine months after Third
Anniversary of Change of
Control ........................ 1,800,000 42,188 1,842,188
Fourth Anniversary of
Change of Control ................ 1,800,000 21,094 1,821,094
32,000,000 2,868,750 34,868,750
----------
1 Subject to adjustment
2 To be distributed to the Present Employees as a group in accordance with
Section 4 of this Agreement.
3 Assumes that interest rate remains constant over the period. The annual
interest factor will be computed on a quarterly basis, using the 90 day LIBOR
interest rate in effect on the calendar quarter ending date as published by
Texas Commerce Bank, National Association.
-20-
Exhibit "C"
Contractor Plan
Aggregate Base Amount: $3,000,0001
CONTRACTOR PLAN
<TABLE>
<CAPTION>
Third Party
Quarterly Contractor
CALCULATION DATE Base Interest Quarterly
AMOUNT2 FACTOR2, 3 AMOUNT2, 3
<S> <C> <C> <C>
Thirty days after Change in
Control .......................................................... 300,000 -- 300,000
Three months after Change of
Control .......................................................... 168,750 31,641 200,391
Six months after Change of
Control .......................................................... 168,750 29,663 198,413
Nine months after Change of
Control .......................................................... 168,750 27,686 196,436
First Anniversary of Change
of Control ....................................................... 168,750 25,708 194,458
Three months after First
Anniversary of Change of
Control .......................................................... 168,750 23,730 192,480
Six months after First
Anniversary of Change of
Control .......................................................... 168,750 21,753 190,503
Nine months after First
Anniversary of Change of
Control .......................................................... 168,750 19,775 188,525
Second Anniversary of
Change of Control ................................................ 168,750 17,798 186,548
Three months after Second
Anniversary of Change of
Control .......................................................... 168,750 15,820 184,570
-21-
Six months after Second
Anniversary of Change of
Control .......................................................... 168,750 13,843 182,593
Nine months after Second
Anniversary of Change of
Control .......................................................... 168,750 11,865 180,615
Third Anniversary of Change
of Control ....................................................... 168,750 9,888 178,638
Three months after Third
Anniversary of Change of
Control .......................................................... 168,750 7,910 176,660
Six months after Third
Anniversary of Change of
Control .......................................................... 168,750 5,933 174,683
Nine months after Third
Anniversary of Change of
Control .......................................................... 168,750 3,955 172,705
Fourth Anniversary of
Change of Control ................................................ 168,750 1,978 170,728
3,000,000 268,945 3,268,945
---------
</TABLE>
1 Subject to adjustment
2 To be distributed to the Third Party Contractors for distribution to the
Present Contractors' Employees as a group in accordance with Section 5 of this
Agreement.
3 Assumes that interest rate remains constant over the period. The annual
interest factor will be computed on a quarterly basis, using the 90 day LIBOR
interest rate in effect on the calendar quarter ending date as published by
Texas Commerce Bank, National Association.
-22-
ANNEX VI
Exhibit "D"
DEFERRED BONUS PLAN
PLANNED DISTRIBUTION: $32 Million to TPC Employees
3 Million to Contract Employees
PARTICIPATION: All Employees of record as of July 2, 1996,
including retirees Neil R. Thornley and Johnny L.
Blanchard and excluding Bill W. Waycaster and
Ronald W. Woliver
COMPENSATION:
Up to one year's service: One month salary per month of service
One year service and above: Salary x (1 + .15Y), where Y is defined as
total years of service, or fractions
thereof, up to 10 years
DISTRIBUTION BASES
The actual amount of the distributions will be determined as of each quarterly
calculation date. The amount of the total actual distribution under the TPC Cash
Bonus Plan will be allocated 32/35 to the TPC Employees and 3/35 to the Contract
Employees.
Using the foregoing allocation mechanism, a total distribution amount (A) will
be determined for each of the TPC Employee and Contract Employees groups. A
factor will then be calculated for each individual employee's fractional
participation (F) in the total distribution for their respective group. Each
employee's fractional participation will be determined by the individual's
Compensation divided by the total of his group's (TPC Employee or Contractor)
Compensation as defined above.
For example, if TPC Employee 1 has been with the company 15 years and makes a
salary of $25,000 per year, his Compensation would be $62,500 [$25,000 x
(1+(0.15 x 10))]. If total Compensation for all TPC Employees eligible to
receive a payment under the plan was $15,000,000, Employee 1 would receive 0.42%
[62,500/15,000,000] of the total amount distributed to TPC Employees.
-23-
EXHIBIT 10.5
SECURITY AGREEMENT
This Security Agreement (the "Agreement") dated as of the ____ of
___________, 1996, is made by and between Boatmen's Trust Company of Texas,
solely in its capacity as trustee ("Trustee") of the TPC Finance Corp. Employee
Stock Ownership Trust (to be renamed the Texas Petrochemicals Corporation
Employee Stock Ownership Trust) (the "Trust") created pursuant to the TPC
Finance Corp. Employee Stock Ownership Plan Trust Agreement (to be renamed the
Texas Petrochemicals Corporation Employee Stock Ownership Plan Trust Agreement)
and the TPC Finance Corp. Employee Stock Ownership Plan (to be renamed the Texas
Petrochemicals Corporation Employee Stock Ownership Plan) (the "ESOP") (the
Trust shall hereinafter be referred to as the "Debtor"), and TPC Finance Corp.
(to be succeeded by merger by Texas Petrochemicals Corporation) (the "Secured
Party" or "Finance Corp.").
INTRODUCTORY PROVISIONS
A. The Secured Party has agreed to make a loan to the Debtor in the amount of
Ten Million Dollars ($10,000,000.00) (the "Loan"), the proceeds of which will be
used by Debtor solely to acquire One Hundred Thousand (100,000) shares of common
stock, $.01 par value, of Texas Petrochemical Holdings, Inc., a Delaware
corporation (the "Shares").
B. The Debtor has this day executed a promissory note (the "Note"), payable
to the order of the Secured Party, evidencing indebtedness arising by reason of
the Loan.
C. As a condition to the making of the Loan to the Debtor, the Secured Party
requires that the Debtor pledge to and grant a security interest in the Shares
to secure the payment and performance of all obligations under the Note
("Obligations") of the Debtor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereto agree as follows:
1. SECURITY INTEREST. The Debtor hereby pledges and delivers to the Secured
Party and grants to the Secured Party security interests in and to any and all
present or future rights of the Debtor in and to all of the following rights,
interests, and property (all of the following being herein sometimes called the
"Collateral"): the Shares subject to reduction and release as provided in
Sections 4.3(g) and 5.4 of the ESOP, which are purchased with proceeds of the
Loan, and the certificates representing such shares and all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares
and any and all substitutes, replacements, accessions, attachments, increases,
revisions, or additions thereto.
-1-
2. THE OBLIGATIONS. This Agreement is being executed and delivered to secure,
and the security interests herein granted (the "Security Interests") shall
secure, full payment and performance of all of the Obligations.
3. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR. The Debtor represents and
warrants to the Secured Party that (a) the Debtor is the sole owner of the
Collateral; (b) the Security Interests are first and prior security interests in
and to all of the Collateral; and (c) no dispute, right of setoff, counterclaim,
or defenses exist with respect to all or any part of the Collateral. The
delivery at any time by the Debtor to the Secured Party of Collateral shall
constitute a representation and warranty by the Debtor under this Agreement
that, with respect to such Collateral, and each item thereof, the matters
heretofore warranted in clauses (a) through (c) of this paragraph are true and
correct.
4. AFFIRMATIVE COVENANTS OF THE DEBTOR. So long as any part of the
Obligations remain unpaid or unperformed, the Debtor covenants and agrees to:
(a) from time to time, and at any time, promptly execute and deliver to the
Secured Party all assignments, certificates and supplemental documents, and do
all other acts or things as the Secured Party may reasonably request in order to
more fully evidence and perfect the Security Interests herein created; (b)
promptly furnish such information as the Secured Party may request concerning
the Collateral; (c) promptly notify the Secured Party of any change in any fact
or circumstance warranted or represented by the Debtor herein; and (d) promptly
notify the Secured Party of any claim, action, or proceeding affecting title to
the Collateral, or any part thereof, or the Security Interests herein created,
and at the request of the Secured Party, appear in and defend, at the Debtor's
expense, any such action or proceeding.
5. NEGATIVE COVENANTS OF THE DEBTOR. The Debtor further covenants and agrees
that, without the prior written consent of the Secured Party, the Debtor will
not (a) sell, assign or transfer any of the Debtor's rights in the Collateral,
or (b) create any other security interest in, mortgage or otherwise encumber the
Collateral, or any part thereof, except the Security Interests herein created.
6. DELIVERY OF COLLATERAL TO THE SECURED PARTY. The Debtor, simultaneously
with the execution of this Agreement, is delivering to the Secured Party the
stock certificates covering the Shares, endorsed in blank for transfer or
accompanied by stock powers appropriate for transfer, with the signatures
thereon guaranteed to the satisfaction of the Secured Party, to be held by the
Secured Party in accordance with the terms and provisions hereof. Unless and
until an Event of Default (hereinafter defined) occurs and is continuing, the
Secured Party shall have no right to have the stock certificates transferred
into its name; and the Debtor shall retain the right prior to such Event of
Default to vote the Shares in accordance with the terms of the ESOP.
7. EVENTS OF DEFAULT. An "Event of Default" shall exist if any one or more of
the following events shall occur and be continuing:
(a) Failure or refusal to pay any principal or interest on the Note
or any fee, expense or other payment required hereunder or under the Note,
within ten days of the date on which such amount is due; or
-2-
(b) Any representation or warranty made hereunder or under the Note
is untrue or inaccurate in any material respect as of the date on which such
representation or warranty is made; or
(c) Failure to perform or a breach of any of the covenants or
agreements contained in this Security Agreement and such failure or breach
shall remain unremedied for five days after notice of such failure or breach
shall have been delivered to the Debtor; or
(d) The ESOP is terminated, or proceedings or actions are commenced
by Finance Corp., any tribunal or any other person to terminate the ESOP or
the Shares are disposed by the ESOP other than in the ordinary course of the
ESOP's operations.
8. REMEDIES. Upon the occurrence of an Event of Default, but only so long as
such Event of Default shall not have been waived or cured, in addition to any
and all other rights and remedies which the Secured Party may then have
hereunder, under the Uniform Commercial Code of the State of Texas or of any
other pertinent jurisdiction (the "UCC"), or otherwise, the Secured Party may:
(a) reduce its claim to judgment or foreclose or otherwise enforce the Security
Interests, in whole or in part, by any available judicial procedure; (b) after
notification, if any, provided for herein, sell, lease, or otherwise dispose of,
at the offices of the Secured Party, on the premises of the Debtor, or
elsewhere, all or any part of the Collateral, in its then condition or following
any commercially reasonable preparation or processing, and any such sale or
other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust the Secured Party's power of
sale, but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Obligations have been paid and performed
in full), and at any such sale it shall not be necessary to exhibit any of the
collateral; (c) at the Secured Party's discretion, vote the Shares included in
the Collateral and, in accordance therewith, the Debtor hereby irrevocably
grants to the Secured Party its proxy to so vote such Shares; (d) at the Secured
Party's discretion, retain the Collateral in satisfaction of the Obligations
whenever the circumstances are such that the Secured Party is entitled to do so
under the UCC or otherwise; and (e) exercise any and all other rights, remedies,
and privileges it may have under the Note or this Security Agreement.
Notwithstanding any other provisions of this Paragraph 8, upon the occurrence
of an Event of Default, the fair market value of assets of the Debtor held as
Collateral which are transferred or sold through foreclosure, or retained in
satisfaction of the Obligations, as determined as of the date of foreclosure or
retention, as the case may be, may not exceed the amount of the indebtedness
which is then due and owing.
With respect to any part of the Collateral which is stock certificates,
bonds, or other securities, the Secured Party shall have authority, upon the
occurrence of an Event of Default, but only so long as such Event of Default
shall not have been waived or cured, without notice to the Debtor, to the extent
of the number of Shares then remaining subject to the security interest
hereunder, which is then equal in current fair market value to the amount of
principal, interest and other sums then due and unpaid under the Note, either to
have them registered in the Secured Party's
-3-
name, or in the name of a nominee, and, with or without such registration, to
demand of the corporation issuing the same, and to receive and receipt for, any
and all dividends and other distributions payable in respect thereof, regardless
of the medium in which paid and whether they be ordinary or extraordinary. Any
corporate entity making payment to the Secured Party hereunder shall be fully
protected in relying upon the written statement of the Secured Party that the
Secured Party then holds the Security Interests which entitles it to receive
such payment, and the receipt of the Secured Party for such payment shall be
full acquittance therefor to the person making such payment. The remedies set
forth in this Section 8 may be exercised only to the extent consistent with the
restrictions on remedies set forth in Section 408(b)(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the regulations
thereunder and Section 4975(d)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder.
9. COSTS, RISKS. The Trustee on behalf of the Debtor, to the extent permitted
by law, covenants to promptly reimburse and pay to the Secured Party, at the
Secured Party's request (to the extent that Debtor and the Secured Party agree
that such will not violate the provisions of United States Treasury Regulation
Section 54.4975-7(b)(5)), the amount of all reasonable expenses (including the
cost of any insurance and payment of taxes or other charges), incurred by the
Secured Party in connection with its custody, preservation, use, operation and
sale of the Collateral, and, all such expenses, costs, taxes, and other charges
shall be a part of the Obligations from the date incurred until the date repaid
to the Secured Party. It is agreed, however, that the risk of loss or damage to
such Collateral is on the Debtor, and the Secured Party shall have no liability
whatsoever for failure to obtain or maintain insurance, nor to determine whether
any insurance ever in force is adequate as to amount or as to the risks insured.
10. NOTICE. Reasonable notification of the time and place of any public sale
of the Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of the Collateral is to be made
(including retention thereof in satisfaction of the Obligations), shall be sent
to the Debtor and to any other person entitled under the UCC to notice. It is
agreed that notice sent or given at least ten (10) calendar days prior to the
taking of the action to which the notice relates is reasonable notification and
notice for the purposes of this paragraph.
11. SECURITIES ACT. Because of the Securities Act of 1933, as amended, or any
other laws or regulations, there may be legal restrictions or limitations
affecting the Secured Party in any attempts to dispose of the Collateral, or
certain portions thereof, in the enforcement of its rights and remedies
hereunder. For these reasons the Secured Party is hereby authorized by the
Debtor, but not obligated, in the event of any Event of Default giving rise to
the Secured Party's rights to sell or otherwise dispose of the Collateral, to
sell all or any part of the Collateral at private sale, subject to investment
letter, or in any other manner which will not require the Collateral, or any
part thereof, to be registered in accordance with the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, or any other law
or regulation. The Secured Party is also hereby authorized by the Debtor, but
not obligated, to take such actions, give such notices, obtain such consents,
and do such other things as the Secured Party may deem required or appropriate
in the event of a sale or disposition of any of the Collateral. The Debtor
clearly understands that the Secured Party may in its discretion approach a
restricted number of potential purchasers and that a
-4-
sale under such circumstances may yield a lower price for the Collateral, or any
part or parts thereof, than would otherwise be obtainable if the Collateral were
registered and sold in the open market.
12. RIGHTS CUMULATIVE. All rights and remedies of the Secured Party hereunder
are cumulative of each other and of every other right or remedy which the
Secured Party may otherwise have at law or in equity or under any other contract
or other writing for the enforcement of the Security Interests herein or in the
collection of the Notes or the Obligations, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
13. ASSIGNMENT. The rights, powers and interests held by the Secured Party
hereunder, together with the Security Interests in the Collateral, may be
transferred and assigned by the Secured Party, in whole or in part, at such time
and upon such terms as the Secured Party may deem advisable.
14. NO WAIVERS. No failure of the part of the Secured Party to exercise, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Secured Party of
any right, power or remedy hereunder preclude further exercise thereof or the
exercise of any other right, power or remedy.
15. FURTHER ASSURANCES. The Debtor agrees that at any time and from time to
time, it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, as
requested by the Secured Party in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.
16. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Debtor hereby appoints the
Secured Party the Debtor's attorney-in-fact, with full authority in the place
and stead of the Debtor and in the name of the Debtor or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Security Agreement; provided, however, the above-named
attorney-in-fact may exercise the powers set forth in this Section only upon
written notice by the Secured Party of the occurrence and continuance of an
Event of Default.
17. AMENDMENTS, ETC. No amendment or waiver of any provision of this Security
Agreement, nor consent to any departure by the Debtor herefrom, shall in any
event be effective unless the same shall be in writing and signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
18. CONSTRUCTION. All provisions hereof shall be construed so as to maintain
(i) the ESOP as a qualified leveraged employee stock ownership plan under
Sections 401(a) and 4975(e)(7) of the Code, (ii) the Trust as exempt from
taxation under Section 501(a) of the Code and (iii) the loan made pursuant to
the Note as an exempt loan under Section 4975(d)(3) of the Code, as defined in
Section
-5-
54.4975-7(b) of the Treasury Regulations, as described in Section 408(b)(3) of
ERISA and as described in the Department of Labor Regulations Section
2550.408b-3.
19. BINDING EFFECT. This Agreement shall be binding on the Debtor and the
Debtor's successors and assigns and shall inure to the benefit of the Secured
Party, and the Secured Party's successors and assigns.
20. TERMINATION. This Agreement and the Security Interests in the Collateral
will terminate when the Obligations secured hereby have been paid in full by
extinguishment thereof but not by renewal, modification or extension thereof.
21. GOVERNING LAW. The law governing this Agreement will be that of the State
of Texas in force on the date of execution of this Agreement. All obligations of
the Debtor under the terms of this Agreement shall be performable in Texas.
22. MAILINGS. Any notice, request, instruction or other document required or
permitted to be delivered hereunder by either party hereto to the other shall be
in writing and shall be delivered or mailed, registered or certified, postage
prepaid, addressed as follows:
To the
Debtor: TPC Finance Corp. Employee Stock Ownership Trust (to be renamed
the Texas Petrochemicals Corporation Employee Stock Ownership
Trust)
c/o Boatmen's Trust Company of Texas, Trustee
5847 San Felipe, Suite 4600
Houston, Texas 77057
and
To the
Secured Party: TPC Finance Corp.
8707 Katy Freeway, Suite 300
Houston, Texas 77024
or to such other address as any party hereto shall hereafter designate by
written notice to the other parties.
23. AGREEMENT AS FINANCING STATEMENT. The Secured Party shall have the right
at any time to execute and file this Agreement as a financing statement, but the
failure of the Secured Party to do so shall not impair the validity or
enforceability of this Agreement.
24. SEVERABILITY. If any provision of this agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
of this Agreement, the legality,
-6-
validity, and enforceability of the remaining provisions of this Agreement shall
not be affected thereby, and in lieu of each such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
25. COUNTERPARTS. This Agreement has been executed in a number of identical
counterparts, each of which for all purposes is to be deemed an original, and
all of which collectively constitute one agreement, but in making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.
26. NUMBER AND GENDER OF WORDS. Whenever herein the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day, month and year first above written.
DEBTOR:
TPC Finance Corp. Employee Stock Ownership Trust
(to be renamed the Texas Petrochemicals Corporation
Employee Stock Ownership Trust)
By: Boatmen's Trust Company of Texas, solely in its
capacity as Trustee and not in its individual or
corporate capacity
By:
Name:
Title:
SECURED PARTY:
TPC Finance Corp.
By:
Name:
Title:
-7-
EXHIBIT 10.6
FIRST AMENDMENT TO
TEXAS PETROCHEMICALS CORPORATION
PROFIT SHARING PLAN
WHEREAS, TEXAS PETROCHEMICALS CORPORATION (the "COMPANY") has heretofore
adopted the TEXAS PETROCHEMICALS CORPORATION PROFIT SHARING PLAN (the "PLAN")
for the benefit of its employees; and
WHEREAS, in conjunction with its change of fiscal year, the Company desires
to amend the Plan to reflect such fiscal year.
NOW, THEREFORE, the Plan shall be amended as follows, effective as of July
1, 1996:
1. Section 1.1(38) of the Plan shall be deleted in its entirety and the
following shall be submitted therefor:
"(38) PLAN QUARTER: A three-consecutive month period commencing on
July 1, October 1, January 1, and April 1 of each year."
2. Section 1.1(39) of the Plan shall be deleted in its entirety and the
following shall be substituted therefor:
"(39) PLAN YEAR: The twelve-consecutive month period commencing July 1
of each year. As a result of the change in Plan Year effective July 1,
1996, the Plan shall have a short Plan Year, commencing June 1, 1996 and
ending June 30, 1996."
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed this 27 day of January, 1996.
TEXAS PETROCHEMICALS CORPORATION
By --------------------, President
TEXAS PETROCHEMICALS CORPORATION
PROFIT SHARING PLAN
As Amended and Restated
Effective Date: October 1, 1994
TABLE OF CONTENTS
ARTICLE PAGE
-------- ---------
I -- DEFINITIONS AND CONSTRUCTION........................ I-1
II -- PARTICIPATION....................................... II-1
III -- CONTRIBUTIONS....................................... III-1
IV -- ALLOCATIONS......................................... IV-1
V -- INVESTMENT OF FUNDS................................. V-1
VI -- RETIREMENT BENEFITS................................. VI-1
VII -- DISABILITY BENEFITS................................. VII-1
VIII -- SEVERANCE BENEFITS.................................. VIII-1
IX -- DEATH BENEFITS...................................... IX-1
X -- TIME AND MANNER OF PAYMENT OF BENEFITS.............. X-1
XI -- WITHDRAWALS AND LOANS............................... XI-1
XII -- ADMINISTRATION OF THE PLAN.......................... XII-1
XIII -- ADMINISTRATION OF FUNDS............................. XIII-1
XIV -- TRUSTEE AND ADMINISTRATION OF TRUST FUND............ XIV-1
XV -- FIDUCIARY PROVISIONS................................ XV-1
XVI -- AMENDMENTS.......................................... XVI-1
XVII -- DISCONTINUANCE OF CONTRIBUTIONS, TERMINATION,
PARTIAL TERMINATION AND MERGER OR CONSOLIDATION.... XVII-1
XVIII -- ADOPTING EMPLOYERS.................................. XVIII-1
XIX -- MISCELLANEOUS PROVISIONS............................ XIX-1
XX -- TOP-HEAVY STATUS.................................... XX-1
i
(40) ROLLOVER ACCOUNT: An individual account for an Eligible Employee which is
credited with the Rollover Contributions of such Employee and which is
credited (or debited) with such account's allocation of net income (or net
loss) of the Trust Fund.
(41) ROLLOVER CONTRIBUTIONS: Contributions made by an Eligible Employee
pursuant to Section 3.8.
(42) TRUST: The trust(s) established under the Trust Agreement(s) to hold and
invest contributions made under the Plan and income thereon, and from
which the Plan benefits are distributed.
(43) TRUST AGREEMENT: The agreement(s) entered into between the Company and the
Trustee establishing the Trust, as such agreement(s) may be amended from
time to time.
(44) TRUST FUND: The funds and properties held pursuant to the provisions of
the Trust Agreement for the use and benefit of the Members, together with
all income, profits, and increments thereto.
(45) TRUSTEE: The trustee or trustees qualified and acting under the Trust
Agreement at any time.
(46) VALUATION DATES: The last day of each month and any other interim
Valuation Date determined by the Committee on a nondiscriminatory basis.
(47) VESTED INTEREST: The portion of a Member's Accounts which, pursuant to the
Plan, is nonforfeitable.
(48) VESTING SERVICE: The measure of service used in determining a Member's
Vested Interest as determined pursuant to Section 8.3.
1.2 NUMBER AND GENDER. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and the plural to include the
singular. The masculine gender, where appearing in this Plan, shall be deemed to
include the feminine gender.
1.3 HEADINGS. The headings of Articles and Sections herein are included
solely for convenience and if there is any conflict between such headings and
the text of the Plan, the text shall control.
II.
PARTICIPATION
2.1 ELIGIBILITY. Any Eligible Employee shall become a Member upon the
first day of the month coincident with or next following the date on which such
Eligible Employee has completed one year of Participation Service.
Notwithstanding the foregoing:
(a) an Eligible Employee who was a Member of the Plan on the day
prior to the Effective Date shall remain a Member of this restatement
thereof as of the Effective Date;
(b) an Eligible Employee who was a Member of the Plan prior to a
termination of employment shall remain a Member upon his reemployment as an
Eligible Employee;
(c) an Employee who has completed one year of Participation Service
but who has not become a Member of the Plan because he was not an Eligible
Employee shall be eligible to become a Member of the Plan immediately upon
becoming an Eligible Employee as a result of a change in his employment
status;
(d) A Member who ceases to be an Eligible Employee but remains an
Employee shall continue to be a Member but, on and after the date he ceases
to be an Eligible Employee, he shall no longer be entitled to defer
Compensation hereunder or share in allocations of Employer Contributions
unless and until he shall again become an Eligible Employee; and
(e) an Eligible Employee may elect not to become a Member or a Member
may elect to cease participating in the Plan by written notice to the
Committee. Such election may be revoked at any time by written notice to
the Committee, effective as of the first day of the Plan Year next
following the
I-8
Plan Year during which such revocation notice is given, provided such
notice is given at least thirty days before the first day of such Plan
Year.
2.2 PARTICIPATION SERVICE. The completion of 1,000 or more Hours of
Service during a Computation Period shall constitute one year of Participation
Service.
III.
CONTRIBUTIONS
3.1 CASH OR DEFERRED CONTRIBUTIONS.
(a) A Member may elect to defer an integral percentage of from 1% to 10%
(or, with respect to a Member who is a Highly Compensated Employee, such lesser
percentage as may be prescribed from time to time by the Committee) of his
Compensation for a Plan Year by having the Employer contribute the amount so
deferred to the Plan. Compensation for a Plan Year not so deferred by such
election shall be received by such Member in cash. A Member's election to defer
an amount of his Compensation pursuant to this Section shall be made by
executing a Compensation reduction agreement pursuant to which the Member
authorizes the Employer to reduce his Compensation in the elected amount and the
Employer, in consideration thereof, agrees to contribute an equal amount to the
Plan. The reduction in a Member's Compensation Plan for a Plan Year pursuant to
his election under a Compensation reduction agreement shall be effected by
Compensation reductions each month within such Plan Year following the effective
date of such agreement. The amount of Compensation elected to be deferred by a
Member for a Plan Year pursuant to this Section shall become a part of the
Employer's Cash or Deferred Contributions for such Plan Year.
(b) A Member's Compensation reduction agreement shall remain in force and
effect for all periods following the date of its execution until modified or
terminated or until such Member terminates his employment. A Member who has
elected to defer a portion of his Compensation may change his deferral election
percentage (within the percentage limits set forth in Paragraph (a) above),
effective as of the first day of any payroll period, by executing and delivering
to the Committee a new Compensation reduction agreement within the time period
prescribed by the Committee, but only two such changes may be made in a Plan
Year.
(c) A Member may cancel his Compensation reduction agreement, effective as
of the first day of any payroll period, by executing and delivering to the
Committee a Compensation reduction cancellation agreement in the form prescribed
by the Committee within the time period prescribed by the Committee. A Member
who so cancels his Compensation reduction agreement may resume Compensation
deferrals, effective as of the first day of a month following six months after
the date on which the cancellation is effective, by executing and delivering to
the Committee a new Compensation reduction agreement within the time period
prescribed by the Committee.
(d) In restriction of the Members' elections provided in Paragraphs (a),
(b) and (c) above, the Cash or Deferred Contributions and the elective deferrals
(within the meaning of section 402(g)(3) of the Code) under all other plans,
contracts and arrangements of the Employer on behalf of any Member for any
calendar year shall not exceed $7,000 (with such amount to be adjusted
automatically to reflect any cost-of-living adjustments authorized by section
402(g)(5) of the Code).
(e) In further restriction of the Members' elections provided in
Paragraphs (a), (b) and (c) above, it is specifically provided that one of the
"actual deferral percentage" tests set forth in section 401(k)(3) of the Code
and the Treasury Regulations thereunder must be met in each Plan Year. If
multiple use of the alternative limitation (within the meaning of section
401(m)(9) of the Code and Treasury Regulation Section 1.401(m)-2(b)) occurs
during a Plan Year such multiple use shall be corrected in accordance with the
provisions of Treasury Regulation Section 1.401(m)-2(c); provided, however, that
if such multiple use is not eliminated by making Employer Safe Harbor
Contributions, then the "actual contribution percentages"
I-9
of all Highly Compensated Employees participating in the Plan shall be reduced,
and the excess contributions distributed, in accordance with the provisions of
Section 3.7(c) and applicable Treasury Regulations so that there is no such
multiple use.
(f) If the restrictions set forth in Paragraph (d) or (e) above would not
otherwise be met for any Plan Year, the Compensation deferral elections made
pursuant to Paragraphs (a), (b) and (c) above of Members who are Highly
Compensated Employees may be reduced by the Committee on a temporary and
prospective basis in such manner as the Committee shall determine.
(g) As soon as administratively feasible following the end of each month,
the Employer shall contribute, as Cash of Deferred Contributions with respect to
each Member, an amount equal to the amount of Compensation elected to be
deferred, pursuant to Paragraphs (a) and (b) above (as adjusted pursuant to
Paragraph (f) above), by such Member during such month. Such contributions, as
well as the contributions pursuant to Sections 3.2, 3.3 and 3.4, shall be made
without regard to current or accumulated profits of the Employer.
Notwithstanding the foregoing, the Plan is intended to qualify as a profit
sharing plan for purposes of sections 401(a), 402, 412 and 417 of the Code.
3.2 EMPLOYER MATCHING CONTRIBUTIONS. For each month in the Plan Year, the
Employer shall contribute to the Trust, as Employer Matching Contributions, an
amount which equals 25% of the Cash or Deferred Contributions which were made
pursuant to Section 3.1 on behalf of each of the Members during such month and
which were not in excess of 6% of each such Member's Compensation for such
month.
3.3 EMPLOYER DISCRETIONARY CONTRIBUTIONS. For each Plan Year, the
Employer may contribute to the Trust, as an Employer Discretionary Contribution,
an additional amount as determined in the discretion of the Directors. At the
time that the Directors authorize an Employer Discretionary Contribution, the
Directors shall designate the date during the Plan Year as of which such
contribution is to be allocated and the portion of such Plan Year for which the
contribution is being made.
3.4 EMPLOYER SAFE HARBOR CONTRIBUTIONS. In addition to the Employer
Matching Contributions made pursuant to Section 3.2 and the Employer
Discretionary Contribution made pursuant to Section 3.3 for each Plan Year, the
Employer, upon the authorization of the Directors in their discretion, may
contribute to the Trust, as a "safe harbor contribution" for such Plan Year,
the amounts necessary to cause the Plan to satisfy the restrictions set forth in
Section 3.1(e) and Section 3.5, respectively. Amounts contributed in order to
satisfy the restrictions set forth in Section 3.1(e) shall be considered
"qualified matching contributions" (within the meaning of Treasury Regulation
Section 1.401(k)-1(g)(13)) for purposes of such Section, and amounts contributed
in order to satisfy the restrictions set forth in Section 3.5 shall be
considered Employer Matching Contributions for purposes of such Section. Any
amounts contributed pursuant to this Paragraph shall be allocated in accordance
with the provisions of Sections 4.2(d) and (e).
3.5 RESTRICTIONS ON EMPLOYER CONTRIBUTIONS. In restriction of the
Employer Contributions hereunder, it is specifically provided that one of the
"actual contribution percentage" tests set forth in section 401(m) of the Code
and the Treasury Regulations thereunder must be met in each Plan Year. The
Committee may elect, in accordance with applicable Treasury Regulations, to
treat Cash or Deferred Contributions to the Plan as Employer Matching
Contributions for purposes of meeting this requirement.
3.6 RETURN OF CONTRIBUTIONS. Anything to the contrary herein
notwithstanding, the Employer's contributions to the Plan are contingent upon
the deductibility of such contributions under Section 404 of the Code. To the
extent that a deduction for contributions is disallowed, such contributions
shall, upon the written demand of the Employer, be returned to the Employer by
the Trustee within one year after the date of disallowance, reduced by any net
losses of the Trust Fund attributable thereto but not increased by any net
earning of the Trust Fund attributable thereto. Moreover, if Employer
contributions are made under a mistake of fact, such contributions shall, upon
the written demand of the Employer, be returned to the Employer by the Trustee
within one year after the payment thereof, reduced by any net
I-10
losses of the Trust Fund attributable thereto but not increased by any net
earnings of the Trust Fund attributable thereto.
3.7 DISPOSITION OF EXCESS DEFERRALS AND EXCESS CONTRIBUTIONS.
(a) Anything to the contrary herein notwithstanding, any Cash or Deferred
Contributions to the Plan for a calendar year on behalf of a Member in excess of
the limitations set forth in Section 3.1(d) and any "excess deferrals" from
other plans allocated to the Plan by such Member no later than March 1 of the
next following calendar year within the meaning of, and pursuant to the
provisions of, section 402(g)(2) of the Code, shall be distributed to such
Member not later than April 15 of the next following calendar year.
(b) Anything to the contrary herein notwithstanding, if, for any Plan
Year, the aggregate Cash or Deferred Contributions made by the Employer on
behalf of Highly Compensated Employees exceeds the maximum amount of Cash or
Deferred Contributions permitted on behalf of such Highly Compensated Employees
pursuant to Section 3.1(e) (determined by reducing Cash or Deferred
Contributions on behalf of Highly Compensated Employees in order of the "actual
deferral percentages" (as that term is defined in section 401(k)(3)(B) of the
Code and the Treasury Regulations thereunder) beginning with the highest of such
percentages), such excess shall be distributed to the Highly Compensated
Employees on whose behalf such excess was contributed before the end of the next
following Plan Year. For purposes of this Paragraph, the determination and
correction of excess Cash or Deferred Contributions of a Member whose actual
deferral percentage is determined under the family aggregation rules of sections
401(k) and 414(q) of the Code shall be made in accordance with the provisions of
such sections and the Treasury Regulations thereunder.
(c) Anything to the contrary herein notwithstanding, if, for any Plan
Year, the aggregate Employer Contributions allocated to the Accounts of Highly
Compensated Employees exceeds the maximum amount of such Employer Contributions
permitted on behalf of such Highly Compensated Employees pursuant to Section 3.5
(determined by reducing Employer Contributions made on behalf of Highly
Compensated Employees in order of the "contribution percentages" (as that term
is defined in section 401(m)(3) of the Code and Treasury Regulations thereunder)
beginning with the highest of such percentages), such excess shall be
distributed to the Highly Compensated Employees on whose behalf such excess
contributions were made (or, if such excess contributions are forfeitable, they
shall be forfeited) before the end of the next following Plan Year. For purposes
of this Paragraph, the determination and correction of excess Employer
Contributions allocated to the Account of a Member whose contribution percentage
is determined under the family aggregation rules of sections 401(m) and 414(q)
of the Code shall be made in accordance with the provisions of such sections and
the Treasury Regulations thereunder. Employer Contributions shall be forfeited
pursuant to this Paragraph only if distribution of all vested Employer
Contributions is insufficient to meet the requirements of this Paragraph. If
vested Employer Contributions are distributed to a Member and nonvested Employer
Contributions remain credited to such Member's Accounts, such nonvested Employer
Contributions shall vest at the same rate as if such distribution had not been
made.
(d) In coordinating the disposition of such excess deferrals and excess
contributions pursuant to this Section, such excess deferrals and excess
contributions shall be treated in the following order:
(1) first, excess deferrals described in Paragraph (a) above shall be
distributed;
(2) second, excess Cash or Deferred Contributions described in
Paragraph (b) above which are not considered in determining the amount of
Employer Matching Contributions pursuant to Section 3.2 shall be
distributed;
(3) third, excess Cash or Deferred Contributions described in
Paragraph (b) above which are considered in determining the amount of
Employer Matching Contributions pursuant to Section 3.2 shall be
distributed, and the Employer Matching Contributions with respect to such
Cash or Deferred Contributions shall be forfeited; and
(4) fourth, excess Employer Contributions described in Paragraph (c)
above shall be distributed (or, if forfeitable, forfeited).
I-11
(e) Any distribution or forfeiture of excess deferrals or excess
contributions pursuant to the provisions of this Section shall be adjusted for
income or loss allocated thereto in accordance with the provisions of Section
4.4 through the Valuation Date next preceding the date of the distribution or
forfeiture. Any forfeiture pursuant to the provisions of this Section shall be
considered to have occurred on the date which is 2-1/2 months after the end of
the Plan Year.
3.8 ROLLOVER CONTRIBUTIONS.
(a) Qualified Rollover Contributions may be made to the Plan by any
Eligible Employee of amounts that are "eligible rollover distributions" within
the meaning of section 402(f)(2)(A) of the Code from an employee's trust
described in section 401(a) of the Code, which is exempt from tax under section
501(a) of the Code. A Rollover Contribution may be made to the Plan irrespective
of whether such eligible rollover distribution was paid to the Eligible Employee
or paid to the Plan as a "direct" Rollover Contribution, but only if any such
Rollover Contribution is made pursuant to and in accordance with applicable
provisions of the Code and Treasury Regulations promulgated thereunder. A direct
Rollover Contribution to the Plan may be effectuated only by wire transfer
directed to the Trustee or by issuance of a check made payable to the Trustee,
which is negotiable only by the Trustee and which identifies the Eligible
Employee for whose benefit the Rollover Contribution is being made. Any Eligible
Employee desiring to effect a Rollover Contribution to the Plan must execute and
file with the Committee the form prescribed by the Committee for such purpose.
The Committee may require as a condition to accepting any Rollover Contribution
that such Eligible Employee furnish any evidence that the Committee in its
discretion deems satisfactory to establish that the proposed Rollover
Contribution is in fact such an eligible rollover distribution and is made
pursuant to and in accordance with applicable provisions of the Code and
Treasury Regulations. All Rollover Contributions to the Plan must be made in
cash. A Rollover Contribution shall be credited to the Rollover Account of the
Eligible Employee for whose benefit such Rollover Contribution is being made as
of the last day of the month in which such Rollover Contribution is made;
provided, however, that for purposes of Section 4.4 only, such Rollover
Contribution shall be allocated to the Rollover Account of such Member as soon
as administratively feasible after such Rollover Contribution is received by the
Trustee.
(b) An Eligible Employee who has made a Rollover Contribution in
accordance with this Section who has not otherwise become a Member of the Plan
in accordance with Article II shall become a Member coincident with such
Rollover Contribution; provided, however, that such Member shall not have a
right to defer Compensation or have Employer Contributions made on his behalf
until he has otherwise satisfied the requirements imposed by Article II.
IV.
ALLOCATIONS
4.1 SUSPENSE ACCOUNT. All contributions, forfeitures and the net income
(or net loss) of the Trust Fund shall be held in suspense until allocated to the
Accounts of the Members or applied as provided herein.
4.2 ALLOCATION OF CONTRIBUTIONS.
(a) Cash or Deferred Contributions made by the Employer on a Member's
behalf pursuant to Section 3.1 shall be allocated to such Member's Cash or
Deferred Account as of the last day of the month for which they were made.
(b) The 25% Employer Matching Contributions for each month pursuant to
Section 3.2 shall be allocated as of the last day of the month for which they
were made to the Employer Matching Contribution Accounts of the Members for whom
such contributions were made.
(c) The Employer Discretionary Contribution, if any, made pursuant to
Section 3.3 for a Plan Year shall be allocated as of the allocation date during
such Plan Year specified by the Directors at the time such Employee
Discretionary Contribution is authorized to the Employer Contribution Accounts
of the Members who (1) were Eligible Employees on such allocation date or (2)
terminated employment during such Plan
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Year on or after Normal Retirement Date or by reason of total and permanent
disability (as defined in Section 7.2) or death. The allocation to each such
eligible Member's Employer Contribution Account shall be that portion of such
Employer Discretionary Contribution which is in the same proportion that such
Member's Compensation for the portion of the Plan Year for which such
contribution is made (as specified by the Employer) bears to the total of all
such Members' Compensation for such portion of the Plan Year.
(d) The Employer's Safe Harbor Contribution, if any, made pursuant to
Section 3.4 for a Plan Year in order to satisfy the restrictions set forth in
Section 3.1(e) shall be allocated in the following priority as of the last day
of such Plan Year to the Cash or Deferred Accounts of Members who (1) received
an allocation of Cash or Deferred Contributions for such Plan Year and (2) were
not Highly Compensated Employees for such Plan Year (each such Member
individually referred to as an "ELIGIBLE MEMBER" for purposes of this
Paragraph):
(A) first, subject to the limitations set forth in Section 4.5, to
the Cash or Deferred Account of the Eligible Member who received the least
amount of Compensation for such Plan Year, then to the Cash or Deferred
Account of the Eligible Member who received the next smallest amount of
Compensation for such Plan Year and continuing in such manner until the
restrictions set forth in Section 3.1(e) have been satisfied; and
(B) next, the remaining portion, if any, of such Employer Safe Harbor
Contribution shall be allocated to the Cash or Deferred Accounts of the
Eligible Members who did not receive an allocation pursuant to clause (A)
above based on the ratio of each such Eligible Member's Cash or Deferred
Contributions for such Plan Year to the total of all such Eligible Members'
Cash or Deferred Contributions for such Plan Year.
(e) The Employer Safe Harbor Contribution, if any, made pursuant to
Section 3.4 for a Plan Year in order to satisfy the restrictions set forth in
Section 3.5 shall be allocated in the following priority as of the last day of
such Plan Year to the Employer Matching Contribution Accounts of Members who (1)
received an allocation of Employer Matching Contributions for such Plan Year and
(2) were not Highly Compensated Employees for such Plan Year (each such Member
individually referred to as an "ELIGIBLE MEMBER" for purposes of this
Paragraph):
(A) first, subject to the limitations set forth in Section 4.5, to
the Employer Matching Contribution Account of the Eligible Member who
received the least amount of Compensation for such Plan Year, then to the
Employer Matching Contribution Account of the Eligible Member who received
the next smallest amount of Compensation for such Plan Year and continuing
in such manner until the restrictions set forth in Section 3.5 have been
satisfied; and
(B) next, the remaining portion, if any, of such Employer Safe Harbor
Contribution shall be allocated to the Employer Matching Contribution
Accounts of the Eligible Members who did not receive an allocation pursuant
to clause (A) above based on the ratio of each such Eligible Member's share
of Employer Matching Contributions for such Plan Year to the total of all
such Eligible Members' share of Employer Matching Contributions for such
Plan Year.
(f) If an Employer Safe Harbor Contribution is made in order to satisfy
the restrictions set forth in both Section 3.1(e) and Section 3.5 for the same
Plan Year, the Employer Safe Harbor Contribution made in order to satisfy the
restrictions set forth in Section 3.1(e) shall be allocated pursuant to
Paragraph (d) above prior to allocating the Employer Safe Harbor Contribution
made in order to satisfy the restrictions set forth in Section 3.5.
(g) Contrary Plan provisions notwithstanding, for purposes of Section 4.4
only, contributions pursuant this Section shall be allocated to the applicable
Accounts of Members as soon as administratively feasible after such
contributions are received by the Trustee.
4.3 APPLICATION OF FORFEITURES. Effective June 1, 1994, any amounts that
are forfeited under any provision hereof other than Section 4.5 during a Plan
Year shall be applied to the payment of administrative expenses of the Plan and
Trust in accordance with Section 13.1. Effective June 1, 1994, any
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amounts that are forfeited under Section 4.5 during a Plan Year shall be applied
to reduce Employer Matching Contributions next coming due.
4.4 ALLOCATION OF NET INCOME OR LOSS AND CHANGES IN VALUE AMONG ACCOUNTS.
As of each Valuation Date, the Trustee shall determine the fair market value of
the assets of each Fund and the net income (or net loss) of each Fund since the
next preceding Valuation Date. Any net increase (or net decrease) in fair market
value and any net income (or net loss) of each Fund since the next preceding
Valuation Date shall be allocated among the Accounts invested in such Fund in
proportion to the value of such Accounts on the next preceding Valuation Date.
4.5 LIMITATIONS.
(a) For purposes of this Section, the following terms and phrases shall
have these respective meanings:
(1) "ANNUAL ADDITIONS" of a Member for any Limitation Year shall
mean the total of (A) the Employer Contributions, Cash or Deferred
Contributions and forfeitures, if any, allocated to such Member's Accounts
for such year, (B) Member's contributions, if any, (excluding any Rollover
Contributions) for such year and (C) amounts referred to in sections
415(l)(1) and 419A(d)(2) of the Code.
(2) "LIMITATION YEAR" shall mean the Plan Year.
(3) "MAXIMUM ANNUAL ADDITIONS" of a Member for any Limitation Year
shall mean the lesser of (A) $30,000 (or, if greater, one-fourth of the
dollar limitation in effect under section 415(b)(1)(A) of the Code for such
Limitation Year) or (B) 25% of such Member's compensation, within the
meaning of section 415(c)(3) of the Code and applicable Treasury
Regulations thereunder and as limited by section 401(a)(17) of the Code for
Limitation Years beginning after December, 31, 1988, during such year
except that the limitation in this Clause (B) shall not apply to any
contribution for medical benefits (within the meaning of section 419(f)(2)
of the Code) after separation from service with the Employer or a
Controlled Entity which is otherwise treated as an Annual Addition or to
any amount otherwise treated as an Annual Addition under section 415(l)(1)
of the Code.
(b) Contrary Plan provisions notwithstanding, in no event shall the Annual
Additions credited to a Member's Accounts for any Limitation Year exceed the
Maximum Annual Additions for such Member for such year. If as a result of a
reasonable error in estimating a Member's Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of section
402(g)(3) of the Code) that may be made with respect to any individual under the
limits of section 415 of the Code, or because of other limited facts and
circumstances, the Annual Additions which would be credited to a Member's
Accounts for a Limitation Year would nonetheless exceed the Maximum Annual
Additions for such Member for such year, the excess Annual Additions which, but
for this Section, would have been allocated to such Member's Accounts shall be
disposed of as follows:
(1) first, any such excess Annual Additions in the form of Cash or
Deferred Contributions on behalf of such Member which would not have been
considered in determining the amount of Employer Contributions allocated to
such Member's Accounts pursuant to Section 4.2 shall be distributed to such
Member, adjusted for income or loss allocated thereto;
(2) next, any such excess Annual Additions in the form of Cash or
Deferred Contributions on behalf of such Member which would have been
considered in determining the amount of Employer Contributions allocated to
such Member's Accounts pursuant to Section 4.2 shall be distributed to such
Member, adjusted for income or loss allocated thereto, and the Employer
Contributions which would have been allocated to such Member's Accounts
based upon such distributed Cash or Deferred Contributions shall, to the
extent such amounts would have otherwise been allocated to such Member's
Accounts, be allocated to a suspense account and shall be held there until
used to reduce future Employer Matching Contributions.
(5) finally, any such excess Annual Additions in the form of Employer
Discretionary Contributions shall, to the extent such amounts would
otherwise have been allocated to such Member's
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Accounts, be allocated to a suspense account and shall be held therein
until used to reduce future Employer Matching Contributions.
(c) If a suspense account is in existence at any time during a Limitation
Year pursuant to this Section, it will not participate in allocations of the net
income (or net loss) of the Trust Fund.
(d) For purposes of determining whether the Annual Additions under this
Plan exceed the limitations herein provided, all defined contribution plans of
the Employer are to be treated as one defined contribution plan. In addition,
all defined contribution plans of Controlled Entities shall be aggregated for
this purpose. For purposes of this Section only, a "CONTROLLED ENTITY" (other
than an affiliated service group member within the meaning of section 414(m) of
the Code) shall be determined by application of a more than 50% control standard
in lieu of an 80% control standard. If the Annual Additions credited to a
Member's Accounts for any Limitation Year under this Plan plus the additions
credited on his behalf under other defined contribution plans required to be
aggregated pursuant to this Paragraph would exceed the Maximum Annual Additions
to such Member for such Limitation Year, the Annual Additions under this Plan
and the additions under such other plans shall be reduced on a pro rata basis
and allocated, reallocated or returned in accordance with applicable plan
provisions regarding Annual Additions in excess of Maximum Annual Additions.
(e) In the case of a Member who also participated in a defined benefit plan
of the Employer or a Controlled Entity (as defined in Paragraph (d) above), the
Employer shall reduce the Annual Additions credited to the Accounts of such
Member under this Plan pursuant to the provisions of Paragraph (b) to the extent
necessary to prevent the limitation set forth in section 415(e) of the Code from
being exceeded. Notwithstanding the foregoing, the provisions of this Paragraph
shall only apply if such defined benefit plan does not provide for a reduction
of benefits thereunder to ensure that the limitation set forth in section 415(e)
of the Code is not exceeded.
(f) If the limitations set forth in this Section would not otherwise be met
for any Limitation Year, the Compensation deferral elections pursuant to Section
3.1 of affected Members may be reduced by the Committee on a temporary and
prospective basis in such manner as the Committee shall determine.
V.
INVESTMENT OF FUNDS
5.1 EMPLOYER CONTRIBUTION ACCOUNTS. The Employer Contribution Accounts of
the Members shall be invested as one Fund in such general investments as the
Committee may determine.
5.2 INVESTMENT OPTIONS FOR CASH OR DEFERRED, EMPLOYER MATCHING AND ROLLOVER
ACCOUNTS.
(a) Each member shall designate, in accordance with the procedures
established from time to time by the Committee, the manner in which the amounts
allocated to his Cash or Deferred, Employer Matching and Rollover Accounts shall
be invested from among the Funds made available from time to time by the
Committee. With respect to each of such Accounts, such Member may designate one
of such Funds for all the amounts allocated to such Account or he may split the
investment of the amounts allocated to such Account between such Funds in such
increments as the Committee may prescribe. If a Member fails to make a proper
designation, then such Accounts shall be invested in the Fund or Funds
designated by the Committee from time to time in a uniform and nondiscriminatory
manner.
(a) A Member may change his investment designation for future contributions
to be allocated to his Cash or Deferred, Employer Matching or Rollover Accounts.
Any such change shall be made in accordance with the procedures established by
the Committee, and the frequency of such changes may be limited by the
Committee.
(b) A Member may elect to convert his investment designation with respect
to the amounts already allocated to his Cash or Deferred, Employer Matching or
Rollover Accounts. Any such conversion shall be
I-15
made in accordance with the procedures established by the Committee, and the
frequency of such conversions may be limited by the Committee.
VI.
RETIREMENT BENEFITS
A Member who terminates his employment on or after his Normal Retirement
Date shall be entitled to an Article X benefit equal in value to the sum of:
(a) the amount in his Accounts as of the Valuation Date next preceding
his Benefit Commencement Date: and
(b) if the Valuation Date next preceding such Member's Benefit
Commencement Date occurs prior to the close of the Plan Year during which
his termination of employment occurred, the amount of such Member's
allocation of Employer Discretionary Contributions and Employer Safe Harbor
Contributions for such Plan Year.
VII.
DISABILITY BENEFITS
7.1 DISABILITY BENEFITS. In the event a Member's employment is terminated
due to total and permanent disability, as of the Committee's certification
thereof as provided in Section 7.2, such Member shall be entitled to an Article
X benefit equal in value to the sum of:
(a) the amount in his Accounts as of the Valuation Date next preceding
his Benefit Commencement Date; and
(b) if the Valuation Date next preceding such Member's Benefit
Commencement Date occurs prior to the close of the Plan Year during which
such disability was determined, the amount of such Member's allocation of
Employer Discretionary Contributions and Employer Safe Harbor Contributions
for such Plan Year.
7.2 TOTAL AND PERMANENT DISABILITY DETERMINED. The Committee shall
determine whether a Member has become totally and permanently disabled and shall
so notify such Member within sixty days thereafter. A Member shall be considered
totally and permanently disabled if such disability is so certified by the
Committee and, unless waived by the Committee as unnecessary, supported by a
written medical opinion that such Member will be permanently incapable of
performing his job for physical or mental reasons.
VIII.
SEVERANCE BENEFITS
8.1 NO BENEFITS UNLESS HEREIN SET FORTH. Except as set forth in this
Article, upon termination of employment of a Member prior to his Normal
Retirement Date for any reason other than total and permanent disability or
death, such Member shall acquire no right to any benefit from the Plan or the
Trust Fund.
8.2 SEVERANCE BENEFIT.
(a) Each Member whose employment is terminated prior to his Normal
Retirement Date for any reason other than total and permanen disability or death
shall be entitled to an Article X benefit equal in value to the sum of:
(1) his Vested Interest in the amount in his Accounts as of the
Valuation Date next preceding his Benefit Commencement Date: and
I-16
(2) if the Valuation Date next preceding such Member's Benefit
Commencement Date occurs prior to the close of the Plan Year during which
his termination of employment occurred, the amount of such Member's Vested
Interest in his allocation of Employer Safe Harbor Contributions for such
Plan Year.
(b) For purposes of this Section, a Member's Vested Interest in his
Employer Accounts shall be determined by such Member's years of Vesting Service
in accordance with the following schedule:
YEARS OF VESTING SERVICE VESTED INTEREST
---------------------------------------- ---------------
1 year............................. 20%
2 years............................ 40%
3 years............................ 60%
4 years............................ 80%
5 years or more.................... 100%
(c) Paragraph (b) above notwithstanding, a Member shall have a 100% Vested
Interest in his Employer Accounts upon attainment of his Normal Retirement Date.
(d) A Member shall have a 100% Vested Interest in his Cash or Deferred
Account and Rollover Account at all times.
8.3 VESTING SERVICE.
(a) For the period preceding the Effective Date, subject to the provisions
of Paragraph (c) below, an individual shall be credited with Vesting Service in
an amount equal to all service credited to him for vesting purposes under the
Plan as it existed on the day prior to the Effective Date.
(b) For the Plan Year beginning with the Effective Date and all Plan Years
thereafter, subject to the provisions of Paragraph (c) below, 1,000 or more
Hours of Service during any Computation Period shall constitute one year of
Vesting Service.
(c) In the case of a Member who incurs five consecutive One-Year
Breaks-in-Service, such Member's years of Vesting Service completed after such
One-Year Breaks-in-Service shall be disregarded in determining such Member's
Vested Interest in any Plan benefits derived from Employer Contributions on his
behalf prior to such One-Year Breaks-in-Service.
8.4 FORFEITURES.
(a) With respect to a Member who terminates employment with the Employer
with a Vested Interest in his Employer Accounts which is less than 100% and
receives a distribution from the Plan of the balance of his Vested Interest in
his Accounts in the form of a lump sum distribution by the close of the second
Plan Year following the Plan Year in which his employment is terminated, the
forfeitable amounts credited to the terminated Member's Employer Accounts as of
the Valuation Date next preceding his Benefit Commencement Date shall become a
forfeiture as of his Benefit Commencement Date.
(b) In the event that amounts credited to a terminated Member's Employer
Accounts become a forfeiture pursuant to Paragraph (a) above, the terminated
Member shall, upon subsequent reemployment with the Employer prior to incurring
five consecutive One-Year Breaks-in-Service, have the forfeited amounts restored
to such Member's Employer Accounts, unadjusted by any subsequent gains or losses
of the Trust Fund; provided, however, that such restoration shall be made only
if such Member repays in cash an amount equal to the amount so distributed to
him pursuant to Paragraph (a) above within five years from the date the Member
is reemployed; provided, further, that such Member's repayment of amounts
distributed to him from his Cash or Deferred Account shall be limited to the
portion thereof which was attributable to contributions with respect to which
the Employer made Employer Matching Contributions. Any such restoration shall be
made as of the Valuation Date coincident with or next succeeding the date of
repayment. Notwithstanding anything to the contrary in the Plan, forfeited
amounts to be restored by the Employer pursuant to this Paragraph shall be
charged against and deducted from forfeitures for the Plan Year in which such
amounts are restored which would otherwise be available to pay administrative
I-17
expenses of the Plan and Trust. If such forfeitures otherwise available are not
sufficient to provide such restoration, the portion of such restoration not
provided by forfeitures shall be charged against and deducted from Employer
Discretionary Contributions otherwise available for allocation to other Member's
in accordance with Section 4.2(c), and any additional amount needed to restore
such forfeited amounts shall be provided by an additional Employer Discretionary
Contribution (which shall be made without regard to current or accumulated
earnings and profits).
(c) With respect to a Member whose Vested Interest in his Employer Accounts
is less than 100% and who makes a withdrawal from or receives a termination
distribution from his Employer Accounts other than a lump sum distribution by
the close of the second Plan Year following the Plan Year in which his
employment is terminated, any amounts remaining in his Employer Accounts shall
continue to be maintained as separate accounts. At any relevant time, such
Member's nonforfeitable portion of his separate accounts shall be determined in
accordance with the following formula:
X=P(AB + (R x D)) - (R x D)
For purposes of applying the formula: X is the nonforfeitable portion of
such separate account at the relevant time; P is the Member's Vested Interest in
his Employer Contribution Account or Employer Matching Contribution Account at
the relevant time; AB is the balance of such separate account at the relevant
time; R is the ratio of the balance of such separate account at the relevant
time to the balance of such separate account after the withdrawal or
distribution; and D is the amount of the withdrawal or distribution. For all
other purposes of the Plan, a Member's separate accounts shall be treated as an
Employer Contribution Account or an Employer Matching Contribution Account. Upon
his incurring five consecutive One-Year Breaks-in-Service, the forfeitable
portion of a terminated Member's separate accounts and Employer Accounts shall
be forfeited as of the end of the Plan Year during which the terminated Member
incurred his fifth such consecutive One-Year Break-in-Service.
(d) With respect to a Member who terminates employment with the Employer
with a Vested Interest in his Employer Accounts greater than 0% but less than
100% and who is not otherwise subject to the forfeiture provisions of Paragraph
(a) or Paragraph (c) above, the forfeitable portion of his Employer Accounts
shall be forfeited as of the end of the Plan Year during which the terminated
Member incurs his fifth consecutive One-Year Break-in-Service.
(e) Any forfeitures occurring pursuant to Paragraphs (a), (c) or (d) above
shall be held in a suspense account and shall be applied to the payment of
administrative expenses of the Plan and Trust in accordance with Section 13.1.
For all Valuation Dates prior to such application, forfeited amounts held in the
suspense account shall not receive allocations of net income (or net loss)
pursuant to Section 4.4
(f) Distributions of benefits described in this Section shall be subject to
the time of payment requirements of Section 10.1
IX.
DEATH BENEFITS
9.1 DEATH BENEFITS. Upon the death of a Member while an Employee, the
Member's designated beneficiary shall be entitled to an Article X benefit equal
in value to the sum of:
(a) the amount in his Accounts as of the Valuation Date next
preceding his Benefit Commencement Date; and
(b) if the Valuation Date next preceding such Member's Benefit
Commencement Date occurs prior to the close of the Plan Year during which
his death occurred, the amount of such Member's allocation of Employer
Discretionary Contributions and Employer Safe Harbor Contributions for such
Plan Year.
9.2 DESIGNATION OF BENEFICIARIES.
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(a) Each Member shall have the right to designate the beneficiary or
beneficiaries to receive payment of his Article X benefit in the event of his
death. Each such designation shall be made by executing the beneficiary
designation form prescribed by the Committee and filing same with the Committee.
Any such designation may be changed at any time by execution of a new
designation in accordance with this Section. Notwithstanding the foregoing, if a
Member who is married on the date of his death designates other than his
surviving spouse as his beneficiary, such designation shall not be effective
unless (1) such spouse has consented thereto in writing and such consent (A)
acknowledges the effect of such specific designation, (B) either consents to the
specific designated beneficiary (which designation may not subsequently be
changed by the Member without spousal consent) or expressly permits such
designation by the Member without the requirement of further consent by the
spouse and (C) is witnessed by a Plan representative (other than the Member) or
a notary public or (2) such consent may not be obtained because such spouse
cannot be located or because of other circumstances described by applicable
Treasury Regulations. Any such consent by such surviving spouse shall be
irrevocable.
(b) If no such designation is on file with the Committee at the time of the
death of the Member or such designation is not effective for any reason as
determined by the Committee, the designated beneficiary or beneficiaries to
receive such Article X benefit shall be as follows:
(1) If a Member leaves a surviving spouse, his Article X benefit shall
be paid to such surviving spouse;
(2) If a Member leaves no surviving spouse, his Article X benefit
shall be paid to such Member's executor or administrator or to his heirs at
law if there is no administration of such Member's estate.
(c) Notwithstanding the preceding provisions of this Section and to
the extent not prohibited by state or federal law, if a Member is divorced
from his spouse and at the time of his death is not remarried to the person
from whom he was divorced, and any designation of such divorced spouse as
his beneficiary under the Plan filed prior to the divorce shall be null and
void unless the contrary is expressly stated in writing filed with the
Committee by the Member. In the event the designation of a divorced spouse
as a Member's beneficiary is null and void pursuant to the provisions of
this Paragraph, such Member's designated beneficiary shall be determined in
accordance with the provisions of Paragraph (b) above as if such divorced
spouse did not survive the Member.
X.
TIME AND MANNER OF PAYMENT OF BENEFITS
10.1 TIME AND MANNER OF PAYMENT.
(a) Subject to the provisions of the remaining Paragraphs of this Section,
payment of a Member's benefit hereunder shall be made as soon as
administratively feasible after the Valuation Date coincident with or next
succeeding the date the Member or his beneficiary becomes entitled to a benefit
pursuant to Article VI, VII, VIII or IX.
(b) Unless (1) the Member has attained age sixty-five or died, (2) the
Member consents to a distribution pursuant to Paragraph (a) within the
ninety-day period ending on the date payment of his benefit hereunder is to
commence pursuant to Paragraph (a) or (3) the Member's Vested Interest in his
Accounts is not in excess of $3,500, the Member's Benefit Commencement Date
shall be deferred to the date which is as soon as administratively feasible
after the Valuation Date coincident with or next succeeding the earlier of the
date the Member attains age sixty-five or the Member's date of death, or such
earlier Valuation Date as the Member may elect by written notice to the
Committee prior to such Valuation Date. No less than thirty days and no more
than ninety days before his Benefit Commencement Date, the Committee shall
inform the Member of his right to defer his Benefit Commencement Date and shall
describe the Member's Direct Rollover election rights pursuant to Paragraph (g)
below. If a distribution is one to which sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than thirty days after the
notice required under section 1.411(a)-11(c) of the Treasury Regulations is
given,
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provided that (i) the plan administrator clearly informs the Member that the
Member has a right to a period of at least thirty days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and (ii) the Member, after
receiving the notice, affirmatively elects a distribution.
(c) A Member's Benefit Commencement Date shall in no event be later than
the sixtieth day following the close of the Plan Year during which such Member
attains, or would have attained, his Normal Retirement Date or, if later,
terminates his employment with the Employer or a Controlled Entity.
(d) A Member's Benefit Commencement Date shall be in compliance with the
provisions of section 4091(a)(9) of the Code and applicable Treasury Regulations
thereunder and shall in no event be later than:
(1) In the case of a Member who attains the age of seventy and
one-half prior to January 1, 1988 and is not a "five-percent owner"
(within the meaning of section 416(i) of the Code) at any time during the
five Plan Year period ending in the calendar year in which such Member
attains the age of seventy and one-half, April 1st following the later of
(A) the calendar year in which such Member attains the age of seventy and
one-half, or (B) the calendar year in which such Member terminates his
employment with the Employer, or if such Member becomes a "five-percent
owner" following the end of such five Plan Year period, April 1st of the
calendar year following the calendar year in which such Member becomes a
"five-percent owner;"
(2) In the case of a Member who does not attain the age of seventy and
one-half prior to January 1, 1988 or is a "five-percent owner" (within
the meaning of section 416(i) of the Code) at any time during the five Plan
Year period ending in the calendar year in which such Member attains the
age of seventy and one-half, April 1st of the calendar year following the
calendar year in which such Member attains the age of seventy and one-half;
and
(3) In the case of a benefit payable pursuant to Article IX, the last
day of the five-year period following the death of such Member.
For purposes of Paragraph (d)(2) above, a Member who attains the age of
seventy and one-half in 1988, is not a "five-percent owner" (within the
meaning of section 416(i) of the Code) at any time during the five Plan Year
period ending in 1988 and does not terminate employment with the Employer prior
to January 1, 1989, shall be considered to attain the age of seventy and
one-half in 1989. Further, the preceding provisions of this Section
notwithstanding, a Member may not elect to defer the receipt of his benefit
hereunder to the extent that such deferral creates a death benefit that is more
than incidental within the meaning of section 401(a)(9)(G) of the Code and
applicable Treasury Regulations thereunder.
(e) Subject to the provisions of Paragraphs (c) and (d) above, a Member's
Benefit Commencement Date shall not occur before the expiration of the latest to
end of the following periods:
(1) a period during which the Member is employed by the Employer or
any Controlled Entity; or
(2) a period during which the Member is employed by a purchaser of
assets from the Employer or a Controlled Entity if such Member transfers to
employment with such purchaser in connection with such purchase.
(f) Subject to the provisions of Paragraph (g) below, a Member's benefit
shall be provided from the Member's Account balance(s) under the Plan and shall
be paid in one lump sum on the Member's Benefit Commencement Date. The Member's
benefit shall be paid to the Member unless the Member has died prior to his
Benefit Commencement Date, in which case the Member's benefit shall be paid to
his beneficiary designated in accordance with the provisions of Section 9.2.
(g) Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Paragraph, a Distributee may
elect, at the time and in the manner prescribed by the Committee, to have all or
any portion of an Eligible Rollover Distribution (other than any portion
attributable to the offset of an outstanding loan balance of such Member
pursuant to the Plan's loan procedure) paid directly to an Eligible Retirement
Plan specified by the Distributee in a Direct Rollover. The preceding sentence
notwithstanding, a Distributee may elect a Direct Rollover pursuant to this
Section
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only if such Distributee's Eligible Rollover Distribution is $200 or more.
Furthermore, if less than 100% of the Member's Eligible Rollover Distribution is
to be a Direct Rollover, the amount of the Direct Rollover must be $500 or more.
Prior to any Direct Rollover pursuant to this Paragraph, the Distributee shall
furnish the Committee with a statement from the plan, account or annuity to
which the benefit is to be transferred verifying that such plan, account or
annuity is, or is intended to be, an Eligible Retirement Plan.
10.2 UNCLAIMED BENEFITS. In the case of a benefit payable on behalf of a
Member, if the Committee is unable to locate the Member or beneficiary to whom
such benefit is payable, upon the Committee's determination thereof, such
benefit shall be forfeited, held in a suspense account and available for
allocation to the Accounts of the eligible Members pursuant to Section 4.2 as of
the end of the Plan Year in which the forfeiture occurred. For all Valuation
Dates prior to such allocation, forfeited amounts held in the suspense account
shall not participate in allocations of the net income (or net loss) of the
Trust Fund. Notwithstanding the foregoing, if subsequent to any such forfeiture
the Member or beneficiary to whom such benefit is payable makes a valid claim
for such benefit, such forfeited benefit shall be restored to the Plan in the
manner provided in Section 8.4(b).
10.3 CLAIMS REVIEW. In any case in which a claim for Plan benefits of a
Member or beneficiary is denied or modified, the Committee shall furnish written
notice to the claimant within ninety days (or within 180 days if additional
information requested by the Committee necessitates an extension of the
ninety-day period), which notice shall:
(a) state the specific reason or reasons for the denial or
modification:
(b) provide specific reference to pertinent Plan provisions on which
the denial or modification is based;
(c) provide a description of any additional material or information
necessary for the Member, his beneficiary or representative to perfect the
claim and an explanation of why such material or information is necessary;
and
(d) explain the Plan's claim review procedure as contained herein.
In the event a claim for Plan benefits is denied or modified, if the
Member, his beneficiary or representative desires to have such denial or
modification reviewed, he must, within sixty days following receipt of the
notice of such denial or modification, submit a written request for review by
the Committee of its initial decision. In connection with such request, the
Member, his beneficiary or representative may review any pertinent documents
upon which such denial or modification was based any may submit issues and
comments in writing. Within sixty days following such request for review the
Committee shall, after providing a full and fair review, render its final
decision in writing to the Member, his beneficiary or representative stating
specific reasons for such decision and making specific references to pertinent
Plan provisions upon which the decision is based. If special circumstances
require an extension of such sixty-day period, the Committee's decision shall be
rendered as soon as possible, but not later than 120 days after receipt of the
request for review. If an extenstion of time for review is required, written
notice of the extension shall be furnished to the Member, beneficiary or
representative prior to the commencement of the extension period.
XI.
WITHDRAWALS AND LOANS
11.1 WITHDRAWALS.
(a) A Member who has a financial hardship, as determined by the Committee,
and who has made all available withdrawals pursuant to the provisions of any
other plans of the Employer and any Controlled Entities of which he is a member
and who has obtained all available loans pursuant to Section 11.2 and pursuant
to the provisions of any other plans of the Employer and any Controlled Entities
of which he is a member may withdraw from his Employer Accounts, his Rollover
Account and his Cash or Deferred Account amounts not to exceed the lesser of (1)
his Vested Interest in such Accounts or (2) the amount
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determined by the Committee as being available for withdrawal pursuant to this
Paragraph. Such withdrawal shall come, first, from his Vested Interest in his
Employer Contribution Account, second, from his Vested Interest in his Employer
Matching Contribution Account, third, from his Rollover Account and, finally,
from his Cash or Deferred Account. For purposes of this Paragraph, financial
hardship means the immediate and heavy financial needs of the Member. A
withdrawal based upon financial hardship pursuant to this Paragraph shall not
exceed the amount required to meet the immediate financial need created by the
hardship and not reasonably available from other resources of the Member. The
amount required to meet the immediate financial need may include any amounts
necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution. The determination of the
existence of a Member's financial hardship and the amount required to be
distributed to meet the need created by the hardship shall be made by the
Committee. A withdrawal shall be deemed to be made on account of an immediate
and heavy financial need of a Member if the withdrawal is for:
(1) expenses of medical care described in section 213(d) of the Code
previously incurred by the Member, the Member's spouse or any dependents of
the Member (as defined in section 152 of the Code) or necessary for those
persons to obtain medical care described in section 213(d) of the Code and
not reimbursed or reimbursable by insurance;
(2) costs directly related to the purchase of a principal residence of
the Member (excluding mortgage payments);
(3) payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Member, or the Member's
spouse, children or dependents (as defined in section 152 of the Code);
(4) payments necessary to prevent the eviction of the Member from his
principal residence or foreclosure on the mortgage of the Member's
principal residence; or
(5) such other financial needs which the Commissioner of Internal
Revenue may deem to be immediate and heavy financial needs through the
publication of revenue rulings, notices and other documents of general
applicability.
The decision of the Committee shall be final and binding, provided that all
Members similarly situated shall be treated in a uniform and nondiscriminatory
manner. The above notwithstanding, (1) withdrawals under this Paragraph from a
Member's Cash or Deferred Account shall be limited to the sum of the Member's
Cash or Deferred Contributions to the Plan, plus income allocable thereto and
credited to the Member's Cash or Deferred Account as of December 31, 1988, less
any previous withdrawals of such amounts, and (2) amounts allocated to a
Member's Cash or Deferred Account pursuant to the provisions of Section 4.2(d)
and Employer Matching Contributions used to satisfy the restrictions set forth
in Section 3.1(e) shall not be subject to withdrawal. A Member who makes a
withdrawal from his Cash or Deferred Account under this Paragraph may not again
make elective contributions or employee contributions to the Plan or any other
qualified or nonqualified plan of the Employer or any Controlled Entity for a
period of twelve months following such withdrawal. Further, such Member may not
make elective contributions under the Plan or any other plan maintained by the
Employer or any Controlled Entity for such Member's taxable year immediately
following the taxable year of the withdrawal in excess of the applicable limit
set forth in Section 3.1(d) for such next taxable year less the amount of such
Member's elective contributions for the taxable year of the withdrawal.
(b) All withdrawals pursuant to this Section shall be made by executing and
filing with the Committee the form prescribed by the Committee for such purpose.
Notwithstanding the provisions of this Section, not more than one withdrawal
pursuant to the Paragraphs above may be made in any one Plan Year and no
withdrawal shall be made from an Account to the extent such Account has been
pledged to secure a loan under Section 11.2. If a Member's Account from which a
withdrawal is made is invested in more than one Fund, the Member shall designate
which Fund, or combination of Funds, from which the withdrawal shall be made. In
the absence of such designation, the withdrawal shall be made pro rata from each
Fund in which such Account is invested. All withdrawals under this Section shall
be paid in cash. Any withdrawal
I-22
hereunder on or after January 1, 1993 shall be subject to the Direct Rollover
election described in Section 10.1(g).
(c) This Section shall not be applicable to a Member following termination
of employment and the amounts in such Member's Accounts shall be distributable
in accordance with the provisions of Article X.
11.2 LOANS.
(a) Upon application by (1) any Member who is an Employee or (2) any Member
no longer employed by the Employer, a beneficiary of a deceased Member or an
alternate payee under a qualified domestic relations order, as that term is
defined in section 414(p)(8) of the Code, who retains an Account balance under
the Plan and who is a party-in-interest, as that term is defined in section
3(14) of the Act, as to the Plan (an individual who is eligible to apply for a
loan under this Section being hereinafter referred to as a "MEMBER" for
purposes of this Section), the Committee may in its discretion direct the
Trustee to make a loan or loans to such Member, not to exceed 50% of the then
value of the Member's Vested Interest in his Accounts. Such loans shall be made
pursuant to the provisions of the Committee's written loan procedure, which
procedure is hereby incorporated by reference as a part of the Plan.
(b) A loan to a Member may not exceed 50% of the then value of such
Member's Vested Interest in his Accounts.
(c) Paragraph (b) above to the contrary notwithstanding, the amount of a
loan made to a Member under this Section shall not exceed an amount equal to the
difference between:
(1) the lesser of $50,000 (reduced by the excess, if any, of (A) the
highest outstanding balance of loans from the Plan during the one-year
period ending on the day before the date on which the loan is made, over
(B) the outstanding balance of loans from the Plan on the date on which the
loan is made) or one-half of the present value of the Member's total
nonforfeitable accrued benefit under all qualified plans of the Employer or
a Controlled Entity; minus
(2) the total outstanding loan balance of the Member under all other
loans from all qualified plans of the Employer or a Controlled Entity.
XII.
ADMINISTRATION OF THE PLAN
12.1 APPOINTMENT OF COMMITTEE. The general administration of the Plan
shall be vested in the Committee which shall be appointed by the Directors and
shall consist of one or more persons. Any individual, whether or not an
Employee, is eligible to become a member of the Committee. Each member of the
Committee shall, before entering upon the performance of his duties, qualify by
signing a consent to serve as a member of the Committee under and pursuant to
the Plan and by filing such consent with the records of the Committee.
12.2 TERM, VACANCIES, RESIGNATION AND REMOVAL. Each member of the
Committee shall serve until he resigns, dies or is removed by the Directors. At
any time during his term of office, a member of the Committee may resign by
giving written notice to the Directors and the Committee, such resignation to
become effective upon the appointment of a substitute member or, if earlier, the
lapse of thirty days after such notice is given as herein provided. At any time
during his term of office, and for any reason, a member of the Committee may be
removed by the Directors with or without cause, and the Directors may in their
discretion fill any vacancy that may result therefrom. Any member of the
Committee who is an Employee shall automatically cease to be a member of the
Committee as of the date he ceases to be employed by the Employer or a
Controlled Entity.
12.3 OFFICERS, RECORDS AND PROCEDURES. The Committee may select officers
and may appoint a secretary who need not be a member of the Committee. The
Committee shall keep appropriate records of its proceedings and the
administration of the Plan and shall make available for examination during
business hours to any Member or beneficiary such records as pertain to that
individual's interest in
I-23
the Plan. The Committee shall designate the person or persons who shall be
authorized to sign for the Committee and, upon such designation, the signature
of such person or persons shall bind the Committee.
12.4 MEETINGS. The Committee shall hold meetings upon such notice and at
such time and places as it may from time to time determine. Notice to a member
shall not be required if waived in writing by that member. A majority of the
members of the Committee duly appointed shall constitute a quorum for the
transaction of business. All resolutions or other actions taken by the Committee
at any meeting where a quorum is present shall be by vote of a majority of those
present at such meeting and entitled to vote. Resolutions may be adopted or
other or other action taken without a meeting upon which written consent signed
by all of the members of the Committee.
12.5 SELF-INTEREST OF MEMBERS. No member of the Committee shall have any
right to vote or decide upon any matter relating solely to himself under the
Plan or to vote in any case in which his individual right to claim any benefit
under the Plan is particularly involved. In any case in which a Committee member
is so disqualified to act and the remaining members cannot agree, the Directors
shall appoint a temporary substitute member to exercise all the powers of the
disqualified member concerning the matter in which he is disqualified.
12.6 COMPENSATION AND BONDING. The members of the Committee shall not
receive compensation with respect to their services for the Committee. To the
extent required by the Act or other applicable law, or required by the Company,
members of the Committee shall furnish bond or security for the performance of
their duties hereunder.
12.7 COMMITTEE POWERS AND DUTIES. The Committee shall supervise the
administration and enforcement of the Plan according to the terms and provisions
hereof and shall have all powers necessary to accomplish these purposes,
including, but not by way of limitation, the right, power, authority and duty:
(a) to make rules, regulations and bylaws for the administration of
the Plan which are not inconsistent with the terms and provisions hereof,
provided such rules, regulations and bylaws are evidenced in writing and
copies thereof are delivered to the Trustee and to the Company, and to
enforce the terms of the Plan and the rules and regulation is promulgated
thereunder by the Committee;
(b) to construe in its discretion all terms, provisions, conditions
and limitations of the Plan. In all cases, the construction, necessary for
the Plan to qualify under the applicable provisions of the Code shall
control;
(c) to correct any defect or supply any omission or reconcile any
inconsistency that may appear in the Plan, in such manner and to such
extent as it shall deem in its discretion expedient to effectuate the
purposes of the Plan;
(d) to employ and compensate such accountants, attorneys, investment
advisors and other agents, employees, and independent contractors as the
Committee may deem necessary or advisable in the proper and efficient
administration of the Plan;
(e) to determine in its discretion all questions relating to
eligibility;
(f) to prescribe procedures to be followed by distributees in
obtaining benefits hereunder;
(g) to prepare, file and distribute, in such manner as the Committee
determines to be appropriate, such information and material as is required
by the reporting and disclosure requirements of the Act;
(h) to make a determination in its discretion as to the right of any
person to a benefit under the Plan;
(i) to receive and review reports from the Trustee and the Investment
Managers as to the financial condition of the Trust Fund, including its
receipts and disbursements.
(j) to instruct the Trustee as to the loans to Members pursuant to the
provision of Section 11.2;
I-24
(k) to furnish the Employer any information necessary for the
preparation of such Employer's tax return or other information that the
Committee determines in its discretion is necessary for a legitimate
purpose;
(l) to require and obtain from the Employer and the Members any
information or data that the Committee determines is necessary for the
proper administration of the Plan;
(m) to review periodically the Plan's short-term and long-term
investment needs and goals and to communicate such needs and goals to the
Trustee and any investment manager as frequently as the Committee, in its
discretion, deems necessary for the proper administration of the Plan and
Trust; and
(n) to instruct the Trustee as to the management, investment, and
reinvestment of the Trust Fund.
12.8 EMPLOYER TO SUPPLY INFORMATION. The Employer shall supply full and
timely information to the Committee relating to the Compensation of all Members,
their ages, their retirement, death or other cause for termination of employment
and such other pertinent facts as the Committee may require. The Employer shall
advise the Trustee of such of the foregoing facts as are deemed necessary for
the Trustee to carry out the Trustee's duties under the Plan. When making a
determination in connection with the Plan, the Committee shall be entitled to
rely upon the aforesaid information furnished by the Employer.
12.9 INDEMNIFICATION. The Company shall indemnify and hold harmless each
member of the Committee against any and all expenses and liabilities arising out
of his or her administrative functions or fiduciary responsibilities, including
any expenses and liabilities which are caused by or result from an act or
omission constituting the negligence of such member in the performance of such
functions or responsibilities, but excluding expenses and liabilities that are
caused by or result from such member's own gross negligence or willful
misconduct. Expenses against which such member shall be indemnified hereunder
shall include, without limitation, the amounts of any settlement or judgment,
costs, counsel fees and related charges reasonably incurred in connection with a
claim asserted or a proceeding brought or settlement thereof.
12.10 PLAN ADMINISTRATOR AND NAMED FIDUCIARY. For purposes of the Act,
Texas Petrochemicals Corporation shall be the Plan "administrator" and shall
be the "named fiduciary" with respect to the general administration of the
Plan (except as to the investment of the assets of the Trust Fund).
XIII.
ADMINISTRATION OF FUNDS
13.1 PAYMENT OF EXPENSES. All expenses incident to the administration of
the Plan and Trust, including but not limited to, legal, accounting, Trustee
fees, expenses of the Committee and the cost of furnishing any bond or security
required of the Committee, shall be paid by the Trustee from the Trust Fund and,
until paid, shall constitute a claim against the Trust Fund which is paramount
to the claims of Members and beneficiaries; provided, however, that (a) the
obligation of the Trustee to pay such expenses from the Trust Fund shall cease
to exist to the extent such expenses are paid by the Employer and (b) in the
event the Trustee's compensation is to be paid, pursuant to this Section, from
the Trust Fund, any individual serving as Trustee who already receives full-time
pay from an employer or an association of employers whose employees are
participants in the Plan, or from an employee organization whose members are
participants in the Plan, shall not receive any additional compensation for
serving as Trustee. This Section shall be deemed a part of any contract to
provide for expenses of Plan and Trust administration, whether or not the
signatory to such contract is, as a matter of convenience, the Employer.
13.2 TRUST FUND PROPERTY. All income, profits, recoveries, contributions,
forfeitures and any and all moneys, securities and properties of any kind at any
time received or held by the Trustee hereunder shall be held for investment
purposes as a commingled Trust Fund. The Committee shall maintain Accounts in
the name of each Member, but the maintenance of an Account designated as the
Account of a Member shall not mean that such Member shall have a greater or
lesser interest than due him by operation of the
I-25
Plan and shall not be considered as segregating any funds or property from any
other funds or property contained in the commingled fund. No Member shall have
any title to any specific asset in the Trust Fund.
13.3 DISTRIBUTIONS FROM MEMBERS' ACCOUNTS. Distributions from a Member's
Accounts shall be made by the Trustee only if, when, and in the amount and
manner directed in writing by the Committee. Any distribution made to a Member
or for his benefit shall be debited to such Member's Account or Accounts. All
distributions hereunder shall be made in cash except as otherwise specifically
provided herein.
XIV.
TRUSTEE AND ADMINISTRATION OF TRUST FUND
As a means of administering the assets of the Plan, the Company has entered
into a Trust Agreement with CG Trust Company as Trustee. The administration of
the assets of the Plan and the duties, obligations, and responsibilities of the
Trustee shall be governed by the Trust Agreement. The Trust Agreement may be
amended from time to time as the Company deems advisable in order to effectuate
the purposes of the Plan. The Trust Agreement is incorporated herein by
reference and thereby made a part of the Plan hereof.
XV.
FIDUCIARY PROVISIONS
15.1 ARTICLE CONTROLS. This Article shall control over any contrary,
inconsistent or ambiguous provisions contained in the Plan.
15.2 GENERAL ALLOCATION OF DUTIES. Each fiduciary with respect to the Plan
shall have only those specific powers, duties, responsibilities and obligations
as are specifically given him under the Plan. The Directors shall have the sole
authority to appoint and remove the Trustee or members of the Committee. Except
as otherwise specifically provided, the Committee shall have the sole
responsibility for the administration of the Plan, which responsibility is
specifically described herein. Except as otherwise specifically provided, the
Trustee shall have the sole responsibility for the administration, investment
and management of the assets held under the Plan. However, if the Committee, as
a co-fiduciary, shall exercise its power given hereunder at any time, and from
time to time, by written notice to the Trustee, to direct the Trustee in the
management, investment, and reinvestment of the Trust Fund, then in such event
the Trustee shall be subject to all proper directions of the Committee that are
made in accordance with the terms of the Plan and the Act. It is intended under
the Plan that each fiduciary shall be responsible for the proper exercise of his
own powers, duties, responsibilities and obligations hereunder and shall not be
responsible for any act or failure to act of another fiduciary except to the
extent provided by law or as specifically provided herein.
15.3 FIDUCIARY DUTY. Each fiduciary under the Plan, including but not
limited to the Committee and the Trustee as "named fiduciaries," shall
discharge his duties and responsibilities with respect to the Plan:
(a) solely in the interest of the Members, for the exclusive purpose
of providing benefits to Members, and their beneficiaries, and defraying
reasonable expenses of administering the Plan;
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of
a like character and with like aims;
(c) by diversifying the investments of the Plan so as to minimize the
risk of large losses, unless under the circumstances it is prudent not to
do so; and
(d) in accordance with the documents and instruments governing the
Plan insofar as such documents and instruments are consistent with
applicable law.
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No fiduciary shall cause the Plan or Trust Fund to enter into a
"prohibited transaction" as provided in section 4975 of the Code or section
406 of the Act.
15.4 DELEGATION AND ALLOCATION. The Committee may appoint subcommittees,
individuals or any other agents as it deems advisable and may delegate to any of
such appointees any or all of the powers and duties of the Committee. Such
appointment and delegation must be in writing, specifying the powers or duties
being delegated, and must be accepted in writing by the delegate. Upon such
appointment, delegation and acceptance, the delegating Committee members shall
have no liability for the acts or omissions of any such delegatee, as long as
the delegating Committee members do not violate their fiduciary responsibility
in making or continuing such delegation.
15.5 INVESTMENT MANAGER. The Directors may, in their sole discretion,
appoint an "investment manager," with power to manage, acquire or dispose of
any asset of the Plan and to direct the Trustee in this regard, so long as:
(a) the investment manager is (1) registered as an investment adviser
under the Investment Advisers Act of 1940, (2) a bank, as defined in the
Investment Advisers Act of 1940, or (3) an insurance company qualified to
do business under the laws of more than one state; and
(b) such investment manager acknowledges in writing that he is a
fiduciary with respect to the Plan.
Upon such appointment, the Directors shall not be liable for the acts of
the investment manager, as long as the Directors do not violate their fiduciary
responsibility in making or continuing such appointment. The Trustee shall
follow the directions of such investment manager and shall not be liable for the
acts or omissions of such investment manager. The investment manager may be
removed by the Directors at any time and within their sole discretion.
XVI.
AMENDMENTS
16.1 RIGHT TO AMEND. Subject to Section 16.2 and any other limitations
contained in the Act or the Code, the Company may from time to time amend, in
whole or in part, any or all of the provisions of the Plan on behalf of the
Company and all Employers. Specifically, but not by way of limitation, the
Company may make any amendment necessary to acquire and maintain a qualified
status for the Plan under the Code, whether or not retroactive.
16.2 LIMITATION ON AMENDMENTS. No amendment of the Plan may be made which
would vest in the Employer, directly or indirectly, any interest in or control
of the Trust Fund. No amendment may be made which would vary the Plan's
exclusive purpose of providing benefits to Members, and their beneficiaries, and
defraying reasonable expenses of administering the Plan or which would permit
the diversion of any part of the Trust Fund from that exclusive purpose. No
amendment shall be made which would reduce any then nonforfeitable interest of a
Member. No amendment shall increase the duties or responsibilities of the
Trustee unless the Trustee consents thereto in writing.
XVII.
DISCONTINUANCE OF CONTRIBUTIONS, TERMINATION,
PARTIAL TERMINATION AND MERGER OR CONSOLIDATION
17.1 RIGHT TO DISCONTINUE CONTRIBUTIONS, TERMINATE, OR PARTIALLY TERMINATE.
The Employer has established the Plan with the bona fide intention and
expectation that from year to year it will be able to, and will deem it
advisable to, make its contributions as herein provided. However, the Directors
realize that circumstances not now foreseen, or circumstances beyond its
control, may make it either impossible or inadvisable to continue to make its
contributions to the Plan. Therefore, the Directors shall have the power to
discontinue contributions to the Plan, terminate the Plan or partially terminate
the
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Plan at any time hereafter. Each member of the Committee and the Trustee shall
be notified of such discontinuance, termination or partial termination.
17.2 PROCEDURE IN THE EVENT OF DISCONTINUANCE OF CONTRIBUTIONS, TERMINATION
OR PARTIAL TERMINATION.
(a) If the Plan is amended so as to permanently discontinue Employer
contributions, or if Employer contributions are in fact permanently
discontinued, the Vested Interest of each affected Member shall be 100%,
effective as of the date of discontinuance. In case of discontinuance, the
Committee shall remain in existence and all other provisions of the Plan which
are necessary, in the opinion of the Committee, for equitable operation of the
Plan shall remain in force.
(b) If the Plan is terminated or partially terminated, the Vested Interest
of each affected Member shall be 100%, effective as of the termination date or
partial termination date, as applicable. Unless the Plan is otherwise amended
prior to dissolution of the Company, the Plan shall terminate as of the date of
dissolution of the Company.
(c) Upon discontinuance, termination or partial termination, any previously
unallocated contributions, forfeitures and net income (or net loss) shall be
allocated among the Accounts of the Members on such date of discontinuance,
termination or partial termination according to the provisions of Article IV, as
if such date of discontinuance or termination were a Valuation Date. Thereafter,
the net income (or net loss) shall continue to be allocated to the Accounts of
the Members until the balances are distributed. In the event of termination, the
date of the final distribution shall be treated as a Valuation Date.
(d) In the case of a termination or partial termination of the Plan, and in
the absence of a Plan amendment to the contrary, the Trustee shall pay the
balance of the Accounts of a Member for whom the Plan is so terminated, or who
is affected by such partial termination, to such Member, subject to the time of
payment, manner of payment and consent provisions of Article X.
17.3 MERGER, CONSOLIDATION OR TRANSFER. This Plan and Trust Fund may not
merge or consolidate with, or transfer its assets or liabilities to, any other
plan, unless immediately thereafter each Member would, in the event such other
plan terminated, be entitled to a benefit which is equal to or greater than the
benefit to which he would have been entitled if the Plan were terminated
immediately before the merger, consolidation or transfer.
XVIII.
ADOPTING EMPLOYERS
18.1 ADOPTION BY OTHER EMPLOYERS. It is contemplated that other
corporations, associations, partnerships or proprietorships may adopt this Plan
and thereby become Employers. Any such entity, whether or not presently
existing, may become, upon approval of the Company, a party hereto by
appropriate action of its Board of Directors or noncorporate counterpart. The
provisions of the Plan shall apply separately and equally to each Employer and
its employees in the same manner as is expressly provided for the Company and
its Employees, except that the power to appoint or otherwise affect the
Committee or the Trustee and the power to amend or terminate the Plan and Trust
Agreement shall be exercised by the Company alone. Nevertheless, any Employer
may, with the consent of the Company, incorporate in its adoption agreement or
in an amendment document specific provisions relating to the operation of the
Plan, and such provisions shall become a part of the Plan as to such employer
only. Transfer of employment among Employers shall not be considered a
termination of employment hereunder, and an Hour of Service with one shall be
considered as an Hour of Service with all others. Any Employer may, by
appropriate action of its Board of Directors or noncorporate counterpart,
terminate its participation in the Plan. Moreover, the Company may, in its
discretion, terminate an Employer's Plan participation at any time.
18.2 SINGLE PLAN. For purposes of the Code and the Act, the Plan as adopted
by the Employers shall constitute a single plan rather than a separate plan of
each Employer. All assets in the Trust Fund shall be available to pay benefits
to all Members and their beneficiaries.
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XIX.
MISCELLANEOUS PROVISIONS
19.1 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of this Plan
shall not be deemed to be a contract between the Employer and any person or to
be consideration for the employment of any person. Nothing herein contained
shall be deemed to give any person the right to be retained in the employ of the
Employer or to restrict the right of the Employer to discharge any person at any
time nor shall the Plan be deemed to give the Employer the right to require any
person to remain in the employ of the Employer or to restrict any person's right
to terminate his employment at any time.
19.2 PAYMENTS SOLELY FROM TRUST FUND. All benefits payable under the Plan
shall be paid or provided for solely from the Trust Fund and neither the
Employer nor the Trustee assumes any liability or responsibility for the
adequacy thereof. The Committee or the Trustee may require execution and
delivery of such instruments as are deemed necessary to assure proper payment of
any benefits.
19.3 ALIENATION OF INTEREST FORBIDDEN. Except as otherwise provided with
respect to "qualified domestic relations orders" pursuant to section 206(d) of
the Act and sections 401(a)(13) and 414(p) of the Code and except as otherwise
provided under other applicable law, no right or interest of any kind in any
benefit shall be transferable or assignable by any Member or any beneficiary or
be subject to anticipation, adjustment, alienation, encumbrance, garnishment,
attachment, execution or levy of any kind. Plan provisions to the contrary
notwithstanding, the Committee shall comply with the terms and provisions of any
"qualified domestic relations orders," including orders which require
distributions to an alternate payee prior to a Member's "earliest retirement
age" as such term is defined in section 206(d)(3)(E)(ii) of the Act and section
414(p)(4)(B) of the Code, and shall establish appropriate procedures to effect
the same.
19.4 NO BENEFITS TO THE EMPLOYER. No part of the corpus or income of the
Trust Fund shall be used for any purpose other than the exclusive purpose of
providing benefits for the Members and their beneficiaries and defraying
reasonable expenses of administering the Plan. Anything to the contrary herein
notwithstanding, the Plan shall never be construed to vest any rights in the
Employer other than those specifically given hereunder.
19.5 PAYMENTS TO MINORS AND INCOMPETENTS. If a Member or beneficiary
entitled to receive a benefit under the Plan is a minor or is determined by the
Committee in its discretion to be incompetent or is adjudged by a court of
competent jurisdiction to be legally incapable of giving valid receipt and
discharge for a benefit provided under the Plan, the Committee may pay such
benefit to the duly appointed guardian or conservator of such Member or
beneficiary or to any third party who is eligible to receive such benefit for
the account of such Member or beneficiary. Such payment shall operate as a full
discharge of all liabilities and obligations of the Committee, the Trustee, the
Employer, and any fiduciary of the Plan with respect to such benefit.
19.6 MEMBER'S ADDRESS. It shall be the affirmative duty of each Member to
inform the Committee of, and to keep on file with the Committee, his current
mailing address and the current mailing address of his designated beneficiary.
If a Member fails to keep the Committee informed of his current mailing address
and the current mailing address of his designated beneficiary, neither the
Committee, the Trustee, the Employer, nor any fiduciary under the Plan shall be
responsible for any late or lost payment of a benefit or for failure of any
notice to be provided timely under the terms of the Plan.
19.7 SEVERABILITY. If any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
19.8 JURISDICTION. The situs of the Plan and the Trust hereby created is
Texas. All provisions of the Plan shall be construed in accordance with the laws
of Texas except to the extent preempted by federal law.
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XX.
TOP-HEAVY STATUS
20.1 ARTICLE CONTROLS. Any Plan provisions to the contrary
notwithstanding, the provisions of this Article shall control to the extent
required to cause the Plan to comply with the requirements imposed under section
416 of the Code.
20.2 DEFINITIONS. For purposes of this Article, the following terms and
phrases shall have these respective meanings:
(a) ACCOUNT BALANCE: As of any Valuation Date, the aggregate amount
credited to an individual's account or accounts under a qualified defined
contribution plan maintained by the Employer or a Controlled Entity
(excluding employee contributions which were deductible within the meaning
of section 219 of the Code and rollover or transfer contributions made
after December 31, 1983, by or on behalf of such individual to such plan
from another qualified plan sponsored by an entity other than the Employer
or a Controlled Entity), increased by (1) the aggregate distributions made
to such individual from such plan during a five-year period ending on the
Determination Date and (2) the amount of any contributions due as of the
Determination Date immediately following such Valuation Date.
(b) ACCRUED BENEFIT: As of any Valuation Date, the present value
(computed on the basis of the Assumptions) of the cumulative accrued
benefit (excluding the portion thereof which is attributable to employee
contributions which were deductible pursuant to section 219 of the Code, to
rollover or transfer contributions made after December 31, 1983 by or on
behalf of such individual to such plan from another qualified plan
sponsored by an entity other than the Employer or a Controlled Entity, to
proportional subsidies or to ancillary benefits) of an individual under a
qualified defined benefit plan maintained by the Employer or a Controlled
Entity increased by (1) the aggregate distributions made to such individual
from such plan during a five-year period ending on the Determination Date
and (2) the estimated benefit accrued by such individual between such
Valuation Date and the Determination Date immediately following such
Valuation Date. Solely for the purpose of determining top-heavy status, the
Accrued Benefit of an individual shall be determined under (1) the method,
if any, that uniformly applies for accrual purposes under all qualified
defined benefit plans maintained by the Employer and the Controlled
Entities or (2) if there is no such method, as if such benefit accrued not
more rapidly than under the slowest accrual rate permitted under section
411(b)(1)(C) of the Code.
(c) AGGREGATION GROUP: The group of qualified plans maintained by
the Employer and each Controlled Entity consisting of (1) each plan in
which a Key Employee participates and each other plan which enables a plan
in which a Key Employee participates to meet the requirements of sections
401(a)(4) or 410 of the Code or (2) each plan in which a Key Employee
participates, each other plan which enables a plan in which a Key Employee
participates to meet the requirements of sections 401(a)(4) or 410 of the
Code and any other plan which the Employer elects to include as a part of
such group; provided, however, that the Employer may elect to include a
plan in such group only if the group will continue to meet the requirements
of sections 401(a)(4) and 410 of the Code with such plan being taken into
account.
(d) ASSUMPTIONS: The interest rate and mortality assumptions specified
for top-heavy status determination purposes in any defined benefit plan
included in the Aggregation Group including the Plan.
(e) DETERMINATION DATE: For the first Plan Year of any plan, the last
day of such Plan Year and for each subsequent Plan Year of such plan, the
last day of the preceding Plan Year.
(f) KEY EMPLOYEE: A "key employee" as defined in section 416(i) of
the Code and the Treasury Regulations thereunder.
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(g) PLAN YEAR: With respect to any plan, the annual accounting period
used by such plan for annual reporting purposes.
(h) REMUNERATION: Compensation withing the meaning of section
415(c)(3) of the Code, as limited by section 401(a)(17) of the Code.
(i) VALUATION DATE: With respect to any Plan Year of any defined
contribution plan, the most recent date within the twelve-month period
ending on a Determination Date as of which the trust fund established under
such plan was valued and the net income (or loss) thereof allocated to
participants' accounts. With respect to any Plan Year of any defined
benefit plan, the most recent date within a twelve-month period ending on a
Determination Date as of which the plan assets were valued for purposes of
computing plan costs for purposes of the requirements imposed under section
412 of the Code.
20.3 TOP-HEAVY STATUS.
(a) The Plan shall be deemed to be top-heavy for a Plan Year, if, as of the
Determination Date for such Plan Year, (1) the sum of Account Balances of
Members who are Key Employees exceeds 60% of the sum of Account Balances of all
Members unless an Aggregation Group including the Plan is not top-heavy or (2)
an Aggregation Group including the Plan is top-heavy. An Aggregation Group shall
be deemed to be top-heavy as of a Determination Date if the sum (computed in
accordance with section 416(g)(2)(B) of the Code and the Treasury Regulations
promulgated thereunder) of (1) the Account Balances of Key Employees under all
defined contribution plans included in the Aggregation Group and (2) the Accrued
Benefits of Key Employees under all defined benefit plans included in the
Aggregation Group exceeds 60% of the sum of the Account Balances and the Accrued
Benefits of all individuals under such plans. Notwithstanding the foregoing, the
Account Balances and Accrued Benefits of individuals who are not Key Employees
in any Plan Year but who were Key Employees in any prior Plan Year shall not be
considered in determining the top-heavy status of the Plan for such Plan Year.
Further, notwithstanding the foregoing, the Account Balances and Accrued
Benefits of individuals who have not performed services for the Employer or any
Controlled Entity at any time during the five-year period ending on the
applicable Determination Date shall not be considered.
(b) If the Plan is determined to be top-heavy for a Plan Year, the Employer
shall contribute to the Plan for such Plan Year on behalf of each Member who is
not a Key Employee and who has not terminated his employment as of the last day
of such Plan Year an amount equal to:
(1) the lesser of (A) 3% of such Member's Remuneration for such Plan
Year of (B) a percent of such Member's Remuneration for such Plan Year
equal to the greatest percent determined by dividing for each Key Employee
the amounts allocated to such Key Employee's Cash or Deferred Account and
Employer Accounts for such Plan Year by such Key Employee's Remuneration;
reduced by
(2) the amount of Employer Discretionary Contributions allocated to
such Member's Accounts for such Plan Year.
The minimum contribution required to be made for a Plan Year pursuant to this
Paragraph for a Member employed on the last day of such Plan Year shall be made
regardless of whether such Member is otherwise ineligible to receive an
allocation of the Employer's contributions for such Plan Year. Notwithstanding
the foregoing, if the Plan is deemed to be top-heavy for a Plan Year, the
Employer's contribution for such Plan Year pursuant to this Paragraph shall be
increased by substituting "4%" in lieu of "3%" in Clause (1) hereof to the
extent that the Directors determine to so increase such contribution to comply
with the provisions of section 416(h)(2) of the Code. Notwithstanding the
foregoing, no contribution shall be made pursuant to this Paragraph for a Plan
Year with respect to a Member who is a participant in another defined
contribution plan sponsored by the Employer or a Controlled Entity if such
Member receives under such other defined contribution plan (for the plan year of
such plan ending with or within the Plan Year of this Plan) a contribution which
is equal to or greater than the minimum contribution required by section
416(c)(2) of the Code. Notwithstanding the foregoing, no contribution shall be
made pursuant to this Paragraph for a Plan Year with respect to a Member who is
a participant in a defined benefit plan sponsored
I-31
by the Employer or a Controlled Entity if such Member accrues under such defined
benefit plan (for the plan year of such plan ending with or within the Plan Year
of this Plan) a benefit which is at least equal to the benefit described in
section 416(c)(1) of the Code. If the preceding sentence is not applicable, the
requirements of this Paragraph shall be met by providing a minimum benefit under
such defined benefit plan which, when considered with the benefit provided under
the Plan as an offset, is at least equal to the benefit described in section
416(c)(1) of the Code.
20.4 TERMINATION OF TOP-HEAVY STATUS. If the Plan has been deemed to be
top-heavy for one or more Plan Years and thereafter ceases to be top-heavy, the
provisions of this Article shall cease to apply to the Plan effective as of the
Determination Date on which it is determined to no longer be top-heavy.
20.5 EFFECT OF ARTICLE. Notwithstanding anything contained herein to the
contrary, the provisions of this Article shall automatically become inoperative
and of no effect to the extent not required by the Code or the Act.
EXECUTED this 17th day of May, 1995.
TEXAS PETROCHEMICALS CORPORATION
By B. W. WAYCASTER
I-32
EXHIBIT 10.7
LEASE
This agreement of lease made and entered into this 7th day of November,
1969, by and between Fred Vincent, married to and living with Juanita Vincent,
born Cole, a resident of Sugartown, Louisiana, herein called VINCENT, and
Petro-Tex Chemical Company, herein represented by its duly authorized Vice
President, which corporation is herein called COMPANY.
W I T N E S S E T H:
1.
Vincent hereby leases to Company, the following described property situated
in Calcasieu Parish, Louisiana, to-wit:
See Lease Description attached as Exhibit A
and Plat attached as Exhibit B, both being
a part of this lease.
2.
This lease is made and entered into for a term of five years commencing
November 7, 1969, and ending November 6, 1974.
3.
The rental to be paid by Company to Vincent shall be a total of
Thirty-three thousand and no/100 dollars ($33,000.00) for the five (5) year
period which shall be paid Three thousand ($3,000) in cash upon signing of lease
and sixty (60) equal installments of Five hundred dollars ($500) monthly in
advance, commencing on the date that this lease commences and continuing on the
same day of each month thereafter.
4.
All rentals to be paid by Company under this lease shall be paid to Vincent
by depositing the same to his credit in Calcasieu Marine National Bank, Sulphur,
Louisiana, or its successor, which is hereby designated and may hereinafter be
referred to as the "Depository Bank" of Vincent and which is hereby
constituted his agent to receive said funds, or at such other depository bank as
Vincent may from time to time designate in writing to Company. Payment of the
rentals to Vincent shall be deemed to have been made as of the date that the
Depository Bank receives Company's check. Should Vincent assign or convey all or
a part of the leased premises or the rentals herefrom, the rentals shall be
apportioned in accordance with the interest assigned and conveyed, but said
assignments and conveyances shall not be binding upon Company until 15 days
after Company has received: (a) a certificate of change of ownership executed by
all of the owners of Vincent's interest and showing upon its face the name and
address of the then owner or owners, their interest and the nature of their
interest and the amount of lease rentals to be paid to them respectively, as
well as the designation of a Depository Bank in which the lease rentals or a
portion thereof may be deposited to the respective owners of the interests shown
thereon: (b) a certified copy of the recorded instrument or instruments
evidencing such change of ownership.
5.
Company may use the leased property for any industrial, commercial or other
lawful purposes, and may construct thereon any and all improvements which in its
discretion are deemed appropriate, including without limitation reshaping of the
contour of the land, construction and laying of foundations, erection of
buildings and other structures, and the installation of fixtures, equipment and
machinery.
6.
Company shall have the full and exclusive authority during the term of this
lease to grant servitudes on, over and across the leased property on such terms
and conditions, and containing such provisions, as in
1
its sole discretion are deemed desirable, and shall be entitled to the
compensation, if any, paid for such servitudes, provided that the term of each
servitude voluntarily granted by Company shall expire upon the expiration or
termination of this lease, and provided that any servitude to continue for a
term longer than the term of this lease can be granted only by both Vincent and
Company, reserving to each their respective rights to the compensation paid or
awarded therefor.
At the expiration or termination of this lease, Vincent shall have the
option to require removal, at the expense of the servitude owner, of all
equipment installed under any servitudes granted solely by Company, or to allow
such equipment to remain in place; failure by Vincent to act on this option
within 60 days following the expiration or termination of this lease shall be
deemed the election by Vincent to allow the equipment to remain in place.
7.
Vincent shall promptly pay all taxes and special assessments on the land
leased herein, and Company shall promptly pay all taxes on the buildings and
other improvements constructed or installed thereon, and shall pay all utility
bills relating to its use of the property.
8.
At the termination or expiration of this lease for any reason, Company may,
but shall not be required to, remove any or all buildings, structures, and other
improvements of any kind, as well as any or all fixtures, equipment and
machinery, which it has constructed or installed thereon, whether movable,
immovable or fixed. It is agreed by Company that in event they elect to remove
all or any part of the buildings, structures, fixtures, equipment machinery and
any other improvements of any kind, they shall not remove any part of the dock
structure and agree that title to same shall be transferred to Vincent. Any
removals must be accomplished by Company within 180 days after termination or
expiration of the lease for any reason, and failure by Company timely to
complete such removals shall vest in Vincent full title to all buildings,
structures, improvements, fixtures, equipment, machinery and other property
remaining on the leased premises.
9.
At the termination or expiration of this lease, Company shall deliver up
the leased premises in good order and condition, except for natural
deterioration and damage by fires, tornado or other casualty, the removal of
fixtures, equipment and machinery, and the elements; in any event, Company shall
deliver the leased premises to Vincent free of trash and rubbish, and shall
backfill and level all pits and excavations created by the removal of buildings,
structures, improvements, fixtures, equipment, machinery and other property.
10.
Company shall properly execute and fulfill all the ordinances, rules and
regulations of any governmental agency applicable to the leased premises because
of its use of said premises, and all orders and requirements imposed by the
Board of Health, Sanitary and Police Departments, for the correction, prevention
and abatement of nuisances in or upon or connected with the premises because of
Company's use thereof during the term of the lease, all at Company's expense.
11.
Company may assign this lease or sub-let the leased premises or any
portions thereof, however, it shall remain liable to Vincent under all the
terms, conditions, covenants and obligations of this lease. Vincent may sell or
transfer the land herein described, in which event, his transferee shall assume
the obligations of Vincent.
12.
Vincent shall not be liable to Company or to Company's employees, patrons
or visitors, or to any other person for any damage to person or property caused
by any act, omission or neglect of Company or any
2
other tenant of the leased premises, and Company agrees to hold Vincent harmless
from all claims for any such damage, whether the injury occurs on or off the
leased premises.
13.
If Company should default for a period of 15 days in the payment of any
installment of the rentals or taxes, and if such default should continue for a
period of 30 days after written notice of such default and request for
compliance having been given Company by Vincent (with a copy of said notice to
any mortgagee of Company for whom a mailing address has theretofore been left
with Vincent for such purposes herein provided), Vincent may at any time
thereafter during the continuance of said default, at his election, declare this
lease cancelled and terminated.
If Company should default for a period of ten (10) days in the performance
of any of its convenants or obligations other than those set forth in the
immediately preceding paragraph, and if such default shall continue for a period
of ninety (90) days after written notice of such default and request for
compliance having been given Company by Vincent (with a copy of said notice to
any mortgagee of Company for whom a mailing address has heretofore been left
with Vincent for such purposes as herein provided) -- or if Company is timely
and diligently pursuing all legal remedies to secure compliance with the terms
of this lease, such ninety (90) day period of time shall be extended for such
additional period of time, and for only such period of time as Company is
proceeding timely and with due diligence in the exercise of all legal remedies
available to Company to secure compliance with the terms of this
lease -- Vincent may at any time thereafter during the continuance of said
default, at his election, declare this lease cancelled and terminated.
If Vincent elects to declare this lease cancelled and terminated as
provided above, Company shall pay Vincent all past due rental and, as liquidated
damages, a sum equal to all of the rental which would become due under the lease
for the unexpired term if the lease should have remained in full force and
effect, and Vincent's lessor's lien shall remain in full force and effect on and
against all property on the leased property to secure payment of said claims.
14.
If Company shall at any time during the term hereof be adjudged a bankrupt,
or shall make a voluntary assignment for the benefit of creditors, or if a
receiver of Company shall be appointed, or if this lease shall by operation of
law devolve on or pass to another person, or persons, other than Company, or any
of its successors and assigns, sub-tenants, sub-lessees, mortgages or other lien
holders, then and in each of said cases:
(a) If there be only one lessee and there be a mortgage of this lease,
then this lease shall thereupon be deemed ipso facto assigned to said mortgagee;
or
(b) If there be more than one lessee, the interest of each lessee involved
in any of said proceedings shall thereupon be deemed ipso facto assigned in
equal shares to the other lessees; or
(c) if there be only one lessee, and no mortgagee of lessee and if there
be a sub-lessee of lessee, this lease shall thereupon be deemed ipso facto
assigned to the sub-lessee of lessee holding the first sub-lease in point of
time subject to any other subleases then in force;
(d) if there be only one lessee, and if there be no mortgagee of lessee or
sub-lessee of lessee, this lease shall thereupon ipso facto terminate and come
to an end; and if this lease should so terminate, Company shall pay Vincent all
past due rental and, as liquidated damages, a sum equal to all of the rental
which would become due under the lease for the unexpired term if the lease
should have remained in full force and effect, and Vincent's lessor's lien shall
remain in full force and effect on and against all property on the leased
property to secure payment of said claims.
15.
Should Company mortgage or otherwise encumber the leasehold estate created
hereby or any buildings, structures, improvements, fixtures, equipment,
machinery, or other property, upon the leased premises, Company shall give
Vincent written notice thereof and the name and address of such mortgages;
3
and thereafter, while said mortgages or other encumbrances are in force, Vincent
shall give said mortgagees a duplicate copy of any and all notices of default or
other notices in writing which Vincent may give or serve upon Company pursuant
to the terms of this lease. A different address may be designated by such
mortgagees by written notice delivered to Vincent from time to time. Any such
mortgagees may, at their option, at any time before the rights of Company shall
have been forfeited to Vincent, as provided for in this lease, pay any of the
rents or other sums of money herein stipulated to be paid by Company or do any
other act or thing required of Company by the terms of this lease; and all
payments so made and all things so done or performed by any such mortgagees
shall be as effective to prevent a forfeiture of the rights of Company hereunder
as the same would have been if done and performed by Company instead of by any
such mortgagees. Any such mortgages or encumbrances so given by Company may
provide that, as between any such mortgages and Company, said mortgagee, on
making good and performing any such default or defaults on the part of Company,
shall be thereby subrogated to any and all of the rights of Company under the
terms and provisions of this lease. No such mortgagee of the rights and
interests of Company hereunder shall be or become entitled to be treated by
Vincent as an assignee of this lease until such time as said mortgagee shall by
foreclosure or other appropriate proceedings in the nature thereof, or as the
result of any other action or by proper conveyance from Company, acquire the
rights and interests of Company under the terms of this lease.
16.
It is agreed and understood that any holding over by the Company of the
leased premises after the expiration of this lease shall operate and be
construed as a month to month lease at a rental to be negotiated.
17.
Company shall have the right to renew this lease for nine (9) additional
terms of five (5) years each by giving notice of its election to renew at least
ninety (90) days before the end of the primary term or the end of any extended
term of the lease. Renewals shall be on the same conditions and under the same
covenants, except that the rental shall be paid monthly in advance as follows:
74 - 79 -- 1st renewal $550 per month
79 - 84 -- 2nd renewal $561 per month
84 - 89 -- 3rd renewal $595 per month
89 - 11/6/94 -- 4th renewal $631 per month
11/9/94 - 11/6/99 -- 5th renewal $673 per month
11/9/99 - 2004 -- 6th renewal $713 per month
11/9/2004 - 2009 -- 7th renewal $761 per month
2009 - 2014 -- 8th renewal $806 per month
2014 - 2019 -- 9th renewal $854 per month
18.
Provided Company is not in default with the terms, conditions and covenants
of this lease which it is perform, then Vincent guarantees Company quiet
enjoyment of the leased premises during the term of this lease.
19.
No waver by Vincent of any default or breach of any term, covenant,
condition, agreement, provision, or stipulation herein contained shall be
treated as a waiver of any subsequent default or breach of the same or any other
term, covenant, condition, agreement, provision, or stipulation hereof.
20.
All notices required in this lease shall be given in writing and by
registered or certified mail. Notice to Vincent shall be sent to him at Route 1,
Box 164, DeRidder, Louisiana, with a copy to Calcasieu Marine National Bank of
Sulphur, Louisiana, or such other address as he shall hereafter designate in
writing to Company.
4
Notice to Company shall be sent to it at P. O. Box 2584 Houston, Texas
(77001), or to such other address as Company shall hereafter designate in
writing to Vincent. Notices to the mortgagees of Company shall be sent to them
at such address as shall hereafter be designated in writing to Vincent.
21.
Either party who defaults in the performance of his obligations under this
lease shall be liable to the other party for all reasonable attorney's fees and
expenses incurred in enforcement of the lease provisions or collection of
damages.
22.
The provisions of this lease shall inure to the benefit of and shall be
binding upon the heirs, successors and assigns, respectively, of the parties
hereto.
THUS DONE, READ AND SIGNED by Fred Vincent, at Lake Charles, Louisiana, on
this 10th day of November, 1969 in the presence of the undersigned competent
witnesses.
WITNESSES:
RAY BURGESS
ELAYNE C. BURGESS
FRED VINCENT
Fred Vincent
(NEED NAME)
NOTARY PUBLIC
THUS DONE, READ AND SIGNED by William A. McMinn on this 7th day of
November, 1969, in the presence of the undersigned competent witnesses:
WITNESSES:
(NEED NAME)
CLEO M. MERCER
Cleo M. Merce
Notary Public in and for Harris County, Texas
My Commission Expires June 1, 1971
PETRO-TEX CHEMICAL COMPANY
BY WILLIAM A. McMINN
EXHIBIT A
Descriptions of Tracts I and II
TRACT I
Commencing at the southwest corner of the southwest quarter of the
southeast quarter (SW Cor. Of SW1/4 of SE1/4) of Section 7, Township 10 South,
Range 9 West, Louisiana Meridian, in Calcasieu Parish, Louisiana.
Thence along the north and south center-line of said Section 7, N 0 degrees
14' E, a distance of 1059.6'. Thence S 89 degrees 49' E a distance of 118.61' to
the east right of way line of State Highway 108 and to the point of
commencement.
Thence continuing S 89 degrees 49' E a distance of 585.67' to the east
property line of lessor. Thence N 0 degrees 11' E along said east property line
a distance of 125.4' to the right descending bank of Bayou D'Inde.
Thence, following the meander of the said right descending bank of Bayou
D'Inde, upstream to intersection of said bank of the bayou with the downstream
boundary of leasehold of The Firestone Tire and
5
Rubber Company as per lease agreement with lessor dated June 14, 1962 and
recorded in Calcasieu Parish Files, Number 889407, Book 822, Page 548. Said
point is located at the present bank line which has been dredged some 40' more
or less inshore from the shore line in 1962 as described in said lease
boundaries. This upstream point on the bayou is located N 71 degrees 42' 30" W
and at a distance of 454.32' from the downstream point on the bayou. Thence S 25
degrees 23' W along said Firestone lease boundary a distance of 60.0'. Thence
continuing along said Firestone lease boundary S 81 degrees 13' W, a distance of
130.63' to the said east right of way line of State Highway 108. Thence along
said right of way line S 0 degrees 02' E a distance of 191.95' to the point of
commencement.
TRACT II
Commencing at the southeast corner of the above described tract. Thence S 0
degrees 11' W a distance of 638.71' to the extended north line of property of
Adam Vincent. Thence S 89 degrees 53' W along said extension and along said
north line of property of Adam Vincent a distance of 234.4' to the northwest
corner of said Adam Vincent property. Thence S 0 degrees 12' W along the west
property line of said Adam Vincent property a distance of 417.2' to the south
line of said Section 7. Thence S 89 degrees 53' W along said section line 30'.
Thence N 0 degrees 12' E a distance of 447.2'. Thence N 89 degrees 53' E a
distance of 234.4'. Thence N 0 degrees 11' E a distance of 608.71' to the south
line of Tract I described above. Thence S 89 degrees 49' E along said south line
of Tract I a distance of 30' to the point of commencement.
The above descriptions are subject to all servitudes of record.
"PLEASE DESCRIBE THIS PAGE"
STATE OF LOUISIANA FOURTEENTH JUDICIAL DISTRICT
PARISH OF CALCASIEU OFFICE OF THE CLERK OF COURT
I HEREBY CERTIFY, That the foregoing is a true and correct copy of the
original Lease filed for record in this office November 28, 1969, bearing File
No. 1157790, and duly recorded on December 1, 1969, in Book 1099 of Conveyances
on page 717, et seq.
IN TESTIMONY WHEREOF, witness my official signature and seal of office at
Lake Charles, Louisiana, on this the 1 day of December 1, A.D. 1969.
ACTON HILLEBRANDT, CLERK OF COURT,
By PRESTON MILLER
Deputy Clerk of Court
OFFICE OF
CLERK OF COURT AND EX-OFFICIO RECORDER
PARISH OF CALCASIEU, LOUISIANA
DEAR SIR:
This certifies that there has been received for recordation an Act of Lease from
Fred Vincent to Petro-Tex. Chemical Corp. filed for record on the 28 day of
November, 1969, bearing file No. 1157790 recorded in Conveyance Record No. 1099
page 717, Mortgage Record No. , page , Record No. , page of the records of the
Parish of Calcasieu, State of Louisiana.
Recording fee 15.00 ACTON HILLEBRANDT, Clerk of Court
Copy 1.00 By MELODY WILSON
NOTE: All Notarial Acts and all Private Acts affecting real estate must remain
on file in this office (R.S. Section 30 and Act. No. 212 of the General Assembly
of the year 1920.)
ASSIGNMENT OF LEASE
6
STATE OF
LOUISIANA Section
Section
PARISH OF
CALCASIEU Section
THIS AGREEMENT is made by and between PETRO-TEX CHEMICAL COMPANY, called
the "Assignor" in this Agreement, and TEXAS BUTYLENE CHEMICAL CORPORATION, a
wholly-owned subsidiary of Texas Petrochemicals Corporation, called the
"Assignee" in this Agreement.
W I T N E S S E T H:
WHEREAS, a Lease was executed on the 7th day of November, 1969, by and
between Fred Vincent, married to and living with Juanita Vincent, born Cole, a
resident of Sugartown, Louisiana, and the Assignor as lessee, by the terms of
which the real property described on Exhibit "A" to said Lease was leased to
the Assignor as lessee pursuant to the terms and provisions set forth therein;
and
WHEREAS, the Lease was amended by an Amendment to Agreement of Lease dated
March 31, 1970; and
WHEREAS, Paragraph 11 of the Lease Agreement dated November 7, 1969,
specifically provides that the Assignor may assign or sublet the leased premises
or any portion thereof, however, Assignor shall remain liable to the lessor
under all of the terms, conditions, covenants and obligations of said Lease; and
WHEREAS, the Assignor now desires to assign the Lease to the Assignee and
the Assignee desires to accept the assignment:
In consideration of the sum of Ten Dollars ($10.00) and other valuable
consideration, the receipt of which is hereby acknowledged by this Agreement,
and the agreement of the Assignee set forth below, the Assignor assigns to the
Assignee and the Assignee's successors and assigns all right, title and interest
in and to the Lease described above, and the Amendment thereto, copies of which
Lease and Amendment thereto are attached to this Assignment as Exhibits "A"
and "B", respectively. The Assignee accepts the assignment and, in addition,
expressly assumes and agrees to perform and fulfill all of the terms, covenants,
conditions and obligations required by the Assignor as the lessee under that
Lease, including the making of all payments due or to be payable on behalf of
the lessor when due and payable.
This Assignment of Lease is effective as of June 21, 1984.
This Agreement shall be binding on and inure to the benefit of the parties
to this Agreement and their successors in interest and assigns.
WITNESS THE EXECUTION HEREOF before the undersigned witnesses on this the
15th day of October, 1991.
PETRO-TEX CHEMICAL COMPANY
By: E. J. MILLER
Vice President
"Assignor"
Witnesses:
CHRISTINA YEPZ
FRANKIE R. CARTER
TEXAS BUTYLENE CHEMICAL CORPORATION
a wholly owned subsidiary of Texas
Petrochemicals Corporation
By: JOHN T. SHELTON
Vice President
"Assignee"
7
Witnesses:
LANELL COOKE
D. BANDEIRA DE MELLO
THE STATE OF
TEXAS Section
Section
COUNTY OF
HARRIS Section
On this 15th day of October, 1991, before me personally appeared E.J. MILAM, to
me personally known, who, being by me duly sworn, did say that he is the Vice
President of Petro-Tex Chemical Corporation and that said instrument was signed
on behalf of said corporation by authority of its Board of Directors and the
said E.J. MILAM acknowledged said instrument to be the free act and deed of said
corporation.
WITNESS my official signature and seal as such notary public on the day, month
and year first above written.
WANDA R. SMITH
Notary Public In and For
Harris County, TEXAS
My Commission Expires: 3-28-95
THE STATE OF
TEXAS Section
Section
COUNTY OF
HARRIS Section
On this 16th day of October 1991, before me personally appeared JOHN T. SHELTON,
to me personally known, who, being by me duly sworn, did say that he is the Vice
President of Texas Butylene Chemical Corporation and that said instrument was
signed on behalf of said corporation by authority of its Board of Directors and
the said JOHN T. SHELTON acknowledged said instrument to be the free act and
deed of said corporation.
WITNESS my official signature and seal as such notary public on the day, month
and year first above written.
PATRICIA A. SMITH
Notary Public In and For
Harris County, TEXAS
My Commission Expires: 6-22-93
8
AMENDMENT TO AGREEMENT OF LEASE
WHEREAS, by Agreement of Lease made and entered into on the 7th day of
November, 1969, and filed for recording on November, 1969, and filed for
recording on November 28, 1969 under File No. 1157790, and recorded in Book
1099, page 717, of the Records of Conveyance of Calcasieu Parish, Louisiana,
Fred Vincent leased to Petro-Tex Chemical Company certain land in Calcasiu
Parish, Louisiana, described in Exhibit A attached to said Agreement of Lease
and shown on a Plat attached to said Agreement of Lease as Exhibit B; and
WHEREAS, Fred Vincent and Petro-Tex Chemical Company desire to amend said
Agreement of Lease with respect to the description of the lands covered thereby.
NOW, THEREFORE, in consideration of the premises, Fred Vincent, married to
and living with Juanita Vincent, born Cole, a resident of Sugartown, Louisiana,
and Petro-Tex Chemical Company, herein represented by its duly authorized Vice
President, do hereby agree that Exhibits A and B attached to said Agreement of
Lease dated November 7, 1969, shall be and are deleted therefrom, and in lieu
thereof, shall be and are attached Exhibit A hereto, being a metes and bounds
description of the land covered by said Agreement of Lease, as amended hereby,
and Exhibit B hereto, being a plat of the land covered by said Agreement of
Lease, as amended hereby, both said Exhibits A and B attached hereto being made
a part of said Agreement of Lease dated November 7, 1969 for all purposes.
The said Fred Vincent hereby leases to Petro-Tex Chemical Company the
property described in Exhibits A and B attached hereto on the same terms as
provided in said Agreement of Lease dated November 7, 1989, which agreement of
Leasse, as amended hereby, is hereby ratified and confirmed.
EXHIBIT "B"
WITNESS THE EXECUTION HEREOF before the undersigned witnesses on this 31st
day of March, 1970.
Witnesses:
NEED NAME FRED VINCENT
Fred Vincent
RAYMOND F. VINCENT
PETRO-TEX CHEMICAL COMPANY
Witnesses:
NEED NAME By Wm. A. McMINN
Vice President
EWELYN MANNING
THE STATE OF
LOUISIANA Section
Section
PARISH OF
CALCASIEU Section
On this 31st day of March, 1970, before me personally appeared FRED
VINCENT, to me known to be the person described in and who executed the
foregoing instrument and acknowledged that he executed the same as his free act
and deed.
WITNESS my official signature and seal as such notary public on the day,
month and year first above written.
NEED NAME
Notary Public in and for
Calcasieu Parish, Louisiana
THE STATE OF
TEXAS Section
Section
COUNTY OF
HARRIS Section
9
On this 25th day of March, 1970, before me personally appeared W. A.
McMinn, to me personally known, who, being by me duly sworn, did say that he is
the Vice President of PETRO-TEX CHEMICAL COMPANY and that said instrument was
signed on behalf of said corporation by authority of its Board of Directors and
the said W. A. McMinn acknowledged said instrument to be the free act and deed
of said corporation.
WITNESS my official signature and seal as such notary public on the day,
month and year first above written.
BERNICE L. HAVERLAND
Notary Public in and for
Harris County, Texas
My commission expires June 1, 1971.
EXHIBIT A
Commencing at the southwest corner of the Southwest Quarter of the
Southeast Quarter (SW corner of SW 1/4 of SE 1/4) of Sec. 7, T 10 S, R 9 W. La.
Mer., in Calcasieu Parish, Louisiana.
Thence along the north and south center-line of said Sec. 7, N O degrees
14' E, a distance of 993.5 ft.
Thence S 89 degrees 49' E, a distance of 118.73' to the east R/W line of
State Highway 108 and to the point of commencement.
Thence continuing S 89 degrees 49' E a distance of 585.50 ft. to the east
property line of lessor.
Thence N O degrees 11' E. along said east property line a distance of 191.5
ft. to the right descending bank of Bayou D'Inde.
Thence following the meander of the said right descending bank of Bayou
D'Inde upstream to intersection of said bank of the bayou with the downstream
boundary of leasehold of The Firestone Tire and Rubber Co. as per lease
agreement with lessor dated June 14, 1962 and recorded in Calcasieu Parish
Files, No. 889407, Book 822, Page 548. Said point is located at the present bank
line which has been dredged some 40' more or less inshore from the shore line in
1962 as described in said lease boundaries. This upstream point on the bayou is
located N. 71 degrees 42' 30" W. and, at a distance of 454.32' from the
downstream point on the bayou.
Thence S 25 degrees 23' W along said Firestone Lease boundary a distance of
60 ft.
Thence continuing along said Firestone Lease boundary S 81 degrees 13' W, a
distance of 130.63 ft. to the said east right of right of way line of State
Highway 108.
Thence along said right of way line S O degrees 02' E a distance of 258.05
ft. to the point of commencement.
10
"PLEASE DESCRIBE THIS PAGE"
EXHIBIT B
11
STATE OF LOUISIANA: OFFICE OF THE CLERK OF
PARISH OF CALCASIEU: COURT 14th JUDICIAL DIST.
I HEREBY CERTIFY, That the above and foregoing is a true
and correct copy of Amendment filed of
record the 7 of April, 1970 bearing file
No. 1169439 IN TESTIMONY WHEREOF, Witness
my official signature and seal at Lake Charles, La., on this
7 day of April A. D. 1970.
(REST UNREADABLE)
12
EXHIBIT 10.8
CREDIT AGREEMENT
$40,000,000.00 Revolving Credit Loan
$85,000,000.00 Term Loan A
$45,000,000.00 Term Loan B
$10,000,000.00 ESOP Loan
Among
TPC Finance Corp. and
Texas Petrochemicals Corporation,
As the Company
The Lenders Defined Herein
And
Texas Commerce Bank National Association,
As Agent for the Lenders
And
ABN AMRO North America, Inc.
as agent for ABN AMRO Bank N.V.
And
The Bank of Nova Scotia
As Co-Documentation Agents for the Lenders
July 1, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS.............................................. -2-
SECTION 1.01 DEFINITIONS. ...................................... -2-
SECTION 1.02 TYPES OF ADVANCES. ................................-22-
SECTION 1.03 ACCOUNTING TERMS. .................................-22-
ARTICLE II
THE LOANS...................................................................-22-
SECTION 2.01 THE LOANS. ........................................-22-
SECTION 2.02 THE ESOP LOAN. ....................................-24-
SECTION 2.03 THE TERM LOANS. ...................................-25-
SECTION 2.04 NOTICE OF ADVANCE. ................................-25-
SECTION 2.05 THE NOTES. ........................................-26-
SECTION 2.06 DISBURSEMENT OF FUNDS. ............................-27-
SECTION 2.07 CONVERSIONS AND CONTINUANCES. .....................-27-
SECTION 2.08 MANDATORY REPAYMENTS. .............................-28-
SECTION 2.09 VOLUNTARY PREPAYMENTS. ............................-31-
SECTION 2.10 METHOD AND PLACE OF PAYMENT/NET PAYMENTS. .........-32-
SECTION 2.11 PRO RATA ADVANCES/PAYMENTS. .......................-33-
SECTION 2.12 INTEREST. .........................................-33-
SECTION 2.13 INTEREST PERIODS. .................................-35-
SECTION 2.14 INTEREST RATE NOT ASCERTAINABLE. ..................-35-
SECTION 2.15 CHANGE IN LEGALITY. (a) ..........................-36-
SECTION 2.16 INCREASED COSTS, TAXES OR CAPITAL
ADEQUACY REQUIREMENTS. ............................-36-
SECTION 2.17 LIBOR ADVANCE PREPAYMENT AND DEFAULT PENALTIES. ...-38-
SECTION 2.18 TAX FORMS. ........................................-38-
ARTICLE III
LETTERS OF CREDIT...........................................................-39-
SECTION 3.01 LETTERS OF CREDIT. ................................-39-
SECTION 3.02 LETTER OF CREDIT REQUESTS. ........................-39-
SECTION 3.03 LETTER OF CREDIT PARTICIPATIONS. ..................-40-
SECTION 3.04 INCREASED COSTS. ..................................-42-
SECTION 3.05 CONFLICT BETWEEN APPLICATIONS AND AGREEMENT. ......-43-
ARTICLE IV
FEES; COMMITMENTS...........................................................-43-
SECTION 4.01 FEES. .............................................-43-
SECTION 4.02 VOLUNTARY REDUCTION OF TOTAL REVOLVING CREDIT
COMMITMENT. .......................................-44-
SECTION 4.03 MANDATORY REDUCTION OF TOTAL REVOLVING CREDIT
COMMITMENT. .......................................-44-
-i-
ARTICLE V
CONDITIONS PRECEDENT........................................................-44-
SECTION 5.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. .......-44-
SECTION 5.02 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. ........-48-
SECTION 5.03 DELIVERY OF DOCUMENTS. ............................-48-
ARTICLE VI
REPRESENTATIONS AND WARRANTIES..............................................-49-
SECTION 6.01 ORGANIZATION AND QUALIFICATION. ...................-49-
SECTION 6.02 AUTHORIZATION AND VALIDITY. .......................-49-
SECTION 6.03 GOVERNMENTAL CONSENTS. ............................-49-
SECTION 6.04 CONFLICTING OR ADVERSE AGREEMENTS OR RESTRICTIONS. -49-
SECTION 6.05 TITLE TO ASSETS; LICENSES AND PERMITS. ............-50-
SECTION 6.06 LITIGATION. .......................................-50-
SECTION 6.07 FINANCIAL STATEMENTS. .............................-50-
SECTION 6.08 NO DEFAULTS. ......................................-51-
SECTION 6.09 INVESTMENT COMPANY ACT. ...........................-51-
SECTION 6.10 UTILITY REGULATION. ................................-51-
SECTION 6.11 ERISA. ............................................-51-
SECTION 6.12 ENVIRONMENTAL MATTERS. ............................-52-
SECTION 6.13 PURPOSE OF LOANS. .................................-53-
SECTION 6.14 SUBSIDIARIES. .....................................-53-
SECTION 6.15 SOLVENCY. .........................................-53-
SECTION 6.16 ACCURACY OF INFORMATION. ..........................-53-
SECTION 6.17 INSURANCE. ........................................-54-
SECTION 6.18 INDEBTEDNESS AND CONTINGENT LIABILITIES. ..........-54-
SECTION 6.19 COMPLIANCE WITH LAWS. .............................-54-
SECTION 6.20 SECURITY INTERESTS. ...............................-54-
SECTION 6.21 MATERIAL CONTRACTS. ...............................-55-
ARTICLE VII
AFFIRMATIVE COVENANTS.......................................................-55-
SECTION 7.01 INFORMATION COVENANTS. ............................-55-
SECTION 7.02 BOOKS, RECORDS AND INSPECTIONS. ...................-57-
SECTION 7.03 INSURANCE AND MAINTENANCE OF PROPERTIES. ..........-58-
SECTION 7.04 PAYMENT OF TAXES. .................................-59-
SECTION 7.05 CORPORATE EXISTENCE. ..............................-59-
SECTION 7.06 COMPLIANCE WITH STATUTES. ..........................-59-
SECTION 7.07 ERISA. .............................................-59-
SECTION 7.08 UTILITY REGULATION. ...............................-60-
SECTION 7.09 SUBSIDIARIES. .....................................-60-
-ii-
ARTICLE VIII
NEGATIVE COVENANTS..........................................................-60-
SECTION 8.01 CHANGE IN BUSINESS. ...............................-60-
SECTION 8.02 CONSOLIDATION, MERGER OR SALE OF ASSETS. ..........-60-
SECTION 8.03 INDEBTEDNESS. .....................................-61-
SECTION 8.04 LIENS. ............................................-62-
SECTION 8.05 INVESTMENTS. ......................................-63-
SECTION 8.06 GUARANTIES. .......................................-63-
SECTION 8.07 RESTRICTED PAYMENTS. ..............................-64-
SECTION 8.08 CHANGE IN ACCOUNTING. .............................-64-
SECTION 8.09 PREPAYMENT OF OTHER INDEBTEDNESS. .................-65-
SECTION 8.10 TRANSACTIONS WITH AFFILIATES. ......................-65-
SECTION 8.11 SUBSIDIARIES' STOCK. ..............................-65-
SECTION 8.12 MATERIAL CONTRACTS..................................-65-
SECTION 8.13 FINANCIAL RATIOS. .................................-65-
SECTION 8.14 CAPITAL EXPENDITURES. .............................-66-
SECTION 8.15 FISCAL YEAR. ......................................-67-
SECTION 8.16 SALE/LEASEBACK TRANSACTIONS. ......................-67-
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES..............................................-67-
SECTION 9.01 EVENTS OF DEFAULT. ................................-67-
SECTION 9.02 PRIMARY REMEDIES. .................................-70-
SECTION 9.03 OTHER REMEDIES. ...................................-70-
ARTICLE X
THE AGENT...................................................................-70-
SECTION 10.01 AUTHORIZATION AND ACTION. ........................-70-
SECTION 10.02 AGENT'S RELIANCE. ................................-71-
SECTION 10.03 AGENT AND AFFILIATES; TCB AND AFFILIATES. ........-72-
SECTION 10.04 LENDER CREDIT DECISION. ..........................-72-
SECTION 10.05 AGENT'S INDEMNITY. ...............................-72-
SECTION 10.06 SUCCESSOR AGENT. .................................-73-
SECTION 10.07 NOTICE OF DEFAULT. ...............................-74-
ARTICLE XI
MISCELLANEOUS...............................................................-74-
SECTION 11.01 AMENDMENTS. ......................................-74-
SECTION 11.02 NOTICES. .........................................-74-
SECTION 11.03 NO WAIVER; REMEDIES. .............................-76-
SECTION 11.04 COSTS, EXPENSES AND TAXES. .......................-76-
SECTION 11.05 INDEMNITY. .......................................-76-
SECTION 11.06 RIGHT OF SETOFF. .................................-77-
SECTION 11.07 GOVERNING LAW. ...................................-78-
-iii-
SECTION 11.08 INTEREST. ........................................-78-
SECTION 11.09 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. ......-79-
SECTION 11.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS. ..........-80-
SECTION 11.11 CONFIDENTIALITY. .................................-82-
SECTION 11.12 PRO RATA TREATMENT. ..............................-82-
SECTION 11.13 SEPARABILITY. ....................................-83-
SECTION 11.14 EXECUTION IN COUNTERPARTS. .......................-83-
SECTION 11.15 INTERPRETATION. ..................................-83-
SECTION 11.16 LIMITATION BY LAW. ...............................-84-
SECTION 11.17 SUBMISSION TO JURISDICTION. ......................-84-
SECTION 11.18 WAIVER OF JURY TRIAL. ............................-85-
SECTION 11.19 FINAL AGREEMENT OF THE PARTIES. ..................-85-
SECTION 11.20 COMPANY ASSUMPTION OF OBLIGATIONS OF FINANCE
CORP. .............................................-85-
SECTION 11.21 EFFECTIVENESS OF AGREEMENTS EXECUTED BY THE
COMPANY. .........................................-86-
EXHIBITS AND SCHEDULES:
Exhibit 1.01A Form of Administrative Questionnaire
Exhibit 1.01B Form of Borrowing Base Certificate
Exhibit 1.01C Account Debtor Receivables Concentration
Exhibit 2.04 Form of Notice of Advance
Exhibit 2.05A Form of Revolving Credit Note
Exhibit 2.05B Form of Term Note A
Exhibit 2.05C Form of Term Note B
Exhibit 2.05D Form of ESOP Note
Exhibit 2.05E Form of Swing Line Note
Exhibit 3.02 Form of Letter of Credit Request
Exhibit 11.10 Form of Assignment and Acceptance
Schedule 1.01 Other Assets
Schedule 6.04 Conflicting or Adverse Agreements or Restrictions
Schedule 6.05 Schedule of Real Property
Schedule 6.06 Existing Litigation
Schedule 6.12 Environmental Matters
Schedule 6.14 Subsidiaries
Schedule 7.03 Existing Insurance
Schedule 8.04(a) Existing Liens
Schedule 8.05(b) Existing Investments
Schedule 8.06(c) Guaranties of Indebtedness
Schedule 8.12 Material Contracts
-iv-
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of July 1, 1996 (this "AGREEMENT")
is entered into by and among TPC Finance Corp., a Texas corporation ("FINANCE
CORP."), to be merged on the Effective Date (as defined below) into Texas
Petrochemicals Corporation, a Texas corporation (such corporation prior to the
merger, "TPC"), the banks and other financial institutions listed on the
signature pages hereto under the caption "LENDER" (together with each other
person who becomes a Lender, collectively the "LENDERS") and Texas Commerce Bank
National Association, individually as a Lender ("TCB") and as agent for the
other Lenders (in such capacity, together with any other Person who becomes the
agent, the "AGENT") and ABN AMRO North America, Inc. as agent for ABN AMRO Bank
N.V., and The Bank of Nova Scotia, each individually as a Lender and together as
co-documentation agents for the other Lenders (in such capacity, together with
any other Person who becomes a co-documentation agent, the "CO-DOCUMENTATION
AGENTS").
Finance Corp. has requested that the Lenders provide the Company
with a credit facility pursuant to which the Lenders will commit to make (a)
revolving credit loans of up to $40,000,000.00 including a swing line facility
not to exceed $5,000,000.00 and a letter of credit facility not to exceed
$7,500,000.00, (b) a term loan of $85,000,000.00, (c) a second term loan of
$45,000,000.00 and (d) a third term loan of up to $10,000,000.00. The proceeds
of the $85,000,000.00 term loan and the $45,000,000.00 term loan and
approximately $500,000.00 of the revolving credit loans shall be loaned by
Finance Corp. to TPC Holding Corp., a Delaware corporation ("PARENT"), to be
used by the Parent solely to finance the purchase of the capital stock of Texas
Olefins Company ("TOC") and its subsidiary, TPC, pursuant to the Purchase
Agreement (as hereafter defined) and to pay certain transaction expenses
incurred in connection with such purchase. The proceeds of the $10,000,000.00
term loan shall be used to fund Finance Corp.'s loan to its employee stock
ownership plan (the "ESOP") to enable the ESOP to purchase shares of common
stock of Texas Petrochemical Holdings, Inc., a Delaware corporation ("HOLDING
CO."). After the merger of TOC into and with TPC and the merger of Finance Corp.
into and with TPC (collectively the "MERGER"), the proceeds of the
$40,000,000.00 revolving credit loans shall be used for general corporate
purposes and for the issuance of letters of credit. In connection therewith, the
Agent has agreed to serve as Agent for the Lenders and the Co-Documentation
Agents have agreed to serve as Co-Documentation Agents for the Lenders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth herein, the Company (as defined below), the Agent, the
Co-Documentation Agents and the Lenders agree as follows:
-1-
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS
SECTION 1.01 DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"ACQUISITION" has the meaning specified in SECTION 6.13.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
Questionnaire in the form of EXHIBIT 1.01A, completed by each Lender and
provided to the Agent and the Company.
"ADVANCE" means, (a) in respect of any Revolving Credit Loan, an
advance pursuant to a Notice of Advance, (b) in respect of any Swing Line Loan,
an advance made by the Swing Line Lender and (c) in respect of each of the Term
Loan A, the Term Loan B and the ESOP Loan, a single advance made on the
Effective Date, in each case comprised of a single Type of Loan made by all the
Lenders concurrently (except as to any Advance made under the Swing Line Loan)
to the Company (or resulting from a conversion or continuance of all or any
portion (subject to minimums herein specified) having, in the case of LIBOR Rate
Advances, the same Interest Period (except as otherwise provided in this
Agreement)).
"ADVANCE DATE" means, with respect to each Advance, the Business
Day upon which the proceeds of such Advance are to be made available to the
Company.
"AFFILIATE" means any Person controlling, controlled by or under
common control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to either (a) vote 10% or more
of the securities having ordinary voting power for election of directors of such
Person or (b) direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or otherwise.
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a corporation solely by reason of his or her being an officer or director of
such corporation.
"AGENT" has the meaning specified in the introduction to this
Agreement.
"AGENT'S LETTER" means that certain letter to The Sterling Group,
Inc. dated June 3, 1996 from TCB and Chase Securities Inc. and acknowledged by
The Sterling Group, Inc.
"AGREEMENT" has the meaning specified in the introduction to this
Agreement.
-2-
"ALTERNATE BASE RATE" means, for any day, a rate per annum
(rounded upwards to the nearest 1/100 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1% per annum. If, for any reason, the Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Federal Funds Effective Rate, including the
inability or failure of the Agent to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"ALTERNATE BASE RATE ADVANCE" means any Advance bearing interest
at a rate determined by reference to the Alternate Base Rate in accordance with
the provisions of ARTICLE II.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender,
such Lender's Domestic Lending Office in the case of an Alternate Base Rate
Advance and such Lender's LIBOR Lending Office in the case of a LIBOR Rate
Advance.
"APPLICATION FOR LETTER OF CREDIT" means a letter of credit
application in a form satisfactory to the Issuing Bank.
"ASSIGNMENT AND ACCEPTANCE" has the meaning specified in SECTION
11.10(C).
"BANKRUPTCY CODE" has the meaning specified in SECTION 9.01(F).
"BOARD" means the Board of Governors of the Federal Reserve
System of the United States (or any successor) and any other banking authority
to which the Lenders are subject for Eurocurrency Liabilities or any other
category of deposits or liabilities by reference to which the LIBOR Rate is
determined.
"BORROWING BASE" means, as to the Company and its Subsidiaries on
a consolidated basis at any time, an amount equal to the sum of (a) 85% of
Eligible Accounts PLUS (b) 65% of Eligible Inventory; PROVIDED that at no time
shall more than 50% of the Borrowing Base be comprised of 65% of Eligible
Inventory.
"BORROWING BASE CERTIFICATE" means, as of any date, a certificate
as to the Borrowing Base as of such date in the form of EXHIBIT 1.01B.
"BUSINESS DAY" means any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Texas) on which banks are open
for business in Houston, Texas and New York
-3-
and, if the applicable Business Day relates to any LIBOR Rate Advance, on which
dealings are carried on in the London eurodollar market.
"CAPITAL EXPENDITURES" means all of the capital expenditures of
the Company and its Subsidiaries on a consolidated basis which, pursuant to
GAAP, are capitalized for balance sheet purposes.
"CAPITALIZED LEASE OBLIGATIONS" means all lease or rental
obligations of the Company and its Subsidiaries determined on a consolidated
basis which, pursuant to GAAP, are capitalized for balance sheet purposes.
"CHANGE OF CONTROL" occurs when any Unrelated Person or any
Unrelated Persons, other than the Designated Shareholders, acting together which
would constitute a Group together with any Affiliates or Related Persons thereof
(in each case also constituting Unrelated Persons) shall at any time either (i)
Beneficially Own more than 35% of the aggregate voting power of all classes of
Voting Stock of the Company or Holding Co. or (ii) succeed in having sufficient
of its or their nominees elected to the Board of Directors of Holding Co. such
that such nominees, when added to any existing director remaining on the Board
of Directors of the Company or Holding Co. after such election who is an
Affiliate or Related Person of such Person or Group, shall constitute a majority
of the Board of Directors of the Company or Holding Co.; PROVIDED, however, no
Change of Control shall have occurred so long as the Designated Shareholders (or
any combination thereof) shall retain more than 50% of the aggregate voting
power of all classes of Voting Stock of the Company and Holding Co. As used
herein (a) "BENEFICIALLY OWN" shall mean "beneficially own" as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as amended, or any successor
provision thereto; PROVIDED, however, that, for purposes of this definition, a
Person shall not be deemed to Beneficially Own securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates until such tendered securities are accepted for purchase or
exchange; (b) "GROUP" shall mean a "group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended; (c) "UNRELATED PERSON" shall mean
at any time any Person other than the Company and Holding Co. or any of their
reported Subsidiaries and other than any trust for any employee benefit plan of
the Company and Holding Co. or any of their reported Subsidiaries; (d) "RELATED
PERSON" of any Person shall mean any other Person owning (1) 5% or more of the
outstanding common stock of such Person or (2) 5% or more of the Voting Stock of
such Person; and (e) "DESIGNATED SHAREHOLDERS" means (1) each Person who owns
any capital stock of Holding Co. on the Effective Date or any common stock in
connection with any registration of shares of common stock by Holding Co. for
sale to certain employees of Holding Co. and its Subsidiaries following the
Merger, (2) any Person who on the Effective Date is or was before such date an
officer, director, stockholder, employee or consultant of The Sterling Group,
Inc., (3) the ESOP, (4) any savings or investment plan sponsored by the Company,
(5) with respect to any Person covered by the preceding clauses (1) through (4)
(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
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such relationship arises from birth, adoption or through marriage), or (f) 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 (a) through (e).
"CO-DOCUMENTATION AGENTS" has the meaning specified in the
introduction to this Agreement.
"CODE" means the Internal Revenue Code of 1986 and the
regulations promulgated thereunder.
"COMMITMENT" means the obligation of each of the Lenders to enter
into and perform this Agreement, to make available the Loans and to issue the
Letters of Credit to the Company in the amounts shown on the signature page of
each Lender hereto (or, as to any Lender that has entered into an Assignment and
Acceptance, in the amount resulting after giving effect to each Assignment and
Acceptance entered into by such Lender) and all other duties and obligations of
the Lenders hereunder.
"COMPANY" means (a) before the Merger, Finance Corp. and (b) upon
and after the Merger, Texas Petrochemicals Corporation, a Texas corporation.
"CREDIT EVENT" means the making of any Advance, the conversion of
any Advance into, or continuation of any Advance as, a LIBOR Rate Advance or the
issuance of any Letter of Credit.
"CURRENT ASSETS" and "CURRENT LIABILITIES" means, as to the
Company and its Subsidiaries determined on a consolidated basis, at any time the
aggregate current assets or current liabilities of the Company and its
Subsidiaries, each as determined in accordance with GAAP; excluding, however,
(a) cash and marketable securities, (b) the current portion of long term
Indebtedness, (c) during the 12-month period preceding the Revolving Credit
Maturity Date, the outstanding principal amount of the Revolving Credit Loans,
and (d) amounts payable as Employee Bonuses.
"DEFAULT" means the occurrence of any event which with the giving
of notice or the passage of time or both would be an Event of Default.
"DEFAULT RATE" means the lesser of (a) the Highest Lawful Rate
and (b) the Alternate Base Rate or, during any Eurodollar Rate Interest Period
in which an Event of Default is continuing, the Eurodollar Rate, as the case may
be, PLUS, the applicable Margin PLUS, two percent (2%) per annum.
-5-
"DERIVATIVES" means, with respect to any Person, foreign exchange
transactions and commodity, currency and interest rate swaps, floors, caps,
collars, forward sales, options and other similar transactions or combinations
of the foregoing.
"DESIGNATED PAYMENT DATE" means September 30, December 31, March
31 and June 30, in any calendar year, PROVIDED, HOWEVER, if in any such year a
Designated Payment Date shall be a day which is not a Business Day, such
Designated Payment Date shall be the next succeeding Business Day, and such
extension of time shall be included in determining the amount to be paid on such
date.
"DISCOUNT DEBENTURES" means the unsecured senior Indebtedness of
Holding Co. evidenced by 13 1/2% Senior Discount Notes of Holding Co. due 2007
used to raise $30,000,000.00 of proceeds and any Series B Senior Discount Notes
due 2007 issued in exchange for such Senior Discount Notes.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office of such Lender designated from time to time as its "Domestic Lending
Office" hereunder.
"EBITDA" means, with respect to the Company and its Subsidiaries
determined on a consolidated basis for the four fiscal quarters (but prior to
June 30, 1997, annualized for the actual number of full fiscal quarters since
the Effective Date) immediately preceding the most recent Financial Statement
Delivery Date, without duplication, the result of net income less any non-cash
income to the extent included in determining net income and without giving
effect to any non-recurring items, extraordinary gains or losses from the sale
of assets or write down in the value of assets owned by the Company and its
Subsidiaries for such period PLUS depreciation, amortization, Interest Expense,
taxes, and other non-cash charges for such period to the extent deducted in
determining net income.
"EFFECTIVE DATE" means the date on which all conditions to make
an Advance set forth in SECTION 5.01 are first met or waived in accordance with
SECTION 11.01 hereof.
"ELIGIBLE ACCOUNTS" means, as to the Company and its wholly-owned
Subsidiaries on a consolidated basis at any time of determination, all
Receivables of such Persons, each of which meets all of the following criteria
on the date of any determination:
(a) the payment of such Receivable is not more than sixty (60)
days past due;
(b) such Receivable was created in connection with the sale of
Inventory or the performance of a service by the Company or any wholly-owned
Subsidiary of the Company in the ordinary course of business;
-6-
(c) such Receivable represents a legal, valid and binding payment
obligation of the account debtor enforceable in accordance with its terms and
arises from an enforceable contract, the performance of which, insofar as it
relates to such Receivable, has been completed by the Company or such
wholly-owned Subsidiary;
(d) the Company or such wholly-owned Subsidiary has good and
indefeasible title to such Receivable, and the Agent for the benefit of the
Lenders, holds a perfected first priority Lien (including compliance with the
Federal Assignment of Claims Act or any similar statute or regulation, if
necessary) in such Receivable pursuant to the Security Documents;
(e) such Receivable is not evidenced by a promissory note,
chattel paper or other instrument;
(f) such Receivable is not subject to any set-off (excluding any
Receivable set-off supported by a letter of credit satisfactory to the Agent),
counterclaim, defense, allowance, adjustment or understanding with the account
debtor thereon that in any way could reasonably be expected to adversely affect
the payment of said Receivable, and there exists no dispute by the account
debtor concerning its payment obligation for such Receivable (or the lesser
amount that is not subject to any of the same);
(g) such Receivable is payable in the United States and is
denominated in U.S. dollars;
(h) such Receivable or portion thereof due from an account debtor
(other than an account debtor listed in EXHIBIT 1.01C hereto) and together with
all other Receivables due from such account debtor, does not comprise more than
ten percent (10%) of the aggregate Receivables of the Company and its
wholly-owned, provided, that in the event such account debtor is rated at least
BBB+ or the equivalent thereof by Standard & Poor's Ratings Group then such
Receivable together with all other Receivables due from such account debtor does
not compromise more then twenty-five (25%) of the aggregate Receivables of the
Company and its wholly-owned Subsidiaries;
(i) such Receivable is from an account debtor domiciled in the
United States or is backed by a letter of credit issued or confirmed by a
commercial bank rated A1 or the equivalent thereof by Standard & Poor's Ratings
Group or P1 or the equivalent thereof by Moody's Investors Service, Inc. and
such letter of credit contains terms and conditions reasonably acceptable to the
Agent;
(j) such Receivable is not due from an account debtor subject to
a proceeding of the kind described in SECTION 9.01(F) or (G); and
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(k) such Receivable is not due from an account debtor which the
Agent has notified the Company does not have a satisfactory credit standing (as
determined on a reasonable basis by the Agent).
"ELIGIBLE ASSIGNEE" means (a) any Lender or any Affiliate thereof
and (b) any other bank or financial institution approved by the Agent, the Swing
Line Lender and the Company.
"ELIGIBLE INVENTORY" means, as to the Company and its
wholly-owned Subsidiaries on a consolidated basis at any time of determination,
the value (determined at the lower of cost or market) of all Inventory owned by
(and in the possession or under the control of) the Company and its wholly-owned
Subsidiaries which is located in the United States and in which the Agent for
the benefit of the Lenders has a perfected first priority security interest
other than Permitted Liens under SECTION 8.04(B), (C), and (E) pursuant to the
Security Documents but shall not include any of the following:
(a) Inventory that has been shipped or delivered to any Person on
consignment;
(b) Inventory that is subject to any claim disputing the
Company's or any wholly-owned Subsidiary's title to or right to possession of
such Inventory;
(c) any allowances, reserves or accruals related to any
Inventory, or Inventory that is not in good condition or does not comply with
any governmental requirement with respect to its manufacture, use or sale;
(d) Inventory evidenced by a negotiable or non-negotiable
document of title; and
(e) Inventory that is not saleable.
"EMPLOYEE BONUSES" means amounts paid or to be paid under the
"TPC Cash Bonus Plan" as defined in the Purchase Agreement.
"EMPLOYEE PLAN" means any employee benefit plan, program or
policy with respect to which the Company or any ERISA Affiliate may have any
liability or any obligation to contribute, other than a Plan or a Multiemployer
Plan.
"ENVIRONMENTAL ASSESSMENT" means the Phase I environmental site
assessment conducted in accordance with ASTM E 1527-94 (dated April 18, 1996)
and the data base summary (dated May 28, 1996) conducted by Pilko & Associates.
"ENVIRONMENTAL LAWS" means applicable federal, state or local
laws, rules or regulations, and any applicable judicial interpretations thereof,
including any judicial or administrative
-8-
order, judgment, permit, approval, decision or determination, in each case
pertaining to conservation or protection of the environment, in effect at the
time in question, including the Clean Air Act, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Federal Water Pollution
Control Act, the Occupational Safety and Health Act, the Resource Conservation
and Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act,
the Superfund Amendments and Reauthorization Act of 1986, the Hazardous
Materials Transportation Act and analogous state and local laws as may be
amended from time to time thereby imposing either more or less stringent
requirements as relates to activity occurring after the effective date of any
such amendments.
"ERISA" means the Employee Retirement Income Security Act of 1974
and the regulations promulgated thereunder.
"ERISA AFFILIATE" means (a) any Person which, together with the
Company, is treated as a "single employer" under Section 414 of the Code and the
regulations thereunder, and (b) any Subsidiary of the Company.
"ESOP" has the meaning specified in the introduction to this
Agreement.
"ESOP LENDER" means any Lender having an ESOP Loan Commitment.
"ESOP LOAN" has the meaning specified in SECTION 2.02.
"ESOP LOAN COMMITMENT" means, with respect to the ESOP Loan and
as to any Lender, the amount set forth opposite such Lender's name on the
signature pages hereof aggregating $10,000,000.00.
"ESOP LOAN MATURITY DATE" means June 30, 2001, unless accelerated
pursuant to SECTION 9.02.
"ESOP NOTE" has the meaning specified in SECTION 2.05(D).
"EUROCURRENCY LIABILITIES" has the meaning specified in
Regulation D as in effect from time to time.
"EVENTS OF DEFAULT" has the meaning specified in SECTION 9.01.
"EXCEPTIONS LETTER" means that certain letter to the Agent and
the Lenders from the Company dated as of the Effective Date regarding
satisfaction of certain requirements concerning real property pledged as
collateral for the Loans.
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"EXCESS CASH FLOW" means, with respect to the Company and its
Subsidiaries determined on a consolidated basis for any fiscal year period, (a)
EBITDA for such period, MINUS (b) the amount equal to (i) actual Capital
Expenditures (exclusive of Capitalized Lease Obligations) incurred during such
period PLUS (ii) the amount of Capital Expenditures for such period permitted to
be made in the next succeeding fiscal year under SECTION 8.14(C) MINUS (iii) the
amount of Capital Expenditures carried forward from the prior fiscal year under
SECTION 8.14(C) for such period, MINUS (c) cash taxes, cash Interest Expense and
scheduled payments or any voluntary prepayment of principal made under Term Loan
A and Term Loan B and the ESOP Loan (but only to the extent that net income for
such period was not reduced for any expense incurred by the Company for
contributions to the ESOP) MINUS (d) any dividend or payment permitted under
SECTION 8.07(A)(II) and (v) MINUS (e) the principal amount of Employee Bonuses
actually paid during such period and MINUS (f) scheduled principal payments
under Capitalized Lease Obligations made during such period.
"EXCESS SALES PROCEEDS" means the aggregate cash proceeds
received by the Company and its Subsidiaries determined on a consolidated basis
from the sale of all or any part of the Other Assets, net of usual and customary
fees, expenses and commissions actually incurred.
"EXECUTION DATE" means the date upon which this Agreement shall
have been executed by the Company, the Lenders, the Agent and the
Co-Documentation Agents.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"FEES" means all amounts payable pursuant to SECTION 4.01.
"FINANCE CORP." has the meaning specified in the introduction to
this Agreement.
"FINANCIALS" has the meaning specified in SECTION 6.07.
"FINANCIAL STATEMENT DELIVERY DATE" means the last day on which
the quarterly or annual financial statements of the Company are to be delivered
to the Agent and the Lenders pursuant to SECTION 7.01(A) or SECTION 7.01(B), as
the case may be.
"FIXED CHARGE COVERAGE RATIO" means, as to the Company and its
Subsidiaries determined on a consolidated basis, for any period a fraction, the
numerator of which is EBITDA for such period MINUS cash taxes for such period,
and the denominator of which is the sum of (a)
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scheduled payments of principal under Term Loan A and Term Loan B and the ESOP
Loan (but only to the extent that net income for such period was not reduced for
any expense incurred by the Company for contributions to the ESOP), (b) cash
Interest Expense for such period, (c) the lesser of (i) Scheduled Capital
Expenditures for such period and (ii) actual Capital Expenditures for such
period, (d) scheduled principal payments under Capitalized Lease Obligations,
(e) actual Employee Bonuses paid during such period, and (f) payments permitted
under SECTION 8.07(A)(II), (III) and (V) and SECTION 8.07(B)(II).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States applied on a consistent basis.
"GUARANTY" means collectively (i) that certain Guaranty Agreement
dated the Execution Date executed by the Parent and Holding Co. (ii) that
certain Guaranty Agreement dated the Execution Date executed by Texas Butylene
Chemical Corporation and (iii) any subsequent guaranty agreement executed and
delivered pursuant to SECTION 7.09.
"HAZARDOUS MATERIALS" means (a) hazardous waste as defined in
applicable regulations issued pursuant to the Resource Conservation and Recovery
Act of 1976, or in any applicable federal, state or local law or regulation, (b)
hazardous substances, as defined in CERCLA, or in any applicable state or local
law or regulation, (c) gasoline or any other petroleum product, (d) toxic
substances, as defined in the Toxic Substances Control Act of 1976, or in any
applicable federal, state or local law or regulation, (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable federal, state or local law or
regulation, as each such act, statute or regulation may be amended from time to
time, and (f) asbestos.
"HIGHEST LAWFUL RATE" means, as to any Lender, the maximum
nonusurious rate of interest that, under applicable law, may be contracted for,
taken, reserved, charged or received by such Lender on the Loans or other
obligations under the Loan Documents at any time or from time to time after
taking into account all amounts that constitute interest. If the maximum rate of
interest which, under applicable law, any of the Lenders are permitted to charge
the Company on the Loans or other obligations shall change after the date
hereof, to the extent permitted by applicable law, the Highest Lawful Rate shall
be automatically increased or decreased, as the case may be, as of the effective
time of such change without notice to the Company or any other Person.
"HOLDING CO." has the meaning specified in the introduction to
this Agreement.
"INDEBTEDNESS" means, with respect to any Person, (a) all
indebtedness of such Person for borrowed money (whether by loan or the issuance
and sale of debt securities) or for the deferred purchase price of property or
services (other than accounts payable), (b) all indebtedness of such Person
created or arising under any conditional sale or other title retention agreement
with
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respect to any property, (c) Capitalized Lease Obligations of such Person, (d)
all guaranties of such Person of indebtedness of others (including the granting
of a Lien on the Company's or any Subsidiaries' assets or security for such
indebtedness) or other contingent liabilities of such Person for indebtedness of
others of any kind (including any letter of credit, any other letter of credit
reimbursement obligations, any guarantee of the financial position or covenants
of any Person or any obligation as buyer under any "take or pay" contract or
similar arrangement), (e) any "mark to market" exposure resulting from any
Derivatives or any hedging transaction and (f) all obligations to deliver goods
or services in consideration of advance payments, excluding such obligations
incurred in the ordinary course of business as conducted by the Company and its
Subsidiaries.
"INTEREST EXPENSE" means, with respect to the Company and its
Subsidiaries determined on a consolidated basis, for any period the total
interest expense for such period determined in conformity with GAAP and
including any interest expense attributable to Capitalized Lease Obligations.
"INTEREST PERIOD" has the meaning specified in SECTION 2.13.
"INVENTORY" means, as to the Company and its Subsidiaries,
inventory as defined in Article 9 of the Uniform Commercial Code (but excluding
work-in-process which is not readily marketable in its current form).
"INVESTMENT" means, as applied to any Person, any direct or
indirect purchase or other acquisition by such Person of the stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other item
which would be classified as an "investment" on a balance sheet of such Person
prepared in accordance with GAAP, including any direct or indirect contribution
by such Person of property or assets to a joint venture, partnership or other
business entity in which such Person retains an interest.
"ISSUING BANK" means, for each Letter of Credit, TCB (or, at the
option of the Company, any other Lender designated by the Company and approved
in writing by the Agent, such approval not to be unreasonably withheld) as the
issuing bank for such Letter of Credit.
"LENDER" has the meaning provided in the introduction to this
Agreement.
"LETTER OF CREDIT FEE" shall mean (a) for any Letter of Credit
outstanding prior to the Financial Statement Delivery Date for the fiscal
quarter ending December 31, 1996, 0.125% per annum fronting fee payable to the
Issuing Bank on the undrawn face amount of each Letter of Credit, and payable
pro rata to each Lender the greater of (i) 2.00% per annum on the face amount of
such Letter of Credit and (ii) $500.00; and
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(b) for any Letter of Credit outstanding during any Margin Period
commencing after the Financial Statement Delivery Date for any fiscal quarter
ending on and after December 31, 1996, 0.125% per annum fronting fee payable to
the Issuing Bank on the face amount of each Letter of Credit, and payable pro
rata to each Lender a fee per annum equal to the greater of (i) the applicable
Margin for any LIBOR Rate Advance and (ii) $500.00.
"LETTER OF CREDIT OBLIGATIONS" means at any time the sum of (a)
the aggregate then undrawn and unexpired amount of outstanding Letters of Credit
and (b) the aggregate amount of drawings under Letters of Credit not reimbursed
pursuant to SECTION 3.03(C).
"LETTER OF CREDIT REQUEST" has the meaning specified in SECTION
3.02(A).
"LETTERS OF CREDIT" has the meaning specified in SECTION 3.01(A).
"LIBOR LENDING OFFICE" means, with respect to each Lender, the
branches or affiliates of such Lender designated as its "LIBOR Lending Office"
from time to time hereunder.
"LIBOR RATE" means, with respect to any LIBOR Rate Advance for
any Interest Period, (a) the interest rate per annum shown on page 3750 of the
Dow Jones & Company Telerate screen or any successor page as the composite
offered rate for London interbank deposits with a period comparable to the
Interest Period for such LIBOR Rate Advance, as shown under the heading "USD" at
11:00 a.m. (London time) two (2) Business Days prior to the first day of such
Interest Period or (b) if the rate in clause (a) of this definition is not shown
for any particular day, the average interest rate per annum (rounded upwards, if
necessary, to the next 1/16th of 1%) offered to the Agent in the interbank
eurodollar market for dollar deposits of amounts in funds comparable to the
principal amount of the LIBOR Rate Advance to which such LIBOR Rate is to be
applicable with maturities comparable to the Interest Period for which such
LIBOR Rate will apply as of approximately 10:00 a.m. (Houston, Texas time) two
(2) Business Days prior to the commencement of such Interest Period.
"LIBOR RATE ADVANCE" means any Advance bearing interest at a rate
determined by reference to the LIBOR Rate in accordance with the provisions of
ARTICLE II.
"LIEN" means, when used with respect to any Person, any mortgage,
lien, charge, pledge, security interest or encumbrance of any kind (whether
voluntary or involuntary and whether imposed or created by operation of law or
otherwise) upon, or pledge of, any of its property or assets, whether now owned
or hereafter acquired, any lease that constitutes a security interest pursuant
to Section 1.201 of the Texas Business and Commerce Code, any capital lease in
the nature of the foregoing, any conditional sale agreement or other title
retention agreement, in each case, for the purpose, or having the effect, of
protecting a creditor against loss or securing the payment or performance of an
obligation.
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"LOAN" and "LOANS" have the meaning specified in SECTION 2.03(B).
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty,
the Exceptions Letter, any agreement with respect to a Derivative entered into
with a Lender existing from time to time and the Security Documents.
"LOAN PARTIES" means, collectively, the Company and its
Subsidiaries, the Parent and Holding Co. and, individually, any one of the
foregoing.
"MAJORITY LENDERS" means Lenders holding at least 51% of the
Total Commitment (notwithstanding any reduction or termination of the Total
Commitment pursuant to SECTION 4.02, 4.03 or 9.02).
"MARGIN" means, (a) with respect to any Advance made under any
Revolving Credit Loan, Term Loan A or ESOP Loan, the rate of interest per annum
determined as set forth below as a function of the Type of such Loan:
(i) during the period from the Execution Date through the
Financial Statement Delivery Date for the fiscal quarter ending December 31,
1996:
LIBOR Rate Alternate Base
ADVANCE RATE ADVANCE
2.00% 1%
(ii) during the period between any two Financial Statement
Delivery Dates for any Margin Period occurring after December 31, 1996:
(A) the rate determined by reference to the pricing grid below as
a function of the ratio of Total Debt (on the last day of the quarter
most recently ended prior to such Financial Statement Delivery Date) to
EBITDA:
LIBOR Rate Alternate Base
TOTAL DEBT/EBITDA ADVANCE MARGIN RATE MARGIN
Less Than 1.50 0.625% 0%
Greater than 1.50 0.75% 0%
-
Less Than 2.00
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LIBOR Rate Alternate Base
TOTAL DEBT/EBITDA ADVANCE MARGIN RATE MARGIN
Greater than 2.00 1.00% 0%
Less Than 2.50
Greater than 2.50 1.25% 0.25%
-
Less Than 3.00
Greater than 3.00 1.50% 0.50%
-
Less Than 3.50
Greater than 3.50 1.75% 0.75%
-
Less Than 4.00
Greater than 4.00 2.00% 1.00%
-
Less Than 4.50
Greater than 4.50 2.50% 1.50%
(B) if the ratio of Total Debt (on the last day of the quarter
most recently ended prior to such Financial Statement Delivery Date) to
EBITDA cannot be reasonably determined by the Agent for any Margin
Period because of the Company's failure to timely deliver its financial
statements until such ratio can be so determined:
LIBOR Rate Alternate Base
ADVANCE RATE ADVANCE
2.50% 1.50%
(b) with respect to any Advance made under the Term Loan B, three
percent (3%) per annum,
(c) with respect to any Advance made under the Swing Line Loan,
the applicable Margin for any Alternate Base Rate Advance as determined in
subclauses (a) (i) and (ii) above.
"MARGIN PERIOD" means a period commencing on the most recent
Financial Statement Delivery Date and ending on the next Financial Statement
Delivery Date.
"MATERIAL ADVERSE EFFECT" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), (a) a material adverse
effect on the financial condition, business, operations, prospects or assets of
the Company on an individual basis or the Company and its Subsidiaries taken as
a whole,
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or (b) a material impairment of the ability of the Company on an individual
basis or the Company and its Subsidiaries taken as a whole to perform
obligations under the Loan Documents or (c) an impairment of the validity or
enforceability of any Loan Document which materially affects the benefits
intended to be bestowed thereunder.
"MATERIAL CONTRACTS" means those agreements listed on SCHEDULE
8.12 hereto.
"MERGER" has the meaning specified in the introduction to this
Agreement.
"MULTIEMPLOYER PLAN" means any plan which is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA) to which the
Company or any ERISA Affiliate contributes or has any obligation or liability to
make contributions, including any withdrawal liability, contingent or otherwise.
"NOTES" means the Revolving Credit Notes, the Term Loan A Notes,
the Term Loan B Notes, the ESOP Notes and the Swing Line Note and "Note" means
any one of the same.
"NOTICE OF ADVANCE" has the meaning specified in SECTION 2.04(A).
"NOTICE OF CONVERSION" has the meaning specified in SECTION 2.07.
"NOTICE OF DEFAULT" has the meaning specified in SECTION 9.02.
"OBLIGATIONS" means all the obligations of the Company now or
hereafter existing under the Loan Documents, whether for principal, interest,
Fees, expenses, indemnification or otherwise.
"OTHER ACTIVITIES" has the meaning specified in SECTION 10.03.
"OTHER ASSETS" means the assets listed on the attached Schedule
1.01.
"OTHER FINANCINGS" has the meaning specified in SECTION 10.03.
"PARENT" has the meaning specified in the introduction to this
Agreement.
"PARENT NOTE" means that certain promissory note executed by the
Parent, as maker, to the Company and Finance Corp., as co-payees, dated as of
the Effective Date evidencing the loan by Finance Corp. of an amount equal to
approximately $140,500,000.00 to be used solely for the purpose of purchasing
the capital stock of TOC and TPC and certain transaction expenses incurred in
connection with such purchase.
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"PAYMENT OFFICE" means the office of the Agent located at 1111
Fannin Street, Houston, Texas 77002, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"PERMITTED INVESTMENTS" means, as to any Person:
(a) securities issued or directly and fully guaranteed or insured
by the United States or any agency or instrumentality thereof (PROVIDED that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition by such
Person,
(b) bankers acceptances or time deposits and certificates of
deposit with maturities of not more than twelve months from the date of
acquisition by such Person which deposits or certificates are either: (i) fully
insured by the Federal Deposit Insurance Corporation or (ii) in any Lender or
commercial bank incorporated in the United States or any United States branch of
any other commercial bank and, in the case of any such other commercial bank,
having capital, surplus and undivided profits aggregating $500,000,000 or more
with a short-term unsecured debt rating of at least A1 from Standard & Poor's
Ratings Group and P1 from Moody's Investors Service,
(c) commercial paper issued by any Person incorporated in the
United States rated at least A1 or the equivalent thereof by Standard & Poor's
Ratings Group and at least P1 or the equivalent thereof by Moody's Investors
Service and, in each case, maturing not more than six months after the date of
acquisition by such Person,
(d) 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); and
(e) repurchase or reverse purchase agreements respecting
obligations with a term of not more than seven days for underlying securities of
the types described in clause (a) above entered into with any bank listed in or
meeting the qualifications specified in clause (b) above.
"PERMITTED LIENS" has the meaning specified in SECTION 8.04.
"PERSON" means an individual, partnership, corporation (including
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a federal, foreign
or domestic state or political subdivision thereof or any agency of such state
or subdivision.
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"PLAN" means any employee pension benefit plan (as defined in
Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of the Code,
other than a Multiemployer Plan, with respect to which the Company, its
Subsidiaries or an ERISA Affiliate contributes or has an obligation or liability
to contribute, including any such plan that may have been terminated.
"PRIME RATE" shall mean the rate which the Agent announces from
time to time as its prime rate, effective as of the date announced as the
effective date of any change in such prime rate. Without notice to the Company
or any other Person, the Prime Rate shall change automatically from time to time
as and in the amount by which such prime rate shall fluctuate. The Prime Rate is
a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Agent may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"PURCHASE AGREEMENT" means that certain Stock Purchase Agreement
(including all annexes and schedules attached thereto) dated May 14, 1996 among
the shareholders of TOC and TPC, as seller, the Parent, as buyer, and Holding
Co.
"RECEIVABLE" means, as to the Company or any Subsidiary at any
time of determination thereof, the unpaid portion of the obligation, as stated
on the respective invoice, or if no invoice, other writing or an electronic
medium, of an account debtor of such Person in respect of Inventory, goods,
technology or other assets purchased and shipped or services rendered in the
ordinary course of business of such Person.
"REFUNDED SWING LINE LOANS" has the meaning specified in SECTION
2.01(B)(II).
"REGISTER" has the meaning specified in SECTION 11.10(D).
"REGULATION D" means Regulation D of the Board (respecting
reserve requirements), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"REGULATION G" means Regulation G of the Board (respecting margin
credit extended by Persons other than banks and broker/dealers), as the same is
from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"REGULATION U" means Regulation U of the Board (respecting margin
credit extended by banks), as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
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"REGULATION X" means Regulation X of the Board (respecting
borrowers who obtain margin credit), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding of
barrels, containers and other closed receptacles) other than in accordance with
Environmental Laws.
"REPORTABLE EVENT" means an event described in Section 4043(c) of
ERISA with respect to a Plan, other than an event described in paragraphs (1)
through (8) as to which the 30-day notice requirement has been waived by the
PBGC.
"RESERVE PERCENTAGE" means, for any Interest Period and for any
Lender, the reserve percentage applicable during such Interest Period under
regulations issued from time to time by the Board (or if more than one such
percentage is so applicable, the daily average for such percentages for those
days in such Interest Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including any
marginal, supplemental or emergency reserves) for such Lender in respect of
liabilities or assets consisting of or including Eurocurrency Liabilities.
"RESPONSIBLE OFFICER" means, with respect to the Company, the
Parent, or Holding Co., the chairman of the board of directors, the president,
chief financial officer or treasurer.
"REVOLVING CREDIT COMMITMENT" means, with respect to the
Revolving Credit Loans and as to any Lender, the amount set forth opposite such
Lender's name on the signature pages hereof, as modified from time to time
pursuant to the terms hereof.
"REVOLVING CREDIT COMMITMENT FEE" has the meaning specified in
SECTION 4.01(A).
"REVOLVING CREDIT LENDER" means any Lender having a Revolving
Credit Commitment hereunder.
"REVOLVING CREDIT LOAN" has the meaning specified in SECTION
2.01.
"REVOLVING CREDIT MATURITY DATE" means December 31, 2002, unless
accelerated pursuant to SECTION 9.02.
"REVOLVING CREDIT NOTE" has the meaning specified in SECTION
2.05(A).
"SCHEDULED CAPITAL EXPENDITURES" has the meaning specified in
SECTION 8.14.
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"SECURITY DOCUMENTS" means all those certain security agreements,
pledge agreements, stock certificates, mortgages, assignments, UCC financing
statements, lien consents and waivers and all other similar documents executed
by the Company and its Subsidiaries, Holding Co., and/or the Parent, as the case
may be, in connection herewith granting to the Agent for the benefit of the
Lenders a Lien in substantially all of the assets of the Company and its
Subsidiaries (other than the Other Assets) and the common stock of the Company
and the Parent as security for the Obligations.
"SUBSIDIARY" means, with respect to any Person, (a) any
corporation, partnership, association, joint venture or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the directors (or other Persons performing similar functions) are at
the time owned by such Person, directly or indirectly and (b) any corporation,
partnership, association, joint venture or other entity in which such Person,
directly or indirectly, has greater than 50% of the equity interest.
"SUBORDINATED DEBT" means the unsecured subordinated Indebtedness
of the Company evidenced by $175,000,000.00 aggregate principal amount of 111/8%
Senior Subordinated Notes of the Company due 2006 and including any exchange
notes issued by the Company in exchange for such Senior Subordinated Notes.
"SWING LINE COMMITMENT" means the Swing Line Lender's obligation
to make Swing Line Loans pursuant to SECTION 2.01(B).
"SWING LINE LENDER" means TCB, in its capacity as provider of the
Swing Line Loans.
"SWING LINE LOAN" or "SWING LINE LOANS" has the meaning specified
in SECTION 2.01(B).
"SWING LINE NOTE" has the meaning specified in SECTION 2.05(E).
"TCB" means Texas Commerce Bank National Association, a national
banking association.
"TOC" has the meaning specified in the introduction to this
Agreement.
"TPC" has the meaning specified in the introduction to this
Agreement.
"TERM LOAN A" has the meaning specified in SECTION 2.03(A).
"TERM LOAN B" has the meaning specified in SECTION 2.03(B).
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"TERM LOAN A COMMITMENT" means, with respect to Term Loan A and
as to any Lender, the amount set forth opposite such Lender's name on the
signature pages hereof under the heading "Term Loan A" aggregating
$85,000,000.00
"TERM LOAN B COMMITMENT" means, with respect to Term Loan B and
as to any Lender, the amount set forth opposite such Lender's name on the
signature pages hereof under the heading "Term Loan B" aggregating
$45,000,000.00
"TERM LOAN A LENDER" means any Lender having a Term Loan A
Commitment hereunder.
"TERM LOAN B LENDER" means any Lender having a Term Loan B
Commitment hereunder.
"TERM LOAN A MATURITY DATE" means December 31, 2002, unless
accelerated pursuant to SECTION 9.02.
TERM LOAN B MATURITY DATE" means June 30, 2004, unless
accelerated pursuant to SECTION 9.02.
"TERM NOTE A" has the meaning specified in SECTION 2.05(B).
"TERM NOTE B" has the meaning specified in SECTION 2.05(C).
"TOTAL COMMITMENT" means an amount equal to the sum of the Total
Revolving Credit Commitment (including the Swing Line Commitment), Term Loan A
Commitments, Term Loan B Commitments and ESOP Loan Commitments.
"TOTAL DEBT" means, as to the Company and its Subsidiaries on a
consolidated basis at any time without duplication, all Indebtedness for
borrowed money, all obligations evidenced by bonds, debentures, notes, or other
similar instruments, all Capitalized Lease Obligations, and all guaranties of
funded Indebtedness (without regard to maturity) of other Persons.
"TOTAL REVOLVING CREDIT COMMITMENT" means $40,000,000.00 as same
may be reduced pursuant to SECTION 4.02 or 4.03.
"TYPE" has the meaning specified in SECTION 1.02.
"UNFUNDED CURRENT LIABILITY" means, with respect to any Plan, the
amount, if any, by which the value of the benefit liabilities under the Plan as
of the close of its most recent Plan year
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exceeds the fair market value of the assets of the Plan, determined in
accordance with Section 412 of the Code.
"UNUTILIZED COMMITMENT" at any time, means the Total Revolving
Credit Commitment LESS Letter of Credit Obligations LESS the outstanding
Advances under the Revolving Credit Loans as same may be reduced pursuant to
SECTION 4.02 OR 4.03.
"VOTING STOCK" means the capital stock of any Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
SECTION 1.02 TYPES OF ADVANCES. Advances hereunder are
distinguished by "Type". The Type of an Advance refers to the determination
whether such Advance is a LIBOR Rate Advance or an Alternate Base Rate Advance.
SECTION 1.03 ACCOUNTING TERMS. All accounting terms not defined
herein shall be construed in accordance with GAAP, as applicable, and all
calculations required to be made hereunder and all financial information
required to be provided hereunder shall be done or prepared in accordance with
GAAP.
ARTICLE II
THE LOANS
SECTION 2.01 THE LOANS. (a) THE REVOLVING CREDIT LOANS. Subject
to the terms and conditions hereof, each Revolving Credit Lender severally
agrees at any time and from time to time on and after the Effective Date and
prior to the Revolving Credit Maturity Date, to make and maintain a revolving
credit loan or loans up to the amount of such Lender's Revolving Credit
Commitment (each a "REVOLVING CREDIT LOAN" and collectively, the "REVOLVING
CREDIT LOANS") to the Company, which Loans (1) shall, at the option of the
Company, be made and maintained pursuant to one or more Advances comprised of
Alternate Base Rate Advances or LIBOR Rate Advances; provided that all Loans
comprising all or a portion of the same Advance shall when made be of the same
Type, (2) in the case of any LIBOR Rate Advance, shall be made in the minimum
amount of $2,000,000.00 and integral multiples of $100,000.00, (3) in the case
of any Alternate Base Rate Advance, shall be made in the minimum amount of
$1,000,000.00 (or if less, in the aggregate amount of the Unutilized Commitment)
and integral multiples of $100,000.00, and (4) may be repaid and, so long as no
Default or Event of Default exists hereunder, reborrowed, at the option of the
Company in accordance with the provisions hereof. Notwithstanding the foregoing,
the aggregate outstanding principal balance of all Revolving Credit Loans and
all Swing Line Loans PLUS the Letter of Credit Obligations shall not exceed the
lesser of the Borrowing Base then in effect and the Total Revolving Credit
Commitment. There shall be no further Advances after the Revolving Credit
Maturity Date.
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(b) SWING LINE COMMITMENT. (i) Subject to the terms and
conditions hereof, the Swing Line Lender agrees at any time and from time to
time on and after the Effective Date and prior to the Revolving Credit Maturity
Date, to make swing line loans (each a "SWING LINE LOAN" and collectively, the
"SWING LINE LOANS") to the Company in an aggregate principal amount at any one
time outstanding not to exceed $5,000,000.00, which Loans (A) shall be made and
maintained pursuant to one or more Advances comprised of Alternate Base Rate
Advances and which shall not be entitled to be converted into LIBOR Rate
Advances, (B) shall be made in the minimum amount of $100,000.00 (or if less, in
the aggregate amount of the Unutilized Commitment) and (C) may be repaid and, so
long as no Default or Event of Default exists hereunder, reborrowed, at the
option of the Company, in accordance with the provisions hereof. Swing Line
Loans shall constitute "Revolving Credit Loans" for all purposes hereunder,
EXCEPT they shall be held by the Swing Line Lender (subject to sub-clause (ii)
below) and shall not be considered a utilization of the Revolving Credit
Commitment of any Revolving Credit Lender hereunder for purposes of calculating
the Revolving Credit Commitment Fee. Notwithstanding the foregoing, the
aggregate outstanding principal balance of all Revolving Credit Loans and Swing
Line Loans PLUS the Letter of Credit Obligations shall not exceed the lesser of
the Borrowing Base then in effect and the Total Revolving Credit Commitment.
(ii) At any time before or after a Default or Event of Default,
the Swing Line Lender, in its sole and absolute discretion may give notice to
the Agent to request each Revolving Credit Lender, including the Swing Line
Lender, to make a Revolving Credit Loan as an Alternate Base Rate Loan in an
amount equal to such Lender's percentage participation in the Total Revolving
Credit Commitment TIMES the outstanding principal balance of any Swing Line Loan
(the "REFUNDED SWING LINE LOAN") outstanding on the date such notice is given;
PROVIDED that the provision of this subsection shall not affect the obligation
of the Company to prepay Swing Line Loans in accordance with SECTION 2.08(D).
Unless the Revolving Credit Commitments shall have expired or terminated, each
Revolving Credit Lender shall make the proceeds of its Revolving Credit Loan
available to the Agent for the account of the Swing Line Lender on the next
Business Day following such request, in immediately available funds. The
proceeds of such Revolving Credit Loans shall be immediately applied to repay
the Refunded Swing Line Loan.
(iii) At any time before or after a Default or Event of Default,
if the Revolving Credit Commitments shall have expired or be terminated while
any Swing Line Loan is outstanding, each Revolving Credit Lender, at the sole
option of the Swing Line Lender shall either, (A) notwithstanding the expiration
or termination of the Revolving Credit Commitments, make a Revolving Credit Loan
as an Alternate Base Rate Loan which such Revolving Credit Loan shall be deemed
a "Revolving Credit Loan" for all purposes of this Agreement and the other Loan
Documents) or (B) be deemed, without further action by any Person, to have
purchased from the Swing Line Lender a participation in such Swing Line Loan in
either case in an amount equal to such Lender's percentage participation in the
Total Revolving Credit Commitment times the outstanding
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principal balance of such Swing Line Loan. The Agent shall notify each such
Lender of the amount of such Revolving Credit Loan or participation and such
Lender will transfer to the Agent for the account of the Swing Line Lender on
the next Business Day following such notice, in immediately available funds, the
amount of its Revolving Credit Loan or participation.
(iv) If any such Lender shall not have so made its Revolving
Credit Loans or its percentage participation available to the Agent pursuant to
this SECTION 2.01(B), such Lender agrees to pay interest thereon for each day
from such date until the date such amount is paid at the lesser of (1) the
Federal Funds Effective Rate on the date payment is to be made to the Agent and
(2) the Highest Lawful Rate. Whenever, at any time after the Agent has received
from any Revolving Credit Lender such Lender's Revolving Credit Loan or
participating interest in a Swing Line Loan, the Agent receives any payment on
account thereof, the Agent will pay to such Lender its participating interest in
such amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender's participating interest was
outstanding and funded) which payment shall be subject to repayment by such
Lender if such payment received by the Agent is required to be returned. Each
Revolving Credit Lender's obligation to make the Revolving Credit Loans or
purchase such participating interests pursuant to this SECTION 2.01(B) shall be
absolute and unconditional and shall not be affected by any circumstance,
including, without limitation, (A) any set-off, counterclaim, recoupment,
defense or other right which such Lender or any other Person may have against
the Swing Line Lender, the Agent or any other Person for any reason whatsoever;
(B) the occurrence or continuance of a Default or an Event of Default or the
termination of Revolving Credit Commitments; (C) the occurrence of any Material
Adverse Effect; (D) any breach of this Agreement by the Company or any other
Lender; or (E) any other circumstance, happening or event whatsoever, whether or
not similar to any of the foregoing. Each Swing Line Loan, once so participated
by any Revolving Credit Lender, shall cease to be a Swing Line Loan with respect
to that amount for purposes of this Agreement but shall continue to be a
Revolving Credit Loan and be evidenced by such Lender's Revolving Credit Note.
SECTION 2.02 THE ESOP LOAN. Subject to the terms and conditions
herein set forth, each ESOP Lender agrees to make and maintain a term loan in
the amount of such Lender's ESOP Loan Commitment (the "ESOP LOAN") to the
Company. The ESOP Loan shall be fully advanced on the Effective Date, and no
ESOP Lender shall have an obligation to make any additional Advance under the
ESOP Loan after such date. Any amount repaid under the ESOP Loan may not be
reborrowed. All amounts outstanding under the ESOP Loan shall, at the option of
the Company, be made and maintained as Alternate Base Rate Advances or LIBOR
Rate Advances; provided that all Loans comprising all or a portion of the same
Advance shall when made be of the same Type.
SECTION 2.03 THE TERM LOANS. (a) Subject to the terms and
conditions herein set forth, each Term Loan A Lender agrees to make and maintain
a term loan in the amount of such Lender's Term Loan A Commitment (the "TERM
LOAN A") to the Company. The Term Loan A shall be fully advanced on the
Effective Date, and no Term Loan A Lender shall have an obligation to
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make any additional Advance under the Term Loan A after such date. Any amount
repaid under the Term Loan A may not be reborrowed. All amounts outstanding
under the Term Loan A shall, at the option of the Company, be made and
maintained as Alternate Base Rate Advances or LIBOR Rate Advances; provided that
all Loans comprising all or a portion of the same Advance shall when made be of
the same Type.
(b) Subject to the terms and conditions herein set forth, each
Term Loan B Lender agrees to make and maintain a term loan in the amount of such
Lender's Term Loan B Commitment (the "TERM LOAN B" and, together with the ESOP
Loan, Revolving Credit Loans, Swing Line Loans, Term Loan A, and any Advances
under a Letter of Credit described in ARTICLE III hereof, the "LOANS") to the
Company. The Term Loan B shall be fully advanced on the Effective Date, and no
Term Loan B Lender shall have an obligation to make any additional Advance under
the Term Loan after such date. Any amount repaid under the Term Loan B may not
be reborrowed. All amounts outstanding under the Term Loan B shall, at the
option of the Company, be made and maintained as Alternate Base Rate Advances or
LIBOR Rate Advances; provided that all Loans comprising all or a portion of the
same Advance shall when made be of the same Type.
SECTION 2.04 NOTICE OF ADVANCE. (a) REVOLVING CREDIT LOANS.
Whenever the Company requires an Advance under the Revolving Credit Loans, it
shall give written notice thereof (a "NOTICE OF ADVANCE") (or telephonic notice
promptly confirmed in writing) to the Agent (i) in the case of an Alternate Base
Rate Advance, not later than 10:00 a.m. (Houston, Texas time) on the date of
such Advance and (ii) in the case of a LIBOR Rate Advance, not later than 11:00
a.m. (Houston, Texas time) three (3) Business Days prior to the date of such
Advance. Each Notice of Advance shall be irrevocable and shall be in the form of
EXHIBIT 2.04 hereto, specifying (A) the aggregate principal amount of the
Advance to be made, (B) the date of such Advance (which shall be a Business
Day), (C) whether it is to be an Alternate Base Rate Advance or a LIBOR Rate
Advance and (D) if the proposed Advance is to be a LIBOR Rate Advance, the
initial Interest Period to be applicable thereto. The Agent shall promptly give
the Revolving Credit Lenders written notice or telephonic notice (promptly
confirmed in writing) of each proposed Advance, of each Revolving Credit
Lender's proportionate share thereof and of the other matters covered by each
Notice of Advance.
(b) SWING LINE LOANS. Whenever the Company requires an Advance
under the Swing Line Loans, it shall give written notice thereof (or telephonic
notice promptly confirmed in writing) to the Swing Line Lender not later than
11:00 a.m. (Houston, Texas time) on the date of such Advance. Each notice shall
be irrevocable and shall specify the aggregate principal amount of such Advance
and the date of such Advance (which shall be a Business Day).
SECTION 2.05 THE NOTES. (a) The Company's obligation to repay the
Revolving Credit Loans made by each Revolving Credit Lender shall be evidenced
by a revolving credit promissory note duly executed and delivered by the Company
to each Revolving Credit Lender substantially in the form of EXHIBIT 2.05A
hereto (each a "REVOLVING CREDIT NOTE" and collectively,
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the "REVOLVING CREDIT NOTES"), and each Revolving Credit Note shall (i) be
payable to the order of such Lender, (ii) be in a stated principal amount equal
to the Revolving Credit Commitment of such Lender, (iii) be payable prior to
maturity as provided herein and mature on the Revolving Credit Maturity Date,
(iv) bear interest as provided in the appropriate clause of SECTION 2.12 and (v)
be entitled to the benefits of this Agreement and the other Loan Documents.
(b) The Company's obligation to repay the Term Loan A made by
each Term Loan A Lender shall be evidenced by a term promissory note duly
executed and delivered by the Company to each Term Loan A Lender substantially
in the form of EXHIBIT 2.05B hereto (each a "TERM NOTE A" and collectively, the
"TERM NOTES A"), and each Term Note A shall (i) be payable to the order of such
Lender, (ii) be in a stated principal amount equal to the Term Loan A Commitment
of such Lender, (iii) be payable prior to maturity as provided herein and mature
on the Term Loan A Maturity Date, (iv) bear interest as provided in the
appropriate clause of SECTION 2.12 and (v) be entitled to the benefits of this
Agreement and the other Loan Documents.
(c) The Company's obligation to repay the Term Loan B made by
each Term Loan B Lender shall be evidenced by a term promissory note duly
executed and delivered by the Company to each Term Loan B Lender substantially
in the form of EXHIBIT 2.05C hereto (each a "TERM NOTE B" and collectively, the
"TERM NOTES B"), and each Term Note B shall (i) be payable to the order of such
Lender, (ii) be in a stated principal amount equal to the Term Loan B Commitment
of such Lender, (iii) be payable prior to maturity as provided herein and mature
on the Term Loan B Maturity Date, (iv) bear interest as provided in the
appropriate clause of SECTION 2.12 and (v) be entitled to the benefits of this
Agreement and the other Loan Documents.
(d) The Company's obligation to repay the ESOP Loan made by each
ESOP Lender shall be evidenced by a term promissory note duly executed and
delivered by the Company to each ESOP Lender substantially in the form of
EXHIBIT 2.05D hereto (each an "ESOP NOTE" and collectively, the "ESOP NOTES"),
and each ESOP Note shall (i) be payable to the order of such Lender, (ii) be in
a stated principal amount equal to the ESOP Loan Commitment of such Lender,
(iii) be payable prior to maturity as provided herein and mature on the ESOP
Loan Maturity Date, (iv) bear interest as provided in the appropriate clause of
SECTION 2.12 and (v) be entitled to the benefits of this Agreement and the other
Loan Documents.
(e) The Company's obligation to repay the Swing Line Loans made
by the Swing Line Lender shall be evidenced by a promissory note duly executed
and delivered by the Company to the Swing Line Lender substantially in the form
of EXHIBIT 2.05E hereto (the "SWING LINE NOTE"), and shall (i) be in a stated
principal amount equal to the Swing Line Commitment, (ii) be payable prior to
maturity as provided herein and mature on the Revolving Credit Maturity Date,
(iii) bear interest as provided in the appropriate clause of SECTION 2.12 and
(iv) be entitled to the benefits of this Agreement and the other Loan Documents.
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SECTION 2.06 DISBURSEMENT OF FUNDS. (a) With respect to any
Advance to be made under any Loan other than the Swing Line Loan, no later than
1:00 p.m. (Houston, Texas time) on any Advance Date, each Lender shall make
available its pro rata portion of the amount of such Advance in U.S. dollars and
in immediately available funds at the Payment Office. The Agent shall credit the
amounts so received to the general deposit account of the Company maintained
with the Agent or as otherwise directed by the Company.
(b) With respect to any Advance to be made under the Swing Line
Loan, no later than 2:00 p.m. (Houston, Texas time) on the requested Advance
Date, the Swing Line Lender shall make available to the Company in immediately
available funds the amount of such Advance at the Company's general deposit
account maintained with the Swing Line Bank or as otherwise directed by the
Company.
(c) Unless the Agent shall have been notified by any Lender prior
to disbursement of an Advance by the Agent that such Lender does not intend to
make available to the Agent such Lender's portion of the Advance to be made on
such date, the Agent may assume that such Lender has made such amount available
to the Agent on such Advance Date and the Agent may, in reliance upon such
assumption, make available to the Company a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Lender
and the Agent has made available same to the Company, the Agent shall be
entitled to recover such corresponding amount on demand from such Lender. If
such Lender does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Company, and the Company
shall pay such corresponding amount to the Agent within two (2) Business Days
after demand therefor. The Agent shall also be entitled to recover from such
Lender or the Company, as the case may be, interest on such corresponding amount
from the date such corresponding amount was made available by the Agent to the
Company to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to, (i) as to any Lender, the Federal Funds Effective Rate
on the date of such Advance and (ii) as to the Company, at the rate per annum
applicable to such Loan PLUS the applicable Margin. Nothing herein shall be
deemed to relieve any Lender from its obligation to fulfill its commitments
hereunder or to prejudice any rights which the Company may have against any
Lender as a result of any default by such Lender hereunder.
SECTION 2.07 CONVERSIONS AND CONTINUANCES. Subject to the
provisions of SECTION 2.17 hereof, the Company shall have the option to convert
on any Business Day all or a portion of the outstanding principal amount of one
Type of Advance into another Type of Advance (other than Advances under the
Swing Line Loan which at all times must be maintained as Alternate Base Rate
Advances) or continue any LIBOR Advance for an additional Interest Period,
PROVIDED, no Advances may be converted into or continued as LIBOR Rate Advances
if a Default or Event of Default is in existence on the date of the conversion
or continuation. Except as provided in SECTION 2.13(B), each such conversion or
continuation shall be effected by the Company giving the Agent written notice
(each a "NOTICE OF CONVERSION") prior to 11:00 a.m. (Houston, Texas time) at
least (a) three (3)
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Business Days prior to the date of such conversion in the case of conversion or
continuation into or continuance as a LIBOR Rate Advance and (b) prior to 10:00
a.m. (Houston, Texas time) on the date of such conversion in the case of a
conversion into an Alternate Base Rate Advance, specifying each Advance (or
portions thereof) to be so converted or continued and, if to be converted into
or continued as a LIBOR Rate Advance, the Interest Period to be initially
applicable thereto. The Agent shall thereafter promptly notify each affected
Lender of such Notice of Conversion.
SECTION 2.08 MANDATORY REPAYMENTS. (a) THE REVOLVING CREDIT
NOTES. All outstanding principal (and any accrued, unpaid interest) on the
Revolving Credit Notes shall be due and payable on the Revolving Credit Maturity
Date. Notwithstanding anything to the contrary contained in this Agreement or in
any other Loan Document, the aggregate outstanding principal balance of the
Revolving Credit Notes and Swing Line Loans PLUS the Letter of Credit
Obligations shall not exceed the lesser of the Borrowing Base and the Total
Revolving Credit Commitment. The Revolving Credit Lenders shall never be
required to make any Advance under the Revolving Credit Loans (or the Swing Line
Lender to make any Swing Line Loan) or issue any Letter of Credit that would
cause the aggregate outstanding principal balance of the Revolving Credit Notes
and Swing Line Loans PLUS the Letter of Credit Obligations to exceed the lesser
of the Borrowing Base and the Total Revolving Credit Commitment. If the
aggregate outstanding principal balance of the Revolving Credit Notes and Swing
Line Loans PLUS the Letter of Credit Obligations at any time exceeds the lesser
of the Borrowing Base and the Total Revolving Credit Commitment, the Company
shall immediately repay the principal of the Revolving Credit Notes in an amount
at least equal to such excess. If after giving effect to any such principal
repayment the Letter of Credit Obligations exceed the lesser of the Borrowing
Base and the Total Revolving Credit Commitment, the Company shall pay an amount
of cash equal to such excess to the Agent to be held as security for the Letter
of Credit Obligations.
(b) THE TERM NOTES. (i) Outstanding principal on the Term Notes A
and Term Notes B shall be due and payable on each Designated Payment Date
commencing September 30, 1996 in such aggregate amounts and for such periods as
follows (as such is reduced by any principal payment made under SECTION
2.08(B)(II), (III) AND (IV) below):
<TABLE>
<CAPTION>
Term Loan A Term Loan B
Installment Due on Installment Due on
PAYMENT DATE EACH DESIGNATED PAYMENT DATE EACH DESIGNATED PAYMENT DATE
<S> <C> <C>
September 30, 1996 $2,500,000 $250,000
December 31, 1996 2,500,000 250,000
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Term Loan A Term Loan B
Installment Due on Installment Due on
PAYMENT DATE EACH DESIGNATED PAYMENT DATE EACH DESIGNATED PAYMENT DATE
Payment Date Each Designated Payment Date Each Designated Payment Date
March 31, 1997 2,500,000 250,000
June 30, 1997 2,500,000 250,000
September 30, 1997 2,500,000 250,000
December 31, 1997 2,500,000 250,000
March 31, 1998 2,500,000 250,000
June 30, 1998 2,500,000 250,000
September 30, 1998 2,500,000 250,000
December 31, 1998 2,500,000 250,000
March 31, 1999 2,500,000 250,000
June 30, 1999 2,500,000 250,000
September 30, 1999 3,000,000 250,000
December 31, 1999 3,000,000 250,000
March 31, 2000 3,000,000 250,000
June 30, 2000 3,000,000 250,000
September 30, 2000 3,750,000 250,000
December 31, 2000 3,750,000 250,000
March 31, 2001 3,750,000 250,000
June 30, 2001 3,750,000 250,000
September 30, 2001 4,500,000 250,000
December 31, 2001 4,500,000 250,000
March 31, 2002 4,500,000 250,000
June 30, 2002 4,500,000 250,000
September 30, 2002 5,000,000 1,000,000
December 31, 2002 5,000,000 1,000,000
March 31, 2003 --- 6,000,000
June 30, 2003 --- 6,000,000
September 30, 2003 --- 6,250,000
December 31, 2003 --- 6,250,000
March 31, 2004 --- 6,250,000
June 30, 2004 --- 6,250,000
</TABLE>
(ii) In addition to the amounts required under sub-clause
(b)(i) above, the Company shall make a principal payment on Term Loan A
and Term Loan B for each fiscal year (commencing with the fiscal year
ending June 30, 1997) prior to September 30 of the following fiscal year
in an amount equal to seventy-five percent (75%) of its Excess Cash Flow
for such fiscal year; PROVIDED, that in the event that the aggregate
outstanding balance of Term Loan A and Term Loan B is reduced to
$75,000,000 or less on or before June 30 of any year, the pro rata
principal payment on Term Loan A and Term Loan B required by this
paragraph shall be reduced to fifty percent (50%) of such Excess Cash
Flow, commencing with the payment due in the fiscal year after such
reduction of the aggregate outstanding balance on Term Loan A and Term
Loan B. All payments required under this SECTION 2.08(B)(II) shall be
applied pro rata against Term Loan A and Term Loan B and, as to any
payment on any of such Notes, pro rata to each remaining principal
installment.
(iii) In addition to the amounts required under
sub-clauses (i) and (ii) above, promptly upon receipt by the Company,
the Company shall make a principal payment on Term Loan A and Term Loan
B in the aggregate amount of (x) a downward adjustment to the "Final TOC
Per Share Purchase Price" or the "Final TPC Per Share Purchase Price"
made under Section 2.5.3(b) and (d), respectively, of the Purchase
Agreement and (xx) any other portion of the "Estimated TOC Per Share
Purchase Price" or "Estimated TPC Per Share Purchase Price" (as such
terms are defined in the Purchase Agreement) returned to the Company.
All payments required under this SECTION 2.08(B)(III) shall be applied
pro rata against Term Loan A and Term Loan B and, as to any payment on
any one of such Loans, pro rata to each remaining principal installment.
(iv) In addition to the amounts required under sub-clauses
(i), (ii) and (iii) above, promptly upon receipt by the Company, the
Company shall make a principal payment on Term Loan A and Term Loan B in
the amount of the cash proceeds received by the Company from any
unrelated third-party as a result of any offering (net of any expenses
of such offering) of the common stock or other equity interest of the
Company or any Subsidiary. All payments required under this SECTION
2.08(B)(IV) shall be applied pro rata against Term Loan A and Term Loan
B and, as to any payment on any of such Loans, pro rata to each
remaining principal installment.
(v) In addition to the amounts required under sub clauses
(i), (ii), (iii) and (iv) above, all outstanding principal (and any
accrued, unpaid interest) on the Term Notes A shall be due and payable
on the Term Loan A Maturity Date and all outstanding principal (and any
accrued, unpaid interest) on the Term Notes B shall be due and payable
on the Term Loan B Maturity Date.
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(c) THE ESOP NOTE. Outstanding principal on the ESOP Notes shall
be due and payable on each Designated Payment Date commencing September 30,
1996, in equal installments of $500,000.00 in the aggregate for all ESOP
Lenders. All outstanding principal (and any accrued, unpaid interest) on the
ESOP Notes shall be due and payable on the ESOP Loan Maturity Date.
(d) THE SWING LINE NOTE. All outstanding principal (and any
accrued, unpaid interest) on the Swing Line Note shall be due and payable on the
Revolving Credit Maturity Date.
SECTION 2.09 VOLUNTARY PREPAYMENTS. The Company shall have the
right to voluntarily prepay Advances in whole or in part upon giving, in the
case of a LIBOR Rate Advance, three (3) Business Days' prior written notice to
the Agent and in the case of an Alternate Base Rate Advance, one (1) Business
Days' prior written notice to the Agent; PROVIDED that at least five (5)
Business Days' prior written notice shall be given for prepayments of Term Loan
A and Term Loan B. Such notice shall specify (a) the date and amount of
prepayment and whether the prepayment is of Term Loans or Revolving Credit
Loans; and (b) in the case of the prepayment of Term Loans, whether the Company
shall approve the election, if any, of the Term Loan B Lenders to decline their
share of any such prepayment as further provided in this SECTION 2.09. Upon
receipt of such notice, the Agent shall promptly notify each applicable Lender
of the contents thereof and of such Lender's percentage participation of such
prepayment and, in the case of any Term Loan B Lender, whether or not the
Company has elected to permit each Term Loan B Lender to, at its option, decline
its Term Loan B share of such prepayment. If any such notice is given, the
amount specified in such notice shall be due and payable on the date specified
therein and (a) no LIBOR Rate Advance may be prepaid prior to the last day of
its Interest Period unless, simultaneously therewith, the Company pays to the
Agent for the benefit of the affected Lenders, all sums necessary to compensate
such Lenders for all costs and expenses resulting from such prepayment, as
reasonably determined by such Lenders, including but not limited to those costs
described in SECTIONS 2.12(F), 2.16, and 2.17 hereof, (b) each partial
prepayment shall be made (i) in the case of a prepayment of a LIBOR Rate
Advance, in a minimum aggregate principal amount of $1,000,000.00 and integral
multiples of $100,000.00, and (ii) in the case of a prepayment of an Alternate
Base Rate Advance, in a minimum aggregate amount of $1,000,000.00 and integral
multiples of $100,000.00; and (c) each prepayment of Term Loan A, Term Loan B,
and ESOP Loan Advances pursuant to this SECTION 2.09 shall be applied to the
outstanding principal of such Advances pro rata to each remaining principal
installment.
Notwithstanding the foregoing and subject to the Company's
approval described above, in respect of any partial prepayment of the Term Loans
(until such time as Term Loan A has been repaid in full) pursuant to this
SECTION 2.09, any Term Loan B Lender may, at its option, irrevocably decline
receipt of its Term Loan B share of any such prepayment, and, if such Lender so
declines, such share shall be applied as an additional prepayment of Term Loan A
pro rata to each remaining principal installment, as further adjusted pursuant
to balance of this SECTION 2.09. Any Term Loan B Lender may notify the Agent and
the Company of its election to decline its Term Loan B share of all such
prepayments, in which event such notice shall be effective until such Lender
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notifies the Agent and the Company to the contrary. Any Term Loan B Lender that
wishes to decline receipt of its share of any given prepayment pursuant to this
SECTION 2.09, shall promptly, and in any event no later than 10:00 a.m.
(Houston, Texas time) on the Business Day following receipt of its notice of
such prepayment, notify the Company and the Agent of such election. Any Term
Loan B Lender that has not provided notice pursuant to one of the two preceding
sentences prior to such 10:00 a.m. deadline shall be deemed to have elected to
accept such prepayment. The Agent shall promptly provide, to all such accepting
Term Loan B Lenders, notice of the principal amount of Term Loan B that Lenders
have elected to decline. Any such accepting Lender may, at its option,
irrevocably decline receipt of its share of any such declined share of such
prepayment (and shall indicate in such notice whether it elects to accept or
decline receipt of its share of such prepayment declined by other Lenders
pursuant to this sentence), and, if such Lender so declines, such share shall be
applied as an additional prepayment of Term Loan A in accordance with this
SECTION 2.09. Any Term Loan B Lender that wishes to decline receipt of its share
of such declined shares, shall promptly, and in any event no later than 10:00
a.m. (Houston, Texas time) on the Business Day following receipt of the notice
from the Agent regarding such declined shares, notify the Company and the Agent
of such election. Any such accepting Lender that has not provided such notice
prior to such 10:00 a.m. deadline shall be deemed to have elected to accept such
the full amount of its share of such prepayment.
SECTION 2.10 METHOD AND PLACE OF PAYMENT/NET PAYMENTS. (a) Except
as otherwise specifically provided herein, all payments under this Agreement due
from the Company shall be made to the Agent for the benefit of the affected
Lenders, or to the Agent for the benefit of the Swing Line Lender if payment is
made under any Swing Line Loan, not later than 11:00 a.m. (Houston, Texas time)
on the date when due and shall be made in lawful money of the United States in
immediately available funds at the Payment Office.
(b) Except with respect to withholdings of United States taxes,
as provided in SECTION 2.18, all payments (whether of principal, interest, Fees,
reimbursements or otherwise) by the Company under this Agreement shall be made
without set-off or counterclaim and shall be made free and clear of and without
deduction for any present or future tax, levy, impost or any other charge, if
any, of any nature whatsoever now or hereafter imposed by any taxing authority.
Except with respect to withholdings of United States taxes as provided in
SECTION 2.18, if the making of such payments by the Company is prohibited by law
unless such a tax, levy, impost or other charge is deducted or withheld
therefrom, the Company shall pay to the Agent, on the date of each such payment,
such additional amounts (without duplication of any amounts required to be paid
by the Company pursuant to SECTION 2.16 or SECTION 3.04) as may be necessary in
order that the net amounts received by the Lenders after such deduction or
withholding shall equal the amounts which would have been received if such
deduction or withholding were not required. The Company shall confirm that all
applicable taxes, if any, imposed on this Agreement or transactions hereunder
shall have been properly and legally paid by it to the appropriate taxing
authorities by sending official tax receipts or notarized copies of such
receipts to the Agent within thirty (30) days after payment of any applicable
-31-
tax. Notwithstanding the foregoing, in no event shall the compensation payable
under this SECTION 2.10(B) (to the extent, if any, constituting interest under
applicable laws) together with all amounts constituting interest under
applicable laws and payable in connection with this Agreement, the Notes and the
other Loan Documents exceed the Highest Lawful Rate.
SECTION 2.11 PRO RATA ADVANCES/PAYMENTS. All Advances (other than
Advances made under the Swing Line Loans) under this Agreement shall be incurred
from the affected Lenders pro rata, and all payments in respect of any Loan
(other than a payment in respect of a Swing Line Loan) from the Company to the
Agent shall be applied, on the basis of the Lenders' respective percentage
participations in the Revolving Credit Commitment, the ESOP Loan Commitment, the
Term Loan A Commitment or the Term Loan B Commitment, as the case may be. It is
understood that no Lender shall be responsible for any default by any other
Lender in its obligation to make Advances hereunder and that each Lender shall
be obligated to make the Advances provided to be made by it hereunder,
regardless of the failure of any other Lender to fulfill its commitments
hereunder.
SECTION 2.12 INTEREST. (a) Subject to SECTION 11.08, the Company
agrees to pay interest on the total outstanding principal balance from time to
time of all Alternate Base Rate Advances from the date of each respective
Advance to maturity (whether by acceleration or otherwise) at a rate per annum
which shall at all times be equal to the lesser of (i) the Highest Lawful Rate
and (ii) the Alternate Base Rate in effect from time to time plus the applicable
Margin as such applicable Margin may change from time to time. If the Alternate
Base Rate is based on the Prime Rate, interest shall be computed on the basis of
the actual number of days elapsed over a year of 365 or 366 days, as the case
may be. If the Alternate Base Rate is based on the Federal Funds Effective Rate,
interest shall be computed on the basis of the actual number of days elapsed
over a year of 360 days.
(b) Subject to SECTION 11.08, the Company agrees to pay interest
on the total outstanding principal balance of all LIBOR Rate Advances from time
to time from the date of each respective Advance to maturity (whether by
acceleration or otherwise) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) which shall, during each
Interest Period applicable thereto, be equal to the lesser of (i) the Highest
Lawful Rate and (ii) the applicable LIBOR Rate for such Interest Period plus the
applicable Margin. The applicable LIBOR Rate shall be fixed for each Interest
Period and shall not change during said Interest Period but the applicable
Margin, which is added to the LIBOR Rate to determine the total interest payable
to the affected Lender, shall be adjusted, effective on the first day of each
Margin Period, whether or not said adjustment occurs at a time other than the
beginning of an Interest Period.
(c) Subject to SECTION 11.08, overdue principal and, to the
extent permitted by law, overdue interest in respect of any Advance and all
other amounts owing hereunder shall bear interest for each day that such amounts
are overdue at a rate per annum equal to the Default Rate.
-32-
(d) Interest on each Advance shall accrue from and including the
date of such Advance to but excluding the date of any repayment thereof and
shall be payable (i) in respect of LIBOR Rate Advances (A) on the last day of
the Interest Period applicable thereto and, in the case of any Interest Period
in excess of three months, on the last day of the third month of the Interest
Period and on the last day of the Interest Period and (B) on the date of any
voluntary or mandatory repayment of Term Loan A or Term Loan B or any conversion
or continuance, (ii) in respect of Alternate Base Rate Advances (A) on each
Designated Payment Date and (B) on the date of any voluntary or mandatory
repayment and (iii) in respect of each Advance, at maturity (whether by
acceleration or otherwise) and, after maturity, on demand.
(e) The Agent, upon determining the LIBOR Rate for any Interest
Period, shall notify the Company thereof. Each such determination shall, absent
manifest error, be final and conclusive and binding on all parties hereto. In
addition, prior to the due date for the payment of interest on any Advances set
forth in the immediately preceding paragraph, the Agent shall notify the Company
of the amount of interest due by the Company on all outstanding Advances on the
applicable due date, but any failure of the Agent to so notify the Company shall
not reduce the Company's liability for the amount owed.
(f) Subject to SECTION 11.08, the Company shall pay to the Agent
for the account of each affected Lender, so long as the Lenders shall be
required under regulations of the Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each such LIBOR Rate
Advance from the date of such Advance until such principal amount is paid in
full, at an interest rate per annum equal at all times during the Interest
Period for such Advance to the lesser of (i) the Highest Lawful Rate and (ii)
the remainder obtained by subtracting (A) the LIBOR Rate for such Interest
Period from (B) the rate obtained by dividing such LIBOR Rate referred to in
clause (A) above by that percentage equal to 100% minus the Reserve Percentage
of such Lender for such Interest Period. Such additional interest shall be
determined by such Lender as incurred and shall be payable upon demand therefor
by the Company to such Lender. Each determination by such Lender of additional
interest due under this Section 2.12(f) shall be conclusive and binding for all
purposes in the absence of manifest error.
SECTION 2.13 INTEREST PERIODS. (a) At the time the Company gives
any Notice of Advance or Notice of Conversion in respect of the making of, or
conversion into, a LIBOR Rate Advance, the Company shall have the right to
elect, by giving the Agent on the dates and at the times specified in SECTION
2.04 or SECTION 2.07, as the case may be, notice of the interest period (each an
"INTEREST PERIOD") applicable to such LIBOR Rate Advance, which Interest Period
shall be either a one, two, three or six-month period; PROVIDED, that:
(i) the initial Interest Period for any LIBOR Rate Advance shall
commence on the date of such LIBOR Rate Advance (including the date of
any conversion thereto or
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continuance thereof pursuant to SECTION 2.07); each Interest Period
occurring thereafter in respect of such LIBOR Rate Advance shall
commence on the expiration date of the immediately preceding Interest
Period;
(ii) if any Interest Period relating to a LIBOR Rate Advance
begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest
Period shall end on the last Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, PROVIDED, that if there are no more
Business Days in that month, the Interest Period shall expire on the
preceding day; and
(iv) no Interest Period for Advances shall extend beyond the
Revolving Credit Maturity Date, Term Loan A Maturity Date, or Term Loan
B Maturity Date or ESOP Loan Maturity Date, as the case may be.
(b) If, upon the expiration of any Interest Period applicable to
a LIBOR Rate Advance, the Company has failed to elect a new Interest Period to
be applicable to such Advance as provided above, the Company shall be deemed to
have elected to convert such Advance into an Alternate Base Rate Advance
effective as of the expiration date of such current Interest Period.
SECTION 2.14 INTEREST RATE NOT ASCERTAINABLE. In the event that
the Agent shall determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties) that on any date for determining
the LIBOR Rate for any Interest Period, by reason of any changes arising after
the date of this Agreement affecting the LIBOR interbank market, adequate and
fair means do not exist for ascertaining the applicable interest rate on the
basis provided for in the definition of LIBOR Rate, then, and in any such event,
the Agent shall forthwith give notice to the Company and to the Lenders of such
determination. Until the Agent notifies the Company that the circumstances
giving rise to the suspension described herein no longer exist, the obligations
of the Lenders to make LIBOR Rate Advances shall be suspended.
SECTION 2.15 CHANGE IN LEGALITY. (a) Notwithstanding anything to
the contrary herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
or its LIBOR Lending Office to make or maintain any LIBOR Rate Advance or to
give effect to its obligations as contemplated hereby, then, by prompt written
notice to the Company, such Lender may:
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(i) declare that LIBOR Rate Advances will not thereafter be made
by such Lender hereunder, whereupon the Company shall be prohibited from
requesting LIBOR Rate Advances from such Lender hereunder (and instead,
any request for a LIBOR Rate Advance, as to such Lender, shall be deemed
to be a request for an Alternate Base Rate Advance) unless such
declaration is subsequently withdrawn; and
(ii) require that all outstanding LIBOR Rate Advances made by
such Lender be converted to Alternate Base Rate Advances, in which event
(A) all such LIBOR Rate Advances made by such Lender shall be
automatically converted to Alternate Base Rate Advances as of the
effective date of such notice as provided in paragraph (b) below (or if
so designated by such Lender in such notice, effective as of another
date) and (B) all payments and prepayments of principal which would
otherwise have been applied to repay the converted LIBOR Rate Advances
shall instead be applied to repay the Alternate Base Rate Advances
resulting from the conversion of such LIBOR Rate Advances.
(b) For purposes of this SECTION 2.15, a notice to the Company by
the Agent pursuant to paragraph (a) above shall be effective on the date of
receipt thereof by the Company.
SECTION 2.16 INCREASED COSTS, TAXES OR CAPITAL ADEQUACY
REQUIREMENTS. (a) If, after the Execution Date, the application or effectiveness
of any applicable law or regulation or compliance by any Lender with any
applicable guideline or request from any central bank or governmental authority
(whether or not having the force of law) (i) shall change the basis of taxation
of payments to such Lender of the principal of or interest on any LIBOR Rate
Advance made by such Lender or any other Fees or amounts payable hereunder
(other than taxes imposed or measured on the overall net or gross income or
revenue of such Lender or its Applicable Lending Office or franchise taxes
imposed upon it by the jurisdiction in which such Lender or its Applicable
Lending Office has an office), (ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement with respect to any LIBOR Rate
Advance made by such Lender against assets of, deposits with or for the account
of, or credit extended by, such Lender (without duplication of any amounts paid
pursuant to SECTION 2.12(F)) or (iii) shall impose on such Lender any other
condition affecting this Agreement or any LIBOR Rate Advance made by such
Lender, and the result of any of the foregoing shall be to increase the cost to
such Lender of maintaining its Revolving Credit Commitment, Swing Line
Commitment, Term Loan A Commitment, Term Loan B Commitment or ESOP Loan
Commitment, as the case may be, or of making or maintaining any LIBOR Rate
Advance or to reduce the amount of any sum received or receivable by such Lender
hereunder (whether of principal, interest or otherwise) in respect thereof by an
amount deemed in good faith by such Lender to be material, then the Company
shall pay to such Lender such additional amount as will compensate it for such
increase or reduction upon demand.
(b) If any Lender shall have determined in good faith that any
change after the Execution Date of any law, rule, regulation or guideline
regarding capital adequacy, or any change
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in the interpretation or administration thereof or compliance with any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency issued after the
Execution Date has or would have the effect of reducing the rate of return on
the capital of such Lender as a consequence of, or with reference to, such
Lender's obligations hereunder to a level below that which it could have
achieved but for such change by an amount deemed by such Lender to be material,
then, from time to time, the Company shall pay to the Agent for the benefit of
such Lender such additional amount as will reasonably compensate it for such
reduction upon demand.
(c) Each Lender will notify the Company through the Agent of any
event occurring after the date of this Agreement which will entitle it to
compensation pursuant to this SECTION 2.16, as promptly as practicable. A
certificate (i) stating that the compensation sought to be recovered pursuant to
this SECTION 2.16 is generally being charged to other similarly situated
customers and (ii) setting forth in reasonable detail the amount necessary to
compensate the Lender in question as specified in paragraph (a) or (b) above, as
the case may be, and the calculation of such amount under clause (a)(i), shall
be delivered to the Company and shall be conclusive absent manifest error. The
Company shall pay to the Agent for the account of such Lender the amount shown
as due on any such certificate upon demand. The failure on the part of any
Lender to demand increased compensation with respect to any Interest Period
shall not constitute a waiver of the right to demand compensation thereafter;
PROVIDED that with respect to events occurring prior to any notice given under
this SECTION 2.16(C), such Lenders shall only be entitled to recover
compensation for such events occurring over a period of 120 days. Upon the
request of the Company, each Lender agrees that it will use reasonable efforts
to designate a different Applicable Lending Office for the Loans due to it
affected by the matter described in SECTIONS 2.16(A) and 2.16 (B), if such
designation will avoid or reduce the liability of the Company to such Lender
under this SECTION 2.16 so long as such designation is not disadvantageous to
such Lender as determined by such Lender in its sole discretion.
(d) Except as expressly provided in SECTION 2.16(C), failure on
the part of any Lender to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any Interest Period shall not constitute a waiver of such
Lender's rights to demand compensation for any increased costs or reduction in
amounts received or receivables or reduction in return on capital with respect
to such Interest Period or any other Interest Period.
SECTION 2.17 LIBOR ADVANCE PREPAYMENT AND DEFAULT PENALTIES.
Subject to SECTION 11.08, the Company shall indemnify each Lender against any
loss or expense (other than loss of profit) which it may sustain or incur as a
consequence of (a) an advance of, or a conversion into, or a continuance of,
LIBOR Rate Advances that does not occur on the date specified therefor in a
Notice of Advance or Notice of Conversion, (b) any payment, prepayment or
conversion of a LIBOR Rate Advance required by any other provision of this
Agreement or otherwise made on a date other than the last day of the applicable
Interest Period or (c) any default in the payment or prepayment of
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the principal amount of any LIBOR Advance or any part thereof or interest
accrued thereon, as and when due and payable (at the due date thereof, by notice
of prepayment or otherwise). Such loss or expense shall include the amount equal
to the excess determined by each Lender of (i) its cost of obtaining the funds
for the Advance being paid, prepaid or converted or not borrowed (based on the
LIBOR Rate) for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Advance (or, in the case of a failure to borrow, the Interest Period for the
Advance which would have commenced on the date of such failure to borrow) OVER
(ii) the amount of interest (as determined by each Lender) that would be
realized in reemploying the funds so paid, prepaid or converted or not borrowed
for such period or Interest Period, as the case may be.
The Agent, on behalf of the Lenders, will notify the Company of
any loss or expense which will entitle the Lenders to compensation pursuant to
this SECTION 2.17, as promptly as is practicable. A certificate of any Lender
setting forth any amount which it is entitled to receive pursuant to this
SECTION 2.17 shall be delivered to the Company and shall be conclusive absent
manifest error. The Company shall pay to the Agent for the account of the
Lenders the amount shown as due on any certificate upon demand. Without
prejudice to the survival of any other obligations of the Company hereunder, the
obligations of the Company under this SECTION 2.17 shall survive the termination
of this Agreement and the assignment of any of the Notes. The failure on the
part of any Lender to demand compensation with respect to this SECTION 2.17
shall not constitute a waiver of the right to demand compensation thereafter;
PROVIDED that with respect to any loss or expense incurred prior to any notice
given under this SECTION 2.17, such Lender shall only be entitled to recover
compensation for such loss or expense incurred over a period of 120 days.
SECTION 2.18 TAX FORMS. With respect to each Lender which is
organized under the laws of a jurisdiction outside the United States, on the
date of the initial Advance hereunder, and from time to time thereafter if
requested by the Company or the Agent, each such Lender shall provide the Agent
and the Company with the forms prescribed by the Internal Revenue Service of the
United States certifying as to such Lender's status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to such Lender hereunder or other documents satisfactory to the Company
and the Agent indicating that all payments to be made to such Lender hereunder
are subject to such tax at a rate reduced by an applicable tax treaty. Unless
the Company and the Agent have received such forms or such documents indicating
that payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, the Company
or the Agent shall withhold taxes from such payments at the applicable statutory
rate in the case of payments to or for any Lender organized under the laws of a
jurisdiction outside the United States.
ARTICLE III
LETTERS OF CREDIT
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SECTION 3.01 LETTERS OF CREDIT. (a) Subject to and upon the terms
and conditions herein set forth, the Issuing Bank agrees that it will, at any
time and from time to time on or after the Effective Date and prior to the
Revolving Credit Maturity Date, following its receipt of a Letter of Credit
Request and Application for Letter of Credit, issue for the account of the
Company and in support of the obligations of the Company or any of its
Subsidiaries, one or more letters of credit (the "LETTERS OF CREDIT"), up to a
maximum amount outstanding at any one time for all Letters of Credit of
$7,500,000.00, PROVIDED that the Issuing Bank shall not issue any Letter of
Credit if at the time of such issuance: (i) Letter of Credit Obligations shall
be greater than an amount which, when added to all Advances under the Revolving
Credit Notes and the Swing Line Note then outstanding, would exceed the lesser
of the Borrowing Base and the Total Revolving Credit Commitment or (ii) the
expiry date or, in the case of any Letter of Credit containing an expiry date
that is extendible at the option of the Issuing Bank, the initial expiry date,
of such Letter of Credit is a date that is later than the Revolving Credit
Maturity Date.
(b) The Issuing Bank shall neither renew or extend nor permit the
renewal or extension of any Letter of Credit (which renewal or extension will
not be for any period ending after the Revolving Credit Maturity Date) if any of
the conditions precedent to such renewal set forth in SECTION 5.02 are not
satisfied or waived or, after giving effect to such renewal, the expiry date of
such Letter of Credit would be a date that is later than the Revolving Credit
Maturity Date.
SECTION 3.02 LETTER OF CREDIT REQUESTS. (a) Whenever the Company
desires that a Letter of Credit be issued for its account or that the existing
expiry date shall be extended, it shall give the Issuing Bank (with copies to be
sent to the Agent and each other Revolving Credit Lender) (i) in the case of a
Letter of Credit to be issued, at least five (5) Business Days' prior written
request therefor and (ii) in the case of the extension of the existing expiry
date of any Letter of Credit, at least five (5) Business Days prior to the date
on which the Issuing Bank must notify the beneficiary thereof that the Issuing
Bank does not intend to extend such existing expiry date. Each such request
shall be executed by the Company and shall be in the form of EXHIBIT 3.02
attached hereto (each a "LETTER OF CREDIT REQUEST") and shall be accompanied by
an Application for Letter of Credit therefor, completed to the reasonable
satisfaction of the Issuing Bank, and such other certificates, documents and
other papers and information as the Issuing Bank or the Agent may reasonably
request. Each Letter of Credit shall be denominated in U.S. dollars, shall
expire no later than the date specified in SECTION 3.01, shall not be in an
amount greater than is permitted under clause (i) of SECTION 3.01(A) and shall
be in such form as may be reasonably approved from time to time by the Issuing
Bank and the Company.
(b) The making of each Letter of Credit Request shall be deemed
to be a representation and warranty by the Company that such Letter of Credit
may be issued in accordance with, and will not violate the requirements of this
Agreement. Unless the Issuing Bank has received notice from any Revolving Credit
Lender before it issues the respective Letter of Credit or extends
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the existing expiry date of a Letter of Credit that one or more of the
conditions specified in ARTICLE V are not then satisfied, or that the issuance
of such Letter of Credit would violate this Agreement, then the Issuing Bank
shall issue the requested Letter of Credit for the account of the Company in
accordance with the Issuing Bank's usual and customary practices. Upon its
issuance of any Letter of Credit or the extension of the existing expiry date of
any Letter of Credit, as the case may be, the Issuing Bank shall promptly notify
the Company and the Agent and the Agent shall notify each Revolving Credit
Lender of such issuance or extension, which notices shall be accompanied by a
copy of the Letter of Credit actually issued or a copy of any amendment
extending the existing expiry date of any Letter of Credit, as the case may be.
SECTION 3.03 LETTER OF CREDIT PARTICIPATIONS. (a) All Letters of
Credit issued subsequent hereto shall be deemed to have been sold and
transferred by the Issuing Bank to each Revolving Credit Lender, and each
Revolving Credit Lender shall be deemed irrevocably and unconditionally to have
purchased and received from the Issuing Bank, without recourse or warranty, an
undivided interest and participation, (to the extent of such Lender's percentage
participation in the Revolving Credit Commitment) in each such Letter of Credit
(including extensions of the expiry date thereof), each substitute Letter of
Credit, each drawing made thereunder and the obligations of the Company under
this Agreement and the other Loan Documents with respect thereto, and any
security therefor or guaranty pertaining thereto.
(b) In determining whether to pay under any Letter of Credit, the
Issuing Bank shall have no obligation relative to the Revolving Credit Lenders
other than to confirm that any documents required to be delivered under such
Letter of Credit appear to have been delivered and that they appear to comply on
their face with the requirements of such Letter of Credit.
(c) In the event that the Issuing Bank makes any payment under
any Letter of Credit, the same shall be considered an Alternate Base Rate
Advance without further action by any Person. The Issuing Bank shall promptly
notify the Agent, which shall promptly notify each Revolving Credit Lender
thereof. Each Revolving Credit Lender shall immediately pay to the Agent for the
account of the Issuing Bank the amount of such Lender's percentage participation
of such Advance. If any Revolving Credit Lender shall not have so made its
percentage participation available to the Agent, such Lender agrees to pay
interest thereon, for each day from such date until the date such amount is paid
at the lesser of (i) the Federal Funds Effective Rate and (ii) the Highest
Lawful Rate.
(d) The Issuing Bank shall not be liable for, and the obligations
of the Company and the Revolving Credit Lenders to make payments to the Agent
for the account of the Issuing Bank with respect to Letters of Credit shall not
be subject to, any qualification or exception whatsoever, including any of the
following circumstances:
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(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Company may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit, the Agent, any
Issuing Bank, any Revolving Credit Lender, or any other Person, whether
in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Company and the
beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of Default.
(e) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by such Issuing Bank's gross negligence or willful
misconduct. IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT SUCH ISSUING
BANK, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS (OTHER THAN WITH RESPECT TO
ANY CLAIMS BY THE ISSUING BANK AGAINST ANY SUCH OFFICER, DIRECTOR, EMPLOYEE OR
AGENT THEREOF) SHALL BE INDEMNIFIED AND HELD HARMLESS FROM, SUBJECT TO THE SAME
TYPE OF PROTECTIONS SET FORTH IN SECTION 11.05(B), ANY ACTION TAKEN OR OMITTED
BY SUCH PERSON UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT OR ANY RELATED
DRAFT OR DOCUMENT ARISING OUT OF OR RESULTING FROM SUCH PERSON'S SOLE OR
CONTRIBUTORY NEGLIGENCE, BUT NOT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH PERSON. The Company agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in accordance with the standards of care specified
in the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce, Publication No. 500 (and any subsequent
revisions thereof approved by a Congress of the International Chamber of
Commerce and adhered to by the Issuing Bank) and, to the extent not inconsistent
therewith, the Uniform Commercial Code of the State of Texas, shall not result
in any liability of the Issuing Bank to the Company.
SECTION 3.04 INCREASED COSTS. (a) Notwithstanding any other
provision herein, but subject to SECTION 11.08, if any Revolving Credit Lender
shall have determined in good faith that any change after the Execution Date of
any law, rule, regulation or guideline or the application or effectiveness of
any applicable law or regulation or any change after the Execution Date in the
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interpretation or administration thereof, or compliance by any Revolving Credit
Lender (or any lending office of such Lender) with any applicable guideline or
request from any central bank or governmental authority (whether or not having
the force of law) issued after the Effective Date either (i) shall impose,
modify or make applicable any reserve, deposit, capital adequacy or similar
requirement against Letters of Credit issued, or participated in, by any
Revolving Credit Lender or (ii) shall impose on any Revolving Credit Lender any
other conditions affecting this Agreement or any Letter of Credit; and the
result of any of the foregoing is to increase the cost to any Revolving Credit
Lender of issuing, maintaining or participating in any Letter of Credit, or
reduce the amount received or receivable by any Revolving Credit Lender
hereunder with respect to Letters of Credit, by an amount deemed by such Lender
to be material, then, from time to time, the Company shall pay to the Agent for
the account of such Lender such additional amount or amounts as will reasonably
compensate such Lender for such increased cost or reduction by such Lender.
(b) Each Revolving Credit Lender will notify the Company through
the Agent of any event occurring after the date of this Agreement which will
entitle such Lender to compensation pursuant to subsection (a) above, as
promptly as practicable. A certificate of such Lender (i) stating that the
compensation sought to be recovered pursuant to this SECTION 3.04 is generally
being charged to other similarly situated customers and (ii) setting forth in
reasonable detail such amount or amounts as shall be necessary to compensate
such Lender as specified in subsection (a) above may be delivered to the Company
(with a copy to the Agent) and shall be conclusive absent manifest error. The
Company shall pay to the Agent for the account of such Lender the amount shown
as due on any such certificate upon demand; PROVIDED that with respect to events
occurring prior to any notice given under the SECTION 3.04(B), such Lender shall
only be entitled to recover compensation for such events occurring over a period
of 120 days.
(c) Except as expressly provided in SECTION 3.04(B), failure on
the part of any Revolving Credit Lender to demand compensation for any increased
costs or reduction in amounts received or receivable or reduction in return on
capital with respect to any Letter of Credit shall not constitute a waiver of
such Lender's rights to demand compensation for any increased costs or reduction
in amounts received or receivables or reduction in return on capital with
respect to such Letter of Credit.
SECTION 3.05 CONFLICT BETWEEN APPLICATIONS AND AGREEMENT. To the
extent that any provision of any application related to any Letter of Credit is
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall control.
ARTICLE IV
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FEES; COMMITMENTS
SECTION 4.01 FEES. (a) The Company agrees to pay to the Agent for
the account of each Revolving Credit Lender a commitment fee (the "REVOLVING
CREDIT COMMITMENT FEE") for the period from and including the Effective Date to
the Revolving Credit Maturity Date, computed for any Margin Period at a rate per
annum as follows calculated on the basis of a 360-day year as follows:
(i) during the period from the Execution Date through the
Financial Statement Delivery Date for the fiscal quarter ending December
31, 1996, one-half of one percent (1/2%) on the daily average Unutilized
Commitment of each Revolving Credit Lender,
(ii) for any period beginning on any Financial Statement
Delivery Date occurring after December 31, 1996:
(A) if the ratio of Total Debt (on the last day of
the quarter most recently ended prior to the first day of such
Margin Period) to EBITDA is less than 3.0 to 1.0, 0.375% on the
daily average Unutilized Commitment of each Revolving Credit
Lender, and
(B) if the ratio of Total Debt (on the last day of
the quarter most recently ended prior to the first day of such
Margin Period) to EBITDA is equal to or greater than 3.0 to 1.0,
or cannot be determined by the Agent because of the Company's
failure to timely deliver its financial statements, 0.50% on the
daily average Unutilized Commitment of each Revolving Credit
Lender until such ratio can be so determined.
Accrued Revolving Credit Commitment Fees shall be calculated to the day
immediately preceding each Designated Payment Date and to the date the Total
Revolving Credit Commitment is terminated. Revolving Credit Commitment Fees
shall be due and payable in arrears (i) on each Designated Payment Date
commencing on the first such date following the Execution Date and (ii) on the
Revolving Credit Maturity Date.
(b) Accrued Letter of Credit Fees shall be due and payable in
arrears (i) on each Designated Payment Date commencing on the first such date
following the Execution Date and (ii) on the Revolving Credit Maturity Date, and
shall be calculated on the basis of a 360-day year.
(c) The Company agrees to pay to the Agent, for its own account in
connection with its duties as Agent and the arrangement and syndication of this
credit facility; for the account of Chase Securities Inc., in connection with
its arrangement and syndication of the credit facility; and
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for the account of each Lender as consideration for such Lender making available
the Loans, all of such fees as have been agreed to pursuant to the Agent's
Letter.
(d) In no event shall the Fees payable under this SECTION 4.01 (to
the extent, if any, constituting interest under applicable laws) together with
all amounts constituting interest under applicable laws and payable in
connection with this Agreement, the Notes and the other Loan Documents exceed
the Highest Lawful Rate.
SECTION 4.02 VOLUNTARY REDUCTION OF TOTAL REVOLVING CREDIT
COMMITMENT. Upon at least five (5) Business Days' prior written notice to the
Agent, the Company shall have the right, without premium or penalty, to reduce
or terminate the Unutilized Commitment in part or in whole; PROVIDED, that (a)
any such reduction shall reduce proportionately the Revolving Credit Commitment
of each of the Revolving Credit Lenders and (b) any partial reduction shall be
in the amount of $5,000,000.00 or integral multiples thereof.
SECTION 4.03 MANDATORY REDUCTION OF TOTAL REVOLVING CREDIT
COMMITMENT. The Revolving Credit Commitments, if not sooner terminated, shall
terminate on the Revolving Credit Maturity Date.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The
obligation of each Lender to make its initial Advance to the Company is subject
to the condition that the Agent shall have received the following, each in form
and substance reasonably satisfactory to the Agent:
(a) this Agreement executed by the Company;
(b) one Revolving Credit Note for each Revolving Credit Lender,
each executed by the Company and payable to the order of said Lender in the
amount of its Revolving Credit Commitment;
(c) one Term Note A for each Term Loan A Lender, each executed by
the Company and payable to the order of said Lender in the amount of its Term
Loan A Commitment;
(d) one Term Note B for each Term Loan B Lender, each executed by
the Company and payable to the order of said Lender in the amount of its Term
Loan B Commitment;
(e) one ESOP Note for each ESOP Lender, each executed by the
Company and payable to the order of said Lender in the amount of its ESOP Loan
Commitment;
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(f) the Swing Line Note executed by the Company and payable to
the order of the Swing Line Lender in the amount of the Swing Line Commitment;
(g) the Guaranty;
(h) the Security Documents executed by the Company, the
Subsidiaries, the Parent and Holding Co., as the case may be, including all
certificates evidencing shares of stock of the Parent and the Company pledged to
the Agent for the benefit of the Lenders under the terms of any Security
Document, together with related stock powers duly executed by the Parent and
Holding Co., as the case may be;
(i) a Borrowing Base Certificate executed by an authorized
officer of Finance Corp.;
(j) a Notice of Advance with respect to the initial Advance
meeting the requirements of SECTION 2.04(A);
(k) a certificate (i) of the secretary or an assistant secretary
of each of Holding Co., the Parent, Finance Corp., and the Company and each of
their respective Subsidiaries certifying (A) true and complete copies of each of
the articles or certificate of incorporation, as amended and in effect, of such
Person, the bylaws, as amended and in effect, of such Person and the resolutions
adopted by the Board of Directors of such Person (1) authorizing the execution,
delivery and performance by such Person of the Loan Documents to which it is or
will be a party and, as to the Company, the Advances to be made hereunder, (2)
approving the forms of the Loan Documents to which it is or will be a party and
which will be delivered at or prior to the date of the initial Advance and (3)
authorizing officers of such Person to execute and deliver the Loan Documents to
which it is or will be a party and any related documents, including, any
agreement contemplated by this Agreement, and (B) the incumbency and specimen
signatures of the officers of such Person executing any documents on its behalf,
and (ii) of a Responsible Officer of the Company certifying (A) that there has
been no change in the businesses or financial condition of such Person which
would reasonably be expected to have a Material Adverse Effect and (B) that no
Default or Event of Default shall have occurred and be continuing or would
result from the initial Advance;
(l) favorable, signed opinions addressed to the Agent and the
Lenders from Bracewell & Patterson, L.L.P., counsel to Holding Co., the Parent,
Finance Corp. and the Company and their respective Subsidiaries, in form and
substance satisfactory to the Agent and its counsel;
(m) the Agent shall have received the payment for the Agent and
the Lenders, as applicable, of all Fees and expenses agreed upon by such parties
and the Company to be payable on or prior to the Execution Date;
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(n) certificates of appropriate public officials as to the
existence, good standing and qualification to do business as a foreign
corporation, as applicable, of Holding Co., the Parent, Finance Corp. and the
Company and their respective Subsidiaries in each jurisdiction in which the
ownership of their properties or the conduct of their business requires such
qualifications;
(o) the Environmental Assessment;
(p) an appraisal prepared by KPMG Peat Marwick L.L.P. of the real
property and improvements to be acquired by the Company pursuant to the Purchase
Agreement;
(q) a letter addressed to each of the Agent and the Lenders and
dated the initial Execution Date, from Murray, Devine & Co., which letter shall
support the conclusions that, after giving effect to the Purchase Agreement, the
Merger and the transaction contemplated thereby, (i) the aggregate fair value
and present fair saleable value of the Company's assets would exceed the
Company's total liabilities, including identified contingent liabilities; (ii)
the Company should be able to pay its debts as they become absolute and mature
in the ordinary course of business; and (iii) the Company does not have an
unreasonably small amount of capital to engage in its business as management has
indicated it is now conducted and is proposed to be conducted following the
consummation of the Acquisition;
(r) a copy of the letter opinion issued by Houlihan, Lokey,
Howard & Zukin to the Company pertaining to the fairness of the price to be paid
for the purchase of common stock of the Parent for the benefit of the ESOP;
(s) Landlord Lien Waivers as required by the Agent for Inventory
locations located on leasehold estates;
(t) copies of the executed Indenture evidencing the Subordinated
Debt;
(u) a copy of each opinion of counsel delivered in connection
with the Purchase Agreement either containing in the body thereof the right of
the Agent and the Lenders to rely thereon or accompanied by a letter from the
Person delivering such opinion authorizing reliance thereon by the Agent and the
Lenders;
(v) Certificates of Insurance evidencing the existence of all
insurance required to be maintained pursuant to SECTION 6.17;
(w) Updated surveys as required by the Agent for the real
property to be acquired under the Purchase Agreement located in Texas;
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(x) Mortgagees Policies of Title Insurance issued by title
companies satisfactory to the Agent, having only exceptions acceptable to the
Agent, to the Company's title to the real property located in Texas as are
satisfactory to the Agent;
(y) the original of the Parent Note;
(z) evidence of cancellation of existing debt facilities and
liens securing such facilities;
(aa) evidence satisfactory to the Agent that not less than
$73,800,000.00 in equity has been contributed to the Parent;
(bb) a copy of the executed Holding Co. indenture under which
Discount Debentures were issued; and
(cc) evidence satisfactory to the Agent that the following has
occurred concurrently with funding on the Effective Date:
(i) the Parent will purchase the stock of TOC and TPC;
(ii) after TOC has become a wholly-owned Subsidiary of the
Parent, TOC will merge into and with TPC, with TPC being the
surviving entity; and
(iii) after TOC and TPC have merged and TPC is a direct,
wholly-owned Subsidiary of the Parent, Finance Corp. will merge
into and with TPC, with TPC being the surviving entity.
The acceptance of the benefits of the initial Credit Event shall
constitute a representation and warranty by the Company to the Agent and each of
the Lenders that all of the conditions specified in this SECTION 5.01 shall have
been satisfied or waived as of that time.
SECTION 5.02 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
obligation of the Lenders to make any Advance is subject to the further
conditions precedent that on the date of such Credit Event:
(a) The conditions precedent set forth in SECTION 5.01 shall have
theretofore been satisfied or waived;
(b) The representations and warranties set forth in ARTICLE VI
shall be true and correct in all material respects as of, and as if such
representations and warranties were made on, the date of the proposed Advance
(unless such representation and warranty expressly relates to an earlier
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date or is no longer true and correct solely as a result of transactions not
prohibited by the Loan Documents), and the Company shall be deemed to have
certified to the Agent and the Lenders that such representations and warranties
are true and correct in all material respects by submitting a Notice of Advance;
(c) The Company shall have complied with the provisions of
SECTION 2.04 or SECTION 3.02, as applicable;
(d) No Default or Event of Default shall have occurred and be
continuing or would result from such Credit Event;
(e) No Material Adverse Effect shall have occurred since the
delivery of the most recent financials; and
(f) The Agent shall have received such other consents, approvals,
opinions or documents as the Agent may reasonably request.
The acceptance of the benefits of each such Credit Event shall
constitute a representation and warranty by the Company to the Agent and each of
the Lenders that all of the conditions specified in this SECTION 5.02 above
exist as of that time.
SECTION 5.03 DELIVERY OF DOCUMENTS. All of the Notes, Security
Documents, certificates and legal opinions referred to in this ARTICLE V, unless
otherwise specified, shall be delivered to the Agent for the account of each of
the Lenders and, except for the Notes, if requested by the Agent in sufficient
copies for each of the Lenders and shall be reasonably satisfactory in form and
substance to the Agent. Any Lender may request in writing to the Agent and the
Company a copy of any other document or paper referred to in this ARTICLE V and
the Company will thereafter provide same to such Lender.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and
to make the Advances provided for herein, the Company for itself, Holding Co.,
the Parent and each of its Subsidiaries makes, on or as of the occurrence of
each such Credit Event (except to the extent such representations or warranties
relate to an earlier date or are no longer true and correct in all material
respects solely as a result of transactions not prohibited by the Loan
Documents), the following representations and warranties to the Agent and the
Lenders:
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SECTION 6.01 ORGANIZATION AND QUALIFICATION. Each Loan Party (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, (b) has the
corporate power to own its property and to carry on its business as now
conducted and (c) is duly qualified as a foreign corporation to do business and
is in good standing, in each case in each jurisdiction in which the failure to
be so qualified or in good standing would reasonably be expected to have a
Material Adverse Effect.
SECTION 6.02 AUTHORIZATION AND VALIDITY. Each Loan Party has the
corporate power and authority to execute, deliver and perform its obligations
hereunder and under the other Loan Documents to which it is a party and all such
action has been duly authorized by all necessary corporate proceedings on its
part. The Loan Documents to which each Loan Party is a party have been duly and
validly executed and delivered by such Loan Party and constitute valid and
legally binding agreements of such Loan Party enforceable in accordance with the
respective terms thereof, except, in each case, as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
SECTION 6.03 GOVERNMENTAL CONSENTS. No authorization, consent,
approval, license or exemption (other than such exemptions that exist under
applicable law, that are permitted, or that have been obtained) of any Person or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is necessary for
the valid execution, delivery or performance by any Loan Party of any Loan
Document to which it is a party or for the grant of a security interest in or
mortgage on the collateral covered by the Loan Documents, except such matters
relating to performance as would ordinarily be done in the ordinary course of
business after the Effective Date.
SECTION 6.04 CONFLICTING OR ADVERSE AGREEMENTS OR RESTRICTIONS.
No Loan Party is a party to any contract or agreement or subject to any
restriction which would reasonably be expected to have a Material Adverse
Effect. As of the Execution Date, all agreements (other than this Agreement and
the other Loan Documents and the agreements evidencing the Subordinated Debt) of
the Company and its Subsidiaries relating to the lending of money or the
issuance of letters of credit to or for the account of any party are described
hereto on SCHEDULE 6.04. Neither the execution nor delivery of the Loan
Documents nor compliance with the terms and provisions hereof or thereof will be
contrary to the provisions of, or constitute a default under (a) the charter or
bylaws of any Loan Party or (b) any applicable law or any applicable regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or (c) any material agreement to which any Loan Party is a party or by which it
is bound or to which it is subject.
SECTION 6.05 TITLE TO ASSETS; LICENSES AND PERMITS. The Company
has good title to all personal property and good and indefeasible title to or a
subsisting leasehold interest in, all realty as reflected as of the Effective
Date on its books and records as being owned or leased by it
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after giving effect to the Merger, subject to no Liens, except Permitted Liens.
All of such assets are being maintained by the appropriate Person in good
working condition in accordance with industry standards. All of the real
property owned or leased by the Company as of the Effective Date is set forth on
SCHEDULE 6.05 hereto, with the applicable owner or lessee, location and real
property interest identified thereon. True, correct and complete copies of (i)
each such real property lease (and all amendments thereto) of which the Company
has possession or knowledge have been delivered to the Agent and (ii) all real
property leases (and amendments thereto) executed after the Effective Date have
been delivered to the Agent. The items of real and personal property owned by or
leased to and used by the Company constitute all of the material assets used in
the conduct of its business as presently conducted after giving effect to the
Merger, and neither this Agreement nor any other Loan Document, nor any
transaction contemplated under any such agreement, will affect any right, title
or interest of the Company in and to any of such assets in a manner that would
have or is reasonably likely to have a Material Adverse Effect. To the knowledge
of the Company there are no actual, threatened or alleged defaults of a material
nature with respect to any leases of real property under which the Company is
bound after giving effect to the Merger. After giving effect to the Merger, the
Company is current and in good standing with respect to all governmental
approvals, permits, certificates, licenses, consents and franchises necessary to
continue to conduct its business and to own or lease and operate its properties
as heretofore conducted, owned, leased or operated except where any such failure
to maintain approvals, permits, certificates, licenses, consents and franchises
would not have a Material Adverse Effect.
SECTION 6.06 LITIGATION. Except as shown on SCHEDULE 6.06 as of
the Effective Date, no proceedings before any court or governmental agency or
department are pending against any Loan Party and, to the knowledge of the
Company, none of same affect any Loan Party or have been threatened. At any time
after the Effective Date, no proceedings against or affecting any Loan Party are
pending or, to the knowledge of the Company, threatened before any court or
governmental agency or department which could reasonably be expected to have a
Material Adverse Effect.
SECTION 6.07 FINANCIAL STATEMENTS. Prior to the Execution Date,
Finance Corp. has furnished to the Lenders the audited combined balance sheet
and income statement of TOC as of May 31, 1995 and the reviewed combined
financial statements of TOC as of February 29, 1996 (such financials,
collectively, "FINANCIALS"). The Financials have been prepared in conformity
with GAAP consistently applied and present fairly, in all material respects, the
financial condition of TOC, its Subsidiaries and Affiliates as of the dates
thereof. Since May 31, 1995, there has not occurred any event which would
reasonably be expected have a Material Adverse Effect.
SECTION 6.08 NO DEFAULTS. The Company and its Subsidiaries are
not in default (a) under any material provisions of any instrument evidencing
any Indebtedness or of any agreement relating thereto in such manner as to cause
a Material Adverse Effect or (b) in any respect under or in violation of any
order, writ, injunction or decree of any court or governmental instrumentality,
in
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such manner as to cause a Material Adverse Effect or (c) under any provision of
any Material Contract, which default would reasonably be expected to have a
Material Adverse Effect.
SECTION 6.09 INVESTMENT COMPANY ACT. Each of the Company and its
Subsidiaries is not, nor are they directly or indirectly controlled by or acting
on behalf of any Person which is, an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended.
SECTION 6.10 UTILITY REGULATION. Neither the Company nor any of
its respective Subsidiaries, is (i) a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company," or an
"affiliate" of a "subsidiary company" of a "holding company,"or a "public
utility company" within the meaning of the Public Utility Holding Company Act of
1935 or (ii) an "electric utility" or "public utility" within the meaning of the
Federal Power Act or (iii) an "electric utility," "public utility," or "utility"
under any state law regulating public utilities.
SECTION 6.11 ERISA. (a) The Company and each ERISA Affiliate have
operated and administered each Plan and Employee Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and would not reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA) which
would individually or in the aggregate reasonably be expected to have a Material
Adverse Effect, and no event, transaction or condition has occurred or exists
that would reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
(b) No accumulated funding deficiency (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived, exists or is
expected to be incurred with respect to any Plan.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate would reasonably be expected to have
a Material Adverse Effect.
(d) The expected post-retirement benefit obligation (determined as
of the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated
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by section 4980B of the Code) of the Company and its Subsidiaries would not
reasonably be expected to have a Material Adverse Effect.
SECTION 6.12 ENVIRONMENTAL MATTERS. Except as disclosed on
SCHEDULE 6.12, the Company and its Subsidiaries (a) possess all environmental,
health and safety licenses, permits, authorizations, registrations, approvals
and similar rights necessary under Environmental Laws for the Company and its
Subsidiaries to conduct their operations as now being conducted, except where
failure to have such licenses, permits, authorizations, registrations,
approvals, and similar rights would not reasonably be expected to have a
Material Adverse Effect, and (b) each of such licenses, permits, authorizations,
registrations, approvals and similar rights is valid and subsisting, in full
force and effect and enforceable by the Company and its Subsidiaries, and the
Company and its Subsidiaries are in compliance with all terms, conditions or
other provisions of such permits, authorizations, registrations, approvals and
similar rights except for such failure or noncompliance that, individually or in
the aggregate for the Company and its Subsidiaries, would not reasonably be
expected to have a Material Adverse Effect. Except as disclosed on SCHEDULE
6.12, neither the Company nor any Subsidiary has received any written notices of
any violation of, noncompliance with, or remedial obligation under, any
Environmental Laws (which violation, non-compliance, or remedial obligation has
not been cured or would not reasonably be expected to have a Material Adverse
Effect) and there are no writs, injunctions, decrees, orders or judgments
outstanding under the Environmental Laws, or lawsuits, claims, proceedings, or,
to the knowledge of the Company, investigations or inquiries pending or
threatened under Environmental Laws, relating to the ownership, use, condition,
maintenance or operation of, or conduct of business related to, any property
owned, leased or operated by the Company and its Subsidiaries or other assets of
the Company and its Subsidiaries other than those violations, instances of
noncompliance, obligations, writs, injunctions, decrees, orders, judgments,
lawsuits, claims, proceedings, investigations or inquiries that, individually or
in the aggregate for the Company and its Subsidiaries, would not reasonably be
expected to have a Material Adverse Effect. There are no obligations,
undertakings or liabilities arising out of or relating to Environmental Laws
which the Company and its Subsidiaries have agreed to, assumed or retained, or
by which the Company and its Subsidiaries are adversely affected, by contract or
otherwise, except such obligations, undertakings or liabilities as would not
reasonably be expected to have a Material Adverse Effect. Except as disclosed on
SCHEDULE 6.12, the Company and its Subsidiaries have not received a written
notice or claim to the effect that any of them are or may be liable to any other
Person as the result of a Release or threatened Release of a Hazardous Material,
except such notice or claim that would not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.13 PURPOSE OF LOANS. (a) The proceeds of the Advances of
the Term Loan A, the Term Loan B and approximately $500,000.00 of the Revolving
Credit Loans will be used (i) by Finance Corp. to fund a Loan to the Parent to
be used by the Parent solely to finance the purchase of the stock of TOC and TPC
pursuant to the Purchase Agreement (the "ACQUISITION") and to pay certain
transaction expenses incurred in connection with the Acquisition, and (ii) by
the
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Company for general corporate purposes. The proceeds of the ESOP Loan will be
loaned by the Company to the ESOP to enable the ESOP to purchase Holding Co.
common stock.
(b) None of the proceeds of any Advance will be used directly or
indirectly for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation U (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry margin stock, or for any other purpose which might constitute this
transaction as a "purpose credit" within the meaning of Regulation U. Neither
the Company nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or any other Loan Document to violate, or
involve the Lenders in a violation of, Regulation G, Regulation U, Regulation X,
or any other regulation of the Board of Governors or to violate the Exchange
Act.
SECTION 6.14 SUBSIDIARIES. Except as disclosed on SCHEDULE 6.14,
on the Effective Date or as disclosed in writing to the Agent, the Company does
not have any Subsidiaries and is not a party to any joint venture, partnership
or similar organization.
SECTION 6.15 SOLVENCY. After giving effect to the initial Advance
hereunder, the Merger, and all other Indebtedness of the Company at the time of
such Advance, (i) the fair value and present fair saleable value of the
Company's assets exceeds the Company's stated liabilities and identified
contingent liabilities; (ii) the Company is able to pay its debts as they become
due; and (iii) the Company has sufficient capital to engage in its business as
management has indicated it is now conducted and is proposed to be conducted
following the consummation of the Acquisition.
SECTION 6.16 ACCURACY OF INFORMATION. Neither this Agreement nor
any other document, certificate, statement or other factual information
(excluding projections), taken as a whole, furnished in writing to the Agent or
any Lender by or on behalf of the Company or any of its Subsidiaries in
connection with this Agreement or any transaction contemplated hereby, taken as
a whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. The financial information with respect to the Company's
projections, copies of which have been furnished to each Lender prior to the
Execution Date, were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were believed by the Company to be reasonable
in all material respects at the time made.
SECTION 6.17 INSURANCE. The Company and its Subsidiaries maintain
insurance of such types as is usually carried by corporations of established
reputation engaged in the same or similar businesses and similarly situated with
financially sound, responsible and reputable insurance companies or associations
(or, as to workers' compensation or similar insurance, with an insurance fund or
by self-insurance authorized by the jurisdiction in which its operations are
carried on) and in such amounts (and with co-insurance and deductibles) as such
insurance is usually carried by
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corporations of established reputation and engaged in the same or similar
businesses and similarly situated, but in any event, with respect to
improvements to real property and tangible personal property (assuming the
subject improvements are in fact replaced or restored), in amounts in excess of
the Loans. Neither the Company nor its Subsidiaries maintains any formalized
self-insurance program with respect to its assets or operations or material
risks with respect thereto in excess of $1,000,000.00 in the aggregate.
SECTION 6.18 INDEBTEDNESS AND CONTINGENT LIABILITIES. As of the
Effective Date, the Company does not have any outstanding Indebtedness
(excluding the Loans and the Subordinated Debt) or material contractually
assumed contingent liabilities.
SECTION 6.19 COMPLIANCE WITH LAWS. The Company and its
Subsidiaries are in compliance with all of the following, (except as to ERISA
and Environmental Laws, only to the extent required under SECTIONS 6.11 AND
6.12, respectively) as applicable in respect of the conduct of their respective
businesses and the ownership of their respective properties: all statutes,
material regulations and material orders of, and all restrictions imposed by all
governmental bodies, except any failure to comply that would not reasonably be
expected to have a Material Adverse Effect.
SECTION 6.20 SECURITY INTERESTS. The Security Documents create
valid Liens in all of the collateral described therein in favor of the Agent for
the benefit of the Lenders securing the Obligations and constitute (subject to
(i) the filing after the Effective Date of financing statements and assignments
of patents and trademarks delivered to the Agent on the Execution Date and
thereafter from time to time and (ii) delivery of any collateral after the
Effective Date as provided herein or any other Loan Document) perfected first
priority Liens (other than Permitted Liens) in substantially all of such
collateral described therein subject to no Liens other than Permitted Liens
(other than titled equipment, rolling stock and patents, trademarks, copyrights
and similar items existing or issued outside of the United States).
SECTION 6.21 MATERIAL CONTRACTS. (a) As of the Execution Date, the
Material Contracts have been duly executed and delivered by, and constitute the
legal, valid and binding obligation of the Company and to its knowledge all
other parties thereto, enforceable against such parties in accordance with its
terms, (i) are in full force and effect and (ii) except as disclosed to the
Agent, have not been amended or modified in any material respect.
(b) All consents required under the Material Contracts in
connection with (i) the Merger and (ii) the Security Documents have been
obtained by the Company.
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ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that on and after the date hereof
and until the Notes are paid in full and the Total Commitment has terminated:
SECTION 7.01 INFORMATION COVENANTS. Except for those items
described below in SECTIONS 7.01(F), (H) AND (I) which will be furnished by the
Company to the Agent, the Company will furnish or cause to be furnished to each
Lender:
(a) As soon as available, and in any event within thirty (30) days
after each month-end and forty-five (45) days after the close of each of the
first three fiscal quarters in each fiscal year of the Company, the consolidated
monthly and consolidated quarterly unaudited balance sheets of the Company and
its Subsidiaries as of the end of such periods and the related consolidated (and
consolidating for quarter-end periods) unaudited statements of income and cash
flows for such periods, setting forth, in each case, commencing on the Financial
Statement Delivery Date after the first anniversary of this Agreement,
comparative figures for the related periods in the prior fiscal year and,
commencing fiscal year 1998 on a quarterly basis, for the budget delivered
pursuant to subsection (h) below, all of which shall be certified by the chief
financial officer or chief executive officer of the Company or any Responsible
Officer as fairly presenting in all material respects, the financial position of
the Company as of the end of such period and the results of its operations for
the period then ended in accordance with GAAP, subject to changes resulting from
normal year-end audit adjustments; and
(b) As soon as available, and in any event within ninety (90) days
after the close of each fiscal year of the Company, the audited consolidated and
unaudited consolidating balance sheet of the Company and its Subsidiaries as at
the end of such fiscal year and the related audited statements of income and
audited cash flows for such fiscal year, setting forth, in each case,
comparative figures for the preceding fiscal year and (i) in the case of such
consolidated financials certified by Deloitte & Touche L.L.P. or other
independent certified public accountants of recognized national standing, whose
report shall be without limitation as to the scope of the audit, unqualified and
otherwise reasonably satisfactory in substance to the Majority Lenders and (ii)
in the case of such consolidating financials certified as set forth in SECTION
7.01(A) above.
(c) Promptly after any Responsible Officer of the Company obtains
knowledge thereof, notice of:
(i) any material violation of, noncompliance with, or remedial
obligations under, Environmental Laws,
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(ii) any material Release or threatened material Release of
Hazardous Materials affecting any property owned, leased or operated
by the Company or its Subsidiaries,
(iii) the existence of any event or condition which constitutes a
Default or an Event of Default,
(iv) any material violation of public health or welfare laws or
regulations,
(v) the filing of any tax or other governmental Liens,
(vi) the creation of any Subsidiary,
(vii) any Person having given any written notice to the Company or
taken any other action with respect to a claimed default or event of
default under any Material Contract or under any other instrument or
agreements, in each case which would reasonably be expected to have a
Material Adverse Effect,
(viii) the institution of any litigation in which the damages
claimed are in excess of $5,000,000.00, and
(ix) any other condition or event which, in the opinion of
management of the Company, would reasonably be expected to have a
Material Adverse Effect,
which notice shall specify the nature and period of existence thereof and
specifying the notice given or action taken by such Person and the nature of any
such claimed default, event or condition and, in the case of an Event of Default
or Default, what action has been taken, is being taken or is proposed to be
taken with respect thereto.
(d) On any Financial Statement Delivery Date, a certificate of a
Responsible Officer to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature and extent
thereof and the action that is being taken or that is proposed to be taken with
respect thereto, which certificate shall set forth the calculations required to
establish whether the Company was in compliance with the provisions of SECTION
8.13 as at the end of such fiscal period or year, as the case may be.
(e) As soon as available and in any event within fifteen (15)
Business Days after the end of each month commencing July, 1996, a Borrowing
Base Certificate and an aging of Receivables in form and substance reasonably
satisfactory to the Agent.
(f) Upon request by the Agent any existing environmental report,
study or audit of the Company's or its Subsidiaries' procedures and policies,
assets and operations in respect of
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Environmental Laws as the Agent may reasonably request; PROVIDED that such
existing report, study or audit is in the possession of the Company or its
Subsidiaries or, if not in their possession, is reasonably obtainable from a
third party having possession and subject to such conditions and requirements as
the Company or its Subsidiaries may reasonably impose to protect legal
privilege, provided that such conditions or requirements may not extend to
withholding information pertaining to factual circumstances or conditions that
the Company would otherwise be required to disclose under this Agreement.
(g) Promptly upon receipt thereof, a copy of any report or
management letter submitted to the Company or its Subsidiaries by its
independent accountants in connection with any regular or special audit of the
Company's or its Subsidiaries' records.
(h) Within sixty (60) days after the start of each fiscal year of
the Company beginning with fiscal year 1998, a financial plan and budget of the
Company and its Subsidiaries for such fiscal year prepared by the Company in its
ordinary course of business, which financial plan and budget shall include a
balance sheet and related statements of income and cash flow for such fiscal
year and the succeeding four fiscal years.
(i) From time to time and with reasonable promptness, such other
information or documents as the Agent or any Lender through the Agent may
reasonably request.
(j) Promptly upon filing, a copy of any Company Current Report
Form 8-K filed with the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the Securities and Exchange
Commission).
(k) Promptly upon consummation thereof, notice of the sale of any
Other Asset.
SECTION 7.02 BOOKS, RECORDS AND INSPECTIONS. The Company and its
Subsidiaries will maintain corporate books and financial records, and will
permit, or cause to be permitted, any Person designated by the Agent, and after
the occurrence and during the continuance of an Event of Default, any Person
designated by any Lender, to visit and inspect any of the properties of the
Company, to examine such corporate books and financial records of the Company
and to make copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of any such corporations with the officers, employees and
agents of the Company and its Subsidiaries, with their independent public
accountants, all at such reasonable times and upon reasonable notice and as
often as the Agent may reasonably request. Upon the occurrence and during the
continuance of an Event of Default, any Person designated by the Agent may
request that such independent public accountants obtain Receivable confirmation
reports from account receivable debtors of the Company and its Subsidiaries.
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SECTION 7.03 INSURANCE AND MAINTENANCE OF PROPERTIES. (a) The
Company will and will cause its Subsidiaries to keep reasonably adequately
insured by financially sound and reputable insurers all of its material
property, which is of a character, and in amounts and against such risks,
usually and reasonably insured by similar Persons engaged in the same or similar
businesses, including, without limitation, insurance against fire, casualty,
business interruption and any other hazards normally insured against. The
Company will at all times maintain and will cause its Subsidiaries to maintain
insurance against its liability for injury to Persons or property, which
insurance shall be by financially sound and reputable insurers and in such
amounts and form as are customary for corporations of established reputation
engaged in the same or a similar business and owning and operating similar
properties, and shall annually provide the Agent a listing of all such insurance
and such other certificates and other evidence thereof, as the Agent shall
reasonably request. A listing of all policies existing on the Execution Date
(including policy limits) of the Company and its Subsidiaries is attached hereto
as SCHEDULE 7.03. The Company shall obtain and cause its Subsidiaries to obtain,
all such endorsements as are available to such policies showing the Agent as an
additional insured, or, at the Agent's option, a co-loss payee, thereunder. In
the event that any improvements are located on any real property of the Company
or any Subsidiary designated as "flood prone" or a "flood risk area," as defined
by the Flood Disaster Protection Act of 1973 (42 U.S.C. ss. 4121), then the
Company or such Subsidiary shall maintain flood insurance in an amount required
by the National Flood Insurance Program on such improvements and shall comply
with all additional requirements of the National Flood Insurance Program as set
forth therein. All policies of insurance required by the terms of this Agreement
or any Security Document shall provide that at least 15 days' prior written
notice be given to the Agent of any termination, cancellation, reduction or
other material modification of such insurance.
(b) The Company will cause all of its and its Subsidiaries'
properties used or useful in the conduct of their respective businesses to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all reasonably necessary
repairs, renewals and replacements thereof, all as in the reasonable judgment of
the Company may be reasonably necessary so that the business carried on in
connection therewith may be properly conducted at all times.
SECTION 7.04 PAYMENT OF TAXES. The Company will pay and discharge
and will cause its Subsidiaries to pay and discharge all material taxes,
assessments and governmental charges or levies imposed upon them or upon their
respective incomes or profits, or upon any properties belonging to any of them,
prior to the date on which penalties attach thereto, except for such amounts
that are being contested in good faith and by appropriate actions and for which
appropriate reserves have been made on the books of such entity in accordance
with GAAP.
SECTION 7.05 CORPORATE EXISTENCE. The Company will do all things
necessary and will cause its Subsidiaries to do all things necessary to (i)
except as permitted under SECTION 8.02, preserve and keep in full force and
effect their respective corporate existences and (ii) maintain all
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rights, franchise agreements, business contracts, patents, trademarks, licenses
and Material Contracts as may be required so that the business carried on in
connection therewith may be properly conducted at all times, except for any
failure to so maintain that would not reasonably be expected to have a Material
Adverse Effect.
SECTION 7.06 COMPLIANCE WITH STATUTES. The Company will comply
with and will cause its Subsidiaries to comply with all applicable statutes
(except as to ERISA and Environmental Laws, only to the extent required under
Sections 6.11 and 6.12, respectively), regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, except for any failure to so comply that would not reasonably be
expected to have a Material Adverse Effect.
SECTION 7.07 ERISA. Immediately after any Responsible Officer of
the Company knows or has reason to know any of the following items are true, the
Company will deliver or cause to be delivered to the Lenders a certificate of
the chief financial officer of the Company setting forth details as to such
occurrence and such action, if any, the Company or any ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by the Company or its ERISA Affiliate with respect
thereto: that a Reportable Event has occurred or that an application may be or
has been made to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard; that a Multiemployer Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that any required contribution which is material to a Plan, Multiemployer
Plan or Employee Plan has not been or may not be timely made; that proceedings
may be or have been instituted under Section 4069(a) of ERISA to impose
liability on the Company or an ERISA Affiliate or under Section 4042 of ERISA to
terminate a Plan or appoint a trustee to administer a Plan; that the Company or
any ERISA Affiliate has incurred or may incur any liability (including any
contingent or secondary liability) on account of the termination of or
withdrawal from a Plan or a Multiemployer Plan; and that the Company or any
ERISA Affiliate may be required to provide security to a Plan under Section
401(a)(29) of the Code; or any other condition(s) exist(s) or may occur with
respect to one or more Plans, Employee Plans and/or Multiemployer Plans which
would reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect.
SECTION 7.08 UTILITY REGULATION. The Company will cause the
representations and warranties set forth in SECTION 6.10 hereof to be and remain
at all times true and correct.
SECTION 7.09 SUBSIDIARIES. The Company will (a) cause any Person
becoming a Subsidiary of the Company to execute in form and substance
satisfactory to the Agent a guaranty, security agreement, deed of trust and/or
other security instruments sufficient to (x) obligate such Subsidiary for
repayment of all or a portion of the Loans and (xx) pledge all or a portion of
such Subsidiaries' assets as collateral for the Loans and (b) execute, and cause
any such Subsidiary to execute, as applicable, a pledge agreement in form and
substance satisfactory to the Agent pledging
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all of its shares of capital stock of any such Subsidiary that is either a
direct Subsidiary of the Company or a direct Subsidiary of a Subsidiary.
SECTION 7.10 MATERIAL CONTRACTS. The Company will notify the Agent
of any material default under any Material Contract promptly after a Responsible
Officer obtains knowledge thereof.
ARTICLE VIII
NEGATIVE COVENANTS
The Company covenants and agrees as to itself and each of its
Subsidiaries that on and after the date hereof and until the Notes are paid in
full and the Total Commitment has terminated:
SECTION 8.01 CHANGE IN BUSINESS. The Company and its Subsidiaries
will not engage in any businesses not of the same general type as, or reasonably
related to, those conducted by the Company on the Effective Date.
SECTION 8.02 CONSOLIDATION, MERGER OR SALE OF ASSETS. Neither the
Company nor any Subsidiary will wind up, liquidate or dissolve its affairs, or
enter into any transaction of merger or consolidation, or sell, transfer or
otherwise dispose of all or any part of its property or assets (other than sales
of Inventory and surplus or obsolete assets in the ordinary course of business,
provided that any disposal does not prejudice the Lenders in any material way),
except that
(a) any Subsidiary of the Company may merge, consolidate, wind up,
liquidate or dissolve into and with the Company or any other wholly-owned
Subsidiary of the Company;
(b) the Company and its Subsidiaries may make Permitted
Investments;
(c) any Subsidiary of the Company may sell its assets to the
Company or another wholly-owned Subsidiary of the Company;
(d) sales of assets by the Company or its Subsidiaries not to
exceed $2,000,000.00 in any fiscal year;
(e) sales of any Other Assets; and
(f) the Merger.
Upon the request and at the expense of the Company in connection with any sale,
transfer or other disposition of property or assets permitted hereunder or under
any other Loan Document, and so long
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as no Default or Event of Default has occurred and is continuing, the Agent
shall upon request execute and deliver, or shall cause the secured party,
mortgage trustee or other appropriate Person to execute and deliver, to the
Company duly executed releases or partial releases, as applicable, of any Lien
pursuant to any Loan Document which it may have in such property or assets, in
form and substance reasonably satisfactory to the Agent, the secured party,
mortgage trustee or other appropriate Person, as the case may be, and the
Company.
SECTION 8.03 INDEBTEDNESS. The Company will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness except:
(a) Indebtedness existing hereunder;
(b) Indebtedness evidenced by the Subordinated Debt or any other
Indebtedness of the Company or any of its Subsidiaries which is expressly and
validly subordinated to the Obligations pursuant to terms, conditions and
amounts of such other subordinated Indebtedness which are satisfactory to the
Lenders;
(c) Capitalized Lease Obligations and purchase money financing
not to exceed $10,000,000.00 in the aggregate outstanding at any time;
(d) Indebtedness relating to loans or advances permitted under
SECTION 8.05; and
(e) Indebtedness that constitutes "mark to market" exposure
resulting from any Derivative for the purpose of hedging in the ordinary course
of business against fluctuations in interest rates, commodity prices and foreign
exchange rates;
(f) obligations under "take or pay" contracts or similar
arrangements entered into in the ordinary course of business; PROVIDED that the
Company or any of its Subsidiaries have not made payments under any such
contracts or arrangements other than payments for product received or product
the Company or any of its Subsidiaries reasonably expects it will be able to
receive within one year from the date the payment was made and the amount of all
such payments in the aggregate could not reasonably be expected to have a
Material Adverse Effect; and
(g) Indebtedness that constitutes a renewal, refinancing or
extension of any Indebtedness referred to in this SECTION 8.03; PROVIDED, that
(i) no Lien existing at the time of such renewal, refinancing or extension shall
be extended to cover any property not already subject to such Lien and (ii) the
principal amount of any Indebtedness renewed, refinanced or extended shall not
exceed the amount of such Indebtedness outstanding immediately prior to such
renewal, refinancing or extension.
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SECTION 8.04 LIENS. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien upon or with
respect to any of its property or assets of any kind whether now owned or
hereafter acquired (nor will it covenant with any other Person not to grant such
a lien to the Agent), except in connection with the following which are
permitted liens ("PERMITTED LIENS"):
(a) Liens existing on the Execution Date and listed on SCHEDULE
8.04(A);
(b) Liens for taxes or assessments or other governmental charges
or levies, either not yet due and payable or being contested in good faith and
by appropriate actions for which adequate reserves have been established;
(c) non-consensual Liens imposed by operation of law including,
without limitation, landlord Liens for rent not yet due and payable, and Liens
for materialmen, mechanics, warehousemen, carriers, employees, workmen,
repairmen, current wages or accounts payable not yet delinquent and arising in
the ordinary course of business or being contested in good faith by appropriate
proceedings and subject to maintenance of adequate reserves;
(d) easements, rights-of-way, restrictions and other similar
Liens or imperfections to title which do not materially interfere with the
occupation, use, and enjoyment by the Company or any of its Subsidiaries of the
property or asset encumbered thereby or materially impair the value of the
property or asset subject thereto and none of which are violated by existing or
proposed improvements or land use of such property or asset;
(e) Liens arising under worker's compensation laws, unemployment
insurance laws or similar legislation;
(f) Liens in favor of the Agent pursuant to the Loan Documents;
(g) Liens securing Indebtedness permitted by SECTION 8.03(C);
(h) Liens of any judgments or orders not constituting an Event of
Default;
(i) any right of set off relating to Indebtedness or Investment
that are not prohibited by this Agreement; and
(j) any renewal, extension or replacement of any Lien referred to
in subparagraph (a) above; PROVIDED, that no Lien arising or existing as a
result of such extension, renewal or replacement shall be extended to cover any
property not theretofore subject to the Lien being extended, renewed or replaced
and PROVIDED FURTHER that the principal amount of the Indebtedness
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secured thereby shall not exceed the principal amount of the Indebtedness so
secured at the time of such extension, renewal or replacement.
SECTION 8.05 INVESTMENTS. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, make or own any Investment in
any Person, except:
(a) the Company and its Subsidiaries may make and own Permitted
Investments;
(b) the Company and its Subsidiaries may continue to own
Investments owned by such Person on the Execution Date as set forth on SCHEDULE
8.05(B);
(c) loans by any Subsidiary of the Company to the Company or
loans by the Company to any Subsidiary in the ordinary course of business not in
excess of $1,000,000.00 in the aggregate;
(d) loans by the Company to the ESOP to purchase shares of the
Parent in the aggregate at any time outstanding not in excess of $10,000,000.00;
(e) Investments arising out of loans and advances for expenses,
travel per diem and similar items in the ordinary course of business to
officers, directors, and employees not to exceed $200,000.00 in the aggregate
outstanding at any time;
(f) other Investments in an amount not to exceed $500,000.00
outstanding at any time; and
(g) Investments reasonably related to the Company's business as
currently conducted from (i) Excess Cash Flow not required to be paid to the
Lenders or (ii) Excess Sales Proceeds.
SECTION 8.06 GUARANTIES. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, guarantee the Indebtedness of
any Person, except:
(a) endorsements of instruments for deposit or collection in the
ordinary course of business;
(b) guaranties in favor of the Agent or the Lenders evidenced by
a Loan Document; and
(c) guaranties by the Company of any obligations of its
Subsidiaries incurred in the ordinary course of business and not prohibited
hereby.
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SECTION 8.07 RESTRICTED PAYMENTS. The Company will not, and will
not permit any Subsidiary to, (a) pay any dividends or make any other
distributions, direct or indirect, on account of any shares of any class of
stock of the Company or such Subsidiary now or hereafter outstanding, except as
follows, provided that (except as to subclause (iii)) there is not then in
existence any Default or Event of Default (i) dividends payable solely in shares
of stock or warrants, rights or options to acquire shares of stock of the
Company or any Subsidiary, (ii) payments to the Parent not to exceed in any
fiscal year $500,000.00, (iii) payments by the Company to the Parent pursuant to
a tax sharing agreement reasonably satisfactory to the Agent between such
parties, (iv) payments by a Subsidiary of the Company to the Company or another
Subsidiary of the Company, (v) commencing fiscal year 2002, dividends or
payments by the Company to Holding Co. to be used by Holding Co. solely for
scheduled payments of interest in respect of the Discount Debentures; or (b)
redeem, retire, purchase or make any other acquisition, direct or indirect, of
any shares of any class of stock of the Company, the Parent or Holding Co. and
or of any warrants, rights or options to acquire any such shares, now or
hereafter outstanding, except as follows, provided that there is not then in
existence any Default or Event of Default (i) to the extent that the
consideration therefor consists solely of shares of stock (including warrants,
rights or options relating thereto) of the Company and (ii) payments by the
Company to the Parent or Holding Co. or payments made directly by the Company to
be used to repurchase, redeem, acquire or retire for value any capital stock of
the Parent or Holding Co. pursuant to any stockholders' agreement, management
equity subscription plan or agreement, stock option plan or agreement or the
ESOP or other employee benefit plan or agreement; PROVIDED that the aggregate
price paid, and not reimbursed, for all such repurchased, redeemed, acquired or
retired capital stock shall not exceed during any one fiscal year of the Company
the greater of (A) $1,000,000.00 or (B) the minimum amount required under the
ESOP.
SECTION 8.08 CHANGE IN ACCOUNTING. The Company will not change
its method of accounting except for (a) immaterial changes permitted by GAAP in
which the Company's auditors concur or (b) changes required by GAAP; PROVIDED
that the Company and the Agent shall negotiate in good faith, to renegotiate any
affected provision of this Agreement to reflect any such change. The Company
shall advise the Agent and the Lenders in writing promptly upon making any
material change to the extent same is not disclosed in the financial statements
required under SECTION 7.01 hereof.
SECTION 8.09 PREPAYMENT OF OTHER INDEBTEDNESS. The Company (a)
will not make any voluntary prepayments or defeasements of principal or interest
on any other Indebtedness of the Company including the Subordinated Debt
(including any redemptions prior to scheduled maturity whether voluntary or
obligatory), except for permanent reduction of Indebtedness other than the
Subordinated Debt, and (b) will not amend any material term (including interest,
payment or subordination terms) of any other Indebtedness including the
Subordinated Debt without the prior written consent of the Lenders except such
amendments of Indebtedness other than Subordinated Debt which do not make any
material term less favorable to the Company or the Lenders.
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SECTION 8.10 TRANSACTIONS WITH AFFILIATES. Other than those
transactions (a) disclosed to the Agent in writing which are to be created on or
before the Effective Date, or (b) payment of salaries, benefits, and Employee
Bonuses in the ordinary course of business, the Company will not, and will not
permit any Subsidiary to, directly or indirectly, engage in any transaction with
any Affiliate, including the purchase, sale or exchange of assets or the
rendering of any service, except transactions in the ordinary course of business
or pursuant to the reasonable requirements of its business and, in each case,
upon terms that are no less favorable than those which might be obtained in an
arm's-length transaction at the time from non-Affiliates.
SECTION 8.11 SUBSIDIARIES' STOCK. After the Effective Date, the
Company will not sell, transfer or otherwise dispose of any class of stock or
any of the voting rights of any Subsidiary of the Company, except as permitted
under SECTION 8.02.
SECTION 8.12 MATERIAL CONTRACTS. The Company will not amend,
cancel or breach any of the Material Contracts except such amendments,
cancellations or breaches as would not reasonably be expected to cause a
Material Adverse Effect.
SECTION 8.13 FINANCIAL RATIOS. For purposes of calculating the
ratios as set forth in this SECTION 8.13, at any time before June 30, 1997,
EBITDA, cash taxes, interest expense and Capital Expenditures for the applicable
periods shall be annualized.
(a) FIXED CHARGE COVERAGE RATIO. The Company will not permit at
any time the Fixed Charge Coverage Ratio to be (a) for the period from the
Execution Date to and including June 30, 1999, less than 1.05 to 1.0 and (b) at
any time after June 30, 1999, less than 1.15 to 1.0.
(b) TOTAL DEBT TO EBITDA RATIO. The Company will not permit at
any time the ratio of Total Debt to EBITDA to be (a) for the period from the
Execution Date to and including June 30, 1997, greater than 4.5 to 1.0, (b) for
the period from July 1, 1997 to and including June 30, 1998, greater than 4.0 to
1.0, (c) for the period from July 1, 1998 to and including June 30, 1999,
greater than 3.75 to 1.0, (d) for the period from July 1, 1999 to and including
June 30, 2000, greater than 3.5 to 1.0, (e) for the period from July 1, 2000 to
and including June 30, 2001, greater than 3.5 to 1.0, (f) for the period from
July 1, 2001 to and including June 30, 2002, greater than 3.0 to 1.0, (g) for
the period from July 1, 2002 to and including June 30, 2003, greater than 3.0 to
1.0, and (h) for the period from July 1, 2003 to and including June 30, 2004,
greater than 3.0 to 1.0.
(c) NET WORTH. The Company will not permit at any time Net Worth
to be less than $65,000,000.00, PLUS seventy-five percent (75%) of cumulative
net income (only if positive and without giving effect to any nonrecurring
items, extraordinary gains or losses or gains or losses from the sale of assets
or write down in the value of assets owned by the Company and its Subsidiaries)
commencing on the Execution Date and one hundred percent (100%) of proceeds of
any equity offering.
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(d) CURRENT RATIO. The Company will not permit at any time the
ratio of Current Assets to Current Liabilities to be less than 1.25 to 1.0.
SECTION 8.14 CAPITAL EXPENDITURES. (a) Except as permitted in
subclauses (b) and (c) below, the Company will not permit any Capital
Expenditures in excess of the following amounts during the following periods
(together with the amounts described in clause (c) below of this SECTION 8.14,
"SCHEDULED CAPITAL EXPENDITURES"):
Scheduled Capital
FISCAL YEAR EXPENDITURE AMOUNT
----------- ------------------
1997 $13,500,000
1998 16,000,000
1999 11,000,000
2000 8,000,000
2001 8,000,000
2002 8,000,000
2003 8,000,000
2004 8,000,000
(b) The Company and its Subsidiaries may make Capital Expenditures
to the extent of the amount of any Excess Cash Flow not required to be paid to
the Lenders during any such period and Excess Sales Proceeds.
(c) To the extent any amount of Scheduled Capital Expenditures is
not used during any single calendar year, such unexpended amount may be carried
forward and expended during the next calendar year (but not any other calendar
year); PROVIDED that during any calendar year in which such unexpended amounts
have been so carried forward, all Capital Expenditures are deemed to apply first
to the carry forward amount and then to the Scheduled Capital Expenditures for
such year.
SECTION 8.15 FISCAL YEAR. Except for a change to June 30, the
Company will not change its fiscal year end.
SECTION 8.16 SALE/LEASEBACK TRANSACTIONS. The Company will not
enter, and will not permit any Subsidiary to enter, into any arrangement with
any Person or to which such Person is a party providing for the leasing by the
Company or any of its Subsidiaries of real or personal
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property which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Company; PROVIDED that the Company or any of its Subsidiaries
may at any time enter into sale/leaseback transactions so long as the aggregate
amount of all such obligations incurred by the Company and its Subsidiaries does
not exceed $10,000,000.00 outstanding at any time.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
SECTION 9.01 EVENTS OF DEFAULT. The following events shall
constitute Events of Default ("EVENTS OF DEFAULT") hereunder:
(a) any installment of principal on any Note shall not be paid on
the date on which such payment is due, or any payment of interest on any Note or
any payment of any Fee shall not be paid on or before the fifth (5th) day after
such payment is due; or
(b) any representation or warranty made or, for purposes of
ARTICLE VI, deemed made by the Company or any Loan Party herein or in any of the
Loan Documents or other document, certificate or financial statement delivered
in connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made or reaffirmed,
as the case may be; or
(c) the Company shall fail to perform or observe any duty or
covenant contained in ARTICLE VIII (other than those described in, but not
permitted by SECTION 8.04(B), (C) or (E)) or in SECTION 7.01(F), or SECTION
7.03(A) or SECTION 7.09 hereof; or
(d) the Company or any Loan Party shall fail to perform or
observe any duty or covenant contained in (i) SECTION 7.01(A), (B), (C), (D),
(E) and (H) or those described in, but not permitted by SECTION 8.04(B), (C) or
(E) and such failure is not remedied within the earlier of (i) ninety (90) days
or (ii) ten (10) days after the earlier of (x) notice of such failure by the
Agent to the Company or (xx) after a Responsible Officer of the Company or any
Subsidiary has actual knowledge thereof; and (ii) this Agreement or any Loan
Document, other than those referenced in SECTION 9.01(A), (B), (C) or clause (i)
of this SECTION 9.01(D) and such failure is not remedied within the earlier of
(i) ninety (90) days or (ii) thirty (30) days after the earlier of (x) notice of
such failure by the Agent to the Company or (xx) after a Responsible Officer of
the Company or any Subsidiary has actual knowledge thereof; or
(e) the Company or any Loan Party shall (i) fail to make (whether
as primary obligor or as guarantor or other surety) any principal payment of or
interest or premium, if any, on any instruments of Indebtedness in the aggregate
in excess of $5,000,000.00 allowed hereunder (other
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than the Notes) and such failure remains outstanding beyond any period of grace
provided with respect thereto or (ii) fail to duly observe, perform or comply
with any agreement with any Person, or any term or condition of any instrument
of Indebtedness in excess of $5,000,000.00 beyond any period of grace provided
with respect thereto, if such failure causes (unless such failure has been
waived by the holder(s) of such Indebtedness), or permits the holder(s) to
cause, such obligations to become due prior to any stated maturity; or
(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company or any Loan Party or of a substantial part of the
property or assets of the Company or any Loan Party, under Title 11 of the
United States Code, as now or hereafter in effect, or any successor thereto (the
"BANKRUPTCY CODE"), or any other federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company or any
Loan Party or for a substantial part of the property or assets of the Company or
any Loan Party or (iii) the winding-up or liquidation of the Company or any Loan
Party; and such proceeding or petition shall continue undismissed for sixty (60)
days or an order or decree approving or ordering any of the foregoing shall be
entered; or
(g) the Company or any Loan Party shall (i) voluntarily commence
any proceeding or file any petition seeking relief under the Bankruptcy Code or
any other federal or state bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
clause (f) above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or any Loan Party or for a substantial part of the property or assets of
the Company or any Loan Party, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) admit in writing its
inability or fail generally to pay its debts as they become due or (vii) take
any action for the purpose of effecting any of the foregoing; or
(h) the Company shall (i) fail to make any principal payment of or
interest or premium, if any, on the Subordinated Debt beyond any period of grace
provided with respect thereto, (ii) fail to duly observe, perform or comply with
any agreement beyond any period of grace provided with respect thereto, if such
failure is to permit the holder(s) to cause such obligations to become due prior
to any stated maturity or (iii) become obligated to redeem, repurchase or repay
all or any portion of any principal, interest or premium on the Subordinated
Debt prior to its scheduled payment; or
(i) Holding Co. shall (i) fail to make any principal payment of or
interest or premium, if any, on the Discount Debentures beyond any period of
grace provided with respect thereto, (ii) fail to duly observe, perform or
comply with any agreement beyond any period of grace provided with respect
thereto, if such failure is to permit the holder(s) to cause such obligations to
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become due prior to any stated maturity or (iii) become obligated to redeem,
repurchase or repay all or any portion of any principal, interest or premium on
the Discount Debentures prior to its scheduled payment; or
(j) a judgment or order, which with other outstanding judgments
and orders against the Company or any Loan Party equal or exceed $2,000,000.00
in the aggregate (to the extent not covered by insurance as to which the
respective insurer has acknowledged coverage), shall be entered against the
Company or any Loan Party and (i) within sixty (60) days after entry thereof
such judgment shall not have been paid or discharged or execution thereof stayed
pending appeal or, within sixty (60) days after the expiration of any such stay,
such judgment shall not have been paid or discharged or (ii) any enforcement
proceeding shall have been commenced (and not stayed) by any creditor or upon
such judgment; or
(k) if (A) (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any Subsidiary or any ERISA Affiliate that a Plan may become subject
to any such proceedings, (iii) any Plan shall have any Unfunded Current
Liability, (iv) the Company or any Subsidiary or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any Subsidiary or any ERISA Affiliate
withdraws from any Multiemployer Plan, (vi) the Company or any Subsidiary or any
ERISA Affiliate fails to make any contribution due, or payment to or with
respect to, any employee benefit plan, or (vii) the Company or any Subsidiary or
any ERISA Affiliate establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary or any ERISA Affiliate thereunder,
and (B) any such event or events described in clauses (i) through (vii) above,
either individually or together with any other such event or events, would
reasonably be expected to have a Material Adverse Effect; or
(l) after the Effective Date, the occurrence of any Change of
Control; or
(m) the Obligations shall cease, except as permitted hereby,
being secured by substantially all of the assets of the Company.
SECTION 9.02 PRIMARY REMEDIES. In any such event, and at any time
after the occurrence of any of the above described events, the Agent shall, if
requested by the Majority Lenders, by written notice to the Company (a "NOTICE
OF DEFAULT") take any or all of the following actions (without prejudice to the
rights of any Lender to enforce any other rights it may have against
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the Company, PROVIDED that, if an Event of Default specified in SECTION 9.01(F)
or SECTION 9.01(G) shall occur, the following shall occur automatically without
the giving of any Notice of Default): (a) declare the Total Commitment
terminated, whereupon the Total Commitment shall forthwith terminate immediately
and any Revolving Credit Commitment Fee shall forthwith become due and payable
without any other notice of any kind; (b) declare the principal of and any
accrued and unpaid interest in respect of all Advances, and all obligations
owing hereunder, to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, notice of demand or of dishonor and
non-payment, protest, notice of protest, notice of intent to accelerate,
declaration or notice of acceleration or any other notice of any kind, all of
which are hereby waived by the Company; and (c) exercise any rights or remedies
under any of the Loan Documents.
SECTION 9.03 OTHER REMEDIES. Upon the occurrence and during the
continuance of any Event of Default, the Agent may proceed to protect and
enforce its and the Lenders' rights, either by suit in equity or by action at
law or both, whether for the specific performance of any covenant or agreement
contained in this Agreement or in any other Loan Document or in aid of the
exercise of any power granted in this Agreement or in any other Loan Document;
or may proceed to enforce the payment of all amounts owing to the Lenders under
the Loan Documents and any accrued and unpaid interest thereon in the manner set
forth herein or therein; it being intended that no remedy conferred herein or in
any of the other Loan Documents is to be exclusive of any other remedy, and each
and every remedy contained herein or in any other Loan Document shall be
cumulative and shall be in addition to every other remedy given hereunder and
under the other Loan Documents or now or hereafter existing at law or in equity
or by statute or otherwise.
ARTICLE X
THE AGENT
SECTION 10.01 AUTHORIZATION AND ACTION. Each Lender hereby
irrevocably appoints and authorizes the Agent to act on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
specifically delegated to or required of the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. The Agent may perform any
of its duties hereunder by or through its agents and employees. The duties of
the Agent shall be mechanical and administrative in nature; the Agent shall not
have by reason of this Agreement or any other Loan Document a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or any
other Loan Document, expressed or implied, is intended to, or shall be so
construed as to, impose upon the Agent any obligations in respect of this
Agreement or any other Loan Document except as expressly set forth herein or
therein. As to any matters not expressly provided for by this Agreement, the
Notes or the other Loan Documents (including enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be
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binding upon the Lenders and all holders of Notes and the Obligations; PROVIDED,
that the Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement or applicable law.
SECTION 10.02 AGENT'S RELIANCE. (a) Neither the Agent nor any of
its directors, officers, agents or employees shall be liable to the Lenders for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement, the Notes or any of the other Loan Documents (i) with the
consent or at the request of the Majority Lenders or (ii) in the absence of its
or their own gross negligence or willful misconduct (IT BEING THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT THE AGENT AND ITS DIRECTORS, OFFICERS,
AGENTS AND EMPLOYEES SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER
THIS SECTION 10.02 RESULTING FROM THEIR SOLE ORDINARY OR CONTRIBUTORY
NEGLIGENCE).
(b) Without limitation of the generality of the foregoing, the
Agent: (i) may treat the payee of each Note and the Obligations as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement, any Note or any other Loan Document; (iv) except as otherwise
expressly provided herein, shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement, any Note or any other Loan Document or to inspect the property
(including the books and records) of the Company; (v) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability,
collectibility, genuineness, sufficiency or value of this Agreement, any Note,
any other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (vi) shall not be responsible to any Lender for the
perfection or priority of any Lien securing the Obligations; and (vii) shall
incur no liability under or in respect of this Agreement, any Note or any other
Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopier, cable or telex)
reasonably believed by it to be genuine and signed or sent by the proper party
or parties.
SECTION 10.03 AGENT AND AFFILIATES; TCB AND AFFILIATES. Without
limiting the right of any other Lender to engage in any business transactions
with the Company or any of its Affiliates, with respect to their commitments,
the Loans made by them and the Notes issued to them, TCB and each other Lender
who may become the Agent shall have the same rights and powers under this
Agreement and its Notes as any other Lender and may exercise the same as though
it was not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include TCB and any such other Lender, in their individual
capacities. TCB, each other Person who becomes the Agent and their respective
Affiliates may be engaged in, or may hereafter engage in, one or more
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loans, letters of credit, leasings or other financing activity not the subject
of this Agreement (collectively, the "OTHER FINANCINGS") with the Company or any
of its Affiliates, or may act as trustee on behalf of, or depositary for, or
otherwise engage in other business transactions with the Company or any of its
Affiliates (all Other Financings and other such business transactions being
collectively, the "OTHER ACTIVITIES") with no responsibility to account therefor
to the Lenders. Without limiting the rights and remedies of the Lenders
specifically set forth herein, no other Lender by virtue of being a Lender
hereunder shall have any interest in (a) any Other Activities, (b) any present
or future guaranty by or for the account of the Company not contemplated or
included herein, (c) any present or future offset exercised by the Agent in
respect of any such Other Activities, (d) any present or future property taken
as security for any such Other Activities or (e) any property now or hereafter
in the possession or control of the Agent which may be or become security for
the obligations of the Company hereunder and under the Notes by reason of the
general description of indebtedness secured, or of property contained in any
other agreements, documents or instruments related to such Other Activities;
PROVIDED, HOWEVER, that if any payment in respect of such guaranties or such
property or the proceeds thereof shall be applied to reduction of the
Obligations evidenced hereunder and by the Notes, then each Lender shall be
entitled to share in such application according to its pro rata portion of such
Obligations.
SECTION 10.04 LENDER CREDIT DECISION. Each Lender acknowledges and
agrees that it has, independently and without reliance upon the Agent or any
other Lender and based on the financial statements referred to in SECTION 7.01
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges and agrees that it will, independently and without reliance upon
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
SECTION 10.05 AGENT'S INDEMNITY. (a) The Agent shall not be
required, insofar as the Lenders are concerned, to take any action hereunder or
to prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document unless indemnified to the Agent's satisfaction by the
Lenders against loss, cost, liability and expense. If any indemnity furnished to
the Agent shall become impaired, it may call for additional indemnity and cease
to do the acts indemnified against until such additional indemnity is given. In
addition, the Lenders agree to indemnify the Agent (to the extent not reimbursed
by the Company), ratably according to the respective aggregate principal amounts
of the Notes then held by each of them (or if no Notes are at the time
outstanding, ratably according to the respective amounts of the Total
Commitment), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent (in such capacity) under
this Agreement, the Notes and the other Loan Documents. Without limitation of
the foregoing, each Lender agrees to reimburse the Agent
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promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Agent in connection with the
preparation, execution, administration, or enforcement of, or legal advice in
respect of rights or responsibilities under, this Agreement, the Notes and the
other Loan Documents to the extent that the Agent is not reimbursed for such
expenses by the Company. The provisions of this SECTION 10.05(A) shall survive
the termination of this Agreement, the payment of the Obligations and/or the
assignment of any of the Notes.
(b) Notwithstanding the foregoing, no Lender shall be liable under
this SECTION 10.05(B) to the Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements due to the Agent resulting from the Agent's gross
negligence or willful misconduct. EACH LENDER AGREES, HOWEVER, THAT IT EXPRESSLY
INTENDS, UNDER THIS SECTION 10.05(B), TO INDEMNIFY THE AGENT RATABLY AS
AFORESAID FOR ALL SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR
RESULTING FROM THE AGENT'S SOLE ORDINARY OR CONTRIBUTORY NEGLIGENCE.
SECTION 10.06 SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Company and may be removed
as Agent under this Agreement, the Notes and the other Loan Documents at any
time with or without cause by the Majority Lenders. Upon any such resignation or
removal, the Majority Lenders shall have the right to appoint a successor Agent,
subject to the approval of the Company, if no Event of Default has occurred and
is continuing, (which approval will not be unreasonably withheld). If no
successor Agent shall have been so appointed by the Majority Lenders, and shall
have accepted such appointment, within 30 calendar days after the retiring
Agent's giving of notice of resignation or the Majority Lenders' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any state thereof and having a combined
capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Agent hereunder and under the Notes and the other Loan Documents
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement, the Notes and the other Loan Documents. After any retiring
Agent's resignation or removal as Agent hereunder and under the Notes and the
other Loan Documents, the provisions of this ARTICLE X shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement, the Notes and the other Loan Documents.
SECTION 10.07 NOTICE OF DEFAULT. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent shall have received notice from a Lender or the
Company referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." If the Agent receives
such notice, the Agent shall give notice thereof to the Lenders; PROVIDED,
HOWEVER, if such notice is
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received from a Lender, the Agent also shall give notice thereof to the Company.
The Agent shall be entitled to take action or refrain from taking action with
respect to such Default or Event of Default as provided in SECTION 10.01 and
SECTION 10.02.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 AMENDMENTS. No amendment or waiver of any provision
of this Agreement, any Note or any other Loan Document, nor consent to any
departure by the Company herefrom or therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Company, as to amendments,
and by the Majority Lenders in all cases, and then, in any case, such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given PROVIDED, no such amendment shall be effective unless
signed by all of the Lenders if it attempts to: (a) change the definition of
"COMMITMENT," "DESIGNATED PAYMENT DATE," "MAJORITY LENDERS," "MARGIN,"
"REVOLVING CREDIT COMMITMENT," "REVOLVING CREDIT MATURITY DATE," "TERM LOAN A
COMMITMENT," "TERM A LOAN MATURITY DATE," "TERM LOAN B COMMITMENT," "TERM LOAN B
MATURITY DATE," "ESOP LOAN COMMITMENT," "ESOP LOAN MATURITY DATE," "TOTAL
COMMITMENT," or "TOTAL REVOLVING CREDIT COMMITMENT"; (b) reduce or increase the
amount or alter the terms of the Commitment of any Lender or subject any Lender
to additional obligations; (c) modify this SECTION 11.01; (d) waive any Default
under SECTION 9.01(A); (e) in any manner change the amount of, or any date fixed
for, any payment of principal or interest on the Notes or any Fee or the
reimbursement obligations of the Company under any Letter of Credit; (f) modify
or waive the mandatory prepayment requirements set forth in Section 2.08 hereof
or the allocation of such prepayments to the Lenders; or (g) except as expressly
permitted hereby, release any collateral pledged as security for the Obligations
or release any Guarantor from its obligations under the Guaranty.
SECTION 11.02 NOTICES. Except with respect to telephone
notifications specifically permitted pursuant to ARTICLE II, all notices,
consents, requests, approvals, demands and other communications provided for
herein shall be in writing (including telecopy communications) and mailed,
telecopied, sent by overnight courier or delivered:
(a) If to the Company:
8600 Park Place Boulevard
Houston, Texas 77017
Telecopy No: (713) 475-7761
Attention: Mr. Claude E. Manning
(b) If to the Agent:
707 Travis, 7th Floor, TCB N 79
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Houston, Texas 77002
Telecopy No: (713) 216-6387
Attention: Manager
with copies to:
Loan Syndication Services
1111 Fannin
9th Floor - M.S. 46
Houston, Texas 77002
Attention: Manager
and to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Telecopy No. (713) 220-4295
Attention: Mr. Douglas J. Dillon
or, in the case of any party hereto, such other address or telecopy number as
such party may hereafter specify for such purpose by notice to the other
parties.
(c) If to any Lender, to the address specified by such Lender (or
the Agent on behalf of any Lender) to the Company.
All communications to the Agent shall, when mailed, telecopied or
delivered, be effective when mailed by certified mail, return receipt requested
to such party at its address specified above, or telecopied to any party to the
telecopy number set forth above, or delivered personally to such party at its
address specified above; PROVIDED, that communications to the Agent pursuant to
SECTION II shall not be effective until actually received by the Agent.
SECTION 11.03 NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right
hereunder, under any Note or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right, or
any abandonment or discontinuance of any steps to enforce such right, preclude
any other or further exercise thereof or the exercise of any other right. No
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances. The
remedies herein are cumulative and not exclusive of any other remedies provided
by law, at equity or in any other agreement.
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SECTION 11.04 COSTS, EXPENSES AND TAXES. The Company agrees to pay
on demand: (a) all reasonable out-of-pocket costs and expenses of the Agent in
connection with the preparation, execution and delivery of this Agreement, the
Notes, the other Loan Documents and the other documents to be delivered
hereunder, including the reasonable fees and out-of-pocket expenses of counsel
for the Agent with respect thereto and with respect to advising the Agent as to
its rights and responsibilities under this Agreement, the Notes and the other
Loan Documents, and any modification, supplement or waiver of any of the terms
of this Agreement or any other Loan Document, (b) all reasonable costs and
expenses of any Lender, including reasonable legal fees and expenses, in
connection with the enforcement of, or preservation of rights under this
Agreement, the Notes and the other Loan Documents and (c) reasonable costs and
expenses incurred in connection with third party professional services required
by the Agent such as appraisers, environmental consultants, accountants or
similar Persons, PROVIDED THAT, prior to any Event of Default hereunder, the
Agent will first obtain the consent of the Company to such expense, which
consent shall not be unreasonably withheld. Without prejudice to the survival of
any other obligations of the Company hereunder and under the Notes, the
obligations of the Company under this SECTION 11.04 shall survive the
termination of this Agreement or the replacement of the Agent and each
assignment of the Notes.
SECTION 11.05 INDEMNITY. (a) The Company shall indemnify the
Agent, the Co-Documentation Agents and each Lender and each Affiliate thereof
and their respective directors, officers, employees and agents (OTHER THAN WITH
RESPECT TO ANY CLAIMS BY THE AGENT, THE CO-DOCUMENTATION AGENTS AND/OR ANY
LENDER OR AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE OR AGENT THEREOF AGAINST THE
AGENT, THE CO-DOCUMENTATION AGENTS OR ANY LENDER, OR ANY AFFILIATE, DIRECTOR,
OFFICER, EMPLOYEE OR AGENT THEREOF) (such indemnified Persons called the
"Indemnitees") from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages (including reasonable legal fees and expenses) to
which any of them may become subject, insofar as such losses, liabilities,
claims or damages arise out of or result from (i) this Agreement, the Notes or
any other Loan Document or any actual or proposed use by the Company of the
proceeds of any extension of credit hereunder, (ii) any investigation,
litigation, claims, or demands under any Environmental Laws, or (iii) any other
proceeding (including any threatened investigation or proceeding) relating to
the foregoing clauses (i) and (ii), whether in each such case arising as a
result of this Agreement or any of the other Loan Documents or the transactions
contemplated hereby, and the Company shall reimburse such Indemnitees, upon
demand for any expenses (including legal fees) reasonably incurred in connection
with any such investigation or proceeding; but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Indemnitees. WITHOUT LIMITING ANY
PROVISION OF THIS AGREEMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO
THAT EACH INDEMNITEE SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ALL SUCH
LOSSES, LIABILITIES, CLAIMS OR DAMAGES ARISING OUT OF OR RESULTING FROM THE SOLE
ORDINARY OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE, BUT NOT FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE. Without prejudice to the
survival of any other obligations of the Company hereunder and under the other
Loan Documents, the obligations
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of the Company under this SECTION 11.05 shall survive the termination of this
Agreement and the other Loan Documents and the payment of the Obligations or the
assignment of the Notes.
(b) Notwithstanding anything set forth herein to the contrary, the
Company shall not, in connection with any one legal proceeding or claim, or
separate but related proceedings or claims arising out of the same general
allegations of circumstances, in which the interest of the Indemnitees (in the
reasonable judgment of such Indemnitees) does not differ in any material
respect, be liable to the Indemnitees (or any of them) under any of the
provisions set forth herein for the fees or expenses of more than one separate
firm of attorneys in each jurisdiction in which legal action is being taken or
may be taken at any time, which firm shall be selected by the Agent (or, if the
Agent fails to so select after notice from the Indemnitees involved, such firm
shall be selected by such Indemnitees), except for any additional firms
reasonably recommended by such firm in good faith for purposes of obtaining
special expertise in any area of law or for purposes of having local counsel in
each court in which such proceeding or proceedings are pending. In any
litigation or other proceeding in which the interests of the Company and any
Indemnitee affected thereby are not adverse (in the reasonable judgment of such
Indemnitee) and with respect to which such Indemnitee may seek indemnification
or reimbursement from the Company hereunder, the Company shall be entitled to
participate (in conjunction with counsel for the Indemnitees), at the Company's
expense, in the defense of such litigation or proceeding with its own counsel.
No Indemnitee shall consent to entry of any judgment or enter into any
settlement of any action or proceeding that would give rise to any liability of
the Company hereunder without the prior written consent of the Company (which
consent shall not be unreasonably withheld).
SECTION 11.06 RIGHT OF SETOFF. If any Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits held and other obligations owing by such Lender, or any
branch, subsidiary or Affiliate, to or for the credit or the account of the
Company against any and all the Obligations of the Company now or hereafter
existing under this Agreement and the other Loan Documents and other obligations
of the Company held by such Lender, irrespective of whether or not such Lender
shall have made any demand under this Agreement, its Note or the Obligations and
although the Obligations may be unmatured. The rights of each Lender under this
SECTION 11.06 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
SECTION 11.07 GOVERNING LAW. This Agreement, all Notes, the other
Loan Documents and all other documents executed in connection herewith shall be
deemed to be contracts and agreements executed by the Company and each Lender
under the laws of the State of Texas and of the United States of America and for
all purposes shall be construed in accordance with, and governed by, the laws of
said state and of the United States of America. Without limitation of the
foregoing, nothing in this Agreement, or in the Notes or in any other Loan
Document shall be deemed to constitute a waiver of any rights which any Lender
may have under applicable federal legislation
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relating to the amount of interest which such Lender may contract for, take,
receive or charge in respect of the Loan and the Loan Documents, including any
right to take, receive, reserve and charge interest at the rate allowed by the
law of the state where any Lender is located. The Agent, each Lender and the
Company further agree that insofar as the provisions of Article 5069-1.04, of
the Revised Civil Statutes of Texas, as amended, are applicable to the
determination of the Highest Lawful Rate with respect to the Notes and the
Obligations hereunder and under the other Loan Documents, the indicated rate
ceiling of such Article shall be applicable; PROVIDED, HOWEVER, that to the
extent permitted by such Article, the Agent may from time to time by notice to
the Company revise the election of such interest rate ceiling as such ceiling
affects the then current or future balances of the Loans. The provisions of
Article 5069-15.01 ET. SEQ. do not apply to any Loan, this Agreement, any Note
issued hereunder or the other Loan Documents.
SECTION 11.08 INTEREST. It is the intention of the parties hereto
that the Agent and each Lender shall conform strictly to usury laws applicable
to it, if any. Notwithstanding anything to the contrary set forth herein, in any
other Loan Document or in any other document or instrument, no provision of any
of the Loan Documents or any other instrument or document furnished pursuant
hereto or in connection herewith is intended or shall be construed to require
the payment or permit the collection of interest in excess of the maximum
non-usurious rate permitted by applicable law. Each provision in this Agreement
and each other Loan Document, agreement or writing is expressly limited so that
in no event whatsoever shall the amount paid, or otherwise agreed to be paid, to
the Agent or any Lender, or charged, contracted for, reserved, taken or received
by the Agent or any Lender, for the use, forbearance or detention of the money
to be loaned under this Agreement or any Loan Document or otherwise (including
any sums paid as required by any covenant or obligation contained herein or in
any other Loan Document which is for the use, forbearance or detention of such
money), exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate, and all amounts owed under this
Agreement and each other Loan Document shall be held to be subject to reduction
to the effect that such amounts so paid or agreed to be paid, charged,
contracted for, reserved, taken or received which are for the use, forbearance
or detention of money under this Agreement or such Loan Document shall in no
event exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate. If the transactions with any Lender
contemplated hereby would be usurious under applicable law then, in that event,
notwithstanding anything to the contrary in any Note payable to such Lender,
this Agreement, any other Loan Document or any other document or instrument, it
is agreed that in the event that the maturity of any Note payable to such Lender
is accelerated or in the event of any required or permitted prepayment, then
such consideration that constitutes interest under law applicable to such Lender
may never include more than the maximum amount allowed by such applicable law
and excess interest, if any, to such Lender provided for in this Agreement or
otherwise shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the indebtedness owed to such Lender by the Company and any
excess refunded by such Lender to the Company. Anything in any Note or any other
Loan Document to the contrary notwithstanding, the Company shall not be
HOU04:29529.11
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<PAGE>
required to pay unearned interest on any Note and the Company shall not be
required to pay interest on the Obligations at a rate in excess of the Highest
Lawful Rate, and if the effective rate of interest which would otherwise be
payable under such Note and such Loan Documents would exceed the Highest Lawful
Rate, or if the holder of such Note shall receive any unearned interest or shall
receive monies that are deemed to constitute interest which would increase the
effective rate of interest payable by the Company under such Note and the other
Loan Documents to a rate in excess of the Highest Lawful Rate, then (a) the
amount of interest which would otherwise be payable by the Company shall be
reduced to the amount allowed under applicable law and (b) any unearned interest
paid by the Company or any interest paid by the Company in excess of the Highest
Lawful Rate shall in the first instance be credited on the principal of the
Obligations of the Company (or if all such Obligations shall have been paid in
full, refunded to the Company). It is further agreed that, without limitation of
the foregoing, all calculations of the rate of interest contracted for,
reserved, taken, charged or received by any Lender under the Notes, the
Obligations and the other Loan Documents or made for the purpose of determining
whether such rate exceeds the Highest Lawful Rate, shall be made, to the extent
permitted by usury laws applicable to such Lender, by amortizing, prorating and
spreading in equal parts during the period of the full stated term of the Notes
and this Agreement.
SECTION 11.09 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by the
Company in connection herewith and the other Loan Documents shall survive the
execution and delivery of this Agreement, the Notes and the other Loan
Documents, the termination of the Total Commitment of the Lenders and will bind
and inure to the benefit of the respective successors and assigns of the parties
hereto, whether so expressed or not, PROVIDED, that the Total Commitment of the
Lenders shall not inure to the benefit of any non-approved successor or assign
of the Company.
SECTION 11.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) All
covenants, promises and agreements by or on behalf of the Company or the Lenders
that are contained in this Agreement shall bind and inure to the benefit of
their respective permitted successors and assigns. The Company may not assign or
transfer any of its rights or obligations hereunder without the consent of the
Lenders.
(b) Any of the Lenders may assign to or sell participations to an
Eligible Assignee a portion of its rights and obligations under this Agreement
and the other Loan Documents (including a portion of its share of the Total
Commitment, the Advances and the Obligations of the Company owing to it and the
Notes); PROVIDED, that, in the case of participations (i) such Eligible
Assignees shall be entitled to the cost protection provisions contained in
ARTICLE II and SECTION 11.04 to the extent the Lender selling the participation
is so entitled, (ii) the Company shall continue to deal solely and directly with
the Agent in connection with its rights and obligations under this Agreement and
the other Loan Documents and (iii) each Lender shall retain the sole right and
responsibility to enforce the Obligations relating to the Loans including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; but such Lender may grant
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a participant rights only to the extent such amendments, modifications or
waivers would effect such participant's interests in any fees payable hereunder
(including, without limitation, the amount and the dates fixed for payment of
any such fees) or the amount of principal or the rate of interest payable on, or
the dates fixed for any payment of principal or of interest on, the Loans.
Except with respect to cost protections provided to a participant pursuant to
this paragraph hereof, no participant shall be a third party beneficiary of this
Agreement nor shall it be entitled to enforce any rights provided to the Lenders
against the Company under this Agreement.
(c) A Lender may assign to any other Lender and, with the prior
written consent of the Company and the Agent (which consents shall not be
unreasonably withheld), a Lender may assign to one or more other Eligible
Assignees all or a portion of its interests, rights, and obligations under this
Agreement and the other Loan Documents (including all or a portion of its share
of the Total Commitment and the same portion of the Loans and other obligations
of the Company at the time owing to it and the Note held by it); PROVIDED,
HOWEVER, that each such assignment (i) shall be in a minimum principal amount of
not less than $10,000,000.00 or such Lender's remaining Commitment (other than
any assignment from any Lender of the Term Loan B in which case in a minimum
principal amount of not less than $5,000,000.00), (ii) shall not reduce any
Lender's Commitment to an amount less than $10,000,000.00 (other than to zero or
other than any Lender of the Term Loan B in which case in a minimum amount of
not less than $5,000,000.00) and shall be of a constant, and not a varying,
percentage of the assigning Lender's Revolving Credit Commitment, Term Loan A
Commitment, ESOP Loan Commitment and the rights and obligations attendant to
such Commitments under this Agreement, (iii) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance, an Assignment and
Acceptance in form and substance satisfactory to the Agent (an "ASSIGNMENT AND
ACCEPTANCE") substantially in the form of EXHIBIT 11.10 hereto, and any Note
subject to such assignment and (iv) no assignment shall be effective until
receipt by the Agent of a reasonable service fee in respect of said assignment
equal to $2,500.00. Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the execution
thereof unless otherwise agreed to by the assigning Lender, the Eligible
Assignee thereunder and the Agent (x) the Eligible Assignee thereunder shall be
a party hereto and to the other Loan Documents and, to the extent provided in
such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and under the other Loan Documents and (y) the assignor Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement and the other Loan Documents
(and, in the case of an Assignment and Acceptance covering all of the remaining
portion of an assigning Lender's rights and obligations under this Agreement and
the other Loan Documents, such Lender shall cease to be a party hereto except,
in the case of an Issuing Bank, with respect to Letters of Credit issued by such
Issuing Bank which are then outstanding).
(d) The Agent shall maintain at its office (i) a copy of each
Assignment and Acceptance delivered to it and (ii) a register (the "REGISTER")
for the recordation of the names and
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addresses (and taxpayer identification numbers, if any) of the Lenders and the
principal amount and types of Loans owing to each Lender pursuant to the terms
hereof from time to time. The entries in the Register shall be conclusive in the
absence of manifest error, and the Company, the Agent, the Swing Line Lender and
the Lenders shall treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a "Lender" hereunder for all purposes of this
Agreement and the Loan Documents. The Register shall be available for inspection
by the Company, the Agent, the Swing Line Lender and any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a copy of (or copies of signed counterparts of) a
duly completed and fully executed Assignment and Acceptance, together with the
existing Note or Notes of the assigning Lender subject to such Assignment and
Acceptance, the Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Company and the affected Lenders. Not later than five (5)
Business Days after the receipt of the notice from the Agent referred to in
clause (iii) above, the Company, at its own expense, shall execute and deliver
to the Agent, in exchange for the Note or Notes of the assigning Lender
surrendered to the Agent pursuant to this paragraph, a new Note or Notes payable
to the order of the assignee Lender and its registered assigns in the principal
amount of the Loans assigned to it. Any such new Note shall be substantially in
the form of EXHIBIT 2.05A, 2.05B, 2.05C, 2.05D and 2.05E, hereto as appropriate.
Cancelled Notes shall be promptly returned to the Company.
(f) Notwithstanding any other provision herein but subject to
SECTION 11.11, any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this SECTION
11.10(F) disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Company or any Subsidiary furnished
to such Lender by or on behalf of the Company or any Subsidiary.
(g) Anything in this SECTION 11.10 to the contrary
notwithstanding, any Lender may at any time, without the consent of the Company
or the Agent, assign and pledge all or any portion of its Commitments and the
Loans owing to it to any Federal Reserve Bank (and its transferees) as
collateral security pursuant to Regulation A of the Board and any Operating
Circular issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
SECTION 11.11 CONFIDENTIALITY. Each Lender agrees to exercise its
best efforts to keep any information delivered or made available by the Company
confidential from anyone other than Persons employed or retained by such Lender
who are or are expected to become engaged by such Lender in evaluating,
approving, structuring or administering the Loans and who are subject to this
confidentiality provision; PROVIDED that nothing herein shall prevent any Lender
from disclosing such information (a) to any other Lender, (b) pursuant to
subpoena or upon the order of any court
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or administrative agency, (c) upon the request or demand of any regulatory
agency (including self regulatory agencies) or authority having jurisdiction
over such Lender, (d) which has been publicly disclosed, (e) to the extent
reasonably required in connection with any litigation to which the Agent, any
Lender, the Company or its respective Affiliates may be a party, (f) to the
extent reasonably required in connection with the exercise of any remedy
hereunder, (g) to such Lender's legal counsel and independent auditors (who are
subject to this confidentiality provision or similar confidentiality provision)
(h) to any actual or proposed participant or assignee of all or part of its
rights hereunder which has agreed in writing to be bound by the provisions of
this SECTION 11.11 and (i) which is clearly not confidential. To the extent
legally permitted, each Lender will use its best reasonable efforts to promptly
notify the Company of any information that it is required or requested to
deliver pursuant to clause (b), (c) or (e) of this SECTION 11.11; PROVIDED that
no notice shall be required for any review of information by representatives of
regulators at any Lender's places of business.
SECTION 11.12 PRO RATA TREATMENT. (a) Except as otherwise
specifically permitted hereunder, each payment or prepayment of principal, if
permitted under this Agreement, and each payment of interest with respect to an
Advance shall be made pro rata among the Lenders on the basis of their
respective percentage participations in the Revolving Credit Commitment, the
ESOP Loan Commitment, the Term Loan A Commitment or the Term Loan B Commitment,
as the case may be.
(b) Each Lender agrees that if, through the exercise of a right of
banker's lien, setoff or claim of any kind against the Company as a result of
which the unpaid principal portion of the Notes and the Obligations held by it
shall be proportionately less than the unpaid principal portion of the Notes and
Obligations held by any other Lender, it shall be deemed to have simultaneously
purchased from such other Lender a participation in the Notes and Obligations
held by such other Lender, in the amount required to render such amounts
proportional; PROVIDED, HOWEVER, that if any such purchase or purchases or
adjustments shall be made pursuant to this SECTION 11.12(B) and the payment
giving rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustments restored without interest.
SECTION 11.13 SEPARABILITY. Should any clause, sentence, paragraph
or Section of this Agreement be judicially declared to be invalid, unenforceable
or void, such decision will not have the effect of invalidating or voiding the
remainder of this Agreement, and the parties hereto agree that the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed to
have been stricken herefrom and the remainder will have the same force and
effectiveness as if such part or parts had never been included herein.
SECTION 11.14 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
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SECTION 11.15 INTERPRETATION. (a) In this Agreement, unless a
clear contrary intention appears:
(i) the singular number includes the plural number and VICE
VERSA;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually, PROVIDED that nothing in this clause is intended to
authorize any assignment not otherwise permitted by this Agreement;
(v) except as expressly provided to the contrary herein,
reference to any agreement, document or instrument (including this
Agreement) means such agreement, document or instrument as amended,
supplemented or modified and in effect from time to time in accordance
with the terms thereof and, if applicable, the terms hereof, and
reference to any Note or other note includes any Note issued pursuant
hereto in extension or renewal thereof and in substitution or
replacement therefor;
(vi) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(viii) with respect to the determination of any period of time,
except as expressly provided to the contrary, the word "from" means
"from and including" and the word "to" means "to but excluding"; and
(ix) reference to any law, rule or regulation means such as
amended, modified, codified or reenacted, in whole or in part, and in
effect from time to time.
(b) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
-82-
(c) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 11.16 LIMITATION BY LAW. All rights, remedies and powers
provided in this Agreement and the other Loan Documents may be exercised only to
the extent that the exercise thereof does not violate any applicable provision
of law, and all the provisions of this Agreement and the other Loan Documents
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Agreement or any other Loan Document invalid, unenforceable, in
whole or in part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
SECTION 11.17 SUBMISSION TO JURISDICTION. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS, HARRIS COUNTY, OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY,
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO ANY
SUCH ACTION OR PROCEEDING. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 11.02 SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
(B) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN
THE COURTS REFERRED TO IN THE FIRST SENTENCE OF CLAUSE (A) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
SECTION 11.18 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT, THE
ISSUING BANK AND EACH LENDER HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
-83-
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 11.19 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 11.20 COMPANY ASSUMPTION OF OBLIGATIONS OF FINANCE CORP.
The Company and TPC hereby assume and agree to pay, perform and discharge all of
the obligations of Finance Corp. under this Agreement and all other Loan
Documents whether for interest, fees, expenses, indemnification or any other
obligation whatsoever.
SECTION 11.21 EFFECTIVENESS OF AGREEMENTS EXECUTED BY THE
COMPANY. This Agreement and all other Loan Documents executed by Texas
Petrochemicals Corporation shall become effective, as to Texas Petrochemicals
Corporation, only after the occurrence and completion of the events described in
SECTION 5.01(CC).
-84-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.
COMPANY:
TEXAS PETROCHEMICALS CORPORATION
By: Claude E. Manning
Claude E. Manning
Vice President
TPC FINANCE CORP.
By: Susan O. Rheney
Susan O. Rheney
President
AGENT:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: Mary C. Arnold
Mary C. Arnold
Vice President
-85-
CO-DOCUMENTATION AGENTS:
ABN AMRO NORTH AMERICA, INC.,
AS AGENT FOR ABN AMRO BANK N.V.
By: GORDON CHANG
Name:GORDON CHANG
Title:VICE PRESIDENT
AND DIRECTOR
By: COLLIS SANDERS
Name:COLLIS SANDERS
Title:VICE PRESIDENT AND
MANAGING DIRECTOR
THE BANK OF NOVA SCOTIA
By: F.C.H. ASHBY
Name: F.C.H. ASHBY
Title:LOAN OPERATIONS
SWING LINE LENDER:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: Mary C. Arnold
Mary C. Arnold
Vice President
-86-
LENDER:
Revolving Credit ABN AMRO BANK N.V.,
Commitment:$3,851,851.85 HOUSTON AGENCY
Term Loan A BY:ABN AMRO NORTH AMERICA, INC.
Commitment: $8,185,185.19 AS AGENT
Term Loan B
Commitment: $3,000,000.00 By: MIKE W. DEPRIEST
Name:MIKE W. DEPRIEST
ESOP Loan Title:Vice President and
Commitment: $962,962.96 Director
By: ROBERT J. CUNNINGHAM
Name:ROBERT J. CUNNINGHAM
Title:Vice President and
Director
Address:
Three Riverway, Suite 1700
Houston, Texas 77056
Telecopy: No.: (713) 629-7533
DOMESTIC LENDING OFFICE
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Belinda Rowell
EURODOLLAR LENDING OFFICE
Three Riverway, Suite 1700
Houston, Texas 77056
Attn: Belinda Rowell
LENDER:
Revolving Credit THE BANK OF NOVA SCOTIA
Commitment: $3,851,851.85
Term Loan A
Commitment: $8,185,185.19 By: F.C.H. ASHBY
Name:F.C.H. ASHBY
Term Loan B Title:LOAN OPERATOR
Commitment: $3,000,000.00
Address:
ESOP Loan 600 Peachtree Street, N.E.
Commitment: $962,962.96 Suite 700
Atlantic, Georgia 30308
Telecopy No.: (404) 888-8998
DOMESTIC LENDING OFFICE
Atlanta Agency
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attn: F. C. H. Ashby
EURODOLLAR LENDING OFFICE
Atlanta Agency
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attn: F. C. H. Ashby
LENDER:
Revolving Credit BANK OF SCOTLAND
Commitment: $3,555,555.55
Term Loan A
Commitment: $7,555,555.56 By:CATHERINE ONIFFREY
Name:CATHERINE ONIFFREY
Term Loan B Title:VICE PRESIDENT
Commitment: $ -0-
Address:
ESOP Loan 565 - 5th Avenue
Commitment: $888,888.89 New York, New York 10017
(212) 557-9460
DOMESTIC LENDING OFFICE
565 - 5th Avenue
New York, New York 10017
EURODOLLAR LENDING OFFICE
565 - 5th Avenue
New York, New York 10017
LENDER:
Revolving Credit BANQUE PARIBAS
Commitment: $2,962,962.96
Term Loan A
Commitment: $6,296,296.30 By:CHRISTOPHER S. GOODWIN
Name:CHRISTOPHER S. GOODWIN
Term Loan B Title:VICE PRESIDENT
Commitment: $ -0-
ESOP Loan
Commitment: $740,740.74 By:LARRY ROBINSON
Name:LARRY ROBINSON
Title:VICE PRESIDENT
Address:
1200 Smith Street
Suite 3100
Houston, Texas 77002
Telecopy No.: (713) 659-3832
DOMESTIC LENDING OFFICE
1200 Smith Street
Suite 3100
Houston, Texas 77002
EURODOLLAR LENDING OFFICE
1200 Smith Street
Suite 3100
Houston, Texas 77002
LENDER:
Revolving Credit THE FIRST NATIONAL BANK OF
Commitment: $3,555,555.55 CHICAGO
Term Loan A
Commitment: $7,555,555.56 By:DIXON P. SCHULTZ
Name:DIXON P. SCHULTZ
Term Loan B Title:VICE PRESIDENT
Commitment: $3,000,000.00
Address:
ESOP Loan 1100 Louisiana, Suite 3200
Commitment: $888,888.89 Houston, Texas 79002
Telecopy No.: (713) 654-7370
DOMESTIC LENDING OFFICE
One First National Plaza
0634, 1 FNP 10
Chicago, Illinois 60670
EURODOLLAR LENDING OFFICE
One First National Plaza
0634, 1 FNP 10
Chicago, Illinois 60670
LENDER:
Revolving Credit HIBERNIA NATIONAL BANK
Commitment: $2,962,962.96
Term Loan A By:COLLEEN SMITH
Commitment: $6,296,296.30 Name:COLLEEN SMITH
Title:ASSISTANT VICE
PRESIDENT
Term Loan B
Commitment: $3,000,000.00 Address:
313 Carondelet Street
ESOP Loan New Orleans, Louisiana 70130
Commitment: $740,740.74
Telecopy No.: (504) 533-5344
DOMESTIC LENDING OFFICE
313 Carondelet Street
New Orleans, Louisiana 70130
EURODOLLAR LENDING OFFICE
313 Carondelet Street
New Orleans, Louisiana 70130
LENDER:
Revolving Credit THE CIT GROUP/BUSINESS
CREDIT, INC.
Commitment: $3,555,555.55
Term Loan A By:
Commitment: $7,555,555.56 Name:
Title:
Term Loan B
Commitment: $3,000,000.00 Address:
Two Lincoln Centre
ESOP Loan 5420 LBJ Freeway, Suite 200
Commitment: $888,888.89 Dallas, Texas 75240
Telecopy No.: (214) 455-1690
DOMESTIC LENDING OFFICE
Two Lincoln Centre
5420 LBJ Freeway, Suite 200
Dallas, Texas 75240
EURODOLLAR LENDING OFFICE
Two Lincoln Centre
5420 LBJ Freeway, Suite 200
Dallas, Texas 75240
LENDER:
Revolving Credit THE FUJI BANK, LIMITED
Commitment: $2,370,370.37
Term Loan A By: PHILLIP C. LAUINGER III
Commitment: $5,037,037.04 Name:PHILLIP C. LAUINGER III
Title:VICE PRESIDENT AND
Term Loan B JOINT MANAGER
Commitment: $-0- Address:
1221 McKinney Street,
Suite 4100
ESOP Loan Houston, Texas 77010
Commitment: $592,592.59
Telecopy No.: (713) 759-0048
DOMESTIC LENDING OFFICE
1221 McKinney Street,
Suite 4100
Houston, Texas 77010
EURODOLLAR LENDING OFFICE
1221 McKinney Street,
Suite 4100
Houston, Texas 77010
LENDER:
Revolving Credit TEXAS COMMERCE BANK
Commitment: $4,444,444.48 NATIONAL ASSOCIATION
Term Loan A
Commitment: $9,444,444.40 By: Mary C. Arnold
Mary C. Arnold
Term Loan B Vice President
Commitment: $11,000,000.00
Address:
ESOP Loan 712 Main Street
Commitment: $1,111,111.12 Houston, Texas 77002
Telecopy No.:(713) 216-6004
DOMESTIC LENDING OFFICE
712 Main Street
Houston, Texas 77002
EURODOLLAR LENDING OFFICE
712 Main Street
Houston, Texas 77002
LENDER:
Revolving Credit THE BOATMEN'S NATIONAL BANK
Commitment: $2,370,370.37 OF ST. LOUIS
Term Loan A
Commitment: $5,037,037.04 By: DOUGLAS W. THORNSBERRY
Name:DOUGLAS W. THORNSBERRY
Term Loan B Title:ASSISTANT VICE
PRESIDENT
Commitment: $-0-
Address:
ESOP Loan 800 Market Street, MS LBP3701
Commitment: $592,592.59 St. Louis, MO 61301
Telecopy No.: (314) 466-6645
DOMESTIC LENDING OFFICE
800 Market Street, MS LBP3701
St. Louis, MO 61301
EURODOLLAR LENDING OFFICE
800 Market Street, MS LBP3701
St. Louis, MO 61301
LENDER:
Revolving Credit NATIONAL BANK OF CANADA
Commitment: $3,555,555.55
Term Loan A By:
Commitment: $7,555,555.56 Name:
Title:
Term Loan B
Commitment: $ -0-
By:
ESOP Loan Name:
Commitment: $888,888.89 Title:
Notice Address:
2121 San Jacinto, Suite 1850
Dallas, Texas 75201
Telecopy No.: (214) 871-2015
DOMESTIC LENDING OFFICE
125 West 55th Street,
23rd Floor
New York, New York 10019
Telcopy No.: (212) 632-8736
EURODOLLAR LENDING OFFICE
125 West 55th Street,
23rd Floor
New York, New York 10019
Telcopy No.: (212) 632-8736
LENDER:
PILGRIM AMERICA PRIME
RATE TRUST
By: MICHAEL J. BACEVICH
Name:MICHAEL J. BACEVICH
Title:VICE PRESIDENT
Term Loan B
Commitment: $5,000,000.00 Address:
2 Renaissance Square
40 N. Central Avenue,
Suite 1200
Phoenix, AZ 85004-4424
Telecopy No.: (602) 417-8327
DOMESTIC LENDING OFFICE
2 Renaissance Square
40 N. Central Avenue,
Suite 1200
Phoenix, AZ 85004-4424
EURODOLLAR LENDING OFFICE
2 Renaissance Square
40 N. Central Avenue,
Suite 1200
Phoenix, AZ 85004-4424
LENDER:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
Term Loan B
Commitment: $7,000,000.00 By:ANTHONY R. CLEMENTE
Name:ANTHONY R. CLEMENTE
Title:AUTHORIZED SIGNATORY
Address:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Telecopy No.: (609) 282-2756
DOMESTIC LENDING OFFICE
800 Scudders Mill Road
Plainsboro, New Jersey 08536
EURODOLLAR LENDING OFFICE
800 Scudders Mill Road
Plainsboro, New Jersey 08536
LENDER:
Revolving Credit WELLS FARGO BANK (TEXAS),
Commitment: $2,962,962.96 NATIONAL ASSOCIATION
Term Loan A By:ANNE M. RHOADS
Commitment: $6,296,296.30 Name:ANNE M. RHOADS
Title:VICE PRESIDENT
Term Loan B
Commitment: $-0- Address:
1000 Louisiana, 3rd Floor
ESOP Loan Houston, Texas 77002
Commitment: $740,740.74
Telecopy No.: (713) 250-4035
DOMESTIC LENDING OFFICE
1000 Louisiana, 3rd Floor
Houston, Texas 77002
EURODOLLAR LENDING OFFICE
1000 Louisiana, 3rd Floor
Houston, Texas 77002
LENDER:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
Term Loan B
Commitment: $7,000,000.00
By:BRIAN W. GOOD
Name:BRIAN W. GOOD
Title:VICE PRESIDENT
Address:
One Parkview Plaza
17 W110 22nd Street
Oakbrook Terrace,
Illinois 60181
Telecopy No.: (708) 684-6740
DOMESTIC LENDING OFFICE
One Parkview Plaza
17 W110 22nd Street
Oakbrook Terrace, Illinois
60181
EURODOLLAR LENDING OFFICE
One Parkview Plaza
17 W110 22nd Street
Oakbrook Terrace, Illinois
60181
LENDER:
CHANCELLOR CAPITAL
Term Loan B
Commitment: $7,000,000.00
By:
Name:
Title:
Address:
1166 Avenue of the Americas
New York, New York 10036
Telecopy No.: (212) 279-9763
DOMESTIC LENDING OFFICE
1166 Avenue of the Americas
New York, New York 10036
EURODOLLAR LENDING OFFICE
1166 Avenue of the Americas
New York, New York 10036
<PAGE>
EXHIBIT 1.01A
ADMINISTRATIVE QUESTIONNAIRE
TPC FINANCE CORP./TEXAS PETROCHEMICALS CORPORATION
CREDIT AGREEMENT
PLEASE FORWARD THIS COMPLETED
FORM AS SOON AS POSSIBLE TO:
Gina Hardwick: FAX (713) 216-2339
Agent: Texas Commerce Bank National Association
712 Main Street, 8-TCB-N 96
Houston, Texas 77002
Telex: 166-350 TCB HOU
Syndications Telecopier: (713) 216-2339 or
Alternate: (713) 216-2291
Syndications Contacts: Ann Krevis Baumgartner (713) 216-7582
Gina Hardwick (713) 216-2093
Operations: Gale Manning (713) 750-2784
Full Legal Name of your Institution:
Hard-copy documents, notices and periodic financial statements of the Company
should be sent to the following account officer designated by your bank:
Officer's Name
Title:
Street Address:
City, State, Zip:
Phone #:
Telefax #:
1
PRIMARY CONTACT INFORMATION
We will send all telecopies regarding time-critical information (drawdowns,
option changes, payments, etc.) to the Primary or Alternate Contact at the
banking location you designate.
1. Your bank's primary contact for telefaxes concerning borrowings, options
on interest rates, etc:
<TABLE>
<CAPTION>
PRIMARY TELEX ALTERNATE ALTERNATE
PRIMARY NAME/ PRIMARY TELEFAX NUMBER AND TELEFAX TELEX NUMBER
TELEPHONE NO. DEPARTMENT NUMBER ANSWERBACK NUMBER AND ANSWERBACK
--------------- ---------- --------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
PRIMARY TELEX ALTERNATE ALTERNATE
ALTERNATE NAME/ PRIMARY TELEFAX NUMBER AND TELEFAX TELEX NUMBER
TELEPHONE NO. DEPARTMENT NUMBER ANSWERBACK NUMBER AND ANSWERBACK
--------------- ---------- --------------- -------------- ---------- ---------------
</TABLE>
IF AT ANY TIME ANY OF THE ABOVE INFORMATION CHANGES, PLEASE ADVISE.
Publicity: Under what name would you prefer your institution to
appear in any future advertisements?
Movement of Funds: TO US: Wire Fed Funds to:
Texas Commerce Bank National Association
ABA # 113000609
For account number #
Attention: Loan Syndication Services/Gale
Manning
Reference:
TO YOU: Wire Fed Funds to:
Name:
ABA #:
For Credit To:
Attention:
Reference:
Other:
2
EXHIBIT 1.01B
BORROWING BASE CERTIFICATE
Reference is made to the Credit Agreement dated as of July 1, 1996 (as may
be amended from time to time, the "CREDIT AGREEMENT") among TPC Finance Corp.
to be merged into Texas Petrochemicals Corporation (collectively as the
"COMPANY"), the lenders party thereto, and Texas Commerce Bank National
Association, as agent for such lenders. Capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned to such terms in
the Credit Agreement. The undersigned, being the of the
Company, does hereby certify, to be best of his/her knowledge, as follows:
BORROWING BASE CALCULATIONS
AS OF , 19
1. Receivables: $
LESS (each as specifically defined in
the definition of "Eligible
Assets"):
Receivables more than 60 days
past due
Receivables not from sale of
Inventory
Sale is not legally binding
No legal title to Receivable or
not subject to Lien
Receivables evidenced by note,
chattel paper or instrument
Receivables subject to
setoff/dispute
Receivables not payable in $ in
US
Receivables in excess of 10%
from single account debtor(1)
Receivables due from account
debtor located outside U.S.
and not backed by acceptable
letter of credit
Receivables from an account
debtor subject to an
insolvency proceedings
Receivables from account debtor
not acceptable to Agent
Other
Eligible Accounts
Eligible Accounts X 85% $
2. Inventory:
LESS:
Inventory located outside US
Inventory shipped or on
consignment
Inventory subject to dispute
Allowances, Reserves or
non-complying with applicable
legal requirements
Subject to negotiable document
of title
Inventory not saleable
Inventory subject to others'
liens
Other
Eligible Inventory
- ------------------------
(1) Other than an account debtor on Exhibit 1.01C; provided that if account
debtor is rated at least BBB+ or the equivalent thereof by Standard & Poor's
Ratings Group, then such Receivable together with all other Receivables due from
such account debtor does not comprise more than 25% of the aggregate Receivables
of the Company and its Subsidiaries.
3
Eligible Inventory X 65%
(Not to exceed 50% of Line 3)
3. Total Borrowing Base
(sum of lines 1 and 2)
4. Total Obligations:
Revolving Credit Advances
Swing Line Advances
Letter of Credit Obligations
5. Excess (Deficiency) of Borrowing Base
(Line 3 minus Line 4)
6. Availability ($40,000,000.00 minus
Line 5) $
IN WITNESS WHEREOF, the Company has caused this certificate to be executed
this day of , 199 by a Responsible Officer.
Texas Petrochemicals Corporation,
as successor by merger to TPC Finance
Corp.
By:
Name:
Title:
EXHIBIT 1.01C
ACCOUNT DEBTOR RECEIVABLES CONCENTRATION
Goodyear Tire & Rubber & Rubber Co.
Bayer Rubber Corp. (Canada)/Bayer Corp.
Firestone Synthetic Rubber & Latex Company, Div. of
Bridgestone/Firestone, Inc.
Lyondell Petrochemical Company
The Lubrizol Corporation
Dow Chemical Company
Union Carbide Chemicals and Plastics Company, Inc.
E.I. Dupont de Nemours & Company
Mobil Chemical Company
Schenectady International, Inc.
American Synthetic Rubber Corporation
Novacor Chemicals, Ltd.
Eastman Chemical Company
Citgo Petroleum Corporation
Rohm and Haas Company
Amoco Gas Company
Phillips Petroleum Corporation
Texaco Chemical, Inc.
EXHIBIT 2.04
FORM OF
NOTICE OF ADVANCE
[Date]
Texas Commerce Bank National
Association, as Agent
for the Lenders parties to the
Credit Agreement referred to below
1111 Fannin Street
Houston, Texas 77002
Attention:
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of July 1, 1996 (the
"CREDIT AGREEMENT"), among TPC Finance Corp. to be merged into Texas
Petrochemicals Corporation (collectively as the "COMPANY"), certain other
lenders that are party thereto, and Texas Commerce Bank National Association, as
Agent for such lenders. All capitalized terms used herein and not otherwise
defined that are defined in the Credit Agreement shall have the meanings as
defined in the Credit Agreement.
The Company, hereby requests an Advance under the Credit Agreement and in
that connection sets forth below the information relating to such Borrowing (the
"PROPOSED BORROWING") as required by Section 2.01 of the Credit Agreement:
Aggregate Principal Amount of
(a) Proposed Borrowing(1) $
Borrowing Date of Proposed
(b) Borrowing(2) $
Type of Advances to comprise the
(c) Proposed Borrowing(3) $
Interest Period and last day
(d) thereof(4) $
Availability for Revolving Credit
(e) Loan:
(i) Borrowing Base Certificate dated $
(ii) Aggregate Revolving Credit
Loans outstanding (including
outstanding Swing Line Loans and
Letter of Credit Outstandings) $
(iii) Borrowing Base Availability
(Line (i) minus Line (ii)) $
(iv) Unused Availability (Lesser of
(a) $40,000,000.00 minus Line (ii);
or (b) Line (iii)) $
By each of the delivery of this Notice of Advance and the acceptance of any
or all of the Advances made by the Lenders in response to this Notice of
Advance, the Company shall be deemed to have represented and warranted that the
conditions to lending specified in Article V of the Credit Agreement have been
satisfied with respect to the Proposed Borrowing.
Very truly yours,
Texas Petrochemicals Corporation
By:
Name:
Title:
- ----------------------
(1) Not less than $2,000,000.00 and in integral multiples of $100,000.00 for
LIBOR Rate Advances; not less than $1,000,000.00 and in integral multiples
of $100,000.00 for Alternate Base Rate Advances.
(2) Must be a Business Day.
(3) Alternate Base Rate Advance or LIBOR Rate Advance.
(4) Applicable to LIBOR Rate Advance, which shall be for one, two, three or six
months duration and shall end not later than the Revolving Credit Maturity
Date.
EXHIBIT 2.05A
FORM OF
REVOLVING CREDIT NOTE
$
FOR VALUE RECEIVED, the undersigned, TPC FINANCE CORP., a Texas corporation
to be merged on the Effective Date into TEXAS PETROCHEMICALS CORPORATION, a
Texas corporation and successor by merger to TPC Finance Corp. (the
"COMPANY"), HEREBY PROMISES TO PAY to the order of (the
"LENDER"), the lesser of and No/100 DOLLARS ($ ) or so
much thereof as may be advanced under the Credit Agreement by the Lender and
outstanding on the Revolving Credit Maturity Date as defined in that certain
Credit Agreement dated as of July 1, 1996 (as may be amended or otherwise
modified from time to time, the "CREDIT AGREEMENT") among the Company, the
Lender, certain other lenders that are party thereto, and Texas Commerce Bank
National Association, as Agent for the Lender and such other lenders. All
capitalized terms used herein and not otherwise defined that are defined in the
Credit Agreement shall have the meanings as defined in the Credit Agreement.
The Company promises to pay interest on the unpaid principal amount of this
Revolving Credit Note ("NOTE") outstanding from time to time from the date
hereof until such principal amount is paid in full, at such interest rates as
are specified in the Credit Agreement. Both principal and interest are payable
in same day funds in lawful money of the United States of America to Texas
Commerce Bank National Association, as Agent, at 712 Main Street, Houston,
Texas, or at such other place as the Agent shall designate in writing to the
Company.
This Note is one of the Revolving Credit Notes referred to in, and the Note
and all provisions herein are entitled to the benefits of, the Credit Agreement.
The obligations of the Company hereunder are secured by the Security Documents.
The Credit Agreement, among other things, (a) provides for the making of
advances by the Lender and other lenders to the Company from time to time, and
(b) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events, for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified, and for limitations on the amount of interest paid such that no
provision of the Credit Agreement or this Note shall require the payment or
permit the collection of interest in excess of the Highest Lawful Rate.
The Company and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
intent to accelerate, protest and notice of protest and diligence in collecting
and bringing of suit against any party hereto, and agree to all renewals,
extensions or partial payments hereon and to any release or substitution of
security herefor, in whole or in part, with or without notice, before or after
maturity; provided nothing in this paragraph shall constitute a waiver of the
notice required under SECTION 9.01 of the Credit Agreement.
This Note shall be governed by and construed under the laws of the State of
Texas and the applicable laws of the United States of America.
TPC FINANCE CORP.
By:
Name:
Title:
TEXAS PETROCHEMICALS CORPORATION,
successor by merger to TPC Finance
Corp.
By:
Name:
Title:
8
EXHIBIT 2.05B
FORM OF
TERM NOTE A
$
FOR VALUE RECEIVED, the undersigned, TPC FINANCE CORP., a Texas corporation
to be merged on the Effective Date into TEXAS PETROCHEMICALS CORPORATION, a
Texas corporation and successor in interest to TPC Finance Corp. (the
"COMPANY"), HEREBY PROMISES TO PAY to the order of (the
"LENDER"), the lesser of and No/100 DOLLARS ($ ) or so
much thereof as may be advanced under the Credit Agreement by the Lender and
outstanding on the Term Loan A Maturity Date as defined in that certain Credit
Agreement dated as of July 1, 1996 (as may be amended or otherwise modified from
time to time, the "CREDIT AGREEMENT") among the Company, the Lender, certain
other lenders that are party thereto, and Texas Commerce Bank National
Association, as Agent for the Lender and such other lenders. All capitalized
terms used herein and not otherwise defined that are defined in the Credit
Agreement shall have the meanings as defined in the Credit Agreement.
The Company promises to pay interest on the unpaid principal amount of this
Term Note A ("NOTE") outstanding from time to time from the date hereof until
such principal amount is paid in full, at such interest rates as are specified
in the Credit Agreement. Both principal and interest are payable in same day
funds in lawful money of the United States of America to the Agent at 712 Main
Street, Houston, Texas, or at such other place as the Agent shall designate in
writing to the Company.
This Note is one of the Term Notes A referred to in, and this Note and all
provisions herein are entitled to the benefits of, the Credit Agreement. The
obligations of the Company hereunder are secured by the Security Documents. The
Credit Agreement, among other things, (a) provides for the making of loans by
the Lender and other lenders to the Company from time to time, and (b) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events, for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified, and for
limitations on the amount of interest paid such that no provision of the Credit
Agreement or this Note shall require the payment or permit the collection of
interest in excess of the Highest Lawful Rate.
The Company and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
intent to accelerate, protest and notice of protest and diligence in collecting
and bringing of suit against any party hereto, and agree to all renewals,
extensions or partial payments hereon and to any release or substitution of
security herefor, in whole or in part, with or without notice, before or after
maturity; provided nothing in this paragraph shall constitute a waiver of the
notice required under SECTION 9.02 of the Credit Agreement.
This Note shall be governed by and construed under the laws of the State of
Texas and the applicable laws of the United States of America.
TPC FINANCE CORP.
By:
Name:
Title:
TEXAS PETROCHEMICALS CORPORATION,
successor in interest to TPC Finance
Corp.
By:
Name:
Title:
EXHIBIT 2.05C
FORM OF
TERM NOTE B
$
FOR VALUE RECEIVED, the undersigned, TPC FINANCE CORP., a Texas corporation
to be merged on the Effective Date into TEXAS PETROCHEMICALS CORPORATION, a
Texas corporation and successor by merger to TPC Finance Corp. (the
"COMPANY"), HEREBY PROMISES TO PAY to the order of (the
"LENDER"), the lesser of and No/100 DOLLARS ($ ) or so
much thereof as may be advanced under the Credit Agreement by the Lender and
outstanding on the Term Loan B Maturity Date as defined in that certain Credit
Agreement dated as of July 1, 1996 (as may be amended or otherwise modified from
time to time, the "CREDIT AGREEMENT") among the Company, the Lender, certain
other lenders that are party thereto, and Texas Commerce Bank National
Association, as Agent for the Lender and such other lenders. All capitalized
terms used herein and not otherwise defined shall have the meanings as defined
in the Credit Agreement.
The Company promises to pay interest on the unpaid principal amount of this
Term Note B ("NOTE") outstanding from time to time from the date hereof until
such principal amount is paid in full, at such interest rates as are specified
in the Credit Agreement. Both principal and interest are payable in same day
funds in lawful money of the United States of America to the Agent at 712 Main
Street, Houston, Texas, or at such other place as the Agent shall designate in
writing to the Company.
This Note is one of the Term Notes B referred to in, and this Note and all
provisions herein are entitled to the benefits of, the Credit Agreement. The
obligations of the Company hereunder are secured by the Security Documents. The
Credit Agreement, among other things, (a) provides for the making of loans by
the Lender and other lenders to the Company from time to time, and (b) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events, for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified, and for
limitations on the amount of interest paid such that no provision of the Credit
Agreement or this Note shall require the payment or permit the collection of
interest in excess of the Highest Lawful Rate.
The Company and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
intent to accelerate, protest and notice of protest and diligence in collecting
and bringing of suit against any party hereto, and agree to all renewals,
extensions or partial payments hereon and to any release or substitution of
security herefor, in whole or in part, with or without notice, before or after
maturity; provided nothing in this paragraph shall constitute a waiver of the
notice required under SECTION 9.02 of the Credit Agreement.
This Note shall be governed by and construed under the laws of the State of
Texas and the applicable laws of the United States of America.
TPC FINANCE CORP.
By:
Name:
Title:
TEXAS PETROCHEMICALS CORPORATION,
successor by merger to TPC Finance
Corp.
By:
Name:
Title:
EXHIBIT 2.05D
FORM OF
ESOP NOTE
$
FOR VALUE RECEIVED, the undersigned, TPC FINANCE CORP., a Texas corporation
to be merged on the Effective Date into TEXAS PETROCHEMICALS CORPORATION, a
Texas corporation and successor by merger to TPC Finance Corp. (the
"COMPANY"), HEREBY PROMISES TO PAY to the order of (the
"LENDER"), the lesser of and No/100 DOLLARS ($ ) or so
much thereof as may be advanced under the Credit Agreement by the Lender and
outstanding on the ESOP Loan Maturity Date as defined in that certain Credit
Agreement dated as of July 1, 1996 (as may be amended or otherwise modified from
time to time, the "CREDIT AGREEMENT") among the Company, the Lender, certain
other lenders that are party thereto, and Texas Commerce Bank National
Association, as Agent for the Lender and such other lenders. All capitalized
terms used herein and not otherwise defined shall have the meanings as defined
in the Credit Agreement.
The Company promises to pay interest on the unpaid principal amount of this
ESOP Note ("NOTE") outstanding from time to time from the date hereof until
such principal amount is paid in full, at such interest rates as are specified
in the Credit Agreement. Both principal and interest are payable in same day
funds in lawful money of the United States of America to the Agent at 712 Main
Street, Houston, Texas, or at such other place as the Agent shall designate in
writing to the Company.
This Note is one of the ESOP Notes referred to in, and this Note and all
provisions herein are entitled to the benefits of, the Credit Agreement. The
obligations of the Company hereunder are secured by the Security Documents. The
Credit Agreement, among other things, (a) provides for the making of loans by
the Lender and other lenders to the Company from time to time, and (b) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events, for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified, and for
limitations on the amount of interest paid such that no provision of the Credit
Agreement or this Note shall require the payment or permit the collection of
interest in excess of the Highest Lawful Rate.
The Company and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
intent to accelerate, protest and notice of protest and diligence in collecting
and bringing of suit against any party hereto, and agree to all renewals,
extensions or partial payments hereon and to any release or substitution of
security herefor, in whole or in part, with or without notice, before or after
maturity; providing nothing in this paragraph shall constitute a waiver of the
notice required under SECTION 9.02 of the Credit Agreement.
This Note shall be governed by and construed under the laws of the State of
Texas and the applicable laws of the United States of America.
TPC FINANCE CORP.
By:
Name:
Title:
TEXAS PETROCHEMICALS CORPORATION,
successor by merger to TPC Finance
Corp.
By:
Name:
Title:
EXHIBIT 2.05E
FORM OF
SWING LINE NOTE
$5,000,000.00
FOR VALUE RECEIVED, the undersigned, TPC FINANCE CORP., a Texas corporation
to be merged on the Effective Date into TEXAS PETROCHEMICALS CORPORATION, a
Texas corporation and successor by merger to TPC Finance Corp. (the
"COMPANY"), HEREBY PROMISES TO PAY to the order of TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "LENDER"), the lesser of FIVE MILLION and No/100
DOLLARS ($5,000,000.00) or so much thereof as may be advanced under the Credit
Agreement by the Lender and outstanding on the Revolving Credit Maturity Date as
defined in that certain Credit Agreement dated as of July 1, 1996 (as may be
amended or otherwise modified from time to time, the "CREDIT AGREEMENT") among
the Company, the Lender, certain other lenders that are party thereto, and Texas
Commerce Bank National Association, as Agent for the Lender and such other
lenders. All capitalized terms used herein and not otherwise defined shall have
the meanings as defined in the Credit Agreement.
The Company promises to pay interest on the unpaid principal amount of this
Swing Line Note ("NOTE") outstanding from time to time from the date hereof
until such principal amount is paid in full, at such interest rates as are
specified in the Credit Agreement. Both principal and interest are payable in
same day funds in lawful money of the United States of America to Texas Commerce
Bank National Association, as Agent at 712 Main Street, Houston, Texas, or at
such other place as the Agent shall deignate in writing to the Company.
This Note is the Swing Line Note referred to in, and the Note and all
provisions herein are entitled to the benefits of, the Credit Agreement. The
obligations of the Company hereunder are secured by the Security Documents. The
Credit Agreement, among other things, (a) provides for the making of loans by
the Lender and other lenders to the Company from time to time, and (b) contains
provisions for acceleratin of the maturity hereof upon the happening of certain
stated events, for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified, and for
limitations on the amount of interest paid such that no provision of the Credit
Agreement or this Note shall require the payment or permit the collection of
interest in excess of the Highest Lawful Rate.
The Company and any and all endorsers, guarantors and sureties severally
waive grace, demand, presentment for payment, notice of dishonor or default,
intent to accelerate, protest and notice of protest and diligence in collecting
and bringing of suit against any party hereto, and agree to all renewals,
extensions or partial payments hereon and to any release or substitution of
security herefor, in whole or in part, with or without notice, before or after
maturity; provided nothing in this paragraph shall constitute a waiver of the
notice required under SECTION 9.02 of the Credit Agreement.
This Note shall be governed by and construed under the laws of the State of
Texas and the applicable laws of the United States of America.
TPC FINANCE CORP.
By:
Name:
Title:
TEXAS PETROCHEMICALS CORPORATION,
successor by merger to TPC Finance
Corp.
By:
Name:
Title:
EXHIBIT 3.02
FORM OF
LETTER OF CREDIT REQUEST
Address to Issuing Bank
Attention:
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of July 1, 1996 (as
amended from time to time, the "CREDIT AGREEMENT") among TPC Finance Corp. to
be merged into Texas Petrochemicals Corporation (collectively as the
"COMPANY"), the lenders party thereto, and Texas Commerce Bank National
Association, as agent for such lenders. Capitalized terms used herein not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Company hereby requests the issuance of a Letter of Credit under the
Credit Agreement, and in that connection sets forth below the information
relating to such Letter of Credit ("PROPOSED LETTER OF CREDIT") as required by
Section 3.02 of the Credit Agreement. The Proposed Letter of Credit must be
issued:
(a) on or before , 19 [1]
(b) for the benefit of
(c) in the amount of $
(d) having an expiry date of , 19 [2]
(e) subject to the conditions set forth in the Application for Letter of
Credit submitted herewith.
The Company hereby refers to Letter of Credit Number (the
"EXPIRING LETTER OF CREDIT") which has an existing expiry date of
. The Company hereby requests that the expiry date of
the Expiring Letter of Credit be extended to .
- ------------------------
[1] Must be not less than five (5) Business Days after notice is given to
the Issuing Bank.
[2] Must be not later than the Revolving Credit Maturity Date.
The Company hereby certifies that after giving effect to the [issuance of
the Proposed Letter of Credit] or [the extension of the Expiring Letter of
Credit] (a) the maximum amount outstanding under all Letters of Credit does not
exceed $ and (b) the sum of the Letter of Credit
Obligations PLUS all Advances under the Revolving Credit Notes and the Swing
Line Note does not exceed $40,000,000.00. The Company hereby certifies that on
the date hereof all applicable conditions to the issuance of the Proposed Letter
of Credit set forth in ARTICLE V of the Credit Agreement have been satisfied and
that the Proposed Letter of Credit complies with the terms of the Credit
Agreement, and upon the issuance of the Proposed Letter of Credit, the Company
will be deemed to have recertified the foregoing on such issuance date.
Sincerely,
Texas Petrochemicals Corporation
By:
Name:
Title:
2
EXHIBIT 11.10
FORM OF ASSIGNMENT AND ACCEPTANCE
DATED , 19
Reference is made to the Credit Agreement dated as of July 1, 1996 (as
amended from time to time, the "CREDIT AGREEMENT"), among TPC Finance Corp to
be merged into Texas Petrochemicals Corporation, the lenders party thereto, and
Texas Commerce Bank National Association, as agent for such lenders. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Credit Agreement.
(the "ASSIGNOR") and
(the "ASSIGNEE") agree as follows:
1. (a) The Assignor hereby sells and assigns to the Assignee (without
recourse to the Assignor), and the Assignee hereby purchases and assumes from
the Assignor, a % interest (the "PERCENTAGE INTEREST") in and to all the
Assignor's rights and obligations under the Credit Agreement as of the
Assignment Date (as defined below), including, without limitation, (i) the
Percentage Interest in the Commitment of the Assignor on the Assignment Date,
(ii) the Percentage Interest in all reimbursement obligations (net of
participations therein purchased by other Lenders pursuant to the Credit
Agreement) in respect of the Letters of Credit either issued by the Assignor or
in which the Assignor has purchased participations pursuant to the Credit
Agreement, (iii) the Percentate Interest in the Revolving Credit Loans, the Term
Loan A, Term Loan B, and the ESOP Loan owing to the Assignor outstanding on the
Assignment Date, (iv) the Percentage Interest in all unpaid interest with
respect to such Loans and all commitment fees and letter of credit fees accrued
to the Assignment Date and (v) the Percentage Interest in the Revolving Credit
Notes, the Term Note A, Term Note B and the ESOP Note held by the Assignor.
(b) In furtherance of the foregoing, (i) to the extent the Assignor is the
Issuing Bank, the Assignee hereby purchases a participation, in the proportion
of the Percentage Interest, in all reimbursement obligations (net of
participations therein purchased by other Lenders pursuant to the Credit
Agreement) in respect of Letters of Credit upon the terms and conditions set
forth in SECTION 3.03 of the Credit Agreement, with the same effect as if the
Assignee had been a lender, and had purchased such participation, on the
issuance date or dates of each Letter of Credit and (ii) to the extent the
Assignor is not the Issuing Bank and has purchased participations in
reimbursement obligations in respect of the Letters of Credit issued by the
Issuing Bank, the Assignee hereby purchases a portion of such participations
(net of portions thereof purchased by other Lenders pursuant to the Credit
Agreement), in the proportion of the Percentage Interest, upon the terms and
conditions set forth in SECTION 3.03 of the Credit Agreement, with the same
effect as if the Assignee had been a Lender, and had directly purchased
participations equal to such portions, on the issuance date or dates of each
Letter of Credit.
2. The Assignor (a) represents that as of the date hereof, (i) its
Revolving Credit Commitment, Term Loan A Commitment, Term Loan B Commitment, and
ESOP Loan Commitment (without giving effect to assignments thereof which have
not yet become effective) is $ , $ and $ , respectively, and the outstanding
balance of its Revolving Credit Loans, Term Loan A, Term Loan B, and ESOP Loan
(unreduced by any assignments thereof which have not yet become effective) are $
, $ , $ and $ , respectively[1.], (ii) the amount of the reimbursement
obligations (net of participations therein purchased by other Lenders pursuant
to the Credit Agreement) in respect of the Letters of Credit issued by the
Assignor as the Issuing Bank is $ [.2] (iii) the amount of the participations in
reimbursement obligations in respect of the Letters of Credit issued by a Lender
other than Assignor purchased by the Assignor (net of portions thereof purchased
by other Lenders pursuant to the Credit Agreement) pursuant to the terms of the
Credit Agreement is $ ; and (iv) the assignment to Assignee effected hereunder
complies with all requirements imposed hereon under the Loan Documents; (b)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto, other than that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim known to the Assignor;
(c) makes no representation or warranty and assumes no responsbility with
respect to the financial condition of the Company or any Subsidiary of the
Company or the performance or observance by the Company or any Subsidiary of the
Company of any of their respective obligations under the Loan Documents or any
other instrument or document furnished pursuant thereto; and (d) attaches the
Revolving Credit Note, Term Note A, Term Note B and ESOP Note issued to Assignor
and requests that the Agent exchange such Notes for a new Revolving Credit Note,
a new Term Note A, new Term Note B, and a new ESOP Note executed, in each
instance, by the borrower and payable to the Assignee in a principal amount
equal to $ , $ , $ and $ , respectively [and a new Revolving Credit Note, a new
Term Note A, new Term Note B, and a new ESOP Note executed by the Borrower and
payable to the Assignor in a principal amount equal to $ , $ , $ and $ ,
respectively)].
3. The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 7.01 (a) and (b) thereof and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance;
(c) agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit
- ----------------------
(1) If the Assignor is an Issuing Bank, clause (ii) should be included.
(2) If the Assignor is NOT an Issuing Bank, clause (iii) should be
included.
2
Agreement; (d) confirms that it is an Eligible Assignee; (e) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement and the other Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (f) agrees that it will be bound by and will
perform in accordance with their terms all the obligations which by the terms of
the Credit Agreement are required to be performed by it as a Lender; (g) agrees
that it will comply with Section 11.11 of the Credit Agreement with respect to
information complying with that provision furnished to it by the Company or the
Assignor (other than information generally available to the public or otherwise
available to the Assignor on a nonconfidential basis); (h) attaches hereto a
completed Administrative Questionnaire[; and (i) attaches the forms prescribed
by the Internal Revenue Service of the United States certifying as to the
Assignee's exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Credit Agreement or such other
documents as are necessary to indicate that all such payments are subject to
such tax at a rate reduced by an applicable tax treaty].(3)
4. The effective date for this Assignment and Acceptance shall be
(the "ASSIGNMENT DATE"), subject to (a) the due execution,
acceptance and recording set forth in the following sentence and (b) the receipt
by the Assignor of payment evidencing Assignee's purchase provided in Section 1
hereof.(4) Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent and the Company for acceptance, and recording by the
Agent pursuant to Section 11.10 (c) of the Credit Agreement.
5. Upon such acceptance and recording, from and after the Assignment Date,
(a) the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (b) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6. Notwithstanding anything to the contrary contained in the Credit
Agreement, the Borrower shall not be required to reimburse the Agent, the
Assignor or the Assignee for any costs and expenses (including attorneys' fees)
incurred by such Person in connection with this Assignment and Acceptance.
7. Upon such acceptance and recording, from and after the Assignment Date,
the Agent and the Company may rely upon this Assignment and Acceptance and the
Agent shall make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and Assignee shall make all appropriate
- --------------------
(3) If the Assignee is organized under the laws of a jurisdiction outside
the United States.
(4) See SECTION 11.01. Such date shall be at least five Business Days after
the execution of this Assignment and Acceptance and delivery thereof to the
Agent, unless otherwise agreed by the Assignor, the Assignee and the Agent.
3
adjustments in payments for periods prior to the Assignment Date by the Agent or
with respect to the making of this assignment directly between themselves.
8. This Assignment and Acceptance shall be deemed to be a contractual
obligation under, and shall be governed by, and construed in accordance with,
the laws of the State of Texas and the applicable laws of the United States of
America.
[NAME OF ASSIGNOR]
By:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
Accepted this day
of , 19
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Agent
By:
Name:
Title:
Accepted this day
of , 19
Texas Petrochemicals Corporation
By:
Name:
Title:
4
SCHEDULE 1.01
Other Assets
1. Hawker Siddeley twin engine airplane, Model 125-600A, Serial #256070,
registration number N411TP.
2. Lots 11, 12, 13, 14, 15, 16, 17, 18, 19, and 20, Block 133, of the
original City of Ennis; address -- 206 North Kaufman, Ennis, Texas;
leased to Lawrence Funeral Home, Inc., pursuant to a Lease dated
October 1, 1989.
3. .4547 acres at 14543 Memorial Drive, Houston, Texas leased to
Ashford-Memorial Pizza Inn, Inc., as Lessee, pursuant to an unrecorded
lease dated December 1, 1993, on which operates a Pizza Inn Restaurant.
4. 30,007 acres of unimproved property located at Highway 6 and
Briarforest in Houston, Harris County, Texas.
5. 8.8962 acres of unimproved property located on Richmond and West Hollow
Drive (the West Hollow Property), Houston, Harris County, Texas.
6. 2.9613 acres at 8705-8707 Katy Freeway, Houston, Harris County, Texas
a.k.a. Hedwig Office Park with one 1-story, one 3-story, and 1 4-story
office building.
7. 4.14560 acre of tract of land at Highway 288 and South MacGregor Drive,
Houston, Harris County, Texas. The property has frontage on Camden
Drive and Gehring Drive in Houston.
SCHEDULE 6.04
Conflicting or Adverse Agreements or Restrictions
None
SCHEDULE 6.05
<TABLE>
<CAPTION>
Owned and Leased Real Property
<C> <C> <C>
LESSOR/OWNER LESSEE ADDRESS
Company Ashford-Memorial 14543 Memorial Drive
Pizza Inn, Inc. Houston, Texas
Company None Unimproved 30.007 acres at
Highway 6, Houston, Texas
Company None Unimproved 8.8962 acres at Richmond
Avenue and the northeast corner of
West Hollow, Houston, Texas
Company Lawrence Funeral Home, Inc. 206 N. Kaufman
Ennis, Texas
Company Various 8705-8707 Katy Freeway
(see attached Rent Roll) Houston, Texas
Company None Unimproved 4.1560 acres at Highway
288 and South MacGregor Drive,
Houston, Texas
Company None 4604 Baker Road
Baytown, Texas 77521
Company None Houston Plant
8600 Park Place Boulevard
Houston, Texas 77017
Fred Vincent TBCC 3524 Cities Service Highway
Westlake, Louisiana 70669
Company None Pipeline
Harris and Galveston
Counties, Texas
</TABLE>
HEDWIG OFFICE PARK
RENT ROLL FOR 8705 8705 KATY FREEWAY, SUITE 302A 4/30/96
HOUSTON, TEXAS 77024
(713) 464-9087
<TABLE>
<CAPTION>
TENANT SUITE NO. S.F. (NRA) RENT DEPOSIT LEASE TERMS
- ------------------------------------- --------- ----------- ----------- ----------- --------------------
<S> <C> <C> <C> <C> <C>
FIRST FLOOR (116%)
Scholastic Learning Center, Inc. 102 1,392 $ 1,183.00 $ 1,183.00 12/1/95 to 11/30/96
TOC Storage 103 395
Vic Kormeier (Storage) 103A 144 50.00 N/A Month to Month
Watts & Company 104 3,509 $ 2,807.00 $ 2,807.00 11/1/95 to 10/31/96
Robert B. Hinsley, P.C. 105 1,577 $ 1,261.00 $ 1,261.00 11/1/95 to 10/31/97
SECOND FLOOR (111.5%)
David Davenport 200 665 $ 532.00 $ 532.00 4/14/96 to 4/30/97
Luro C. Taylor & Alex Deal 201 960 $ 768.00 $ 768.00 12/1/95 to 11/30/96
Bill Robbins 202 537 $ 430.00 $ 430.00 6/1/95 to 5/31/96
203 588
Global Translation Services 204 1,521 $ 1,293.00 $ 1,293.00 5/1/96 - 4/30/98
Vic Kormeier (Storage) 205 432 $ 200.00 Month to Month
John G. Dickerson 206 441 $ 375.00 $ 375.00 1/1/96 to 12/31/97
Video Communication Production 207 416 $ 332.80 $ 332.80 6/8/95 to 6/7/96
Peter Dailey and Associates 208 1,017 $ 800.00 $ 800.00 1/1/96 to 12/31/96
Travel Desk 210 678 $ 576.00 $ 576.00 1/1/96 to 12/31/96
</TABLE>
Page 1
HEDWIG OFFICE PARK
RENT ROLL FOR 8705 8705 KATY FREEWAY, SUITE 302A 4/30/96
HOUSTON, TEXAS 77024
(713) 464-9087
<TABLE>
<CAPTION>
TENANT SUITE NO. S.F. (NRA) RENT DEPOSIT LEASE TERMS
- ------------------------------------- --------- ----------- ----------- ----------- --------------------
<S> <C> <C> <C> <C> <C>
THIRD FLOOR (116%)
Plant & Machinery 300 4,977 $ 3,981.00 $ 3,981.00 2/1/96 to 12/31/97
Management Office 302A 946
Farrington Temporary Services, Inc. 304 811 $ 689.00 $ 689.00 1/1/96 to 12/31/97
George Brown & Company 306 389 $ 330.00 $ 330.00 6/15/91 to 6/16/96
FOURTH FLOOR (112%)
Kormeier & Walters
(Val/Kor Intn'l Inc.) 400 2,047 $ 1,637.60 $ 1,637.60 10/1/93 to 9/30/00
Creole Compression 401 600 $ 555.00 N/A Month to Month
Ka-Tex Constructors, Inc. 402 492 $ 390.00 N/A 1/1/96 to 12/31/96
J.L. Sleeper Jr. 403 386 $ 308.80 $ 308.80 5/1/96 - 4/30/97
Swalm Foundation 405 1,291
Beverly Twaddell 406 647 $ 517.60 $ 517.60 10/1/94 to 10/1/00
Claremont Management Group, Inc. 408 1,391 $ 1,182.00 N/A Month to Month
</TABLE>
Page 2
HEDWIG OFFICE PARK
RENT ROLL FOR 8705 8705 KATY FREEWAY, SUITE 302A DATE 4/30/96
HOUSTON, TEXAS 77024
(713) 464-9087
<TABLE>
<CAPTION>
TENANT SUITE NO. S.F. (NRA) RENT DEPOSIT LEASE TERMS
- ------------------------------------- --------- ----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C>
FIRST FLOOR (112%)
Hunt & Associates 100 4,726 $ 3,780.00 $ 3,780.00 6/1/93 to 6/1/96
Michael Sopher Ins. Agengy 101 580 $ 464.00 $ 464.00 7/15/93 to 7/14/96
Credit Services of Houston 102 601 $ 510.85 $ 510.85 5/1/96 to 4/30/97
TOC Storage 104 602
Sword Petroleum Exploration 105 1,071 $ 910.35 $ 910.35 1/31/96 to 3/31/97
Terry Blackburn Photography 103 485 $ 412.00 $ 412.00 4/1/96 to 3/31/97
SECOND FLOOR (109.6%)
TOC/TPC Offices 200 2,464
Intercoastal Energy, Inc. 203 730 $ 584.00 $ 584.00 1/1/96 to 12/31/96
Petrophysics, Inc. 206 1,302 $ 1,041.00 $ 1,041.00 6/1/95 to 5/31/97
Universe Technical Translation, Inc. 208 2,652 $ 2,121.60 $ 2,121.60 10/15/94 to 10/14/99
Anne Bohnn 204 347 $ 315.00 N/A Month to Month
THIRD FLOOR (108.1%)
TOC/TPC Offices 300 8,313
ANNEX
Terry Blackburn Photography Annex 1,905 $ 1,210.00 $ 1,210.00 1/31/96 to 1/31/97
</TABLE>
Page 3
HEDWIG OFFICE PARK
RENT ROLL FOR 8707 8705 KATY FREEWAY, SUITE 302A DATE 4/30/96
HOUSTON, TEXAS 77024
(713) 464-9087
<TABLE>
<CAPTION>
TENANT SUITE NO. S.F. (NRA) RENT DEPOSIT LEASE TERMS
- ------------------------------------- --------- ---------- ----------- ------- --------------------
<S> <C> <C> <C> <C> <C>
ASHFORD MEMORIAL PIZZA INN, INC. Pizza Inn 2,883 $ 1,750.00 -- 12/1/93 to 10/31/98
</TABLE>
Page 4
SCHEDULE 6.06
Proceedings
1. The Company is contesting in good faith the taxes in the matter of
Hearing No. 35,082 where the Comptroller of Public Accounts of the State
of Texas is alleging claim for taxes in the amount of $606,943.05 as of
May 11, 1995, plus accrued interest in the amount of $92.24 per day.
2. See attached.
3. See Schedule 6.12.
LIST OF OUTSTANDING PENDING OR THREATENED LITIGATION
The following is a list of outstanding pending litigation, as of May 14,
1996, against Texas Olefins Company ("TOC"):
1. PAULA JEAN BOUDREAUX ET AL. V. TEXAS CHEMICAL COMPANY, ET AL.; No. B
141,684, 60th Judicial District Court of Jefferson County, Texas;
2. MARGARET KATHERINE FULLER ET AL. V. EXXON CORPORATION, ET AL.; No. A
145,539, 58th Judicial District Court of Jefferson County, Texas;
3. KURT GUILBEAUX ET AL. V. TEXACO CHEMICAL COMPANY ET AL.; No. B 149,581,
60th Judicial District Court of Jefferson County, Texas;
4. THOMAS AND JULIA DUCOTE V. AMOCO CHEMICAL COMPANY, ET AL.; No. 150,406,
60th Judicial District Court of Jefferson County, Texas;
5. VAN LARRY REED ET AL. V. FINA OIL & CHEMICAL COMPANY; No. B 152,671,
60th Judicial District Court of Jefferson County, Texas;
6. ROBERT J. PROVOST ET AL. V. AMOCO CORPORATION ET AL.; No. B 154,096,
60th Judicial District of Jefferson County, Texas; and
7. BOBBY JOE CHERRY ET UX V. AMERICAN MINERAL SPIRITS COMPANY ET AL.; No. E
154,089, 172nd Judicial District Court of Jefferson County, Texas.
The following is a list of outstanding pending litigation, as of May 14,
1996, against Texas Petrochemicals Corporation ("TPC"):
1. STANLEY ABBOTT SR. AND JOYCE ABBOTT ET AL. V. OWENS CORNING FIBERGLASS
CORPORATION; No. 95,039743, 152nd Judicial District Court of Harris
County, Texas;
2. IRENE E. LOPEZ ET AL. V. E.I.DuPONT De NEMOURS AND COMPANY ET AL.; No.
D-152,200, 136th Judicial District Court of Jefferson County, Texas;
3. WIRT A. MCMULLAN V. TEXAS PETROCHEMICALS CORPORATION; No. 94CV0728,
122nd Judicial District Court of Galveston County, Texas;
4. JAMES MOUTON ET UX V. TEXACO CHEMICAL COMPANY ET AL.; No. D 150,058,
136th Judicial District Court of Jefferson County, Texas;
5. JERRY SMITH ET UX V. TEXACO CHEMICAL COMPANY ET AL.; No. B-145,547, 60th
Judicial District Court of Jefferson County, Texas;
6. PRESTON WOOD ET UX V. MOBIL OIL CORPORATION ET AL.; No. 0960078-C, 260th
Judicial District Court of Orange County, Texas;
7. DANIEL W. BATES ET UX V. TEXACO CHEMICAL COMPANY ET AL.; No. B-154,579,
60th Judicial District Court of Jefferson County, Texas; and
8. COMPTROLLER OF PUBLIC ACCOUNTS OF THE STATE OF TEXAS RE: TEXAS
PETROCHEMICALS CORPORATION, HEARING NO. 35,082.
The following is a potential claim against Texas Olefins Company ("TOC"):
Potential claims of minor beneficiaries under the Jennifer Ann Swalm
Trust dated July 6, 1972 ("Trust"), which claims have been released by
the Trustees and legal guardian and parents of the minor beneficiaries of
the Trust.
The following is a list of threatened litigation, as of May 14, 1996,
against Texas Petrochemicals Corporation ("TPC"):
1. Claims for indemnity from Petro-Texas Chemical Corporation
("Petro-Tex"). On February 4, 1992, counsel for Petro-Tex requested
TPC to indemnify Petro-Texas with respect to the following litigation:
(a) PAULA JEAN BOUDREAUX ET AL. V. TEXAS CHEMICAL COMPANY, ET AL.; No.
B141,684, 60th District Court of Jefferson County, Texas.
2. Claim for indemnity from Petro-Tex to TPC by letter dated May 12, 1993,
counsel for Petro-Tex requested TPC to indemnify and provide a defense
to Petro-Tex with respect to the following litigation:
(a) Cause No. B 141,684; PAULA JEAN BOUDREAUX, ET AL, V. TEXACO
CHEMICAL COMPANY, ET AL.; in the 60th Judicial District Court of
Jefferson County, Texas ("Boudreaux Lawsuit")
(b) Cause No. D 142,192; NORMAN DENNIS, ET AL. V TEXACO CHEMICAL
COMPANY, ET AL.; in the 136th Judicial District Court of
Jefferson County, Texas ("Dennis Lawsuit");
(c) Cause No. D 137,680; DEBORAH JEAN NIGH, ET AL. V. UNION OIL
COMPANY, ET AL.; in the 136th Judicial District Court of
Jefferson County, Texas ("Nigh Lawsuit");
(d) Cause No. E 0145,420; LUCY K. BEAVER, ET AL. V. FIRESTONE, ET
AL.; in the 172nd Judicial District Court of Jefferson County,
Texas ("Beaver lawsuit");
(e) Cause No. E 141,856; ESTELLE FLEMING, ET AL. V. B.F. GOODRICH,
ET AL.; in the 60th Judicial District Court of Jefferson County,
Texas ("Fleming Lawsuit"); and
(f) Cause No. A 145,539; MARGARET J. FULLER, ET AL, V. EXXON, ET
AL.; in the 58th Judicial District Court of Jefferson County,
Texas ("Fuller Lawsuit").
3. Claim for indemnity from Tenneco to TPC. On December 9, 1993, counsel
for Tenneco requested TPC to indemnify Petro-Tex with respect to the
following cases:
(a) ADAMS, ET AL. V. AMOCO CHEMICAL, ET AL.; No. 93-045837, in the
234th Judicial District Court of Harris County, Texas;
(b) ALLCORN, ET AL. V. AMOCO CHEMICAL, ET AL.; No. 93-042492, in the
55th Judicial District Court of Harris County, Texas;
(c) RHODES V. ABBOTT LABORATORIES, ET AL.; No. 93-J-0485-C, in the
Judicial District Court of Matagorda County, Texas.
4. Claim for indemnity from Tenneco to TPC. On April 14, 1994, counsel for
Tenneco requested TPC to indemnify Petro-Tex under the purchase
agreement between Petro-Tex and TPC dated June 8, 1994.
5. Claim for indemnity from Tenneco to TPC. On May 12, 1994, counsel for
Tenneco again reasserted Petro-Tex's position that TPC was obligated to
indemnify Petro-Tex for all claims alleged in the above cases.
6. Claim for indemnity from Tenneco to TPC. On July 15, 1994, TPC received
notice for indemnification from counsel for Tenneco for Malone Service
Company -- Environmental Claim.
Counsel for TPC has repeatedly advised counsel for Tenneco and Petro-Tex
that TPC did not assume any of the liabilities for which Petro-Tex was seeking
indemnity. Counsel for TPC further advised Petro-Tex that TPC was not obligated
to indemnify Petro-Tex in connection with various tort claims arising from the
sale of products by Petro-Tex prior to June 21, 1984.
To the actual knowledge of officers of TPC, no litigation has been
initiated by either Tenneco or Petro-Tex for indemnification to Petro-Tex with
respect to any of the above claims.
SCHEDULE 6.12
Environmental Matters
1. The No. 1 Dehydro Reactor emits greater than 5 tons per year of carbon
monoxide but does not burn at a temperature equal to or greater than
1300 degrees farenheit, in contravention of 30 Tex. Admin. Code Section
119.2. The installation of a duct burner and new waste heat boiler, to
be completed by November 1996, is to correct this concern.
2. Solid waste construction debris is stored in the construction parking
lot without a permit.
3. The Company's air emissions permit requires a 3 inch vacuum for
servicing of inerted vessels at the Company's docks, which vacuum the
Company does not have. The Company has submitted an application to
amend the permit.
4. Bayer has been named in a suit against the Washburn Tunnel Facility of
the Gulf Coast Waste Disposal Authority (GCWDA) regarding the disposal
of various wastes disposed by the GCWDA. The Company also has sent
non-hazardous wastes to the Washburn Tunnel Facility.
5. The Company has received complaints from its neighbors on occasion
concerning noise, and has installed a 16-foot earthen noise barrier at
the facility's southeast boundary to address those complaints and
comply with the City of Houston noise ordinance.
6. The issues identified in the environmental, health and safety
assessment and the database summary of the commercial properties
conducted by Pilko & Associates, Inc. and dated, respectively, April
18, 1996 and May 28, 1996.
7. In February 1996, the EPA issued an order to the Company and Bayer
Corporation 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 penalty was assessed.
8. Under the terms of the 1984 purchase agreement with Petro-Tex, 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 site in Texas City, Texas, where Petro-Tex and
other companies along the Gulf Coast allegedly sent wastes for disposal
in the 1970s and early 1980s. 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.
9. See Schedule 6.06.
SCHEDULE 6.14
Domestic and Foreign Subsidiaries
1. Texas Butylene Chemical Corporation, a Texas corporation and
wholly-owned subsidiary of the Company.
2. The Company owns beneficially and of record, free and clear of all
Liens, the sole outstanding limited partnership interest in the
Hollywood/Texas Olefins, Ltd., a Texas limited partnership
("Hollywood/Texas Olefins"), representing a 50% interest in
Hollywood/Texas Olefins.
3. The Company owns beneficially and of record, free and clear of all
Liens, 2.82% of the shares of Gulf Coast Waste Disposal Authority.
SCHEDULE 7.03
Existing Insurance
See attached Schedule
TEXAS OLEFINS COMPANY
MASTER PROPERTY & BUSINESS INTERRUPTION PROGRAM
SECURITY DIAGRAM -- 1995/96
$345MM
XS
$5MM (INSURED'S RETENTION)
Lloyds of London..................... 8.50%
SR Intercontinental Business Inc.
Co................................. 5.00%
Great Lakes Reinsurance (UK) PLC..... 5.00%
Asianational Gencell, SPA............ 0.50%
Cpcasifigo Norcsk Skadcforslering.... 1.25%
Gem Insurance Company Limited........ 7.00%
Total........................ 27.25%
LIMIT: $94,012,500
$340MM
XS
$5MM XS $5MM (INSURED'S RETENTION)
Underwriters Indemnity Co. of N.A.
thru CKINA........................... 20.00%
New Hampshire Insurance Company...... 10.00%
Hartford Stearn Boiler Inspection &
Insurance Company.................... 10.00%
Gem Insurance Company Limited........ 3.50%
Pulcrum Insurance Company............ 5.00%
Assicurazioni Generali, SPA.......... 1.00%
Total................................ 49.50%
LIMIT: $168,300.00
$150MM XS $190MM XS $5MM XS $5MM (INSURED'S
RETENTION)
Nat'l Union Fire Ins. Co. of
Pittsburgh, PA thru Scmt Tech...... 10.00%
Reliance Insurance Company of
Illinois............................. 6.50%
Firemen's Fund Insurance Company..... 4.25%
Underwriters Indemnity Company....... 2.50%
Total................................ 23.25%
LIMIT: $34,875,000
$190MM XS $9MM XS $5MM
(INSURED'S RETENTION)
Nat'l Union Fire Ltd. Co. of
Pittsburgh, PA thru Scmt Tech...... 10.00
Reliance Insurance Company of
Illinois........................... 10.00%
Firemen's Fund Insurance Company..... 2.50%
Underwriters Indemnity Company....... 0.75%
Total................................ 23.25%
LIMIT: $44,175,000
Lexington Insurance Company $5MM XS $5MM
(Insured's Retention) - 72.75% LIMIT: $3,637.50
$5,000,000 Insured's Retention LIMIT: $5,000.00
NOTE: Currency in U.S. Dollars June 21, 1996
<TABLE>
<CAPTION>
COVERAGE POLICY DATA LIMITS PREMIUM
- -------------------------------------------------------------------------- ----------- ---------
<S> <C> <C> <C>
International Traffic Bond Washington International $ 10,000 $ 200
3500701
12-22-94/95
Diesel Fuel Bond Safeco Insurance Co. $ 15,000 $ 119
No. 5718908
3-10-94/95
REMARKS
- ------------------------------------- -------------------------------------
<S> <C>
International Traffic Bond Covers obligations associated with
shipping containers used in
international traffic.
Diesel Fuel Bond Covers tax obligations associated
with purchase of diesel fuel.
TOTAL PREMIUM $3,085,624
TOTAL STATE TAX $63,930
TOTAL STAMPING FEES $1,693
GRAND TOTAL $3,471,247
</TABLE>
NOTE: 1. Actual premium costs should be estimated as follows:
Gross Premium $ 3,471,247
Less -165,500 Loss fixed credit paid for each of three
years under X. L. Europe MAXL Program
-6,380 Workers' Comp premium for Las Lomas
Ranch & The Falls Resort
-7,026 Business Auto premium for Las Lomas
------------ Ranch & the Falls Resort
$ 3,292,341
2. The following coverages have been considered, but not carried:
Directors & Officers Liability
Employment Practices Liability
Environmental Impairment Liability
3. Losses: There have been no major losses on any of the above
policies during the past 5 years.
THE EXTENT OF INSURANCE IS AT ALL TIMES GOVERNED BY THE COMPLETE TERMS AND
CONDITIONS OF THE POLICY MARCH 27, 1996
TEXAS OLEFINS COMPANY/TEXAS PETROCHEMICALS CORPORATION -- SUMMARY OF
INSURANCE -- PAGE 5
<TABLE>
<CAPTION>
COVERAGE POLICY DATA LIMITS PREMIUM
- -------------------------------------------------------------------------- ----------- ---------
<S> <C> <C> <C>
Automobile Liability Hartford Insurance Co. $ 1,000,000 $ 64,142
61UENKL2636
6-21-95/96
Workers' Compensation Texas Workers' Compensation Insurance A.1,000,000 $ 63,279
Fund Statutory
TSF 11257102 for
6-21-95/96 Medical
&
Compen-
sation
B.
Employers '
Liability
$
Fiduciary Liability Aetna Casualty & Surety Co. $ 1,000,000 $ 3,522
71FF100873072
3-8-94/95
Fidelity Coverage Texas Pacific $ 1,000,000 $ 7,080
(Employee Dishonesty) Fidelity Co.
81077808
6-21-95/96
Customs Bond Washington International $ 100,000 $ 800
1555670
7-31-94/95
REMARKS
- ------------------------------------- -------------------------------------
Automobile Liability Provides liability coverage for
owned, hired and non-owned
vehicles.
Deductible -- None.
Physical Damage not provided.
Occurrence, defense cost outside
limits.
Workers' Compensation Covers job related injury or illness
and lawsuits (if any) filed by
employees in connection with work
related accidents.
Occurrence, defense cost outside
limits.
Fiduciary Liability Covers errors and omissions committed
by fiduciaries in connection with
the Employee Benefits Program.
Fidelity Coverage Covers criminal acts against the
(Employee Dishonesty) insured committed by employees
Customs Bond Covers obligations associated with
import & export duties.
</TABLE>
THE EXTENT OF INSURANCE IS AT ALL TIMES GOVERNED BY THE COMPLETE TERMS AND
CONDITIONS OF THE POLICY
TEXAS OLEFINS COMPANY/TEXAS PETROCHEMICALS CORPORATION -- SUMMARY OF
INSURANCE -- PAGE 4
TEXAS OLEFINS COMPANY
TEXAS PETROCHEMICALS CORPORATION
SUMMARY OF INSURANCE
For 1995/96
<TABLE>
<CAPTION>
COVERAGE POLICY DATA LIMITS PREMIUM
- -------------------------------------------------------------------------- ----------- ---------
<S> <C> <C> <C>
Property & Business Interception Various U.S. and European Companies $345,000,000 $1,825,000
(See attached schedule)
JLW2817
6-21-95/96
Boiler & Machinery and Business Reliance Insurance Co. $100,000,000 $ 423,437
Interruption Travelers Insurance Co.
Hartford Steam Boiler Insurance Co.
NZC0109594
6-21-95/96
Marine Cargo Loyds of London & Certain ILU $ 5,000,000 $ 48,070
Companies
MOA951089
6-21-95/96
Miscellaneous Property & Business National Union Fire Insurance Company $17,610,500 $ 39,975
Interruption of Pittsburgh, PA
ST260 40 05
6-21-95/96
REMARKS
- ------------------------------------- -------------------------------------
Property & Business Interception Covers direct damage to real and
business personal property.
Deductibles: PD & BI (Combined)
$5,000,000.
Premium: $1,825,000
State Tax: $48,166.52
Stamping Fee: $ 1,367.50
Total Premium: $1,874,535
Boiler & Machinery and Business Covers mechanical breakdown to
Interruption machinery, boilers, pressure
vessels, electrical and
refrigeration equipment.
Deductibles:
PD: $100,000
BI: 20-Day
Wait
Marine Cargo Covers physical damage to cargo
shipped via barge and open ocean
vessel.
Deductible: 1/2% of cargo value.
Miscellaneous Property & Business Covers office buildings, ranch
Interruption property, Baytown facility, tank
cars on premises (belonging to
others).
Deductible - $5,000
</TABLE>
THE EXTENT OF INSURANCE IS AT ALL TIMES GOVERNED BY THE COMPLETE TERMS AND
CONDITIONS OF THE POLICY
TEXAS OLEFINS COMPANY/TEXAS PETROCHEMICALS CORPORATION -- SUMMARY OF
INSURANCE -- PAGE 1
<TABLE>
<CAPTION>
COVERAGE POLICY DATA LIMITS PREMIUM
- -------------------------------------------------------------------------- ----------- ---------
<S> <C> <C> <C>
Excess Liability Lexington Insurance Co. $10,000,000 $ 40,000
No. 8784707
6-21-95/96
Excess Liability X. L. Europe $475,000,000 $ 520,000
No. XLEXS 00250
6-21-95/96
* $ 354,500
Charterers / Wharfingers Liability Various London Companies $ 1,000,000 $ 35,000
MOA951088
6-21-95/96
Excess Liability Lexington Insurance Co. $10,000,000 $ 285,000
No. 5109905
6-21-95/96
Excess Liability Westchester Fire Insurance Company $ 5,000,000 $ 50,000
XLS310179
6-21-95/96
REMARKS
- ------------------------------------- -------------------------------------
Excess Liability Covers bodily injury and property damage
to members of the public (3rd party claimants).
(3rd excess liability layer)
Claims Made, defense cost outside limits.
Named Peril Pollution.
Punitive Damages Included.
Premium: $40,000
State Tax: $1,940
Stamping Fees: $40.00
Total Premium: $41,980
Excess Liability Covers bodily injury and property damage
to members of the public (3rd party claimants).
(4th excess liability layer)
(Three Year Loss Responsive
Program -- MAXL)
*Reflects Annual Premium after
deduction of anticipated Loss Fund
Credit
Charterers / Wharfingers Liability Covers liabilities arising from
ownership of dock facilities and
chartering of vessels.
Deductible: $10,000
Occurrence, defense cost outside
limits.
Excess Liability Covers bodily injury and property
damage to members of the public
(3rd party claimants).
Deductible: $1,000,000 per
occurrence SIR
(1st excess liability layer).
Claims Made, defense cost outside
limits.
Named Peril Pollution.
Punitive Damages Includes.
Premium: $285,000
State Tax: $13,822.50
Stamping Fees: $285.00
Total Premium: $299,108
Excess Liability Covers bodily injury and property
damage to members of the public
(3rd party claimants).
(2nd excess liability layer)
Claims Made, defense cost outside
limits.
Named Peril Pollution.
Punitive Damages Included.
</TABLE>
THE EXTENT OF INSURANCE IS AT ALL TIMES GOVERNED BY THE COMPLETE TERMS AND
CONDITIONS OF THE POLICY
TEXAS OLEFINS COMPANY/TEXAS PETROCHEMICALS CORPORATION -- SUMMARY OF
INSURANCE -- PAGE 2
SCHEDULE 8.04 (a)
Existing Liens
1. Financing Statement No. 93-137592 filed July 15, 1993 with the Texas
Secretary of State in favor of South Texas Equipment Company.
2. Financing Statement No. 93-216056 filed November 10, 1993 with the
Texas Secretary of State in favor of South Texas Equipment Company.
3. Financing Statement No. 94-039546 filed March 3, 1994 with the Texas
Secretary of State in favor of Unisys Corporation.
4. Financing Statement No. 94-096864 filed May 16, 1994 with the Texas
Secretary of State in favor of Leasetec Corporation.
5. Financing Statement No. 94-198274 filed October 10, 1994 with the Texas
Secretary of State in favor of Leasetec Corporation.
6. Financing Statement No. 902229 filed November 6, 1995 with the Harris
County, Texas County Clerk in favor of Space Master Building.
SCHEDULE 8.05(b)
Existing Investments
1. The Company owns beneficially and of record, free and clear of all
Liens, the sole outstanding limited partnership interest in the
Hollywood/Texas Olefins, Ltd., a Texas limited partnership
("Hollywood/Texas Olefins"), representing a 50% interest in
Hollywood/Texas Olefins.
2. 2.82% of the shares of Gulf Coast Waste Disposal Authority.
SCHEDULE 8.06(c)
Guaranties of Indebtedness
None.
SCHEDULE 8.12
Material Contracts
1. Facilities Agreement dated August 24, 1972 among Gulf Coast Waste
Disposal Authority, Air Products and Chemicals, Inc., Atlantic
Richfield Company, Champion International Corporation, Crown Central
Petroleum Corporation and Petro-Tex Chemical Corporation and Amendment
to Facilities Agreement dated May 1, 1982.
2. Agreement dated August 24, 1972 by and among Air Products and
Chemicals, Inc., Atlantic Richfield Company, Champion International
Corporation, Crown Central Petroleum Corporation and Petro-Tex Chemical
Corporation.
3. Joint venture Agreement regarding Industrial Waste Treatment Company
referenced in Agreement described in 2 above.
4. Waste Plant Agreement dated July 1, 1977 between Petro-Tex Chemical
Corporation and Denka Chemical Corporation.
5. WharfUse Agreement dated August 11, 1966 between Petro-Tex Chemical
Corporation and Harris County Houston Ship Channel Navigation District
and Amendment to Lease Agreement relating to same dated June 6, 1978
effective as of May 1, 1978 and Second Amendment to Lease Agreement
dated April 1, 1984.
6. Operating Agreement dated December 9, 1988 between Hollywood/Texas
Olefins, Ltd. and Texas Olefins Company and Amendment No. 1 thereto
dated February 12, 1989.
EXHIBIT 10.10
COMPANY
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") dated effective as of
July 1, 1996 is between TPC FINANCE CORP., a Texas corporation to be merged into
TEXAS PETROCHEMICALS CORPORATION, a Texas corporation (collectively the
"PLEDGOR"), to TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association, as agent (the "AGENT") for the benefit of the Agent and the
lenders (the "LENDERS") party to the Credit Agreement (as defined below).
PRELIMINARY STATEMENT
The Lenders, the Agent, ABN AMRO North America, Inc., as agent for ABN AMRO
Bank N.V. and The Bank of Nova Scotia, as co-documentation agents, and the
Pledgor entered into a Credit Agreement dated as of even date herewith (said
Credit Agreement, as it may hereafter be amended or otherwise modified from time
to time, being the "CREDIT AGREEMENT"), pursuant to which the Lenders agreed
to make the following Loans to the Pledgor: (a) revolving credit loans of up to
$40,000,000.00; (b) a term loan of up to $85,000,000.00; (c) a second term loan
of up to $45,000,000.00; and (d) a third term loan of up to $10,000,000.00. All
capitalized terms used herein and not otherwise defined shall have the meanings
as defined in the Credit Agreement.
The Pledgor is the owner of 1,000 shares of capital stock of the Texas
Butylene Chemical Corporation, a Texas corporation and wholly owned subsidiary
of the Pledgor (the "PLEDGED SHARES") evidenced by Certificate No. 2. It is a
condition precedent to the obligations of the Agent to make the Loans under the
Credit Agreement that the Pledgor shall have executed and delivered this Pledge
Agreement.
NOW THEREFORE, in consideration of the premises and in order to induce the
Lenders to make available to the Pledgor the Loans under the Credit Agreement
the Pledgor hereby agrees as follows:
SECTION 1. DEFINED TERMS
(a) The term "UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of Texas; PROVIDED that if by mandatory
provisions of law, the perfection or the effect or perfection or
non-perfection of the security interests granted pursuant to SECTION 2
hereof, as well as all other security interests created or assigned as
additional security for the Secured Obligations (as defined below in
SECTION 3) pursuant to the provisions of this Pledge Agreement, in any
Pledged Collateral is governed by the UCC as in effect in such other
jurisdiction other than Texas, "UCC" means the UCC as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
(b) The term "Issuer" means Texas Butylene Chemical Corporation, a
Texas corporation and wholly owned subsidiary of the Pledgor.
SECTION 2. PLEDGE. The Pledgor hereby pledges to the Agent for the benefit
of itself and the Lenders, and grants to the Agent for the benefit of itself and
the Lenders a security interest in, the following (the "PLEDGED COLLATERAL"):
(i) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(ii) all additional shares of stock of Issuer from time to time
acquired by the Pledgor in any manner, and the certificates representing
such additional shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares; and
(iii) all proceeds of any of the foregoing.
The inclusion of proceeds in this Pledge Agreement does not authorize the
Pledgor to sell, dispose of or otherwise use the Pledged Collateral in any
manner not specifically authorized hereby.
SECTION 3. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures the
prompt and complete (a) payment of all obligations of the Company to the Agent
and the Lenders now or hereafter existing under the Credit Agreement, the Notes
and the other Loan Documents, (b) the performance and observance by the Company
of all covenants and conditions contained in all of the Loan Documents, whether
for principal, interest, fees, expenses or otherwise and (c) the performance and
observance by the Pledgor of all covenants and conditions contained in this
Pledge Agreement (all such obligations, covenants and conditions described in
the foregoing clauses (a), (b), and (c) being hereinafter referred to as the
"SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or instruments
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of the Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Agent. Upon the occurrence and during the continuance of any Event of Default,
the Agent shall have the right, upon the instruction of the Majority Lenders and
without notice to the Pledgor, to transfer to or to register in the name of the
Agent or the Lenders or any of their respective nominees any or all of the
Pledged Collateral, subject only to the revocable rights specified in SECTION 7
(A) hereof. In addition, upon the occurrence and during the continuance of any
Event of Default, the Agent shall have the right at any such time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
2
SECTION 5. REPRESENTATIONS AND WARRANTIES. In addition to the
representations and warranties of the Pledgor under the Credit Agreement, the
Pledgor represents and warrants as follows:
(a) The Pledged Shares have been duly authorized and validly issued and are
fully paid and non-assessable.
(b) The Pledgor is the legal and beneficial owner of the Pledged Collateral
free and clear of any Lien except for Permitted Liens, if any, and Liens created
in favor of the Agent.
(c) The delivery of the Pledged Shares to the Agent and this Pledge
Agreement, together with the filing of an appropriate financing statement with
the Texas Secretary of State is sufficient to create a valid and perfected first
priority Lien in the Pledged Collateral, subject only to Permitted Liens, if
any, securing the Secured Obligations.
(d) The Pledged Shares constitute one hundred percent (100%) of the issued
and outstanding common stock of Issuer.
SECTION 6. FURTHER ASSURANCES. The Pledgor agrees that from time to time,
at the expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action that the Agent or
the Majority Lenders may reasonably request as being necessary or desirable, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Agent or any Lender to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral. The
Pledgor will furnish to the Agent from time to time statements and schedules
further identifying and describing the Pledged Collateral and such other reports
in connection with the Pledged Collateral as the Agent or any Lender may
reasonably request, all in reasonable detail as the Agent or any Lender may
reasonably request. The Pledgor agrees to deliver, upon its receipt from
issuance thereof, to the Agent or any Lender any certificate or other evidence
of Issuer evidencing any Pledged Shares issued after the date hereof, and such
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent or such Lender.
SECTION 7. VOTING RIGHTS AND DIVIDENDS. (a) So long as no Event of Default
shall have occurred and be continuing and the Agent has not delivered the notice
specified in SECTION 7(B):
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Pledge
Agreement or the Loan Documents.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends paid in respect of the Pledged Collateral; PROVIDED, except as
expressly permitted by the Credit
3
Agreement, that any and all (A) dividends paid or payable other than in
cash in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of, or in exchange for, any Pledged
Collateral, (B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution and (C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged Collateral,
shall be, and shall be forthwith delivered to the Agent for the benefit of
the Lenders to be applied against the Obligations, or, if no Obligations
are outstanding, to hold as, Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Agent, be
segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Agent as Pledged Collateral in the same form as
so received (with any necessary endorsement).
(iii) The Agent shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default,
at the option of the Agent exercised in a writing sent to the Pledgor:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant
to SECTION 7(A)(I) shall cease, and the Agent shall thereupon have the sole
right to exercise such voting and other consensual rights.
(ii) All rights of the Pledgor to receive the dividends which it would
otherwise be entitled to receive and retain pursuant to SECTION 7(A)(II)
shall cease, and the Agent for the benefit of the Lenders shall thereupon
have the sole right to receive and apply against the Obligations or, if no
Obligations are outstanding, hold as Pledged Collateral such dividends and
interest.
(iii) All dividends which are received by the Pledgor contrary to the
provisions of paragraph (ii) of this Section shall be received in trust for
the benefit of the Agent, shall be segregated from other funds of the
Pledgor and shall be forthwith paid over to the Agent as Pledged Collateral
in the same form as so received (with any necessary endorsement).
SECTION 8. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES. (a) Except as
permitted in the Credit Agreement, the Pledgor shall not: (i) sell, assign (by
agreement, operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral, or (ii) create or permit
to exist any Lien upon or with respect to any of the Pledged Collateral, except
for the Lien created by this Pledge Agreement, Permitted Liens and any other
Lien in favor of the Agent.
4
(b) The Pledgor agrees that it will cause Issuer not to issue any
stock or other securities (i) in substitution for the Pledged Shares,
except to the Pledgor and (ii) in addition to the Pledged Shares, except in
such amounts and to such holders as will maintain the percentage of
ownership set forth in SECTION 5(D) hereof for the Pledgor, except as
otherwise permitted by SECTION 8.02 of the Credit Agreement. Immediately
upon its acquisition (directly or indirectly) of any such substitute or
additional shares of stock or other securities of any Issuer, the Pledgor
will execute such documentation as requested by Agent pledging, and
evidencing the pledge hereunder of, such shares of stock or other
securities.
SECTION 9. AGENT APPOINTED ATTORNEY IN FACT. Effective upon the occurrence
and during the continuance of an Event of Default under any Loan Document, the
Pledgor hereby irrevocably appoints the Agent the Pledgor's attorney in fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor, from time to time in the Agent's sole discretion to take any action and
to execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including, without limitation,
to receive, endorse and collect all certificates or instruments made payable to
the Pledgor representing any dividend or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same.
SECTION 10. AGENT MAY PERFORM. If the Pledgor fails to perform any
agreement contained herein, the Agent may itself, during the existence of an
Event of Default, perform, or cause performance of, such agreement, and the
expenses of the Agent incurred in connection therewith shall be payable by the
Pledgor under SECTION 11.04 of the Credit Agreement.
SECTION 11. THE AGENT'S DUTIES. The powers conferred on the Agent hereunder
are solely to protect its interest in the Pledged Collateral and shall not
impose any duty upon it to exercise any such powers. Except for reasonable care
in the custody of any Pledged Collateral in its possession and the accounting
for moneys actually received by it hereunder, the Agent shall have no duty as to
any Pledged Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Pledged
Collateral. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if the
Pledged Collateral is accorded treatment substantially equal to that which the
Agent accords its own property, it being understood that the Agent shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Collateral, whether or not the Agent has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
SECTION 12. REMEDIES UPON DEFAULT. If any Event of Default under the Loan
Documents shall have occurred and be continuing:
5
(a) The Agent may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a Agent on default under
the UCC (whether or not the UCC applies to the affected Pledged
Collateral), and the Agent may also, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or at
any of the Agent's offices or elsewhere, for cash or credit, and upon such
other terms as may be commercially reasonable. The Pledgor agrees that at
least ten (10) days' notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to
make any sale of Pledged Collateral regardless of notice of sale having
been given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned.
(b) Any cash received by the Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied by the Lenders against the outstanding
Obligations, and if no Obligations are outstanding, such cash may be held
by the Agent upon the instruction of the Majority Lenders as collateral
for, and/or then or at any time thereafter applied (after payment of any
amounts payable to the Agent pursuant to SECTION 11.04 of the Credit
Agreement) in whole or in part by the Lenders against, all or any part of
the Secured Obligations in such order as each Lender shall elect. Any
surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all the Secured Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
(c) In connection with the sale of any Pledged Collateral, the Agent
is authorized, but not obligated, to limit prospective purchasers to the
extent deemed reasonably necessary or desirable by the Agent to render such
sale exempt from the registration requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), and any applicable state
securities laws and regulations, and no sale so made in good faith by the
Agent shall be deemed not to be "commercially reasonable" solely as a
result of such limit of prospective purchasers.
(d) All rights and remedies of the Agent for the benefit of itself and
the Lenders expressed herein are in addition to all other rights and
remedies possessed by the Agent in the Loan Documents and any other
agreement or instrument relating to the obligations.
(e) In connection with a public or private sale by the Agent pursuant
to this SECTION 12 of the Pledged Collateral or any part thereof, the Agent
may disclose, in accordance with SECTION 11.11 of the Credit Agreement, to
prospective purchasers any and all non-public information available to the
Agent which pertains to (i) Issuer of the Pledged Collateral, or (ii) the
Pledgor, provided in the case of the Pledgor, such non-public information
is material to said issuer, its financial condition or the Pledged
Collateral.
6
SECTION 13. PRIVATE SALES; FURTHER ASSURANCES. The Pledgor recognizes that
the Agent may be unable to effect a public sale of any or all of the Pledged
Collateral by reason of certain prohibitions contained in the laws of any
jurisdiction outside the United States or in the United States Securities Act of
1933 (the "1933 ACT") and applicable state securities laws, but may instead be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers who will be obliged to agree, among other things, to acquire such
Pledged Collateral for their own account for investment and not with a view to
the distribution or resale thereof. The Pledgor acknowledges and agrees that any
such private sale by the Agent may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that no such private sale shall, to
the extent permitted by applicable law, be deemed not to be "commercially
reasonable" solely as a result of such prices and other sale terms. The Agent
shall not be under any obligation to delay a sale of any of the Pledged
Collateral for the period of time necessary to permit Issuer of such securities
to register such securities under the laws of any jurisdiction outside the
United States, under the 1933 Act or under any applicable state securities laws,
even if Issuer would agree to do so. If the Agent is able to lawfully effect a
public sale without registration of the Pledged Collateral under the laws of any
jurisdiction outside the United States, under the 1933 Act or under any
applicable state securities laws, then the Agent may conduct such public sale of
the Pledged Collateral, rather than a private sale, if the Agent would realize a
higher sales price in such public sale.
SECTION 14. AMENDMENTS. No amendment or waiver of any provision of this
Pledge Agreement, nor consent to any departure by the Pledgor herefrom, shall in
any event be effective unless the same shall be made in accordance with SECTION
11.01 of the Credit Agreement and signed by the Pledgor and the Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 15. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be given in the manner and at the addresses of the
Pledgor and the Agent as set forth in the Credit Agreement and shall become
effective, as specified in the Credit Agreement.
SECTION 16. WAIVER OF MARSHALLING. All rights of marshalling of assets of
the Pledgor, including any such right with respect to the Pledged Collateral,
are hereby waived by the Pledgor.
SECTION 17. LIMITATION BY LAW. All rights, remedies and powers provided in
this Pledge Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Pledge Agreement are intended to be subject to all applicable mandatory
provisions of law which may be controlling from time to time and to be limited
to the extent necessary so that they will not render this Pledge Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.
7
SECTION 18. SEPARABILITY. Should any clause, sentence, paragraph,
subsection or Section of this Pledge Agreement be judicially declared to be
invalid, unenforceable or void, such declaration will not have the effect of
invalidating or voiding the remainder of this Pledge Agreement, and the parties
hereto agree that the part or parts of this Pledge Agreement so held to be
invalid, unenforceable or void will be deemed to have been stricken herefrom by
the parties hereto, and the remainder of this Pledge Agreement will have the
same force and effectiveness as is such stricken part or parts had never been
included herein.
SECTION 19. NO WAIVER; REMEDIES. No failure on the part of the Agent to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 20. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This Pledge
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until payment in full of the
Secured Obligations, (b) be binding upon the Pledgor, its successors and
assigns, and (c) inure to the benefit of the Agent for the benefit of itself and
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), any Lender may assign or
otherwise transfer all or a portion of its interest, rights and obligations
under the Notes held by it pursuant to SECTION 11.10 of the Credit Agreement.
Upon the payment in full of the Secured Obligations, the Pledgor shall be
entitled to the return, upon its request and at its expense, of such of the
Pledged Collateral as shall not have been sold or otherwise applied against the
Secured Obligations pursuant to the terms hereof; PROVIDED, that the Pledgor
shall otherwise be entitled to such return of the Pledged Collateral upon
payment in full of all Secured Obligations other than those arising under
SECTION 11.05 of the Credit Agreement if the Agent is not on notice of any fact,
circumstance, event or claim which reasonable construed could give rise to an
obligation of the Pledgor under such Section.
SECTION 21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in this Pledge Agreement or made in writing by the
Pledgor in connection herewith are true and correct in all material respect when
made or deemed to be made and shall survive the execution and delivery of this
Pledge Agreement until repayment of the Secured Obligations. Any investigation
by the Agent shall not diminish in any respect whatsoever its rights to reply on
such representations and warranties.
SECTION 22. INTERPRETATION.
(a) In this Pledge Agreement, unless a clear contrary intention appears:
(i) the singular number includes the plural number and VICE VERSA;
8
(ii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Pledge Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iii) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Pledge Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually, PROVIDED that
nothing in this clause (iii) is intended to authorize any assignment not
otherwise permitted by this Pledge Agreement.
(iv) reference to any agreement, document or instrument means such
agreement, document or instrument as amended, supplemented or modified and in
effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof, and reference to any notes includes any notes
issued pursuant to any Loan Document in extension or renewal thereof and in
substitution or replacement therefor;
(v) unless the context indicates otherwise, reference to any Article,
Section, Schedule or Exhibit means such Article or Section hereof or such
Schedule or Exhibit hereto;
(vi) the words "including" (and with correlative meaning "include")
means including, without limiting the generality of any description preceding
such term;
(vii) with respect to the determination of any period of time, the word
"from" means "from and including" and the word "to" means "to but
excluding," and
(viii) reference to any law means such as amended, modified, codified or
reenacted, in whole or in part, and in effect from time to time.
(b) The Section headings herein are for convenience only and shall not
affect the construction hereof.
(c) No provision of this Pledge Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 23. GOVERNING LAW; TERMS. THIS PLEDGE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
9
SECTION 24. INCONSISTENCIES. In the event of any irreconcilable
inconsistencies between any provision of this Pledge Agreement and any provision
of the Credit Agreement, the provisions of the Credit Agreement shall control.
SECTION 25. SUBMISSION TO JURISDICTION. (a) ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN HARRIS COUNTY OR THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY OF THIS
PLEDGE AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDINGS, THE PLEDGOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
SECTION 15, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION.
(b) THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS PLEDGE AGREEMENT BROUGHT
IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
SECTION 26. WAIVER OF JURY TRIAL. THE PLEDGOR AND AGENT HEREBY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS PLEDGE AGREEMENT
OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY, IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR
RELATING TO ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS PLEDGE
AGREEMENT, AND AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
10
SECTION 27. FINAL AGREEMENT OF THE PARTIES. THIS PLEDGE AGREEMENT
(INCLUDING THE SCHEDULE HERETO), THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE
TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge
Agreement effective as of the date first above written.
7
TPC FINANCE CORP.
By: /s/ SUSAN O. RHENEY
---------------
Susan O. Rheney
President
TEXAS PETROCHEMICALS CORPORATION,
successor by merger to TPC Finance
Corp.
By: /s/ CLAUDE E. MANNING
-----------------
Claude E. Manning
Vice President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
as Agent
By: /s/ MARY C. ARNOLD
--------------
Mary C. Arnold
Vice President
11
IRREVOCABLE STOCK OR BOND POWER
FOR VALUE RECEIVED, the undersigned does (do) hereby sell, assign and transfer
to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(SOCIAL-SECURITY OR TAXPAYER IDENTIFYING NO.)
IF STOCK shares of the stock of
COMPLETE represented by Certificate(s) No(s) inclusive,
THIS registered in the name(s) of
PORTION
IF BONDS bonds of in the principal amount of $,
COMPLETE No(s) inclusive,
THIS registered in the name(s) of
PORTION
The undersigned does (do) hereby irrevocably constitute and
appoint attorney to transfer the said stock or bonds(s), as
the case may be, on the books of said Company, with full
power of substitution in the premises.
TPC Finance Corp.
By: /s/ SUSAN O. RHENEY
- --------------------------------------------------------------------------------
Susan O. Rheney
President
- --------------------------------------------------------------------------------
(PERSON(S) EXECUTING THIS POWER SIGN(S) HERE)
Dated _____________________________________________
Signature(s) Guaranteed
IMPORTANT - READ CAREFULLY
The signature(s) to this Power must correspond with the name(s) as written upon
the face of the certificate(s) or bond(s) in every particular without alteration
or enlargement or any change whatever. Signature guarantee should be made by a
member or member organization of the New York Stock Exchange, members of other
Exchanges having signatures on file with transfer agent or by a commercial bank
or trust company having its principal office or correspondent in the City of New
York. Notary acknowledgements are not acceptable.
ORGANIZED UNDER THE LAWS OF THE STATE OF TEXAS
NUMBER SHARES
2 1,000
Texas Butylene Chemical Corporation
The Corporation is authorized to issue 5,000,000 Shares -- No Par Value
This certifies that TEXAS PETROCHEMICAL CORPORTATION is the owner of ONE
THOUSAND (1,000) fully paid and non-assessable Shares of the above Corporation
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated June 21, 1984
/s/ LA NELL COOKE /s/ JOHN T. SHETLON
- ----------------- -------------------
La Nell Cooke John T. Shelton
SECRETARY PRESIDENT
Each share of Capital Stock of Texas Butylene Chemical Corporation has a
stated value of One Dollar ($1.00) per share.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations. Additional abbreviations may also
be used though not in the list.
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM -- as tenants in common.............. UNIF GIFT MIN ACT -- .......Custodian.... (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act.........(State)
CT TEN -- as joint tenants with right of
survivorship and not as tenants in
common
</TABLE>
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO
- --------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
................................................................................
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
................................................................................
......................................................................... Shares
represented by the within Certificate and, hereby irrevocably constitutes and
appoints........................................................................
Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in its premises.
Dated ......................................................................
In presence of ...................................................... .
EXHIBIT 10.9
COMPANY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") dated as of
July 1, 1996 is between TPC FINANCE CORP., a Texas corporation to be merged into
TEXAS PETROCHEMICALS CORPORATION, a Texas corporation with an office at 8600
Park Place Boulevard, Houston, Texas 77017 (collectively referred to as the
"DEBTOR"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, in its capacity as
agent (in such capacity, the "AGENT") for the benefit of the Agent and the
lenders (the "LENDERS") party to the Credit Agreement (as defined below).
PRELIMINARY STATEMENT
The Lenders, the Agent and ABN AMRO North America, Inc. as agent
for ABN AMRO Bank N.V. and The Bank of Nova Scotia, as co-documentation agents,
and the Debtor have entered into a Credit Agreement dated this date (said Credit
Agreement, as it may hereafter be amended or otherwise modified from time to
time, the "CREDIT AGREEMENT") pursuant to which the Lenders commit to make
available to the Debtor (a) revolving credit loans of up to $40,000,000.00,
including swing line loans and the issuance of letters of credit, (b) a term
loan of up to $85,000,000.00, (c) a second term loan of up to $45,000,000.00 and
(d) a third term loan of up to $10,000,000.00. It is a condition precedent to
the obligation of the Lenders to make the Loans to the Debtor that the Debtor
shall have granted the security interest contemplated by this Security
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to make Loans to the Debtor under the Credit Agreement, the
Debtor hereby agrees as follows:
SECTION 1. DEFINED TERMS.
(a) Each capitalized term used herein and not otherwise defined
shall have the meaning for such term as defined in the Credit Agreement.
(b) The term "FEEDSTOCK" means the petrochemicals used by the
Debtor to manufacture Product, including crude butadiene, isobutane, methanol
and any other petrochemical or other substances used for the production of
Products.
(c) The term "PIPELINE" means the pipelines owned or operated by
the Debtor for the gathering, transmission or distribution of any material,
including, without limitation, Feedstock and/or Products.
-1-
(d) The term "PRODUCT" means the petrochemical products
manufactured by the Debtor including butadiene, methyl tertiary-butyl ether,
n-butylenes (butene-1 and butene-2) and specialty isobutylenes.
(e) The term "UCC" means the Uniform Commercial Code as in effect
on the date hereof in the State of Texas; PROVIDED that if by mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interests granted pursuant to SECTION 2 hereof, as well as all
other security interests created or assigned as additional security for the
Secured Obligations pursuant to the provisions of this Security Agreement, in
any Collateral is governed by the UCC as in effect in such other jurisdiction
other than Texas, "UCC" means the UCC as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
SECTION 2. GRANT OF SECURITY. The Debtor hereby grants to the
Agent for the benefit of the Agent and the Lenders, a security interest in, all
of the Debtor's right, title and interest in and to the following, whether
presently held or hereafter acquired (the "COLLATERAL"):
(a) (i) All accounts (as defined in the UCC) and (ii) (whether or
not included in such definition), all receivables, accounts receivable, lease
receivables, contract rights, chattel paper, drafts, acceptances, instruments,
writings evidencing a monetary obligation or a security interest or a lease of
goods, general intangibles and other obligations of any kind, now or hereafter
existing, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services, and all rights now or hereafter existing
in and to all security agreements, leases, and other contracts securing or
otherwise relating to any such accounts, lease receivables, chattel paper,
drafts, acceptances, instruments, writings evidencing a monetary obligation or a
security interest or a lease of goods, general intangibles or obligations (any
and all of the foregoing in sub-clause (i) and (ii) being the "RECEIVABLES");
and
(b) All inventory (as defined in the UCC) in all of its forms,
wherever located, now or hereafter existing and whether acquired by purchase,
merger or otherwise, and all Feedstock, all Product including all Product and
all Feedstock located in any Pipeline, storage terminal, storage facility,
barge, tank and tankcar and all raw materials, stores, tools, and work in
process therefor, all finished goods, spare parts, service parts, and all
materials used or consumed in the manufacture, packing, shipping, advertising,
selling, leasing or production thereof, including (whether or not included in
such UCC definition) goods in which the Debtor has an interest in mass or joint
or other interest or right of any kind and goods which are returned to or
repossessed by the Debtor, and all accessions thereto and products thereof and
documents therefor (any and all of the foregoing being the "INVENTORY"); and
(c) All general intangibles (as defined in the UCC), and (whether
or not included in such definition) all inventions, processes, production
methods, proprietary information and know-how; all intellectual property rights;
all business records, books, files, ledgers, documents and
-2-
correspondence, confidential and otherwise, including market information, sales
aids, customer and supplier lists, files, records and data; all accounting
information and all media in which or on which any of the information or
knowledge or data or records may be recorded or stored and all computer programs
used for the compilation or printout of such information, knowledge, records or
data; all computer software (including all source codes), data rights,
documentation and associated license, escrow, support, maintenance and software
development agreements now or hereafter held pertaining to the operations of the
Debtor's business; all licenses and sublicenses, including any of such which
relate to computer software; all consents, permits, variances now or hereafter
held by Debtor pertaining to operations or business now or hereafter conducted;
all rights to receive return of deposits and trust payments; all rights to
payment under letters of credit and similar agreements; all tax refunds; all
proceeds of any insurance, indemnity, warranty or guaranty; and all causes of
action, rights, claims and warranties (any and all of the foregoing being the
"GENERAL INTANGIBLES"); and
(d) All equipment (as defined in the UCC) and (whether or not
included in such definition), all tangible personal property including all
plant, terminal or facility equipment and other manufacturing and research
items, computer hardware, all vehicles, goods, machinery, chattels, tools, dies,
jigs, molds, parts, machine tools, furniture, furnishings, fixtures, and
supplies, of every nature, wherever located, all additions, accessories and
improvements thereto and substitutions therefor and all accessories, parts and
equipment which may be attached to or which are necessary for the operation and
use of such personal property or fixtures, whether or not the same shall be
deemed to be affixed to, arise out of or relate to any real property owned or
leased by the Debtor, together with all accessions thereto, and all rights under
or arising out of present or future leases or contracts relating to the
foregoing (any and all of the foregoing being the "EQUIPMENT"); and
(e) Any motor vehicle, trailer or other vehicle required to be
registered or licensed under the Texas Certificate of Title Act or any similar
Law and as to which title thereto is evidenced by a certificate of title issued
by a governmental authority (any and all of the foregoing being the "TITLED
VEHICLES"); and
(f) All rights in and to all permits, licenses, authorizations,
approvals, product and establishment registrations and approvals, certificates
of convenience or necessity franchises, immunities, easements, consents, grants,
ordinances and other rights, in each case granted by any governmental authority
pertaining to the operation of the business; and
(g) All sales orders, sales contracts, purchase orders, purchase
contracts, operating agreements, tolling agreements, service agreements,
development agreements, consulting agreements, leases and other contract rights,
including the Material Contracts and, to the extent they can lawfully be
conveyed or assigned under express or implied warranties from providers of goods
or services pertaining to the operation of the business (any and all of the
foregoing being the "CONTRACTS"); and
-3-
(h) All letters patent of the United States or any other country,
all registrations and recordings thereof, and all applications for letters
patent of the United States or any other country, including all national and
multinational statutory invention registrations, patents (including letters
patent; patent registrations and patent applications and any other patents which
may issue on such application) and each patent and patent application listed on
SCHEDULE I hereto and including all reissues, continuations or extensions
thereof and all rights therein provided by law, multinational treaties or
conventions (the "PATENTS"); and
(i) All trademarks, trade names, service marks, trade dress,
logos, including all good will associated therewith, whether or not registered,
all registrations and recordings thereof, and all applications in connection
therewith, including registrations and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State thereof or any other country throughout the world or any political
subdivision thereof, including those listed on SCHEDULE II hereto and including
all reissues, extensions or renewals thereof, and all written agreements
granting any right to use any trademark or trademark registration and all rights
therein provided by multinational treaties or conventions (the "TRADEMARKS");
and
(j) All instruments, chattel paper or letters of credit (each as
defined in the UCC) evidencing, representing, arising from or existing in
respect of, including all promissory notes held by the Debtor evidencing
indebtedness owed by any Subsidiary or by the Parent (any and all of the
foregoing being the "INSTRUMENTS"); and
(k) All documents (as defined in the UCC) or other receipts
covering, evidencing or presenting goods; and
(l) All products and proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral.
Notwithstanding the foregoing, the Collateral in which a security
interest is granted under this Security Agreement specifically excludes the
following to the extent same are presently in existence: (i) general intangibles
and contract rights (including real property leases, but other than rights for
the payment of money), in either case arising under written contracts which
expressly prohibit assignment of such rights without the prior written consent
of the other party thereto and for which such consent is required and has not
been received by the Debtor, (ii) to the extent prohibited by applicable law,
licenses and permits issued by any governmental authority or agency; provided
such hypothecation under this Security Agreement would create a default under
applicable law and (iii) the Other Assets.
-4-
The inclusion of proceeds in this Security Agreement does not
authorize the Debtor to sell, dispose of or otherwise use the Collateral in any
manner not specifically authorized hereby.
SECTION 3. SECURITY FOR OBLIGATIONS. This Security Agreement
secures the prompt and complete (a) payment of all Obligations of the Debtor to
the Agent and the Lenders now or hereafter existing under the Notes, the Credit
Agreement and the other Loan Documents and (b) performance and observance of all
covenants and conditions contained in the Credit Agreement, this Security
Agreement and any other Loan Document, and in any case whether for principal,
interest, fees, expenses or otherwise (all such Obligations, covenants and
conditions described in the foregoing clauses (a) and (b) being hereinafter
collectively referred to as the "SECURED OBLIGATIONS").
SECTION 4. DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein (and
subject to any defenses thereto) to perform all of its duties and obligations
thereunder to the same extent as if this Security Agreement had not been
executed, (b) the exercise by the Agent for the benefit of the Lenders of any of
the rights hereunder shall not release the Debtor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) neither the Agent nor any Lender shall have any obligation or liability
under the contracts and agreements included in the Collateral solely by reason
of this Security Agreement, nor shall the Agent or any Lender be obligated to
perform any of the obligations or duties of the Debtor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder in each
case, solely by reason of this Security Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Debtor represents
and warrants as follows:
(a) Those locations specified on SCHEDULE III hereto or such
other locations disclosed to the Agent after the date hereof constitute all of
the locations at which there is located any Equipment and/or Inventory of the
Debtor (other than rolling stock or Inventory in transit). The principal place
of business and chief executive office of the Debtor and the office where the
Debtor keeps its records concerning the Receivables, are located at the address
specified in the introductory paragraph to this Security Agreement or at such
other locations disclosed in writing to the Agent after the date hereof.
(b) The Debtor owns the Collateral free and clear of any Lien,
except for Permitted Liens. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except for protective filings under true leases, filings made
in connection with SECTION 8.04 (G) of the Credit Agreement and such as may have
been filed in favor of the Agent for the benefit of the Lenders relating to this
Security Agreement.
(c) This Security Agreement has been duly executed and delivered
by the Debtor. Upon the filing of financing statements in the locations
requested by the Secured Party and the filing
-5-
of this Security Agreement in the United States Patent and Trademark Office, the
security interests granted herein shall constitute valid and perfected security
interests in the Collateral, subject only to Permitted Liens, to the extent such
security interests can be perfected by such filings pursuant to the UCC and
applicable U.S. trademark and patent laws.
(d) No consent of, or notice to, any other Persons and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the grant
by the Debtor of the Lien granted hereby or for the execution, delivery or
performance of this Security Agreement by the Debtor or (ii) for the perfection
of the rights and remedies hereunder, other than the filing of financing
statements and this Security Agreement as provided in (c) above.
(e) Except as set forth in SCHEDULE IV hereto, the Debtor has
exclusive possession and control of the Equipment and Inventory.
(f) All information with respect to the Collateral and the
obligors under the Receivables set forth in any Schedule hereto, certificate or
other writing at any time heretofore or hereafter furnished by the Debtor to the
Agent or any Lender, taken as a whole, is, to the Debtor's knowledge, true,
correct and complete in all material respects as of the date specified therein.
SECTION 6. FURTHER ASSURANCES. (a) The Debtor agrees that from
time to time, at the expense of the Debtor, the Debtor will promptly execute and
deliver all further instruments and documents, and take all further action
(including any filings with the United States Patent and Trademark Office or
delivery of documents of title for the Titled Vehicles), that the Agent or the
Majority Lenders may request as being necessary or desirable, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent or any Lender to exercise and enforce its rights
and remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Debtor will: (i) mark conspicuously each
chattel paper included in the Receivables and any Instrument related thereto and
each of its records pertaining to the Collateral with a legend indicating that
such document, Instrument or Collateral is subject to the security interest
granted hereby; (ii) if any Receivable shall be evidenced by a promissory note
or other Instrument deliver and pledge to the Agent for the benefit of the
Lenders such note or Instrument duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to the Agent and (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices as the Agent may request as being necessary or desirable in order to
perfect and preserve the security interests granted or purported to be granted
hereby.
(b) The Debtor hereby authorizes the Agent for the benefit of
itself and the Lenders to file one or more financing or continuation statements,
and amendments thereto, relative to all or any part of the Collateral without
the signature of the Debtor, in each case where permitted by law. A carbon,
photographic or other reproduction of any financing statement executed by the
-6-
Debtor covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
(c) The Debtor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent or the
Majority Lenders may reasonably request, all in reasonable detail.
(d) The Debtor will promptly notify the Agent of any change of
its name, corporate structure, federal employer identification number or the
address of its principal place of business or chief executive office where its
books and records are maintained.
(e) The Debtor shall keep its principal place of business and
chief executive office and the office where it keeps its records concerning the
Collateral, at the location or locations therefor specified in SECTION 5(A) or,
upon 30 days' prior written notice (or such other notice acceptable to the
Agent) to the Agent, at such other locations in a jurisdiction where all action
required by SECTION 6 shall have been taken with respect to the Collateral. The
Debtor will hold and preserve such records and will upon reasonable notice
permit representatives of the Agent at any time during normal business hours to
inspect and make abstracts from such records.
(f) Except as otherwise provided in this subsection (f), the
Debtor shall continue to collect, at its own expense, all amounts due or to
become due the Debtor under the Receivables. In connection with such
collections, the Debtor may take (and, upon the occurrence and continuance of an
Event of Default at the Agent's direction, shall take) such action as the Debtor
or the Agent may deem necessary or advisable to enforce collection of the
Receivables; PROVIDED, that the Agent for the benefit of itself and the Lenders
shall have the right at any time during the existence of an Event of Default,
upon written notice to the Debtor of its intention to do so, to notify the
account debtors or obligors under any Receivables of the assignment of such
Receivables to the Agent for the benefit of itself and the Lenders and to direct
such account debtors or obligors to make payment of all amounts due or to become
due to the Debtor thereunder directly to the Agent and, upon such notification
and at the expense of the Debtor, to enforce collection of any such Receivables,
and to adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Debtor might have done. After receipt by
the Debtor of the notice from the Agent referred to in the PROVISO to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by the Debtor in respect of the Receivables shall be received in trust
for the Agent for the benefit of itself and the Lenders hereunder, shall be
segregated from other funds of the Debtor and shall be forthwith paid over to
the Agent for the benefit of itself and the Lenders in the same form as so
received (with any necessary endorsement) to be held as cash collateral and
either (A) released to the Debtor so long as no Event of Default shall be
continuing or (B) if any Event of Default shall be continuing, applied as
provided in SECTION 12 (B), and (ii) the Debtor shall not adjust, settle or
compromise the amount or payment of any Receivable, or release wholly or partly
any account debtor or obligor thereof, or allow any credit or discount thereon,
except with the prior written consent of the Agent.
-7-
(g) The Debtor shall keep the Equipment and Inventory (other than
such Inventory sold in the ordinary course of business or Inventory in transit)
at the places therefor specified in SECTION 5(A) or, upon at least 30 days'
prior written notice (or such other notice acceptable to the Agent) to the
Agent, at such other places in jurisdictions where all action required by
SECTION 6 shall have been taken with respect to such Equipment and Inventory.
(h) The Debtor shall promptly upon request furnish to the Agent a
statement respecting any material loss or damage to any of the Equipment,
Inventory or Titled Vehicles and will permit the Agent to inspect the Collateral
upon reasonable notice during normal business hours.
SECTION 7. INSURANCE. The Debtor shall, at its own expense,
maintain insurance as required by the Credit Agreement.
SECTION 8. TRANSFERS AND OTHER LIENS. The Debtor shall not: (a)
sell, assign (by agreement, operation of law or otherwise) or otherwise dispose
of any of the Collateral (other than in the ordinary course of business or as
permitted by the Credit Agreement) or (b) create or suffer to exist any Lien
upon or with respect to any of the Collateral, except for Permitted Liens.
SECTION 9. AGENT APPOINTED ATTORNEY-IN-FACT. The Debtor hereby
irrevocably appoints the Agent for the benefit of the Lenders the Debtor's
attorney-in-fact, with full authority in the place and stead of the Debtor and
in the name of the Debtor, from time to time during the existence of an Event of
Default in the Agent's sole discretion, to take any action and to execute any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including:
(a) to obtain insurance required to be paid pursuant to SECTION 7
herein,
(b) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral,
(c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a) above,
(d) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Agent for the
benefit of the Lenders with respect to any of the Collateral, and
(e) to sell, transfer, assign, or otherwise deal in or with the
Collateral or the proceeds or avails thereof, as provided herein and subject to
applicable law, as fully and effectually as if the Agent were the absolute owner
thereof provided, that the Agent shall give the Debtor not less than ten (10)
days' prior written notice of the time and place of any sale or other intended
-8-
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. The Debtor agrees that such notice constitutes "reasonable
notification" within the meaning of ss. 9.504(c) of the UCC.
SECTION 10. AGENT MAY PERFORM. If the Debtor fails to perform any
agreement contained herein, the Agent may itself, during the existence of an
Event of Default, perform, or cause performance of, such agreement, and the
expenses of the Agent incurred in connection therewith shall be payable by such
Debtor under SECTION 11.04 of the Credit Agreement.
SECTION 11. THE AGENT'S DUTIES. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for reasonable care
in the custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral. The Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
any Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that the Agent shall not have any responsibility for taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
SECTION 12. REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Agent for the benefit of itself and the Lenders may
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of
a secured party on default under the UCC (whether or not the UCC applies to the
affected Collateral) and the Agent may also (i) require the Debtor to, and the
Debtor hereby agrees that it will at its expense and upon request of the Agent
forthwith, assemble all or part of the Collateral as directed by the Agent and
make it available to the Agent at a place to be designated by the Agent which is
reasonably convenient to both parties and (ii), without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Lenders' offices or elsewhere, for cash
or on credit, and upon such other terms as may be commercially reasonable. The
Debtor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days' prior notice to the Debtor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification thereof. The Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) Any cash received by the Agent shall be applied pro rata by
the Lenders against the Obligations, and if no Obligations are outstanding, such
cash may be held by the Agent for the benefit of itself and the Lenders as
Collateral and all cash proceeds received by the Agent for the
-9-
benefit of itself and the Lenders in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may be held by the
Agent as collateral for, and/or then or at any time thereafter applied pro rata
(after payment of any amounts payable to the Agent for the benefit of itself and
the Lenders pursuant to SECTION 11.04 of the Credit Agreement) in whole or in
part by the Lenders against, all or any part of the Secured Obligations. Any
surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all the Secured Obligations shall be paid over to the Debtor
or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 13. AMENDMENTS. No amendment or waiver of any provision
of this Security Agreement, nor consent to any departure by the Debtor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Agent and the Debtor, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 14. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing and addressed to the
Debtor at the address at the beginning of this Security Agreement and to any
party to the Credit Agreement at the address provided for such party in the
Credit Agreement, or as to any party at such other address as shall be
designated by such party in a written notice to each other party complying as to
delivery with the terms SECTION 11.02 of the Credit Agreement.
SECTION 15. TERMINATION; REINSTATEMENT. (a) The Debtor agrees
that this Security Agreement and the Liens granted hereunder shall terminate
when, but only when, all Secured Obligations have been fully paid and performed
and the Commitments have expired or been terminated. At any time thereafter upon
the Debtor's request the Agent shall promptly reassign and redeliver, including
the termination of any financing statements (or cause to be reassigned and
redelivered) to the Debtor, or to such Person or Persons as the Debtor shall
designate in writing, against receipt, such of the Collateral (if any) as shall
not have been sold or otherwise applied by the Agent for the benefit of itself
and the Lenders pursuant to the terms hereof and shall still be held by it
hereunder. Any such reassignment shall be without recourse upon, or
representation or warranty by, the Agent (other than that the Agent for the
benefit of itself and the Lenders has not sold, encumbered or otherwise
transferred any interest in the Collateral except as provided in this Security
Agreement) and shall be at the sole cost and expense of the Debtor.
(b) This Security Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any amount received by the Agent
or any other Lender in respect of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Agent or such other Lender upon the
filing of any bankruptcy proceeding by or of the Debtor or upon the appointment
of any intervenor or conservator of, or trustee or similar official for, the
Debtor or any substantial part of its assets, or otherwise, all as though such
payments had not been made.
SECTION 16. WAIVER OF MARSHALLING. All rights of marshalling of
assets of the Debtor, including any such right with respect to the Collateral,
are hereby waived by the Debtor.
-10-
SECTION 17. LIMITATION BY LAW. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Security Agreement are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this Security
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
SECTION 18. SEPARABILITY. Should any clause, sentence, paragraph,
subsection or Section of this Security Agreement be judicially declared to be
invalid, unenforceable or void, such declaration will not have the effect of
invalidating or voiding the remainder of this Security Agreement, and the
parties hereto agree that the part or parts of this Security Agreement so held
to be invalid, unenforceable or void will be deemed to have been stricken
herefrom by the parties hereto, and the remainder will have the same force and
effectiveness as if such stricken part or parts had never been included herein.
SECTION 19. NO WAIVER; REMEDIES. No failure on the part of the
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 20. PARTIAL RELEASE OF SECURITY INTEREST. Upon the
request of the Debtor in connection with any sale, transfer or other disposition
of property or assets permitted hereunder or under the Credit Agreement, so long
as no Default or Event of Default has occurred and is continuing, the Agent
shall execute and deliver to the Debtor duly executed releases or partial
releases, as applicable, of any security interest it may have in such property
or assets, in form and substance reasonably satisfactory to the Agent and the
Debtor.
SECTION 21. CONTINUING SECURITY INTEREST. This Security Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until payment in full of the Secured
Obligations, (b) be binding upon the Debtor, its successors and assigns and (c)
inure to the benefit of the Agent for the benefit of itself and the Lenders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Lender may assign or otherwise
transfer all or a portion of its interests, rights and obligations under the
Notes held by it pursuant to SECTION 11.10 of the Credit Agreement. Upon the
payment in full of the Secured Obligations, the Lien granted hereby shall
terminate and all rights to the Collateral shall revert to the Debtor. Upon any
such termination, the Agent will, at the Debtors' expense, promptly execute and
deliver to the Debtor such documents as the Debtor shall reasonably request to
evidence such termination.
SECTION 22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Security Agreement or made in
writing by or on behalf of the Debtor in
-11-
connection herewith are true and correct in all material respects when made or
deemed made and shall survive the execution and delivery of this Security
Agreement until repayment of the Secured Obligations. Any investigation by the
Agent or any Lender shall not diminish in any respect whatsoever its rights to
rely on such representations and warranties.
SECTION 23. GOVERNING LAW; TERMS. This Security Agreement shall
be governed by and construed in accordance with the laws of the State of Texas
and the applicable laws of the United States of America, except as required by
mandatory provisions of law and except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in respect
of any particular collateral are governed by the laws of a jurisdiction other
than the State of Texas.
SECTION 24. INCONSISTENCIES. In the event of any irreconcilable
inconsistences between any provision of this Security Agreement and any
provision of the Credit Agreement, the provisions of the Credit Agreement shall
control.
SECTION 25. INTERPRETATION.
(a) In this Security Agreement, unless a clear contrary intention
appears:
(i) the singular number includes the plural number and VICE
VERSA;
(ii) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Security Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Security Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually, PROVIDED
that nothing in this clause (iii) is intended to authorize any assignment not
otherwise permitted by this Security Agreement;
(iv) reference to any agreement, document or instrument means
such agreement, document or instrument as amended, supplemented or modified and
in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof, and reference to any Note includes any Note issued
pursuant hereto in extension or renewal thereof and in substitution or
replacement therefor;
(v) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section hereof or
such Schedule or Exhibit hereto;
(vi) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any description
preceding such term;
-12-
(vii) with respect to the determination of any period of time,
the word "from" means "from and including" and the word "to" means "to but
excluding;" and
(viii) reference to any law means such as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to time.
(b) The Section headings herein are for convenience only and
shall not affect the construction hereof.
(c) No provision of this Security Agreement shall be interpreted
or construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 26. SUBMISSION TO JURISDICTION. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN HARRIS COUNTY OR THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY
OF THIS SECURITY AGREEMENT, THE DEBTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
SECTION 14, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE DEBTOR IN ANY OTHER JURISDICTION.
(B) THE DEBTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS SECURITY AGREEMENT
BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 27. WAIVER OF JURY TRIAL. THE DEBTOR AND AGENT HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
-13-
RIGHTS UNDER THIS SECURITY AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS SECURITY AGREEMENT, AND AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 28. FINAL AGREEMENT OF THE PARTIES. THIS SECURITY
AGREEMENT (INCLUDING THE SCHEDULES HERETO), THE NOTES, THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT" AS DEFINED IN SECTION
26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
-14-
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement
to be duly executed and delivered by its officer duly authorized as of the date
first above written.
TPC FINANCE CORP.
By:
Susan O. Rheney
President
TEXAS PETROCHEMICALS
CORPORATION successor by
merger to TPC Finance Corp.
By:
Claude E. Manning
Vice President
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
As Agent
By:
Mary C. Arnold
Vice President
-15-
<PAGE>
SCHEDULE I
PATENTS
<TABLE>
<CAPTION>
Description Country Registration No. Expiration Date
<S> <C> <C> <C>
ISO-C4 Compound Reactions United States 4,065,512 July 6, 1996
with Perfluorosulfonic Acid
Resin Catalysts
Calcium Oxide Modified United States 4,083,884 July 19, 1996
Zinc
Fixed Bed Process for the United States 4,087,471 May 20, 1997
Production of T-Butanol
Dimerization of Isobutene United States 4,100,220 June 27, 1997
Method of Activating Zinc United States 4,150,064 April 17, 1996
Ferrite Oxidative
Dehydrogenation Catalysts
Preparation of United States 4,152,358 May 1, 1996
Hydroferoxides by
Autoxidation
Apparatus and Method for the United States 4,154,086 April 6, 1998
Discovery of Volatile Organic
Compounds in Water
Dehydrogenation Process and United States 4,172,854 October 30, 1996
Cataylst
Isobutene Removal from C4 Untied States 4,313,016 October 23, 2000
Streams
Modified Zinc Ferrite United States 4,332,972 June 1, 1999
Oxidative Dehydrogenation
Catalysts in Oxidative
Dehydrogenation
Olefin Conversion Process United States 4,436,949 September 21, 2002
Process for Oligomerization United States 4,436,211 June 31, 2001
of C2 to C10 Normal Olefins
Isobutene Removal from C4 Untied States 4,469,911 September 4, 2001
Streams
Acetylene Removal Process United States 4,513,159 April 23, 2002
Process for the Production of United States 4,540,839 March 26, 2004
Polymer Gasoline
<PAGE>
* Production of Isobutene United States 4,570,026 August 12, 2003
from Methyl Tertiary Butyl
Ether
Acetylene Removal Process United States 4,644,088 February 17, 2004
Acetylene Removal Process United States 4,658,080 April 14, 2004
Catalytic Oxidative United States 4,658,074 April 14, 2004
Dehydrogenation Process
Oxidative Dehydrogenation United States 4,973,793 June 8, 2009
of Amylenes
Alkene Isomerization Process United States 5,043,523 August 27, 2008
and Catalyst
Belgium 890,559 September 30, 2001
(3845/ASL/CD)
Canada 1,169,889 (T5962-12) June 26, 2001
France p8118317 September 29, 2001
(3845/AWM)
Germany P3140154.6 September 10, 2001
Italy 1,143,249 (7436) October 20, 2001
UK 2,085,914B (563A97) September 15, 2001
Germany P3153739.1 October 10, 2001
Belgium 809,825 (3689) October 22, 2001
Canada 1,161,066 (T5962-11) January 24, 2001
France 8,114,160 June 21, 2001
(CA/ASL/AC)
Germany 3,140,153 September 10, 2001
(P3140153.8)
Italy 1,143,217 (7210) August 3, 2001
Japan 1,718,711 August 4, 2001
(122342/81)
UK 2,086,415B (540A39) June 12, 2003
Canada 1,215,963 (T5962-4) December 30, 2003
<PAGE>
France 8,317,751 (5186) November 3, 2003
Italy 1,170,559 (9282) Nobember 2, 2003
Japan 1,787,371 November 11, 2003
(212287/83)
UK 2,129,701B September 30, 2003
(698A522)
Germany P3340958.7 November 12, 2003
Netherlands 8,383,824 November 6, 2003
Argentina 247,193 (317,031) November 30, 2009
South Africa 904,116 May 29, 2010
Taiwan NI-51977 (79106233) November 10, 2006
Romania 108,342 (145301) July 11, 2005
Mexico 172,648 (21006) June 4, 2010
China 29,013 (90-104198) June 8, 2005
Russia 4830124/04 June 7, 2005
India 496/DEL/90 May 23, 2004
</TABLE>
- --------------
* This patent is currently owned by Petro-Tex Chemical Corporation and will
be assigned to Texas Petrochemical Corporation within a reasonably time
after the Execution Date.
<PAGE>
SCHEDULE II
TRADEMARKS
Description Country Registration No. Issued
"Skip" United States 1,803,456 November 9, 1993
PetroTex France 1,190,022 June 21, 1984
PetroTex & Map Brazil 609,203,703 June 21, 1984
PetroTex and Mark Brazil 692,037,082 June 21, 1984
<PAGE>
SCHEDULE III
LOCATIONS OF EQUIPMENT AND INVENTORY
8600 Park Place Boulevard
Houston, Texas 77017
4604 Baker Road
Baytown, Texas 77521
IMTT Bayonne
Foot of East 22nd Street
P.O. Box 67
Bayonne, New Jersey 07002
<PAGE>
SCHEDULE IV
INVENTORY AND EQUIPMENT NOT IN POSSESSION AND CONTROL OF DEBTOR
Turbine rotators located at Elliot Support Service, 2001 West Sam Houston
Parkway North, Houston, Texas 77210.
17,000 pounds of diisobutylene stored at 3639 Willowbend, Houston, Texas.
Westinghouse gas compressor stored at Powerserve International, Inc., 16530
Peninsula, Houston Texas 77015.
<PAGE>
EXHIBIT 10.10
HOLDING CO
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") dated effective
as of July 1, 1996 is made by TEXAS PETROCHEMICAL HOLDINGS, INC., a Delaware
corporation ( the "PLEDGOR"), to TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association, as agent (the "AGENT") for the benefit of the
Agent and the lenders (the "LENDERS") party to the Credit Agreement (as defined
below).
PRELIMINARY STATEMENT
The Lenders, the Agent, ABN AMRO North America, Inc., as agent
for ABN AMRO Bank N.V. and The Bank of Nova Scotia, as co-documentation agents,
and TPC Finance Corp. to be merged into Texas Petrochemicals Corporation, a
Texas corporation entered into a Credit Agreement dated as of even date herewith
(said Credit Agreement, as it may hereafter be amended or otherwise modified
from time to time, being the "CREDIT AGREEMENT"), pursuant to which the Lenders
agreed to make the following Loans to the Company: (a) revolving credit loans of
up to $40,000,000.00; (b) a term loan of up to $85,000,000.00; (c) a second term
loan of up to $45,000,000.00; and (d) a third term loan of up to $10,000,000.00.
All capitalized terms used herein and not otherwise defined shall have the
meanings as defined in the Credit Agreement.
The Pledgor is the owner of 1,000 shares of capital stock of TPC
Holding Corp, a Delaware corporation and wholly owned subsidiary of the Pledgor
(the "PLEDGED SHARES") evidenced by Certificate No. 1. It is a condition
precedent to the obligations of the Agent to make the Loans under the Credit
Agreement that the Pledgor shall have executed and delivered this Pledge
Agreement.
NOW THEREFORE, in consideration of the premises and in order to
induce the Lenders to make available to the Pledgor the Loans under the Credit
Agreement the Pledgor hereby agrees as follows:
SECTION 1. DEFINED TERMS
(a) The term "UCC" means the Uniform Commercial Code as in effect
on the date hereof in the State of Texas; PROVIDED that if by mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interests granted pursuant to SECTION 2 hereof, as well as all
other security interests created or assigned as additional security for the
Secured Obligations (as defined below in SECTION 3) pursuant to the provisions
of this Pledge Agreement, in any Pledged Collateral is governed by the UCC as in
effect in such other jurisdiction other than Texas, "UCC" means the UCC as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.
-1-
(b) The term "Issuer" means TPC Holding Corp., a Delaware
corporation and wholly owned subsidiary of the Pledgor.
SECTION 2. PLEDGE. The Pledgor hereby pledges to the Agent for
the benefit of itself and the Lenders, and grants to the Agent for the benefit
of itself and the Lenders a security interest in, the following (the "PLEDGED
COLLATERAL"):
(i) the Pledged Shares and the certificates representing the
Pledged Shares, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(ii) all additional shares of stock of Issuer from time to time
acquired by the Pledgor in any manner, and the certificates representing
such additional shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such shares; and
(iii) all proceeds of any of the foregoing.
The inclusion of proceeds in this Pledge Agreement does not
authorize the Pledgor to sell, dispose of or otherwise use the Pledged
Collateral in any manner not specifically authorized hereby.
SECTION 3. SECURITY FOR OBLIGATIONS. This Pledge Agreement
secures the prompt and complete (a) payment of all obligations of the Company to
the Agent and the Lenders now or hereafter existing under the Credit Agreement,
the Notes and the other Loan Documents (b) the performance and observance by the
Company of all covenants and conditions contained in all of the Loan Documents,
whether for principal, interest, fees, expenses or otherwise and (c) the
performance and observance by the Pledgor of all covenants and conditions
contained in this Pledge Agreement (all such obligations, covenants and
conditions described in the foregoing clauses (a) and (b) being hereinafter
referred to as the "SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of the Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent. Upon the occurrence and during the continuance of any
Event of Default, the Agent shall have the right, at any such time in its sole
discretion or upon the instruction of the Majority Lenders and without notice to
the Pledgor, to transfer to or to register in the name of the Agent or the
Lenders or any of their respective nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in SECTION 7(A)
hereof. In addition, upon the occurrence and during the continuance of any Event
of Default, the Agent shall have the right
-2-
at any such time to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. In addition to the
representations and warranties of the Pledgor under the Credit Agreement, the
Pledgor represents and warrants as follows:
(a) The Pledged Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any Lien except for Permitted Liens, if any,
created in favor of the Agent.
(c) The Pledgor has the corporate power and authority to execute,
deliver and perform its obligations hereunder and under the other Loan Documents
to which it is a party and all such action has been duly authorized by all
necessary corporate proceedings on its part. The Loan Documents to which the
Pledgor is a party have been duly and validly executed and delivered by the
Pledgor and constitute valid and legally binding agreements of the Pledgor
enforceable in accordance with the respective terms thereof, except, in each
case, as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws relating
to a affecting the enforcement of creditors' rights generally and general
principles of equity.
(d) No authorization, consent, approval, license or exception of
or filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality is necessary for the valid execution,
delivery or performance by the Pledgor of this Pledge Agreement.
(e) The execution, delivery and performance of this Pledge
Agreement does not (i) result in breach of, or constitute a default under, the
charter or bylaws of the Pledgor or any material agreement, lease or instrument
to which the Pledgor presently is a party or (ii) result in or require the
creation or imposition of, any mortgage, deed of trust, pledge, lien, security
interest or other share or encumbrance of any nature upon or with respect to any
of the Pledgor's property or interests, be they tangible or intangible. The
Pledgor is not in violation of or in default under any material indenture,
agreement lease or instrument that would reasonable be expected to have a
material adverse effect on the financial condition, business, operations,
prospects, or assets of the Pledgor and its Subsidiaries, taken as a whole.
(f) The delivery of the Pledged Shares to the Agent and this
Pledge Agreement, together with the filing of an appropriate financing statement
with the Texas Secretary of State is sufficient to create a valid and perfected
first priority Lien in the Pledged Collateral, subject only to Permitted Liens,
if any, securing the Secured Obligations.
-3-
(g) The Pledged Shares constitute one hundred percent (100%) of
the issued and outstanding common stock of Issuer.
SECTION 6. FURTHER ASSURANCES. (a) The Pledgor covenants and
agrees to furnish or cause to be furnished to each Lender:
(i) As soon as available, and in any event within
forty-five (45) days after the close of each of the first three fiscal
quarters in each fiscal year of the Pledgor, the consolidated quarterly
unaudited balance sheets of the Pledgor and its Subsidiaries as of the
end of such periods and the related consolidated unaudited statements of
income and cash flows for such periods, setting forth, in each case,
commencing on the Financial Statement Delivery Date after the first
anniversary of this Pledge Agreement, comparative figures for the
related periods in the prior fiscal year (to the extent available) all
of which shall be certified by the chief financial officer or chief
executive officer of the Pledgor or any Responsible Officer as fairly
presenting in all material respects, the financial position of the
Pledgor as of the end of such period and the results of its operations
for the period then ended in accordance with GAAP, subject to changes
resulting from normal year-end audit adjustments; and
(ii) As soon as available, and in any event within ninety
(90) days after the close of each fiscal year of the Pledgor, the
audited consolidated balance sheet of the Pledgor and its Subsidiaries
as at the end of such fiscal year and the related audited statements of
income and audited cash flows for such fiscal year, setting forth, in
each case, comparative figures for the preceding fiscal year (to the
extent available) and certified by an independent certified public
accountant of recognized national standing, whose report shall be
without limitation as to the scope of the audit and reasonably
satisfactory in substance to the Majority Lenders.
(b) The Pledgor agrees that from time to time, at the expense of
the Pledgor, the Pledgor will promptly execute and deliver all further
instruments and documents, and take all further action that the Agent or the
Majority Lenders may reasonably request as being necessary or desirable, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Agent or any Lender to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral. The
Pledgor will furnish to the Agent from time to time statements and schedules
further identifying and describing the Pledged Collateral and such other reports
in connection with the Pledged Collateral as the Agent or any Lender may
reasonably request, all in reasonable detail as the Agent or any Lender may
reasonably request. The Pledgor agrees to deliver, upon its receipt from
issuance thereof, to the Agent or any Lender any certificate or other evidence
of Issuer evidencing any Pledged Shares issued after the date hereof, and such
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Agent or such Lender.
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SECTION 7. VOTING RIGHTS AND DIVIDENDS. (a) So long as no Event
of Default shall have occurred and be continuing and the Agent has not delivered
the notice specified in SECTION 7(B):
(i) The Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Pledge Agreement or the Loan Documents.
(ii) The Pledgor shall be entitled to receive and retain any and
all dividends paid in respect of the Pledged Collateral; PROVIDED,
except as expressly permitted by the Credit Agreement, that any and all
(A) dividends paid or payable other than in cash in respect of, and
instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or payable in cash in respect
of any Pledged Collateral in connection with a partial or total
liquidation or dissolution and (C) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged
Collateral, shall be, and shall be forthwith delivered to the Agent for
the benefit of the Lenders to be applied against the Obligations, or, if
no Obligations are outstanding, to hold as, Pledged Collateral and
shall, if received by the Pledgor, be received in trust for the benefit
of the Agent, be segregated from the other property or funds of the
Pledgor, and be forthwith delivered to the Agent as Pledged Collateral
in the same form as so received (with any necessary endorsement).
(iii) The Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to paragraph (i) above and to receive the
dividends which it is authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default, at the option of the Agent exercised in a writing sent to the Pledgor:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to SECTION 7(A)(I) shall cease, and the Agent shall thereupon
have the sole right to exercise such voting and other consensual rights.
(ii) All rights of the Pledgor to receive the dividends which it
would otherwise be entitled to receive and retain pursuant to SECTION
7(A)(II) shall cease, and the Agent for the benefit of the Lenders shall
thereupon have the sole right to receive and apply against the
Obligations or, if no Obligations are outstanding, hold as Pledged
Collateral such dividends and interest.
(iii) All dividends which are received by the Pledgor contrary to
the provisions of paragraph (ii) of this Section shall be received in
trust for the benefit of the Agent, shall
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be segregated from other funds of the Pledgor and shall be forthwith
paid over to the Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement).
SECTION 8. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES. (a)
Except as permitted in the Credit Agreement, the Pledgor shall not: (i) sell,
assign (by agreement, operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral, or (ii) create
or permit to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the Lien created by this Pledge Agreement and any other
Lien in favor of the Agent.
(b) The Pledgor agrees that it will cause Issuer not to issue any
stock or other securities (i) in substitution for the Pledged Shares,
except to the Pledgor and (ii) in addition to the Pledged Shares, except
in such amounts and to such holders as will maintain the percentage of
ownership set forth in SECTION 5(D) hereof for the Pledgor, except as
otherwise permitted by SECTION 8.02 of the Credit Agreement. Immediately
upon its acquisition (directly or indirectly) of any such substitute or
additional shares of stock or other securities of any Issuer, the
Pledgor will execute such documentation as requested by Agent pledging,
and evidencing the pledge hereunder of, such shares of stock or other
securities .
SECTION 9. AGENT APPOINTED ATTORNEY IN FACT. Effective upon the
occurrence and during the continuance of an Event of Default under any Loan
Document, the Pledgor hereby irrevocably appoints the Agent the Pledgor's
attorney in fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor, from time to time in the Agent's sole discretion to
take any action and to execute any instrument which the Agent may deem necessary
or advisable to accomplish the purposes of this Pledge Agreement, including,
without limitation, to receive, endorse and collect all certificates or
instruments made payable to the Pledgor representing any dividend or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.
SECTION 10. AGENT MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Agent may itself, during the existence of an
Event of Default, perform, or cause performance of, such agreement, and the
expenses of the Agent incurred in connection therewith shall be payable by the
Pledgor under SECTION 13 hereof.
SECTION 11. THE AGENT'S DUTIES. The powers conferred on the Agent
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for reasonable
care in the custody of any Pledged Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Agent shall have no
duty as to any Pledged Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Pledged Collateral. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its possession if
the Pledged Collateral is accorded treatment substantially equal to that which
the Agent accords its own property, it being understood that the Agent shall not
have any responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders
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or other matters relative to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
SECTION 12. REMEDIES UPON DEFAULT. If any Event of Default under
the Loan Documents shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a Agent on default under the UCC
(whether or not the UCC applies to the affected Pledged Collateral), and the
Agent may also, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Agent's offices or elsewhere,
for cash or credit, and upon such other terms as may be commercially reasonable.
The Pledgor agrees that at least ten (10) days' notice to the Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash received by the Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied by the Lenders against the outstanding Obligations,
and if no Obligations are outstanding, such cash may be held by the Agent upon
the instruction of the Majority Lenders as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to the Agent
pursuant to SECTION 13(B) hereof) in whole or in part by the Lenders against,
all or any part of the Secured Obligations in such order as each Lender shall
elect. Any surplus of such cash or cash proceeds held by the Agent and remaining
after payment in full of all the Secured Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
(c) In connection with the sale of any Pledged Collateral, the
Agent is authorized, but not obligated, to limit prospective purchasers to the
extent deemed reasonably necessary or desirable by the Agent to render such sale
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and any applicable state securities laws and
regulations, and no sale so made in good faith by the Agent shall be deemed not
to be "commercially reasonable" solely as a result of such limit of prospective
purchasers.
(d) All rights and remedies of the Agent for the benefit of
itself and the Lenders expressed herein are in addition to all other rights and
remedies possessed by the Agent in the Loan Documents and any other agreement or
instrument relating to the obligations.
(e) In connection with a public or private sale by the Agent
pursuant to this SECTION 12 of the Pledged Collateral or any part thereof, the
Agent may disclose, in accordance with
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SECTION 11.11 of the Credit Agreement, to prospective purchasers any and all
non-public information available to the Agent which pertains to (i) Issuer of
the Pledged Collateral, or (ii) the Pledgor, provided in the case of the
Pledgor, such non-public information is material to said issuer, its financial
condition or the Pledged Collateral.
SECTION 13. INDEMNITY AND EXPENSES.
(a) The Pledgor agrees to indemnify and shall indemnify the Agent
and each Lender and each Affiliate thereof and their respective directors,
officers, employees and agents (other than with respect to any claims by the
Administrative Agent and/or any Lender or Affiliate thereof against the
Administrative Agent or any Lender or any Affiliate, director, officer, employee
or agent thereof) (such indemnified Persons called the "INDEMNITEES") from, and
hold each of them harmless against, any and all losses, liabilities, claims or
damages (including reasonable legal fees and expenses) to which any of them may
become subject, insofar as such losses, liabilities, claims or damages arise out
of or result from the Pledged Collateral, this Pledge Agreement or any other
Loan Documents or any investigation, litigation or other proceeding (including
any threatened investigation or proceeding) relating to the foregoing, and the
Pledgor shall reimburse such Indemnitees, upon demand for any expenses
(including legal fees) reasonably incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or willful
misconduct of the Indemnitees. WITHOUT LIMITING ANY PROVISION OF THIS PLEDGE
AGREEMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH
INDEMNITEE SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ALL SUCH LOSSES,
LIABILITIES, CLAIMS OR DAMAGES ARISING OUT OF OR RESULTING FROM THE SOLE
ORDINARY OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNITEE, BUT NOT FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE. Without prejudice to the
survival of any other obligations of the Pledgor hereunder and under the other
Loan Documents, the obligations of the Pledgor under this SECTION 13 shall
survive the termination of this Pledge Agreement and the other Loan Documents
and the payment of the Obligations or the assignment of the Notes.
(b) Notwithstanding anything set forth herein to the contrary,
the Pledgor shall not, in connection with any one legal proceeding or claim, or
separate but related proceedings or claims arising out of the same general
allegations of circumstances, in which the interest of the Indemnitees (in the
reasonable judgment of such Indemnitees) does not differ in any material
respect, be liable to the Indemnitees (or any of them) under any of the
provisions set forth herein for the fees or expenses of more than one separate
firm of attorneys in each jurisdiction in which legal action is being taken or
may be taken at any time, which firm shall be selected by the Administrative
Agent (or, if the Administrative Agent fails to so select after notice from the
Indemnitees involved, such firm shall be selected by such Indemnitees), except
for any additional firms reasonably recommended by such firm in good faith for
purposes of obtaining special expertise in any area of law or for purposes of
having local counsel in each court in which such proceeding or proceedings are
pending. In any litigation or other proceeding in which the interests of the
Pledgor and any Indemnitee affected thereby are not adverse (in the reasonable
judgment of such Indemnitee) and with respect to which such Indemnitee may seek
indemnification or reimbursement from the Pledgor
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hereunder, the Pledgor shall be entitled to participate (in conjunction with
counsel for the Indemnitees), at the Pledgor's expense, in the defense of such
litigation or proceeding with its own counsel. No Indemnitee shall consent to
entry of any judgment or enter into any settlement of any action or proceeding
that would give rise to any liability of the Pledgor hereunder without the prior
written consent of the Pledgor (which consent shall not be unreasonably
withheld).
(c) The Pledgor agrees to pay within ten (10) Business Days after
demand, to the Agent or any Lender the amount of any and all reasonable third
party, out of pocket expenses, including the reasonable fees and disbursements
of its counsel and of any experts and agents, that the Agent or any Lender may
incur in connection with (i) the sale of, collection from, or other realization
upon, any of the Collateral, (ii) the exercise or enforcement of any of the
rights of the Agent hereunder or (iii) the failure by the Pledgor to perform or
observe any of the provisions hereof. The Pledgor agrees to pay interest on any
expenses or other sums payable to the Agent or any Lender hereunder that are not
paid when due at a rate per annum equal to the lesser of (i) the Highest Lawful
Rate and (ii) the Default Rate.
SECTION 14. PRIVATE SALES; FURTHER ASSURANCES. The Pledgor
recognizes that the Agent may be unable to effect a public sale of any or all of
the Pledged Collateral by reason of certain prohibitions contained in the laws
of any jurisdiction outside the United States or in the United States Securities
Act of 1933 (the "1933 ACT") and applicable state securities laws, but may
instead be compelled to resort to one or more private sales thereof to a
restricted group of purchasers who will be obliged to agree, among other things,
to acquire such Pledged Collateral for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale by the Agent may result in prices and other
terms less favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that no such private sale shall, to
the extent permitted by applicable law, be deemed not to be "commercially
reasonable" solely as a result of such prices and other sale terms. The Agent
shall not be under any obligation to delay a sale of any of the Pledged
Collateral for the period of time necessary to permit Issuer of such securities
to register such securities under the laws of any jurisdiction outside the
United States, under the 1933 Act or under any applicable state securities laws,
even if Issuer would agree to do so. If the Agent is able to lawfully effect a
public sale without registration of the Pledged Collateral under the laws of any
jurisdiction outside the United States, under the 1933 Act or under any
applicable state securities laws, then the Agent may conduct such public sale of
the Pledged Collateral, rather than a private sale, if the Agent would realize a
higher sales price in such public sale.
SECTION 15. AMENDMENTS. No amendment or waiver of any provision
of this Pledge Agreement, nor consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be made in accordance with
SECTION 11.01 of the Credit Agreement and signed by the Pledgor and the Agent,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
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SECTION 16. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be given in the manner and at the
addresses of the Pledgor and the Agent as set forth in the Credit Agreement and
shall become effective, as specified in the Credit Agreement.
SECTION 17. WAIVER OF MARSHALLING. All rights of marshalling of
assets of the Pledgor, including any such right with respect to the Pledged
Collateral, are hereby waived by the Pledgor.
SECTION 18. LIMITATION BY LAW. All rights, remedies and powers
provided in this Pledge Agreement may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and all the
provisions of this Pledge Agreement are intended to be subject to all applicable
mandatory provisions of law which may be controlling from time to time and to be
limited to the extent necessary so that they will not render this Pledge
Agreement invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
SECTION 19. SEPARABILITY. Should any clause, sentence, paragraph,
subsection or Section of this Pledge Agreement be judicially declared to be
invalid, unenforceable or void, such declaration will not have the effect of
invalidating or voiding the remainder of this Pledge Agreement, and the parties
hereto agree that the part or parts of this Pledge Agreement so held to be
invalid, unenforceable or void will be deemed to have been stricken herefrom by
the parties hereto, and the remainder of this Pledge Agreement will have the
same force and effectiveness as if such stricken part or parts had never been
included herein.
SECTION 20. NO WAIVER; REMEDIES. No failure on the part of the
Agent to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 21. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Pledge Agree ment shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until payment in full
of the Secured Obligations, (b) be binding upon the Pledgor, its successors and
assigns, and (c) inure to the benefit of the Agent for the benefit of itself and
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (c), any Lender may assign or
otherwise transfer all or a portion of its interests, rights and obligations
under the Notes held by it pursuant to SECTION 11.10 of the Credit Agreement.
Upon the payment in full of the Secured Obligations, the Pledgor shall be
entitled to the return, upon its request and at its expense, of such of the
Pledged Collateral as shall not have been sold or otherwise applied against the
Secured Obligations pursuant to the terms hereof; PROVIDED, that the Pledgor
shall likewise be entitled to such return of the Pledged Collateral upon payment
in full of all Secured Obligations other than those arising under SECTION 13(A)
hereof if the Agent is not on
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notice of any fact, circumstance, event or claim which reasonably construed
could give rise to an obligation of the Pledgor under such Section.
SECTION 22. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Pledge Agreement or made in
writing by the Pledgor in connection herewith are true and correct in all
material respect when made or deemed to be made and shall survive the execution
and delivery of this Pledge Agreement until repayment of the Secured
Obligations. Any investigation by the Agent shall not diminish in any respect
whatsoever its rights to rely on such representations and warranties.
SECTION 23. INTERPRETATION.
(a) In this Pledge Agreement, unless a clear contrary intention
appears:
(i) the singular number includes the plural number and VICE
VERSA;
(ii) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Pledge Agreement as a whole and not to
any particular Article, Section or other subdivision;
(iii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Pledge Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually, PROVIDED that nothing in this clause (iii) is intended to
authorize any assignment not otherwise permitted by this Pledge
Agreement;
(iv) reference to any agreement, document or instrument means
such agreement, document or instrument as amended, supplemented or
modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof, and reference to any notes
includes any notes issued pursuant to any Loan Document in extension or
renewal thereof and in substitution or replacement therefor;
(v) unless the context indicates otherwise, reference to any
Article, Section, Schedule or Exhibit means such Article or Section
hereof or such Schedule or Exhibit hereto;
(vi) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term;
(vii) with respect to the determination of any period of time,
the word "from" means "from and including" and the word "to" means "to
but excluding;" and
(viii) reference to any law means such as amended, modified,
codified or reenacted, in whole or in part, and in effect from time to
time.
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(b) The Article and Section headings herein are for convenience
only and shall not affect the construction hereof.
(c) No provision of this Pledge Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 24. GOVERNING LAW; TERMS. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
SECTION 25. INCONSISTENCIES. In the event of any irreconcilable
inconsistences between any provision of this Pledge Agreement and any provision
of the Credit Agreement, the provisions of the Credit Agreement shall control.
SECTION 26. SUBMISSION TO JURISDICTION. (A) ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, IN HARRIS COUNTY OR THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY EXECUTION AND DELIVERY
OF THIS PLEDGE AGREEMENT, THE PLEDGOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING. THE PLEDGOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN
SECTION 16, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION.
(B) THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS PLEDGE AGREEMENT
BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
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COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
SECTION 27. WAIVER OF JURY TRIAL. THE PLEDGOR AND BY ITS
ACCEPTANCE HEREOF, THE AGENT AND EACH LENDER HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS PLEDGE AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND
AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 28. FINAL AGREEMENT OF THE PARTIES. THIS PLEDGE
AGREEMENT (INCLUDING THE SCHEDULE HERETO), THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS CONSTITUTE A "LOAN AGREEMENT' AS DEFINED IN SECTION 26.02(A) OF
THE TEXAS BUSINESS AND COMMERCE CODE, AND REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Pledgor has executed and delivered this
Pledge Agreement effective as of the date first above written.
TEXAS PETROCHEMICAL HOLDINGS, INC.
By:
Susan O. Rheney
President
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By:
Mary C. Arnold
Vice President
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THE STERLING GROUP
THE STERLING GROUP, INC.
EIGHT GREENWAY PLAZA, SUITE 702
HOUSTON, TEXAS 77046
713-877-8257
FAX 713-877-1824
May 6, 1996
Texas Petrochemical Holdings, Inc.
TPC Holding Corp.
8 Greenway Plaza, Suite 702
Houston, Texas 77046
Ladies and Gentlemen:
This letter agreement will confirm the agreement between Texas Petrochemical
Holdings, Inc. ("Holdings") and TPC Holding Corp. ("TPCHC"), on behalf of
themselves and their respective present and future direct and indirect
wholly-owned subsidiaries (collectively, the "Companies" and individually, a
"Company"), and The Sterling Group, Inc. ("Sterling") in connection with TPCHC's
acquisition of the common stock of Texas Olefins Company and its subsidiary
Texas Petrochemicals Corporation (the "Acquisition"), as follows:
1. SERVICES. Sterling has provided or will provide consulting services prior
to the closing to Holdings, TPCHC and the Companies in connection with the
organization of Holdings, TPCHC and the Companies, structuring the
Acquisition and the financing thereof, arrangements for outside consulting
services in connection with the Acquisition, advice with respect to
employee benefit and compensation arrangements and other reasonable
assistance prior to the closing of the Acquisition when and as requested by
Holdings, TPCHC or any of the Companies.
2. FEE AND EXPENSES. For its services in connection with the Acquisition,
Sterling will be entitled to receive from the TPCHC at the consummation of
the Acquisition a fee in the amount of $4,000,000 and reimbursement of all
expenses paid or incurred by Sterling in connection therewith.
3. INDEMNIFICATION. Holdings and TPCHC, on behalf of themselves and each of
the Companies, jointly and severally, agree to indemnify and hold harmless
Sterling, its consultants, each of their respective controlling persons and
each director, officer, employee, principal, consultant, affiliate and
agent thereof (each an "Indemnified Person") from and against any and all
losses, claims, damages and liabilities, joint or several, to which any
Indemnified Person may become subject relating to or arising out of, or in
connection with, any advice or services provided under this Agreement or
the transactions contemplated by this Agreement, the Acquisition
(including, without limitation, the use of proceeds from the sale of
securities and the financing of the Acquisition) or any related transaction
(including without limitation, any engagement letters entered into by
Sterling with CS First Boston Corporation, Merrill Lynch & Co., or any
other investment banking firm with respect to the financing of the
Acquisition, and that certain letter agreement between Sterling and Texas
Commerce Bank National Association dated April 30, 1996 and the
transactions contemplated thereby), and to reimburse each Indemnified
Person, promptly upon demand, for expenses (including reasonable counsel
fees and expenses) as they are incurred in connection with the
investigation of, giving testimony or furnishing documents for, preparation
for or defense of any pending or threatened loss, claim, damage or
liability, or any litigation, proceeding or other action in respect thereof
(collectively, "Actions"), including any amount paid in settlement of any
litigation, proceeding or other action (commenced or threatened), to which
Holdings shall have consented in writing (such consent not to be
unreasonably withheld), whether or not any Indemnified Person is a party
and whether or not liability resulted therefrom; provided, however, that
the indemnity contained in this Agreement will not apply to any Indemnified
Person with respect to losses, claims, damages, liabilities or related
expenses that are found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted from the
willful misconduct or gross negligence of such Indemnified Person. In
addition, neither Holdings, TPCHC nor any of the Companies will, without
prior written consent of Sterling, settle, compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened Action in respect of which indemnification or contribution may
be sought hereunder (whether or not any Indemnified Person is a party
thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person from all
liabilities arising out of such Action.
Promptly after receipt by an Indemnified Person of written notice with
respect to the commencement of any investigation, claim or other Action
with respect to which such Indemnified Person may seek indemnification
hereunder, such Indemnified Person shall notify Holdings in writing at the
address set forth on the first page hereof of such Action; but the omission
so to notify Holdings shall not relieve Holdings, TPCHC or any of the
Companies from any liability that Holdings, TPCHC or any of the Companies
may have hereunder to such Indemnified Person. The Indemnified Persons
shall be entitled to retain separate counsel of their own choice; provided
that Holdings, TPCHC or any of the Companies shall not be responsible for
the fees and expenses of more than one firm of attorneys (and local
counsel, if appropriate) for all of the Indemnified Persons in any single
Action, unless the Indemnified Persons shall have been advised that there
may be one or more legal defenses available to any of them that may be
different from or additional to those available to the others, in which
event each such Indemnified Person shall be entitled to separate counsel at
the expense of Holdings, TPCHC and the Companies.
If indemnification is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) for reason of public policy or
any other reason not to
be available, Holdings and TPCHC, on behalf of themselves and each of the
Companies, and the Indemnified Person shall contribute to the losses, claims,
damages, liabilities or expenses (or Actions in respect thereof) for which
such indemnification is held unavailable in such proportion as is appropriate
to reflect the relative benefits to and fault of Holdings, TPCHC or any of
the Companies, on the one hand, and the Indemnified Person, on the other
hand, in connection with the matter giving rise to such losses, claims,
damages, liabilities or expenses (or Actions in respect thereof).
Notwithstanding the foregoing, Sterling shall not be obligated to contribute
any amount hereunder that exceeds the fees and expenses received by Sterling
hereunder. No person found liable for a fraudulent misrepresentation (within
the meaning of Section 11 (f) of the Securities Act of 1933, as amended)
shall be entitled to contribution from any person who is not found liable for
such fraudulent misrepresentation.
Holdings and TPCHC, on behalf of themselves and each of the Companies, also
agree, jointly and severally, that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
Holdings, TPCHC or any of the Companies for or in connection with advice or
services rendered or to be rendered by any Indemnified Person pursuant to
this Agreement, the Acquisition, the financing thereof, the transactions
contemplated thereby or any Indemnified Person's actions or inactions in
connection with any such advice, services or transactions except for
liabilities that are determined by a judgment of a court of competent
jurisdiction (not subject to further appeal) to have resulted from such
Indemnified Person's gross negligence or willful misconduct in connection
with any such advice, actions, inactions or services.
If any term, provision, covenant or restriction contained in this Section is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained in the Agreement (including
this Section) shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
The provisions contained in this Section 3 shall remain in full force and
effect (i) whether or not any of the transactions contemplated hereby are
consummated, (ii) regardless of the termination or completion of any
Indemnified Person's services hereunder, (iii) notwithstanding the
termination of this Agreement and (iv) notwithstanding any investigation made
by or on behalf of Sterling or any Indemnified Person.
This Section 3 is for the benefit of the parties hereto and the Indemnified
Persons, and may be enforced directly by any Indemnified Person, whether or
not a party to this Agreement.
4. GOVERNING LAW. This Agreement shall be governed by and constructed in
accordance with, the laws of the State of Texas, without giving effect to
choice of law doctrines requiring the application of laws of any other
jurisdiction.
If the foregoing meets with your approval and correctly expresses our agreement,
please sign and return the enclosed duplicate copy of this letter.
Very truly yours,
THE STERLING GROUP, INC.
By: SUSAN O. RHENEY
Name: SUSAN O. RHENEY
Title: PRINCIPAL
ACKNOWLEDGED AND AGREED
TEXAS PETROCHEMICAL HOLDINGS, INC.
By: WILLIAM A. McMINN
Name: WILLIAM A. McMINN
Title: CHAIRMAN
TPC HOLDING CORP.
By: WILLIAM A. McMINN
Name: WILLIAM McMINN
Title: CHAIRMAN
EXHIBIT 10.12
INDEMNITY AGREEMENT
This Indemnity Agreement (the "Agreement") is entered into this ____ day
of _______________, ____, between TEXAS PETROCHEMICALS CORPORATION, a Texas
corporation (the "Company"), and ______________________, an officer, director or
employee of the Company ("Indemnitee").
1. BACKGROUND. The Company desires that Indemnitee serve or continue to
serve as a director, officer or employee of the Company. In order to induce
Indemnitee to so serve or continue to serve, the Company desires and intends
hereby to provide indemnification (including advancement of expenses) against
any and all liabilities asserted against Indemnitee to the fullest extent now or
in the future permitted by the Texas Business Corporation Act (the "Act"). For
and in consideration of the premises and the covenants contained herein, the
Company and Indemnitee do hereby enter into this Agreement.
2. CONTINUED SERVICE. Indemnitee will serve or continue to serve, at the
will of the shareholders and/or the Board of Directors or under separate
contract, if such exists, as a director or officer so long as he is duly elected
and qualified in accordance with the Bylaws of the Company or until the
Indemnitee's earlier death, resignation or removal or as an employee so long as
he is employed by the Company.
3. INDEMNIFICATION. The Company shall indemnify Indemnitee as follows:
The Company shall indemnify Indemnitee when he was, is or is threatened to be
made a named defendant or respondent in a proceeding because Indemnitee is or
was a director, an officer, an employee or an agent of the Company but only if
it is determined in accordance with Section 6 below that Indemnitee:
(a) conducted himself in good faith;
(b) reasonably believed:
(i) in the case of conduct in his official capacity
as a director, officer, employee or agent of the Company,
that his conduct was in the Company's best interests; and
(ii) in all other cases, that his conduct was at
least not opposed to the Company's best interests; and
(c) in the case of any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful.
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The termination of a proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent is not of itself
determinative that Indemnitee did not meet the requirements set forth in this
Section 3.
4. LIMITATION ON INDEMNIFICATION. Except to the extent permitted by
Section 5 below, Indemnitee shall not be indemnified under Section 3 above in
respect of a proceeding:
(a) in which Indemnitee is found liable on the basis that
personal benefit was improperly received by him, whether or not
the benefit resulted from an action taken in his official
capacity; or
(b) in which Indemnitee is found liable to the Company.
For the purposes hereof, Indemnitee shall be deemed to have been found
liable in respect of any claim, issue or matter only after the Indemnitee shall
have been so adjudged by a court of competent jurisdiction after exhaustion of
all appeals therefrom.
5. EXTENT OF INDEMNIFICATION. If Indemnitee is entitled to
indemnification under Section 3, the Company shall indemnify Indemnitee against
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable expenses actually incurred by Indemnitee in connection with the
proceeding; however, if the Indemnitee is found liable to the Company or is
found liable on the basis that personal benefit was improperly received by
Indemnitee, the indemnification (1) shall be limited to reasonable expenses
actually incurred by Indemnitee in connection with the proceeding, and (2) shall
not be made in respect of any proceeding in which Indemnitee shall have been
found liable for willful or intentional misconduct in the performance of
Indemnitee's duty to the Company. The reasonableness of the Indemnitee's
expenses contemplated in this Section 5 shall be determined in the same manner
that the determination of indemnification is made under Section 6.
6. DETERMINATION OF INDEMNIFICATION.
(a) a determination of whether Indemnitee is entitled to
indemnification under Section 3 shall be made:
(i) by the Board of Directors of the Company by a majority
vote of a quorum consisting of directors who at the time of the
vote are not named defendants or respondents in the proceeding;
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(ii) if such a quorum cannot be obtained, by a majority
vote of a committee of the Board of Directors, designated to act
in the matter by a majority vote of all directors, consisting
solely of two or more directors who, at the time of the vote, are
not named defendants or respondents in the proceeding;
(iii) by special legal counsel selected by the Board of
Directors or a committee of the Board of Directors by vote as set
forth in paragraphs (a)(i) or (a)(ii) of this Section 6, or, if
such a quorum cannot be obtained and such a committee cannot be
established, by a majority vote of all directors; or
(iv) by the shareholders in a vote that excludes the
shares held by directors who are named defendants or respondents
in the proceeding.
(b) the Board of Directors, independent legal counsel or
shareholders, as the case may be, shall make such determination of
indemnification under paragraph (a) of this Section 6 in accordance with
the following procedure:
(i) Indemnitee may submit to the Board of Directors a
sworn Request for Indemnification, substantially in the form of
Exhibit A, in which the Indemnitee requests indemnification from
the Company pursuant to this Agreement and states that he has met
the standard of conduct required for indemnification under
Section 3.
(ii) The Indemnitee's submission of a Request for
Indemnification to the Board of Directors shall create a
rebuttable presumption that the Indemnitee has met the
requirements set forth in Section 3 and, therefore, is entitled
to indemnification thereunder. The directors, special legal
counsel or shareholders, as the case may be, shall determine,
within 30 days after submission of the Request for
Indemnification, specifically that the Indemnitee is so entitled
unless they or it possess clear and convincing evidence to rebut
the foregoing presumption, which evidence shall be disclosed to
the Indemnitee with particularity.
7. MANDATORY INDEMNIFICATION FOR REASONABLE EXPENSES UPON SUCCESSFUL
DEFENSE. The Company shall indemnify Indemnitee against reasonable expenses
incurred by him in connection with a proceeding in which he is a named defendant
or respondent because he is or was a director, officer or employee of the
Company if he has been wholly successful, on the merits or otherwise, in the
defense of the proceeding. The reasonableness of the Indemnitee's expenses
contemplated in this Section 7 shall be determined in any
-3-
manner set forth in Section 6, except that if the determination that
indemnification is permissible is made by special legal counsel, pursuant to
Section 6(a)(iii), the determination as to reasonableness of Indemnitee's
expenses must be made in the manner specified by Section 6(a)(iii).
8. ADVANCEMENT OF REASONABLE EXPENSES. Reasonable expenses incurred by
Indemnitee who was, is or is threatened to be made a named defendant or
respondent in a proceeding shall be paid or reimbursed by the Company, in
advance of the final disposition of the proceeding, without the determination
specified in Section 6 or the determination as to the reasonableness of such
expenses contemplated in Sections 5 and 7, within 14 days after: the Company
receives from Indemnitee, a sworn Statement of Undertaking, substantially in the
form of Exhibit B, in which (i) Indemnitee shall state that he believes in good
faith that he has met the standard of conduct necessary for indemnification
under Section 3, and (ii) the Indemnitee, or any other person on behalf of
Indemnitee, shall undertake to repay the amount paid or reimbursed by the
Company if it is ultimately determined that he has not met those requirements or
if it is ultimately determined that the indemnification of Indemnitee against
expenses incurred by him in connection with such proceeding is prohibited by
Section 5.
9. PARTICIPATION IN OTHER PROCEEDINGS. Notwithstanding any other
provision of this Agreement, the Company shall promptly pay or reimburse
expenses incurred by Indemnitee in connection with his appearance as a witness
or other participation in a proceeding at a time when he is not a named
defendant or respondent in the proceeding.
10. NONEXCLUSIVITY. The right to indemnification and advancement of
expenses provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under any statute, bylaw, insurance
policy, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue after Indemnitee has ceased to be
a director, officer or employee and shall inure to the benefit of his heirs,
executors and administrators.
11. MERGER, CONSOLIDATION OR CHANGE OF CONTROL. In the event that the
Company shall be a constituent corporation in a consolidation or merger, whether
the Company is the resulting or surviving corporation or is absorbed, or if
there is a change of control of the Company, Indemnitee shall stand in the same
position under this Agreement with respect to the resulting, surviving or
changed corporation as he 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. The obligations of the Company under this Agreement shall be deemed to
-4-
be assumed by and shall continue as obligations of the resulting, surviving or
changed corporation, as the case may be.
12. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
definitions apply herein:
(a) "director" means any person who is or was a director of the
Company and any person who, while a director of the Company, is or was
serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary
of another foreign or domestic corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise;
(b) "expenses" include court costs and attorneys' fees;
(c) "officer" means any person who is or was an officer of the
Company and any person who, while an officer of the Company, is or was
serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary
of another foreign or domestic corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise;
(d) "official capacity"
(i) means when used with respect to a director, the office of
director in the Company; and
(ii) means when used with respect to a person other than a
director, the elective or appointive office in the Company held
by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Company; but
(iii) in both paragraphs (d)(i) and (d)(ii), does not include
service for any other foreign or domestic corporation or any
partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise;
(e) "proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investiga tive, any appeal in such an action, suit, or
proceeding, and any inquiry or investiga tion that could lead to such an
action, suit, or proceeding; and
-5-
(f) "change of control" means any change in the ownership of a
majority of the capital stock of the Company or in the composition of a
majority of the members of the Board of Directors of the Company.
13. ATTORNEYS' FEES. In the event that Indemnitee institutes any legal
action to enforce his rights under, or to recover damages for breach of this
Agreement, Indemnitee, if he prevails in whole or in part, shall be entitled to
recover from the Company all attorneys' fees and disbursements incurred by him.
14. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future state or federal laws,
or rules and regulations promulgated thereunder effective during the term
hereof, such provision shall be fully severable, and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be
inserted as a part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable, which provision shall be prepared as follows: (i) in the
event the severed provision is declared illegal, invalid or unenforceable by a
court of competent jurisdiction, such court shall have the authority to prepare
the legal, valid and enforceable provision; or (ii) in the event the court
referred to in clause (i) above refuses or is unable to prepare such a
replacement provision, or in the event the illegal, invalid or enforceable
provisions rendered such by any act or event other than the pronouncement of a
court of competent jurisdiction, the Corporation and the Shareholders, or their
representa tives, shall promptly meet and negotiate a substitute provision for
the severed provision.
15. CONTROLLING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without regard to the
conflicts of laws provisions thereof.
16. ENTIRE AGREEMENT; MODIFICATION; SURVIVAL. This Agreement contains
the entire agreement of the parties relating to the subject matter hereof. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement shall survive the termination
of Indemnitee's service as a director, officer or employee of the Company.
17. VOLUNTARY DISSOLUTION OR BANKRUPTCY. In the event that the Company
decides to voluntarily dissolve or to file a voluntary petition for relief under
applicable bankruptcy, moratorium or similar laws, then not later than ten (10)
days prior to such dissolution or
-6-
filing, the Company shall deposit in trust, for the 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 17 shall not apply
to the dissolution of the Company in connection with a transaction as to which
Section 11 hereof applies.
18. AMENDMENTS TO ACT. This Agreement is intended to provide indemnity
to Indemnitee to the fullest extent allowed under Texas law. Accordingly, to the
extent permitted by law, if the Act permits greater indemnity than the indemnity
set forth herein, or if any amendment is made to the Act, or any other
applicable law, expanding the indemnity permissible under Texas 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 Texas law.
19. HEADINGS AND GENDER. The headings and titles to the Sections of this
Agreement are inserted for convenience only and shall not be deemed a part
hereof or affect the construction or interpretation of any provision hereof. All
pronouns and any variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identification of the person or
persons, firm or firms, corporation or corporations may require.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and set their seals as of the date first above written.
TEXAS PETROCHEMICALS CORPORATION
Attest:____________________ By:
Name:
Title:
(Corporate Seal)
INDEMNITEE
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EXHIBIT A
REQUEST FOR INDEMNIFICATION
STATE OF TEXAS ss.
ss.
COUNTY OF ___________ ss.
I, __________________________, after first being duly sworn, hereby
state as follows:
1. This Request for Indemnification is submitted to the Board of
Directors of TEXAS PETROCHEMICALS CORPORATION, a Texas corporation (the
"Company"), pursuant to the Indemnity Agreement dated ____________, 1996 (the
"Agreement"), between the Company and me.
2. I am requesting indemnification from the Company pursuant to the
Agreement in connection with the following proceeding:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
3. With respect to my conduct that is at issue in this proceeding, I --
(a) conducted myself in good faith;
(b) reasonably believed: (1) in the case of conduct in my
official capacity as a director, officer or employee of the Company, that my
conduct was in the Company's best interests; and (2) in all other cases, that my
conduct was at least not opposed to the Company's best interests; and
(c) in the case of any criminal proceeding, had no reasonable
cause to believe my conduct was unlawful.
Accordingly, I have met the standard of conduct required for indemnification
under Section 3 of the Agreement.
-8-
I have executed this Request for Indemnification on this ___ day of
________, ____.
__________________________
Signature
__________________________
Print name
Subscribed and sworn to before me on this ___ day of _____________,
____.
__________________________
Notary Public in and for
The State of Texas
-9-
EXHIBIT B
STATEMENT OF UNDERTAKING
STATE OF TEXAS ss.
ss.
COUNTY OF __________ ss.
I, ____________________, after first being duly sworn, hereby state as
follows:
1. This Statement of Undertaking is submitted to the Board of Directors
of TEXAS PETROCHEMICALS CORPORATION, a Texas corporation (the "Company"),
pursuant to the Indemnity Agreement dated _______________, 1996 (the
"Agreement"), between the Company and me.
2. I am requesting from the Company, pursuant to the Agreement, the
advancement of expenses that I have incurred in connection with the following
proceeding:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
3. I believe in good faith that I have met the standard of conduct
necessary for indemnification under Section 3 of the Agreement.
4. I undertake to repay the amount paid or reimbursed by the Company if
it is ultimately determined that (a) I have not met the standard of conduct
necessary for indemnification under Section 3 of the Agreement, or (b)
indemnification of me against expenses that I have incurred in connection with
the proceeding described by me in Paragraph 2, above, is prohibited by Section 5
of the Agreement.
-10-
I have executed this Statement of Undertaking on this ___ day of
__________, ____.
__________________________
Signature
__________________________
Print name
Subscribed and sworn to before me on this ___ day of _____________,
____.
__________________________
Notary Public in and for
The State of Texas
-11-
EXHIBIT 10.13
TAX SHARING AGREEMENT
This Agreement is effective as of the first day of the consolidated
return year ending December 31, 1996, and is entered into between Texas
Petrochemical Holdings, Inc. (the "Parent"), and TPC Holding Corporation, Texas
Petrochemical Corporation, and Texas Butylene Chemical Corporation (the
"Subsidiaries").
WITNESSETH:
WHEREAS, the parties (hereinafter sometimes referred to as "Members"; or
in the singular "Member") hereto are part of an affiliated group of corporations
of which Parent is the common parent (the "TPC Affiliated Group") as defined in
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the TPC Affiliated Group will file a consolidated federal
income tax return for its initial taxable period ending December 31, 1996 in
accordance with Section 1501 of the Code and is required to file consolidated
income tax returns for years subsequent to such year; and
WHEREAS, it is the intent and desire of the parties hereto that a method
be established for allocating the TPC Affiliated Group's consolidated federal
regular income tax liability and its consolidated federal minimum tax liability
among the Members (as required by Section 1552(a) of the Code); for reimbursing
the Parent for payment of such tax liability; and to provide for the allocation
and payment of any refund arising from a carryback of tax items or attributes,
such as net operating losses or tax credits, from subsequent tax years.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. CONSOLIDATED FEDERAL INCOME TAX RETURN. Parent shall file a U.S.
consolidated federal income tax return for the TPC Affiliated Group for the
taxable year ending December 31, 1996 and for each subsequent taxable year in
respect of which this Agreement is in effect and for which the TPC Affiliated
Group is required or permitted to file a consolidated federal income tax return.
The Parent and each of the Subsidiaries shall execute and file such consents,
elections, and other documents that may be required or appropriate for the
proper filing of such returns.
2. ALLOCATION ELECTION UNDER SECTION 1552(B) OF THE CODE. Consistent
with the requirements of Section 1552(b) of the Code and Sections 1.1552-1(d) of
the Regulations, Parent shall, within the time permitted under the Code and the
Regulations, cause the TPC
-1-
Affiliated Group to elect a method to apportion its consolidated federal regular
income tax liability from those methods permitted by the Regulations, and Parent
shall cause the TPC Affiliated Group to apportion its consolidated federal
regular income tax liability among the Members in accordance with such method.
The Parent shall cause the TPC Affiliated Group to allocate its consolidated
federal minimum tax liability as provided in Proposed Regulations Section
1.1552-1(g).
3. ALLOCATION OF REGULAR CONSOLIDATED FEDERAL INCOME TAX LIABILITY AMONG
MEMBERS. The Members agree to determine and allocate the consolidated federal
regular income tax liability of the TPC Affiliated Group among themselves in the
following manner:
STEP 1. The consolidated federal regular income tax liability of
the TPC Affiliated Group, as determined under Section 1.1502-2, shall be
allocated to the Members as provided in Paragraph 2 of this Agreement;
STEP 2. An additional amount shall be allocated to each Member
equal to 100 percent of the excess, if any, of (i) the "separate return
federal regular income tax liability" (as defined below) of such Member
for the taxable year over (ii) the tax liability of such Member
determined in accordance with Step 1 of Paragraph 3 of this Agreement.
STEP 3. The total of any additional amounts allocated to Members
pursuant to Step 2 of Paragraph 3 of this Agreement (including amounts
allocated as a result of a carryback) shall be paid (as provided in
Paragraph 7 of this Agreement) by such Members to those other Members
which had such items to which such total is attributable, determined
pursuant to a consistent method which reasonably reflects such items
(such consistency and reasonableness to be determined by the party
charged with the administration of this Agreement in accordance with
Paragraph 6 of this Agreement). However, for this purpose, the amounts
paid to Members will generally be deemed consistent and reasonable if,
in the case of utilized net operating losses, such amount is equal to
the product of the net operating losses utilized multiplied by the
highest marginal federal income tax rate applicable to corporations, and
in the case of utilized tax credits, such amount is 100 percent of such
tax credits (unless, due to special circumstances, this would be
inequitable). The Parent will maintain specific records to substantiate
the determinations made under this Paragraph 3.
a. For purposes of this Agreement, the "separate return federal
regular income tax liability" of each Member for the taxable year shall
be determined as if such Member were filing a separate tax return under
the Code (and the term will not
-2-
have the same meaning as set forth in Section 1.1502-12 of the
Regulations). For purposes of determining the "separate return federal
regular income tax liability" of a Member:
(1) With respect to any dividends received by one Member
from another Member, the parties will assume that such dividends
qualify for the 100 percent dividends received deduction of
Section 243 of the Code, or shall be eliminated from such
calculation in accordance with Section 1.1502- 14(a)(1) of the
Regulations.
(2) Each Member shall treat any gain or loss on
intercompany transactions, whether deferred or not, in the manner
required by Section 1.1502-13 of the Regulations.
(3) The Members shall determine the limitations on the
calculation of any deduction or the utilization of any tax
credits, or the calculation of a tax liability on a consolidated
basis. Accordingly, the Members shall apply the limitations of
Sections 38(c), 56(a), 170(b)(2), and 172(b)(2) of the Code (and
similar limitations) on a consolidated basis.
(4) Elections as to the tax credits and tax computations
which may have been different from the consolidated treatment if
separate returns were filed shall be made on an annual basis by
the Parent.
b. Under the principles of Revenue Ruling 66-374, 1966-2 CB 427,
the "net operating loss" of a Member is the deduction which such Member
would have had available if it actually filed a separate return for the
year and thus would not include any portion of a Member's net operating
loss sustained in a prior or subsequent year which had been absorbed by
the TPC Affiliated Group or by the Member in computing actual
liabilities for prior or subsequent years. Notwithstanding the preceding
sentence, no benefit under Step 3 of Paragraph 3 of this Agreement shall
be granted a Member unless the carryover tax attribute or item is
availed of in reducing the consolidated federal income tax liability. In
calculating any benefit from a carryback or carryover of net operating
losses, adjustments shall be made to such prior or subsequent year's
separate return tax liability as required under Section 172(b)(2) and
172(d) of the Code. For purposes of this calculation, the election under
Section 172(b)(3) shall be made on a separate company basis.
4. ALLOCATION OF CONSOLIDATED FEDERAL MINIMUM TAX LIABILITY AMONG
MEMBERS. The Members of the TPC Affiliated Group agree to determine and allocate
the consolidated federal minimum tax liability among themselves in the following
manner:
-3-
STEP 1. The consolidated federal minimum tax liability of the TPC
Affiliated Group shall be allocated among the Members as provided in
Paragraph 2 of this Agreement;
STEP 2. An additional amount shall be allocated to each Member
equal to 100 percent of the excess, if any of (i) the "separate return
federal minimum tax liability" (as defined below) of such Member for the
taxable year over (ii) the consolidated minimum tax liability allocated
to such Member in accordance with Step 1 of Paragraph 4 of this
Agreement.
STEP 3. The total of any additional amounts allocated to Members
pursuant to Step 2 of Paragraph 4 of this Agreement (including amounts
allocated as a result of a carryback) shall be paid (as provided in
Paragraph 7 of this Agreement) by such Members to those other Members
which had tax items to which such total is attributable pursuant to a
consistent method which reasonably reflects such items (such consistency
and reasonableness to be determined by the party charged with the
administration of this Agreement in accordance with Paragraph 6 of this
Agreement). The Parent will maintain specific records to substantiate
the determinations made under this Paragraph 4.
For purposes of this Agreement, the "separate return federal minimum tax
liability" of each Member for the taxable year shall be determined as if such
Member were filing a separate tax return under the Code. For purposes of
determining the "separate return federal minimum tax liability" of a Member, the
provisions of Subparagraphs a and b of Paragraph 3 of this Agreement shall
apply, to the extent applicable. Moreover, to the extent adopted by the
president of Parent in his capacity as administrator of this Agreement, the
principals of Proposed Regulations Section 1.1502-55 dealing with computation of
alternative minimum tax of consolidated groups, shall be employed in this
paragraph 4.
5. RULES REGARDING ALLOCATION METHOD. Regarding the application of the
allocation method in Paragraphs 3 and 4 of this Agreement, it is acknowledged
that the amount of consolidated federal regular income tax liability or the
consolidated federal minimum tax liability of the TPC Affiliated Group allocated
to each Member under the method elected in Paragraph 2 of this Agreement shall
(i) decrease the earnings and profits of such Member, and (ii) be treated as a
liability of such Member for such amount.
6. ADMINISTRATION OF TAX ALLOCATION AGREEMENT. The provisions of this
Agreement shall be administered by the chief financial officer of Parent.
-4-
7. PAYMENTS. Each Member shall pay the Parent its allocated consolidated
federal regular income tax liability and/or consolidated federal minimum tax
liability as determined under Paragraphs 3 and 4 of this Agreement. Payments are
to be made no later than thirty days after the date of filing of the
consolidated federal income tax return for such taxable year.
8. ESTIMATED TAX ASSESSMENT. The chief financial officer of Parent shall
have the right to assess Members their share of estimated tax payments to be
made on the projected consolidated federal income tax liability for each year.
Payment to the chief financial officer shall be made ten days after such
assessment. Such member will receive credit for such prepayments in the year-end
computation under Paragraph 7 of this Agreement.
9. CARRY BACK OR FORWARD OF CONSOLIDATED NET OPERATING LOSS OR CREDIT TO
SEPARATE RETURN YEAR OR CONSOLIDATED RETURN YEAR FOR OTHER AFFILIATED GROUP. If
part or all of an unused consolidated net operating loss or tax credit is
allocated to a Member pursuant to Section 1.1502-79 of the Regulations, and it
is carried back or forwarded to a year in which such Member filed a separate
income tax return or a consolidated federal income tax return with another
affiliated group, any refund or reduction in tax liability arising from the
carryback or carryover shall be retained by such Member. (If such refund or
reduction goes to some entity other than the Member, then such entity shall pay
over such amount to the Member.) Notwithstanding the above, the Parent shall
determine whether an election shall be made not to carryback any consolidated
net operating loss arising in a consolidated return year (including any portion
allocated to a Member under Section 1.1502- 79) in accordance with Section
172(b)(3)(C) of the Code.
10. ADJUSTMENT TO CONSOLIDATED FEDERAL INCOME TAX LIABILITY. If the
consolidated federal income tax liability of the TPC Affiliated Group is
adjusted for any taxable period, whether by means of an amended return, claim
for refund, or after-tax audit by the Service, the liability of each Member
shall be recomputed under Paragraphs 2, 3 and 4 of this Agreement to give effect
to such adjustments. In the case of a refund, the Parent shall make payment to
each Member for its shares of the refund, determined in the same manner as in
Paragraph 7 of this Agreement, within thirty days after the refund is received
by the Parent, and in the case of an increase in tax liability, each Member
shall pay to the Parent its allocable share of such increased tax liability
within ten days after receiving notice of such liability from the Parent. If any
interest is to be paid or received as a result of a consolidated federal income
tax deficiency or refund, such interest shall be allocated to the Members in the
ratio each Member's change on consolidated federal income tax liability bears to
the total change in tax liability. Any penalty shall be allocated upon such
basis as the chief financial officer of the Parent deems just and proper in view
of all applicable circumstances.
-5-
11. TERM. This Agreement shall apply to the taxable year specified in
the preamble of this Agreement, and all subsequent taxable years, unless the
Members agree in writing to terminate the Agreement. Notwithstanding such
termination, this Agreement shall continue in effect with respect to any payment
or refunds due for all taxable periods prior to termination.
12. ASSIGNABILITY. The Agreement shall not be assignable by any Member
without the prior written consent of the others.
13. AVAILABILITY OF RECORDS. All material including, but not limited to,
returns, supporting schedules, work papers, correspondence, and other documents
relating to the consolidated federal income tax returns filed for a taxable year
during which this Agreement was in effect shall be made available to any Member
to the Agreement during regular business hours for a minimum period equal to
applicable federal record retention requirements.
14. RESOLUTION OF DISPUTES. A dispute or difference between the parties
with respect to the operation or interpretation of this Agreement shall be
decided by three arbitrators who must all be certified public accountants. Each
Member (or if there are more than three members, all members will be divided
into three groups) shall elect an arbitrator. The court of arbitrators shall be
held in the office of Parent. The parties shall bear the cost of arbitration,
including all fees for attorneys and accountants, in a ratio to be determined by
Parent.
15. DEPARTURE OF MEMBER FROM TPC AFFILIATED GROUP. Any Member which
leaves the consolidated group shall be bound by this Agreement.
16. ADDITIONAL MEMBERS. The Members hereto specifically recognize that
from time to time other companies may become Members of the TPC Affiliated Group
and hereby agree that such new Members may become parties to this Agreement by
executing the master copy of this Agreement which shall be maintained at
Parent's headquarters. It will not be necessary for all the other Members to
resign the Agreement but the new Member may simply sign the existing Agreement
and it will be effective as if the old Members had resigned.
17. CHANGE IN CONSOLIDATED INCOME TAX LAW. Any alteration, modification,
addition, deletion, or other change in the consolidated income tax return
provision of the Code or the regulations thereunder shall automatically be
applicable to this Agreement mutatis mutandis.
-6-
18. CONTINUATION OF AGREEMENT. Failure of one or more parties hereto to
qualify by meeting the definition of Member of the "TPC Affiliated Group" shall
not operate to terminate this Agreement with respect to the other parties as
long as two or more parties hereto continue so to qualify.
19. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
respective successors and assigns of the parties hereto; but no assignment shall
relieve any party's obligations hereunder without the written consent of the
other parties.
20. CHOICE OF LAW. This Agreement shall be governed by the laws of the
State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated, effective as of the date first written above.
PARENT
Texas Petrochemical Holdings, Inc.
By:
Name:
Date: ________ Title:
SUBSIDIARIES
TPC Holding Corporation
By:
Name:
Date: ________ Title:
Texas Petrochemical Corporation
By:
Name:
Date: ________ Title:
-7-
Texas Butylene Chemical Corporation
By:
Name:
Date: ________ Title:
-8-
EXHIBIT 12.1
TEXAS OLEFINS COMPANY, SUBSIDIARIES AND AFFILIATE
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
1992 1993 1994 1995 MAY 31, 1996 JUNE 30, 1996
--------- --------- --------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes and
minority interest.................. $ 63,498 $ 41,081 $ 52,303 $ 49,268 $24,508 $1,988
Interest expense..................... 1,145 1,087 663 475 2,343 98
Interest portion of rental expense... 1,670 1,630 1,430 1,470 1,600 140
--------- --------- --------- --------- ------------- --------------
Earnings...................... $ 66,313 $ 43,798 $ 54,396 $ 51,213 $28,451 $2,226
========= ========= ========= ========= ============= ==============
Fixed Charges:
Interest expense................... $ 1,145 $ 1,087 $ 663 $ 475 $ 2,343 $ 98
Interest portion of rental
expense......................... 1,670 1,630 1,430 1,470 1,600 140
--------- --------- --------- --------- ------------- --------------
Total fixed charges........... $ 2,815 $ 2,717 $ 2,093 $ 1,945 $ 3,943 $ 238
========= ========= ========= ========= ============= ==============
Ratio of earnings to fixed
charges......................... 23.6x 16.1x 26.0x 26.3x 7.2x(2) 9.4x
</TABLE>
PRO FORMA PRO FORMA
TWELVE ONE MONTH
MONTHS ENDED ENDED
MAY 31, 1996 JUNE 30, 1996
------------- --------------
Loss before income taxes and minority
interest........................... $ (9,600) $ (1,600)
Interest expense..................... 31,900 2,500
Interest portion of rental expense... 1,600 140
------------- --------------
Earnings...................... $ 23,900 $ 1,040
============= ==============
Fixed Charges:
Interest expense................... $ 31,900 $ 2,500
Interest portion of rental
expense......................... 1,600 140
------------- --------------
Total fixed charges........... $ 33,500 $ 2,640
============= ==============
Ratio of earnings to fixed
charges......................... -- (1) -- (1)
============= ==============
- ------------------------------------
(1) For the proforma 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 $(9.6) million and $(1.6) million respectively.
(2) For the twelve months ended May 31, 1996, income before taxes and minority
interest includes a $12.6 million noncash provisions for the impairment of
certain non-strategic properties which TPC intends to sell.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Texas Butylene Chemical Corporation, a Texas corporation
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our reports dated August 16, 1996, on our audits of the financial statements of
TPC Finance Corp. and Texas Olefins Company, subsidiaries and affiliate, which
includes explanatory paragraphs relating to the acquisition of Texas Olefins
Company and changes in accounting principles. We also consent to the reference
to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Houston, Texas
September 6, 1996
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director
of Texas Petrochemicals Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints B. W. Waycaster 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-4 (or other
appropriate form), together with all amendments 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 thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this ____ day of August, 1996.
William A. McMinn
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director
of Texas Petrochemicals Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints B. W. Waycaster 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-4 (or other
appropriate form), together with all amendments 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 thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this ____ day of August, 1996.
Gordon A. Cain
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director
of Texas Petrochemicals Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints B. W. Waycaster 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-4 (or other
appropriate form), together with all amendments 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 thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this ____ day of August, 1996.
James J. Collis
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director
of Texas Petrochemicals Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints B. W. Waycaster 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-4 (or other
appropriate form), together with all amendments 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 thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this ____ day of August, 1996.
William B. Huff
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director
of Texas Petrochemicals Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints B. W. Waycaster 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-4 (or other
appropriate form), together with all amendments 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 thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this ____ day of August, 1996.
John T. Shelton
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer or director
of Texas Petrochemicals Corporation, a Texas corporation (the "Company"), hereby
constitutes and appoints B. W. Waycaster 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-4 (or other
appropriate form), together with all amendments 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 thereof.
IN WITNESS WHEREOF, the undersigned has hereto signed this power of
attorney this ____ day of August, 1996.
Susan O. Rheney
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
TEXAS PETROCHEMICALS CORPORATION
---------------------------------------------------
(Exact name of obligor as specified in its charter)
Texas 74-1778313
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8707 Katy Freeway, Suite 300
Houston, Texas 77024
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
11 1/2% Senior Subordinated Notes due 2006
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject,
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor and underwriter. If the obligor or
any underwriter for the obligor is an affiliate of the trustee,
describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect.
(2) A copy of the Certificate of Authority of the trustee
to do business.
(3) A copy of the Certification of Fiduciary Powers of the
trustee.
(4) A copy of the By-Laws of the trustee as now in effect.
(5) Consent of the trustee required by Section 321(b)
of the Act.
(6) A copy of the latest Consolidated Reports of Condition
and Income of the trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon imcomplete information. Said Items may, however, be considered
correct unless amended by an amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 27th day of August, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/
-------------------------
Michael M. Hopkins
Its Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. The general business of the Association
shall be conducted at its main office and its branches.
THIRD. The board of directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders, the exact number of
directors within such minimum and maximum limits to be fixed and determined
from time to time by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special meeting thereof.
Unless otherwise provided by the laws of the United States, any vacancy in the
board of directors for any reason, including an increase in the number thereof,
may be filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the board of
directors may designate, on the day of each year specified therefore in the
bylaws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The capital
stock may be increased or decreased from time to time, in accordance with
the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the board
of directors, in its discretion, may from time to time determine and at such
price as the board of directors may from time to time fix.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
SIXTH. The board of directors shall appoint one of its members president of
this Association, who shall be chairman of the board, unless the board appoints
another director to be the chairman. The board of directors shall have the
power to appoint one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact the business
of this Association.
The board of directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a board of
directors to do and perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other place within the limits of the City of Hartford,
Connecticut, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time. Unless otherwise provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting of the
shareholders shall be given by first class mail, postage prepaid, mailed at
least ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
TENTH. (a) Right to Indemnification. Each person who was or is made 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 (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
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Dated at , as of .
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Revision of February 15, 1996
<PAGE>
EXHIBIT 2
[LOGO]
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COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
(1) The Comptroller of the Currency, pursuant to Revised Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering, regulation and
supervision of all National Banking Associations.
(2) "Fleet National Bank", Springfield, Massachusetts
(Charter No. 1338), is a National Banking Association formed under the
laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department, in the City of
Washington and District of Columbia, this
14th day of August, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank",
Springfield, Massachusetts, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attanined the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
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<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
coporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and dispositon of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
-3-
<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liablity
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Commitee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in liew thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Commmunity Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committes of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
-5-
<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
-7-
<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
-8-
<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
-9-
<PAGE>
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Texas Petrochemicals Corporation and Fleet National Bank, as Trustee,
does hereby consent that, pursuant to Section 321(b) of the Trust Indenture
Act of 1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ Michael M. Hopkins
-------------------------------
Michael M. Hopkins
Its: Vice President
Dated:
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Federal Financial Institutions Examination Council
- --------------------------------------------------------------------------------
[FEDERAL FINANCIAL Please refer to page i, [1]
INSTITUTIONS EXAMINATION Table of Contents, for
COUNCIL LOGO] the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(960630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
-----------------------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and
Income (including the supporting schedules) have been prepared in conformance
with the instructions issued by the appropriate Federal regulatory authority
and are true to the best of my knowledge and belief.
/s/ Giro DeRosa
- --------------------------------------------------------------------------------
Signature of Officer Authorized to Sign Report
July 25, 1996
- --------------------------------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) 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 appropriate Federal
regulatory authority and is true and correct.
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
/s/
- --------------------------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | Banks should affix
--------------------- the address label
(RCRI 90150) in this space.
CALL NO. 196 31 06-30-96
STAR: 25-0590 00327 STCERT: 25-02490
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency
<PAGE>
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
___ ___
FDIC Certificate Number | 0 | 2 | 4 | 9 | 9 | | Banks should affix the address label in this space. |
______________________
(RCRI 9050) CALL NO. 196 31 06-30-96
STBK: 25-0590 00327 STCERT: 25-02499
FLEET NATIONAL BANK
ONE MONARCH PLACE
SPRINGFIELD, MA 01102
|___ ___|
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 031
Page i
/2/
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
________________________________________________________________________________
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement...........................................RI-1,2,3
Schedule RI-A--Changes in Equity Capital....................................RI-4
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses..................................................................RI-4,5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority..........................................................RI-5
Schedule RI-D--Income from
International Operations..................................................RI-6
Schedule RI-E--Explanations...............................................RI-7,8
REPORT OF CONDITION
Schedule RC--Balance Sheet................................................RC-1,2
Schedule RC-A--Cash and Balances Due
From Depository Institutions..............................................RC-3
Schedule RC-B--Securities...............................................RC-3,4,5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..............................................RC-6,7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only).....................................................RC-7a,7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks)..................................RC-8
Schedule RC-E--Deposit Liabilities....................................RC-9,10,11
Schedule RC-F--Other Assets................................................RC-11
Schedule RC-G--Other Liabilities...........................................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.........................................................RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs..................................................................RC-13
Schedule RC-K--Quarterly Averages..........................................RC-13
Schedule RC-L--Off-Balance Sheet Items...............................RC-14,15,16
Schedule RC-M--Memoranda................................................RC-17,18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets..............................................RC-19,20
Schedule RC-O--Other Data for Deposit
Insurance Assessments.................................................RC-21,22
Schedule RC-R--Regulatory Capital.......................................RC-23,24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income.....................................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Consolidated Report of Income
for the period January 1, 1996 - June 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
<TABLE>
<CAPTION>
Schedule RI--Income Statement _________
| I480 |
______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________|_____________________|
<S> <C> <C>
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate .................................................. | 4011 616,395 | 1.a.(1)(a)
(b) Loans to depository institutions .............................................. | 4019 588 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers ........... | 4024 286 | 1.a.(1)(c)
(d) Commercial and industrial loans ............................................... | 4012 562,807 | 1.a.(1)(d)
(e) Acceptances of other banks .................................................... | 4026 261 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans ............................................ | 4054 9,643 | 1.a.(1)(f)(1)
(2) Other ..................................................................... | 4055 97,346 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions ........................ | 4056 0 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations ....................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations .................................................... | 4504 5,232 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices ........................................... | 4058 84,576 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4059 1,981 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases .................................................................... | 4505 75,341 | 1.b.(1)
(2) Tax-exempt leases ................................................................. | 4307 791 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices ............................................................... | 4105 914 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 4106 142 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations ... | 4027 209,142 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities ............................................................ | 4506 0 | 1.d.(2)(a)
(b) Tax-exempt securities ......................................................... | 4507 2,953 | 1.d.(2)(b)
(3) Other domestic debt securities .................................................... | 3657 12,164 | 1.d.(3)
(4) Foreign debt securities ........................................................... | 3658 3,348 | 1.d.(4)
(5) Equity securities (including investments in mutual funds) ......................... | 3659 10,212 | 1.d.(5)
e. Interest income from trading assets.................................................... | 4069 360 | 1.e.
______________________
</TABLE>
____________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
Dollar Amounts in Thousands | Year-to-date |
___________________________________________________________________________________ ______________
<S> <C> <C>
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased | ////////////////// |
under agreements to resell in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4020 24,925 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ | 4107 1,719,407 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) .............. | 4508 8,583 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................... | 4509 133,915 | 2.a.(1)(b)(1)
(2) Other savings deposits .................................. | 4511 26,678 | 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ | 4174 88,690 | 2.a.(1)(b)(3)
(4) All other time deposits ................................. | 4512 214,225 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs .......................................... | 4172 50,022 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase in domestic offices of the bank and of | ////////////////// |
its Edge and Agreement subsidiaries, and in IBFs .................... | 4180 152,094 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ............................... | 4185 121,525 | 2.c.
d. Interest on mortgage indebtedness and obligations under | ////////////////// |
capitalized leases .................................................. | 4072 361 | 2.d.
e. Interest on subordinated notes and debentures ....................... | 4200 26,110 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... | 4073 822,203 | 2.f.
___________________________
3. Net interest income (item 1.g minus 2.f) ............................... | ////////////////// | RIAD 4074 | 897,204 | 3.
___________________________
4. Provisions: | ////////////////// |
___________________________
a. Provision for loan and lease losses ................................. | ////////////////// | RIAD 4230 | 21,672 | 4.a.
b. Provision for allocated transfer risk ............................... | ////////////////// | RIAD 4243 | 0 | 4.b.
___________________________
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities .................................... | 4070 144,614 | 5.a.
b. Service charges on deposit accounts in domestic offices ............. | 4080 111,736 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d)............................................... A220 10,646 5.c.
d. Other foreign transaction gains (losses) ............................ | 4076 247 | 5.d.
e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ................................................ | 5407 372,950 | 5.f.(1)
(2) All other noninterest income* ................................... | 5408 211,593 | 5.f.(2)
___________________________
g. Total noninterest income (sum of items 5.a through 5.f) ............. | ////////////////// | RIAD 4079 | 851,786 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. | ////////////////// | RIAD 3521 | 1 | 6.a.
b. Realized gains (losses) on available-for-sale securities ............ | ////////////////// | RIAD 3196 | 16,126 | 6.b.
___________________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ...................................... | 4135 322,146 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) .... | 4217 114,912 | 7.b.
c. Other noninterest expense* .......................................... | 4092 631,554 | 7.c.
___________________________
d. Total noninterest expense (sum of items 7.a through 7.c) ............ | ////////////////// | RIAD 4093 | 1,068,612 | 7.d.
___________________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
___________________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)| ////////////////// | RIAD 4301 | 674,833 | 8.
9. Applicable income taxes (on item 8) .................................... | ////////////////// | RIAD 4302 | 280,303 | 9.
___________________________
10. Income (loss) before extraordinary items and other adjustments | ////////////////// |
___________________________
(item 8 minus 9) ....................................................... | ////////////////// | RIAD 4300 | 394,530 | 10.
_________________________________________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________ ______________
<S> <C> <C>
11. Extraordinary items and other adjustments: | ////////////////// |
a. Extraordinary items and other adjustments, gross of income taxes* . | 4310 0 | 11.a.
b. Applicable income taxes (on item 11.a)* ........................... | 4315 0 | 11.b.
c. Extraordinary items and other adjustments, net of income taxes | ////////////////// |__________________________
(item 11.a minus 11.b) ............................................ | ////////////////// | RIAD 4320 | 0 | 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ......................... | ////////////////// | RIAD 4340 | 394,530 | 12.
_________________________________________________
</TABLE>
<TABLE>
<CAPTION>
__________
| I481 |
_______________
Memoranda | Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes .......................... | 4513 1,798 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8) ............................................................... | 8431 20,910 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees on payroll at end of current period (round to | //// Number |
nearest whole number) ........................................................................... | 4150 9,852 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | //// MM DD YY |
accounting this calendar year, report the date of the bank's acquisition ........................ | 9106 00/00/00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures ...................................................................... | 8757 1,428 | M.8.a.
b. Foreign exchange exposures ................................................................... | 8758 9,218 | M.8.b.
c. Equity security and index exposures .......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures ................................................................ | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income.....................................................| 8761 (5,575)| M.9.a.
b. Net (increase) decrease to interest expense ...................................................| 8762 (5,752)| M.9.b.
c. Other (noninterest) allocations ...............................................................| 8763 (172)| M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).................................| A251 0 | M.10.
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. _________
| I483 |
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition | ////////////////// |
and Income ...................................................................................... | 3215 1,342,473 | 1.
2. Equity capital adjustments from amended Reports of Income, net* ................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) ............................ | 3217 1,342,473 | 3.
4. Net income (loss) (must equal Schedule RI, item 12) ............................................. | 4340 394,530 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net .............................. | 4346 0 | 5.
6. Changes incident to business combinations, net .................................................. | 4356 4,161,079 | 6.
7. LESS: Cash dividends declared on preferred stock ................................................ | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock ................................................... | 4460 490,634 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions | ////////////////// |
for this schedule) .............................................................................. | 4411 0 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ................ | 8433 (46,607)| 11.
12. Foreign currency translation adjustments ........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ........ | 4415 (1,003,722)| 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, | ////////////////// |
item 28) ........................................................................................ | 3210 4,357,119 | 14.
______________________
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
<TABLE>
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
__________
| I486 |
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4651 35,701 | 4661 8,412 | 1.a.
b. To non-U.S. addressees (domicile) ..................................... | 4652 0 | 4662 0 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................. | 4653 0 | 4663 0 | 2.a.
b. To foreign banks ...................................................... | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ...... | 4655 2 | 4665 22 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ......................................... | 4645 38,139 | 4617 19,005 | 4.a.
b. To non-U.S. addressees (domicile) ..................................... | 4646 0 | 4618 102 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans ........................................ | 4656 1,137 | 4666 733 | 5.a.
b. Other (includes single payment, installment, and all student loans) ... | 4657 7,864 | 4667 2,681 | 5.b.
6. Loans to foreign governments and official institutions ................... | 4643 0 | 4627 0 | 6.
7. All other loans .......................................................... | 4644 826 | 4628 541 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ......................................... | 4658 3,729 | 4668 3,241 | 8.a.
b. Of non-U.S. addressees (domicile) ..................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ......................................... | 4635 87,398 | 4605 34,737 | 9.
___________________________________________
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-B--Continued
Part I. Continued
Memoranda
__________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
____________________ ____________________
| Calendar year-to-date |
_________________________________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 383 | 5410 1,374 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 189 | 3583 253 | M.5.a.
b. Secured by farmland ................................................... | 3584 145 | 3585 131 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ..................... | 5411 2,650 | 5412 108 | M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 13,892 | 5414 1,231 | M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 837 | 3589 395 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 17,988 | 3591 6,294 | M.5.e.
|_________________________________________|
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
_____________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income.......... | 3124 266,943 | 1.
2. Recoveries (must equal part I, item 9, column B above) ........................................ | 4605 34,737 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) ................................. | 4635 87,398 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 21,672 | 4.
5. Adjustments* (see instructions for this schedule) ................................ ............ | 4815 636,497 | 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b) ..................................................................................... | 3123 872,451 | 6.
|____________________|
</TABLE>
____________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
| I489 |
____________ ________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Federal ....................................................................................... | 4780 N/A | 1.
2. State and local................................................................................ | 4790 N/A | 2.
3. Foreign ....................................................................................... | 4795 N/A | 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) ............ | 4770 N/A | 4.
____________________________| |
5. Deferred portion of item 4 ........................................ | RIAD 4772 | N/A | ////////////////// | 5.
__________________________________________________
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-6
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
Part I. Estimated Income from International Operations
__________
| I492 |
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked ................................................................... | 4837 N/A | 1.a.
b. Interest expense booked .................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs | ////////////////// |
(item 1.a minus 1.b) ..................................................................... | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices .. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations .............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............. | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations ....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a | ////////////////// |
minus 3.b and 3.c) ....................................................................... | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs ................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5) ........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 .... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) .............. | 4341 N/A | 8.
______________________
<CAPTION>
Memoranda ______________________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Intracompany interest income included in item 1.a above ..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above .................................... | 4848 N/A | M.2.
______________________
</TABLE>
<TABLE>
<CAPTION>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Interest income booked at IBFs .............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs ............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items ................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income ........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs) ........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs) ............................................................................ | 4853 N/A | 5.
______________________
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-7
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
__________
| I495 |
______ ________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains on other real estate owned ..................................................... | 5415 0 | 1.a.
b. Net gains on sales of loans .............................................................. | 5416 0 | 1.b.
c. Net gains on sales of premises and fixed assets .......................................... | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 5.f.(2): | ////////////////// |
_____________
d. | TEXT 4461 | Income on Mortgages Held for Resale | 4461 81,194 | 1.d.
e. | TEXT 4462 | Gain From Branch Divestitures | 4462 77,976 | 1.e.
___________
f. | TEXT 4463 |______________________________________________________________________________| 4463 | 1.f.
_____________
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets ................................................ | 4531 135,939 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net losses on other real estate owned .................................................... | 5418 0 | 2.b.
c. Net losses on sales of loans ............................................................. | 5419 0 | 2.c.
d. Net losses on sales of premises and fixed assets ......................................... | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of | ////////////////// |
Schedule RI, item 7.c: | ////////////////// |
_____________
e. | TEXT 4464 | Intercompany Corporate Support Function Charges | 4464 143,184 | 2.e.
___________
f. | TEXT 4467 | Intercompany Data Processing & Programming Charges | 4467 158,034 | 2.f.
___________
g. | TEXT 4468 |______________________________________________________________________________| 4468 | 2.g.
_____________
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and | ////////////////// |
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe | ////////////////// |
all extraordinary items and other adjustments): | ////////////////// |
_____________
a. (1) | TEXT 4469 |__________________________________________________________________________| 4469 | 3.a.(1)
_____________
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a.(2)
_____________ ____________________________
b. (1) | TEXT 4487 |__________________________________________________________________________| 4487 | 3.b.(1)
_____________
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b.(2)
_____________ ____________________________
c. (1) | TEXT 4489 |__________________________________________________________________________| 4489 | 3.c.(1)
_____________
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c.(2)
____________________________
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, | ////////////////// |
item 2) (itemize and describe all adjustments): | ////////////////// |
_____________
a. | TEXT 4492 |______________________________________________________________________________| 4492 | 4.a.
___________
b. | TEXT 4493 |______________________________________________________________________________| 4493 | 4.b.
_____________
5. Cumulative effect of changes in accounting principles from prior years (from | ////////////////// |
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
_____________
a. | TEXT 4494 |______________________________________________________________________________| 4494 | 5.a.
___________
b. | TEXT 4495 |______________________________________________________________________________| 4495 | 5.b.
_____________
6. Corrections of material accounting errors from prior years (from Schedule RI-A, | ////////////////// |
item 10) (itemize and describe all corrections): | ////////////////// |
_____________
a. | TEXT 4496 | 4496 | 6.a.
___________|______________________________________________________________________________
b. | TEXT 4497 4497 | 6.b.
____________|____________________________________________________________________________________________________
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RI-8
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RI-E--Continued
________________
| Year-to-date |
______ ______________
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
_____________
a. | TEXT 4498 | Fleet National Bank Surplus Distribution to FFG | 4498 (1,003,722) | 7.a.
__________________________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
___________________________________________________________________________________________
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, | ////////////////// |
item 5) (itemize and describe all adjustments): | ////////////////// |
_____________ | |
a. | TEXT 4521 | 12/31/95 Ending Balance of Pooled Entities | 4521 | 8.a.
___________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
___________________________________________________________________________________________| |
____________________
9. Other explanations (the space below is provided for the bank to briefly describe, | I498 | I499 |
______________________
at its option, any other significant items affecting the Report of Income):
___
No comment |X| (RIAD 4769)
___
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: Fleet National Bank Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-1
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
__________
| C400 |
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1) ................................... | 0081 4,130,928 | 1.a.
b. Interest-bearing balances(2) ............................................................ | 0071 46,521 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .............................. | 1754 257,441 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ............................ | 1773 7,250,067 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic offices | ////////////////// |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// |
a. Federal funds sold ...................................................................... | 0276 17,428 | 3.a.
b. Securities purchased under agreements to resell ......................................... | 0277 0 | 3.b.
4. Loans and lease financing receivables: ____________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 31,278,251 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ................... | RCFD 3123 | 872,451 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ....................... | RCFD 3128 | 0 | ////////////////// | 4.c.
____________________________
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ..................................... | 2125 30,405,800 | 4.d.
5. Trading assets (from schedule RC-D )........................................................ | 3545 71,354 | 5.
6. Premises and fixed assets (including capitalized leases) ................................... | 2145 534,844 | 6.
7. Other real estate owned (from Schedule RC-M) ............................................... | 2150 34,546 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ... | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding ............................... | 2155 16,634 | 9.
10. Intangible assets (from Schedule RC-M) ..................................................... | 2143 2,283,414 | 10.
11. Other assets (from Schedule RC-F) .......................................................... | 2160 3,978,638 | 11.
12. Total assets (sum of items 1 through 11) ................................................... | 2170 49,027,615 | 12.
______________________
</TABLE>
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC--Continued
___________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
<S> <C> <C>
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I) ............................................................................... | RCON 2200 34,110,580 | 13.a.
____________________________
(1) Noninterest-bearing(1) ................................ | RCON 6631 10,202,036 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ...................................... | RCON 6636 23,908,544 | /////////////////////// | 13.a.(2)
____________________________
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II) .............................................................................. | RCFN 2200 1,745,663 | 13.b.
____________________________
(1) Noninterest-bearing ................................... | RCFN 6631 400 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,745,263 | /////////////////////// | 13.b.(2)
____________________________
14. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | /////////////////////// |
a. Federal funds purchased ............................................................... | RCFD 0278 4,302,800 | 14.a.
b. Securities sold under agreements to repurchase ........................................ | RCFD 0279 566,036 | 14.b.
15. a. Demand notes issued to the U.S. Treasury .............................................. | RCON 2840 14,411 | 15.a.
b. Trading liabilities (from Schedule RC-D) .............................................. | RCFD 3548 57,446 | 15.b.
16. Other borrowed money: | /////////////////////// |
a. With a remaining maturity of one year or less.......................................... | RCFD 2332 487,435 | 16.a.
b. With a remaining maturity of more than one year........................................ | RCFD 2333 893,259 | 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ........................... | RCFD 2910 11,561 | 17.
18. Bank's liability on acceptances executed and outstanding ................................. | RCFD 2920 16,634 | 18.
19. Subordinated notes and debentures ........................................................ | RCFD 3200 1,213,219 | 19.
20. Other liabilities (from Schedule RC-G) ................................................... | RCFD 2930 1,251,452 | 20.
21. Total liabilities (sum of items 13 through 20) ........................................... | RCFD 2948 44,670,496 | 21.
| /////////////////////// |
22. Limited-life preferred stock and related surplus ......................................... | RCFD 3282 0 | 22.
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus ............................................ | RCFD 3838 125,000 | 23.
24. Common stock ............................................................................. | RCFD 3230 19,487 | 24.
25. Surplus (exclude all surplus related to preferred stock).................................. | RCFD 3839 2,551,927 | 25.
26. a. Undivided profits and capital reserves ................................................ | RCFD 3632 1,693,408 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ................ | RCFD 8434 (32,703)| 26.b.
27. Cumulative foreign currency translation adjustments ...................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27) ........................................ | RCFD 3210 4,357,119 | 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, | /////////////////////// |
and 28) .................................................................................. | RCFD 3300 49,027,615 | 29.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external __________________
auditors as of any date during 1995 ............................................................... | RCFD 6724 N/A | M.1.
__________________
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
____________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
12
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
__________
| C405 |
_________________________________ ________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin .................................................................... | 0022 3,402,522 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .............. | ////////////////// | 0020 2,655,163 | 1.a.
b. Currency and coin .................................................... | ////////////////// | 0080 747,539 | 1.b.
2. Balances due from depository institutions in the U.S. ................... | ////////////////// | 0082 500,301 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ................................... | 0085 500,373 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks .. | ////////////////// | 0070 7,902 | 3.
a. Foreign branches of other U.S. banks ................................. | 0073 690 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ........... | 0074 7,948 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ................................. | 0090 265,916 | 0090 0 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) .................................. | 0010 4,177,449 | 0010 4,176,641 | 5.
___________________________________________
<CAPTION>
______________________
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above) .............................................................................. | 0050 453,780 | M.1.
______________________
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
_______
| C410 |
___________________________________________________________________________ ________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ......... | 0211 250 | 0213 250 | 1286 1,274,624 | 1287 1,252,546 | 1.
2. U.S. Government agency | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and corporation obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) .............. | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) ................... | 1294 0 | 1295 0 | 1297 498 | 1298 505 | 2.b.
_____________________________________________________________________________________
</TABLE>
_____________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
_____________________________________________________________________________________
| Held-to-maturity | Available-for-sale |
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
____________________ ____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________________________ ____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
3. Securities issued by states | ////////////////// |/ //////////////// | ////////////////// | ///////////////// |
and political subdivisions | ////////////////// |////////////////// | ////////////////// | ///////////////// |
in the U.S.: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. General obligations ......... | 1676 150,357 |1677 150,242 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ......... | 1681 8,887 |1686 8,889 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and similiar obligations .....| 1694 0 |1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Pass-through securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Guaranteed by | ////////////////// |////////////////// | ////////////////// | ///////////////// |
GNMA ....................... | 1698 0 |1699 0 | 1701 861,176 | 1702 852,929 | 4.a.(1)
(2) Issued by FNMA | ////////////////// |////////////////// | ////////////////// | ///////////////// |
and FHLMC ................. | 1703 908 |1705 908 | 1706 4,854,605 | 1707 4,831,023 | 4.a.(2)
(3) Other pass-through | ////////////////// |////////////////// | ///////////////////| ///////////////// |
secruities ................. | 1709 4 |1710 4 | 1711 0 | 1713 0 | 4.a.(3)
b. Other mortgage-backed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (include CMO's, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
REMICs, and stripped | ////////////////// |////////////////// | ////////////////// | ///////////////// |
MBS): | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(1) Issued or guaranteed | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by FNMA, FHLMC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
or GNMA ............... | 1714 0 |1715 0 | 1716 0 | 1717 0 | 4.b.(1)
(2) Collateralized | ////////////////// |////////////////// | ////////////////// | ///////////////// |
by MBS issued or | ////////////////// |////////////////// | ////////////////// | ///////////////// |
guaranteed by FNMA, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
FHLMC, or GNMA ........ | 1718 0 |1719 0 | 1731 0 | 1732 0 | 4.b.(2)
(3) All other mortgage- | ////////////////// |////////////////// | ////////////////// | //////////////// |
backed securities ..... | 1733 0 |1734 0 | 1735 518 | 1736 518 | 4.b.(3)
5. Other debt securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Other domestic debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities.................. | 1737 0 |1738 0 | 1739 817 | 1741 812 | 5.a.
b. Foreign debt | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities ................. | 1742 97,035 |1743 78,878 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// |////////////////// | ////////////////// | ///////////////// |
a. Investments in mutual | ////////////////// |////////////////// | ////////////////// | ///////////////// |
funds ...................... | ////////////////// |////////////////// | 1747 0 | 1748 0 | 6.a.
b. Other equity securities | ////////////////// |////////////////// | ////////////////// | ///////////////// |
with readily determin- | ////////////////// |////////////////// | ////////////////// | ///////////////// |
able fair values ........... | ////////////////// |////////////////// | 1749 0 | 1751 0 | 6.b.
c. All other equity | ////////////////// |////////////////// | ////////////////// | ///////////////// |
securities (1) ............. | ////////////////// |////////////////// | 1752 311,734 | 1753 311,734 | 6.c.
7. Total (sum of items 1 | ////////////////// |////////////////// | ////////////////// | ///////////////// |
through 6) (total of | ////////////////// |////////////////// | ////////////////// | ///////////////// |
column A must equal | ////////////////// |////////////////// | ////////////////// | ///////////////// |
Schedule RC, item 2.a) | ////////////////// |////////////////// | ////////////////// | ///////////////// |
(total of column D must | ////////////////// |////////////////// | ////////////////// | ///////////////// |
equal Schedule RC, | ////////////////// |////////////////// | ////////////////// | ///////////////// |
item 2.b) ..................... | 1754 257,441 | 1771 239,171 | 1772 7,303,972 | 1773 7,250,067 | 7.
|__________________________________________________________________________________|
</TABLE>
____________
1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-B--Continued
<CAPTION>
___________
Memoranda | C412 |
___________ _________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Pledged securities(2) ......................................................................... | 0416 2,308,912 | M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Fixed rate debt securities with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | 0343 72,490 | M.2.a.(1)
(2) Over three months through 12 months .................................................... | 0344 77,125 | M.2.a.(2)
(3) Over one year through five years ....................................................... | 0345 2,734,577 | M.2.a.(3)
(4) Over five years ........................................................................ | 0346 2,925,207 | M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) ..... | 0347 5,809,399 | M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | 4544 531,365 | M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | 4545 855,010 | M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | 4551 0 | M.2.b.(3)
(4) Less frequently than every five years .................................................. | 4552 0 | M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) .. | 4553 1,386,375 | M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total debt | ////////////////// |
securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus nonaccrual | ////////////////// |
debt securities included in Schedule RC-N, item 9, column C) ............................... | 0393 7,195,774 | M.2.c.
3. Not applicable | ////////////////// |
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included | ////////////////// |
in Schedule RC-B, items 3 through 5, column A, above) ......................................... | 5365 0 | M.4.
5. Not applicable | ////////////////// |
6. Floating rate debt securities with a remaining maturity of one year or less(2),(4) (included in | ////////////////// |
Memorandum items 2.b(1) through 2.b.(4) above)................................................. | 5519 3,700 | M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer ................................................................................... | 1778 0 | m.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost ............................................................................. | 8780 0 | M.8.a.
b. Fair Value ................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost ............................................................................. | 8782 0 | M.9.a.
b. Fair Value ................................................................................. | 8783 0 | M.9.b.
----------------------
</TABLE>
____________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
_________
Do not deduct the allowance for loan and lease losses from amounts | C415 |
reported in this schedule. Report total loans and leases, net of unearned _________________________________|________|
income. Exclude assets held for trading. | (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Loans secured by real estate ........................................... | 1410 11,754,916 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 433,880 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 2,172 | 1.b
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 2,022,596 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 4,418,239 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 492,952 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 559,373 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 3,825,704 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 143,682 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 143,682 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 0 | 1517 12,345 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 672 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 149 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 523 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 5,889 | 1590 5,889 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 12,446,547 | 1763 12,402,858 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 83,521 | 1764 54,074 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,217,352 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 161,652 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans).. | 2011 2,055,700 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 0 | 2081 0 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 167,100 | 2107 167,100 | 8.
9. Other loans ............................................................ | 1563 2,146,172 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. | ////////////////// | 1545 156,275 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,989,897 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 2,300,055 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 2,300,055 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 0 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 through | ////////////////// | ////////////////// |
10 minus item 11) (total of column A must equal Schedule RC, item 4.a).. | 2122 31,278,251 | 2122 31,205,115 | 12.
___________________________________________
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page: RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
___________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
Memoranda | Bank | Offices |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above .............. | 1496 0 | 1496 0 | M.1.
2. Loans and leases restructured and in compliance with modified terms | ////////////////// | ////////////////// |
(included in Schedule RC-C, part I, above and not reported as past due | ////////////////// | ////////////////// |
or nonaccrual in Schedule RC-N, Memorandum item 1): | ////////////////// | ////////////////// |
a. Loans secured by real estate: | ////////////////// | ////////////////// |
(1) To U.S. addressees (domicile) ................................... | 1687 511 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ............................... | 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans | ////////////////// |
to individuals for household, family, and other personal expenditures)| 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables | ////////////////// |
of non-U.S. addressees (domicile) included in Memorandum item 2.b | ////////////////// |
above ............................................................... | 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those | ////////////////// |
in nonaccrual status): | ////////////////// |
a. Fixed rate loans and leases with a remaining maturity of: | ////////////////// |
(1) Three months or less ............................................ | 0348 10,215,575 | M.3.a.(1)
(2) Over three months through 12 months ............................. | 0349 369,421 | M.3.a.(2)
(3) Over one year through five years ................................ | 0356 3,479,742 | M.3.a.(3)
(4) Over five years ................................................. | 0357 5,791,166 | M.3.a.(4)
(5) Total fixed rate loans and leases (sum of | ////////////////// |
Memorandum items 3.a.(1) through 3.a.(4)) ....................... | 0358 19,855,904 | M.3.a.(5)
b. Floating rate loans with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently .................................... | 4554 8,960,876 | M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . | 4555 1,848,295 | M.3.b.(2)
(3) Every five years or more frequently, but less frequently than | ////////////////// |
annually ........................................................ | 4561 250,031 | M.3.b.(3)
(4) Less frequently than every five years ........................... | 4564 12,721 | M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) | ////////////////// |
through 3.b.(4)) ................................................ | 4567 11,071,923 | M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) | ////////////////// |
(must equal the sum of total loans and leases, net, from | ////////////////// |
Schedule RC-C, part I, item 12, plus unearned income from | ////////////////// |
Schedule RC-C, part I, item 11, minus total nonaccrual loans and | ////////////////// |
leases from Schedule RC-N, sum of items 1 through 8, column C) ...... | 1479 30,927,827 | M.3.c.
d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS | ////////////////// |
(INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE)......... | A246 1,543,411 | M.3.d.
4. Loans to finance commercial real estate, construction, and land | ////////////////// |
development activities (NOT SECURED BY REAL ESTATE) included in | ////////////////// |
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2) ........... | 2746 271,706 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, | ////////////////// |
above .................................................................. | 5369 0 | M.5.
| ////////////////// |_____________________
6. Adjustable rate closed-end loans secured by first liens on 1-4 family | ////////////////// | RCON Bil Mil Thou |
residential properties (included in Schedule RC-C, part I, item | ////////////////// | ___________________|
1.c.(2)(a), column B, page RC-6) ....................................... | ////////////////// | 5370 1.655.898 | M.6.
|_________________________________________|
</TABLE>
_____________________________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplememtal Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7a
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<S> <C>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less
and farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original
amount" of a loan: (1) For loans drawn down under lines of credit or loan commitments, the "original amount" of the loan is the
size of the line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or
renewed prior to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the
"original amount" is the amount currently outstanding on the report date. (2) For loan participations and syndications, the
"original amount" of the loan participation or syndication is the entire amount of the credit originated by the lead lender.
(3) For all other loans, the "original amount" is the total amount of the loan at origination or the amount currently
outstanding as of the report date, whichever is larger.
Loans to Small Businesses
</TABLE>
<TABLE>
<S> <C>
1. Indicate in the appropriate box at the right whether all or substantially all of the dollar volume of your
bank's "Loans secured by nonfarm nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar volume of your bank's
"Commercial and industrial loans to U.S. addressees" in domestic offices reported in Schedule RC-C, __________
part I, item 4.a, column B, have original amounts of $100,000 or less (If your bank has no loans ________| C415 |
outstanding in both of these two loan categories, place an "X" in the box marked "NO" and go to | RCON YES NO|
Item 5; otherwise, see instructions for further information.).................................. | 6999 | |///| x | 1.
___________________
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. _____________________
| Number of Loans |
2. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |/////////// |
a. "Loans secured by nonfarm nonresidential properties" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 1.e, column B....... | 5562 N/A | 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic | ////////////////// |
offices reported in Schedule RC-C, part I, item 4.a, column B ...... | 5563 N/A | 2.b.
______________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
____________________ ____________________
Dollar Amounts in Thousands | RCON | ///////////| RCON Bil Mil Thou |
_____________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm | /////////////////////////////////////// | 1.
nonresidential properties" in domestic offices reported in Schedule RC-C | /////////////////////////////////////// | 1.a.
part I item 1.e, column B (sum of items 3.a through 3.c must be less | /////////////////////////////////////// |
or equal to Schedule RC-C, part I, item 1.e, column B): | /////////////////////////////////////// | 1.b
a. With original amounts of $100,000 or less ........................... | 5564 1,988 | 5565 76,370 | 3.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5566 2,805 | 5567 332,639 | 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5568 2,736 | 5569 952,476 | 3.c.
4. Number and amount currently outstanding of "Commercial and industrial | /////////////////////////////////////// |
loans to U.S. addressees" in domestic offices reported in Schedule RC-C, | /////////////////////////////////////// |
part I, item 4.a, column B (sum of items 4.a through 4.c must be less | /////////////////////////////////////// |
than or equal to Schedule RC-C, part I, item 4.a, column B): | /////////////////////////////////////// |
a. With original amounts of $100,000 or less ........................... | 5570 11,433 | 5571 337,759 | 4.a.
b. With original amounts of more than $100,000 through $250,000 ........ | 5572 2,127 | 5573 228,713 | 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ...... | 5574 1,968 | 5575 601,126 | 4.c.
___________________________________________
</TABLE>
17a
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-7b
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
Schedule RC-C -- Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the
dollar volume of your bank's "Loans secured by farmland (including farm residential
and other improvements)" in domestic offices reported in Schedule RC-C, part I, item
1.b, column B, and all or substantially all of the dollar volume of your bank's
"Loans to finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these two YES NO
loan categories, place an "X" in the box marked "NO" and do not complete items 7 _______________________
and 8; otherwise, see instructions for further information.)................................... | 6860 | | /// | X | 5.
|_____________________|
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip items 6.a and 6.b
and complete items 7 and 8 below.
</TABLE>
<TABLE>
<S> <C>
______________________
| Number of Loans |
6. Report the total number of loans currently outstanding for each of the |____________________|
following Schedule RC-C, part I, loan categories: | RCON |//////////// |
a. "Loans secured by farmland (including farm residential and other |______| |
improvements)" in domestic offices reported in Schedule RC-C, part I, | ////////////////// |
item 1.b, column B........................................................ | 5576 N/A | 6.a.
b. "Loans to finance agricultural production and other loans to farmers" in | ////////////////// |
domestic offices reported in Schedule RC-C, part I, item 3, column B...... | 5577 N/A | 6.b.
|____________________|
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________
| (Column A) | (Column B) |
| | Amount |
| | Currently |
| Number of Loans | Outstanding |
|_____________________|______________________|
Dollar Amounts in Thousands | RCON |/////////////| RCON Bil Mil Thou |
________________________________________________________________________________| ______| |_____________________ |
7. Number and amount currently outstanding of "Loans secured by farmland | ////////////////////////////////////////// |
(including farm residential and other improvements)" in domestic offices | ////////////////////////////////////////// |
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a | ////////////////////////////////////////// |
through 7.c must be less than or equal to Schedule RC-C, part I, item 1.b, | ////////////////////////////////////////// |
column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5578 18 | 5579 292 | 7.a.
b. With original amounts of more than $100,000 through $250,000............ | 5580 8 | 5581 850 | 7.b.
c. With original amounts of more than $250,000 through $500,000............ | 5582 4 | 5583 1,030 | 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural | ////////////////////////////////////////// |
production and other loans to farmers" in domestic offices reported in | ////////////////////////////////////////// |
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c | ////////////////////////////////////////// |
must be less than or equal to Schedule RC-C, part I, item 3, column B): | ////////////////////////////////////////// |
a. With original amounts of $100,000 or less............................... | 5584 46 | 5585 992 | 8.a.
b. With original amounts of more than $100,000 through $250,000............ | 5586 17 | 5587 1,877 | 8.b.
c. With original amounts of more than $250,000 through $500,000............ | 5588 4 | 5589 1,054 | 8.c.
|_____________________|______________________|
</TABLE>
17b
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
__________
| C420 |
__________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou|
__________________________________________________________________________________________________| ________________________|
<S> <C> <C>
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- | /////////////////////// |
backed securities) .......................................................................... | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ......................................................| RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 66,696 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3544 4,658 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 71,354 | 12.
<CAPTION>
___________________________
___________________________
| ///////// Bil Mil Thou |
LIABILITIES | ________________________|_
<S> <C> <C>
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 57,446 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 57,446 | 15.
___________________________
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-9
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
__________
| C425 |
______________________________________________________ ________
| | Nontransaction |
| Transaction Accounts | Accounts |
_________________________________________ ____________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
| accounts (including| demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
__________________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 8,615,650 | 2240 8,158,203 | 2346 22,594,478 | 1.
2. U.S. Government ...................................... | 2202 58,650 | 2280 58,605 | 2520 42,512 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 818,151 | 2290 706,072 | 2530 702,686 | 3.
4. Commercial banks in the U.S. ......................... | 2206 836,005 | 2310 836,005 | 2550 771 | 4.
5. Other depository institutions in the U.S. ............ | 2207 221,571 | 2312 221,571 | 2349 2,968 | 5.
6. Banks in foreign countries ........................... | 2213 18,445 | 2320 18,445 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 108 | 2300 108 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 198,585 | 2330 198,585 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 10,767,165 | 2210 10,197,594 | 2385 23,343,415 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCON Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 2,735,425 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 1,636,611 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 2,350 | M.1.c.(1)
(2) Issued EITHER in denominations of $100,000 OR in denominations greater than $100,000 | ////////////////// |
and participated out by the broker in shares of $100,000 or less ........................ | 2344 1,634,261 | M.1.c.(2)
d. MATURITY DATA FOR BROKERED DEPOSITS: | ////////////////// |
(1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.c.(1) ABOVE)................. | A243 171 | M.1.d.(1)
(2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING | ////////////////// |
MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.b ABOVE)..................... | A244 509,265 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 457,587 | M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must | ////////////////// |
equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 10,738,339 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 2,655,659 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 7,247,099 | M.2.b.
c. Time certificates of deposit of $100,000 or more ............................................ | 6645 2,702,318 | M.2.c.
d. Open-account time deposits of $100,000 or more .............................................. | 6646 0 | M.2.d.
3. All NOW accounts (included in column A above) .................................................. | 2398 569,571 | M.3.
4. Not applicable
______________________
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
_________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of | ////////////////// |
Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) | ////////////////// |
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: | ////////////////// |
(1) Three months or less.................................................................... | A225 1,684,248 | M.5.a.(1)
(2) Over three months through 12 months..................................................... | A226 3,493,722 | M.5.a.(2)
(3) Over one year........................................................................... | A227 2,002,999 | M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently............................................................ | A228 66,130 | M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... | A229 0 | M.5.b.(2)
(3) Less frequently than annually........................................................... | A230 0 | M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above)............... | A231 45,084 | M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates | ////////////////// |
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) | ////////////////// |
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum | ////////////////// |
items 2.c and 2.d above):(1) | ////////////////// |
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: | ////////////////// |
(1) Three months or less ................................................................... | A232 534,657 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A233 754,429 | M.6.a.(2)
(3) Over one year through five years ....................................................... | A234 1,282,541 | M.6.a.(3)
(4) Over five years ........................................................................ | A235 36,761 | M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: | ////////////////// |
(1) Quarterly or more frequently ........................................................... | A236 31,182 | M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ........................ | A237 37,950 | M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ................. | A238 24,798 | M.6.b.(3)
(4) Less frequently than every five years .................................................. | A239 0 | M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of | ////////////////// |
one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above)............... | A240 19,186 | M.6.c.
______________________
</TABLE>
_______________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 6/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
______________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,730,162 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).... | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 15,501 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,745,663 | 7.
Memorandum
Dollar Amounts in Thousands |RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) |A245 1,745,263 | M.1.
______________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-F--Other Assets
__________
| C430 |
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Income earned, not collected on loans ........................................................ | RCFD 2164 167,538 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 0 | 2.
3. Excess residential mortgage servicing fees receivable ........................................ | RCFD 5371 134,288 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2168 3,676,812 | 4.
_____________ ___________________________
a. | TEXT 3549 | Mortgages held for Resale | RCFD 3549 | 1,858,683 | /////////////////////// | 4.a.
_________________________________________________________________| | | |
___________
b. | TEXT 3550 |____________________________________________________| RCFD 3550 | | /////////////////////// | 4.b.
___________
c. | TEXT 3551 |____________________________________________________| RCFD 3551 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 3,978,638 | 5.
___________________________
<CAPTION>
Memorandum ___________________________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
___________________________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-G--Other Liabilities
__________
| C435 |
_________________ ________
Dollar Amounts in Thousands | ////////// Bil Mil Thou |
__________________________________________________________________________________________________ _________________________
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices(2) ............................ | RCON 3645 58,011 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 594,954 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 119,644 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item)............................. | RCFD 2938 478,843 | 4.
_____________ ___________________________
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | | /////////////////////// | 4.a.
___________
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
___________
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________
___________________________
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 1,251,452 | 5.
</TABLE>
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
__________
| C440 |
____________ ________
| Domestic Offices |
____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 16,634 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 16,634 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 17,428 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 4,868,836 | 4.
5. Other borrowed money ............................................................................ | 3190 1,380,694 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 1,669,058 | 7.
| ////////////////// |
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and IBFs) . | 2192 48,946,123 | 8.
| ////////////////// |
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and IBFs)| 3129 42,919,946 | 9.
______________________
</TABLE>
<TABLE>
<CAPTION>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. ______________________
| RCON Bil Mil Thou |
____________________
<S> <C> <C>
10. U.S. Treasury securities ....................................................................... | 1779 1,252,796 | 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed | ////////////////// |
securities) .................................................................................... | 1785 505 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 159,244 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 5,684,860 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 4 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 0 | 13.b.(1)
(2) All other mortgage-backed securities..................................................... | 2253 518 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 812 | 14.
15. Foreign debt securities ........................................................................ | 3160 97,035 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds ................................................................. | 3161 0 | 16.a.
b. Other equity securities with readily determinable fair values ............................... | 3162 0 | 16.b.
c. All other equity securities ................................................................. | 3169 311,734 | 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 7,507,508 | 17.
______________________
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
<S> <C> <C>
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 0 | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
______________________
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-13
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices. __________
| C445 |
____________ ________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_____________________________________________________________________________________________________ ____________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 0 | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12, | ////////////////// |
column A) ..................................................................................... | 2076 0 | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) .... | 2077 0 | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 0 | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 0 | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 0 | 6.
______________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule RC-K--Quarterly Averages (1)
__________
| C455 |
_________________ ________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
_______________________________________________________________________________________________ _________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions .............................. | RCFD 3381 10,737 | 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) ...... | RCFD 3382 6,349,267 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) ................... | RCFD 3383 155,938 | 3.
4. a. Other debt securities(2) ............................................................. | RCFD 3647 98,458 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock). | RCFD 3648 347,675 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3365 812,114 | 5.
6. Loans: | ///////////////////// // |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ...................................................................... | RCON 3360 31,884,320 | 6.a.(1)
(2) Loans secured by real estate ..................................................... | RCON 3385 14,940,513 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers .............. | RCON 3386 5,935 | 6.a.(3)
(4) Commercial and industrial loans .................................................. | RCON 3387 12,923,362 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ...... | RCON 3388 2,224,980 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............ | RCFN 3360 70,458 | 6.b.
7. Trading assets .......................................................................... | RCFD 3401 105,824 | 7.
8. Lease financing receivables (net of unearned income) .................................... | RCFD 3484 2,231,479 | 8.
9. Total assets (4) ........................................................................ | RCFD 3368 52,282,230 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............ | RCON 3485 965,535 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................ | RCON 3486 9,210,475 | 11.a.
b. Other savings deposits ............................................................... | RCON 3487 3,907,216 | 11.b.
c. Time certificates of deposit of $100,000 or more ..................................... | RCON 3345 2,653,452 | 11.c.
d. All other time deposits .............................................................. | RCON 3469 7,513,443 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs.. | RCFN 3404 1,765,593 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic | /////////////////////// |
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs ............. | RCFD 3353 6,363,286 | 13.
14. Other borrowed money .................................................................... | RCFD 3355 2,670,145 | 14.
___________________________
</TABLE>
_______________
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the
quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
23
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. __________
| C460 |
____________ ________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
____________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home | ////////////////// |
equity lines ............................................................................... | 3814 1,637,875 | 1.a.
b. Credit card lines .......................................................................... | 3815 32,940 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 648,369 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 383,022 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 18,626,522 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 2,337,268 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 158,029 | ////////////////// | 2.a.
___________________________
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 175,703 | 3.
a. Amount of performance standby letters of credit conveyed to | ////////////////// |
___________________________
others .......................................................... | RCFD 3822 | 12,580 | ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 176,335 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by | ////////////////// |
the reporting bank ............................................................................ | 3428 16,524 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 7,409 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified | ////////////////// |
against loss by the reporting bank) ........................................................... | 3433 0 | 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. FNMA and FHLMC residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3650 246,244 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3651 246,244 | 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3652 33,550 | 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3653 33,550 | 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | 3654 0 | 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | 3655 0 | 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date................................................................... | A249 0 | 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date.................. | A250 0 | 9.d.(2)
10. When-issued securities: | ////////////////// |
a. Gross commitments to purchase .............................................................. | 3434 0 | 10.a.
b. Gross commitments to sell .................................................................. | 3435 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 622,366 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
a. | TEXT 3555 |______________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
b. | TEXT 3556 |______________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
___________
c. | TEXT 3557 |______________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
_____________
d. | TEXT 3558 |______________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
_____________ _______________________________________________
Dollar Amounts in Thousands RCFD Bil Mil Thou
_________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC,item 28,"Total equity capital") | 5591 0 | 13.
_____________ __________________________
a. | TEXT 5592 |______________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
___________
b. | TEXT 5593 |______________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
___________
c. | TEXT 5594 |______________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________
d. | TEXT 5595 |______________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
_____________
________________________________________________
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
_____________
| C461 |
_________________________________________ ____________________________|___________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
| Contracts | Contracts | Contracts | Contracts |
|___________________|____________________|____________________|____________________|
Dollar Amounts in Thousands |Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou | Tril Bil Mil Thou |
_______________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
| Off-balance Sheet Derivatives | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
| Position Indicators | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
____________________________________| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
14. Gross amounts (e.g., notional | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
amounts) (for each column, sum of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
items 14.a through 14.e must equal | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
sum of items 15, 16.a, and 16.b): |___________________|____________________|___________________ |____________________|
a. Futures contracts ............. | 1,229,392 | 0 | 0 | 36,486 | 14.a.
|___________________|____________________|____________________|____________________|
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
|___________________|____________________|____________________|____________________|
b. Forward contracts ............. | 2,576,500 | 1,931,682 | 0 | 21,832 | 14.b.
|___________________|____________________|____________________|____________________|
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
|___________________|____________________|____________________|____________________|
c. Exchange-traded option contracts:| ///////////////// | ////////////////// | ////////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
(1) Written options .......... | 0 | 0 | 0 | 0 | 14.c.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 450,000 | 0 | 0 | 2,206 | 14.c.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
|___________________|____________________|____________________|____________________|
d. Over-the-counter option contracts: | //////////////////| ///////////////// | ///////////////// | //////////////// |
(1) Written options .......... | 1,324,980 | 3,887 | 0 | 0 | 14.d.(1)
|___________________|____________________|____________________|____________________|
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
|___________________|____________________|____________________|____________________|
(2) Purchased options ........ | 10,131,934 | 3,887 | 0 | 0 | 14.d.(2)
|___________________|____________________|____________________|____________________|
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
|___________________|____________________|____________________|____________________|
e. Swaps ............................ | 19,502,262 | 0 | 0 | 0 | 14.e.
|___________________|____________________|____________________|____________________|
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
|___________________|____________________|____________________|____________________|
15. Total gross notional amount of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading ......................... | 3,386,305 | 1,939,456 | 0 | 2,206 | 15.
|___________________|____________________|____________________|____________________|
| RCFD A126 | RFD A127 | RCFD 8723 | RCFD 8724 |
|___________________|____________________|____________________|____________________|
16. Total gross notional amount of | ///////////////// | //////////////// | ///////////////// | ////////////////// |
derivative contracts held for | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
purposes other than trading: | ///////////////// | ///////////////// | ///////////////// | ////////////////// |
|___________________|____________________|____________________|____________________|
a. Contracts marked to market ... | 4,202,500 | 0 | 0 | 36,486 | 16.a.
|___________________|____________________|____________________|____________________|
| RCFD 8725 | RCFD 8726 | RCF 8727 | RCFD 8728 |
|___________________|____________________|____________________|____________________|
b. Contracts not marked to market | 27,626,263 | 0 | 0 | 21,832 | 16.b.
|___________________|____________________|____________________|____________________|
| RCFD 8729 | RCFD 8730 | RFD 8731 | RCFD 8732 |
|___________________|____________________|____________________|____________________|
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-L -- Continued
<CAPTION>
_________________________________________ _________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and other|
___________________________________| Contracts | Contracts | Contracts | Contracts |
| Off-balance Sheet Derivatives |___________________|____________________|____________________|____________________|
| Position Indicators |RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
|_____________________________________________________________________________________________________________________|
<S> <C> <C> <C> <C> <C>
17. Gross fair values of | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8733 29,782 | 8734 41,523 | 8735 0 | 8736 58 | 17.a.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8737 20,932 | 8738 36,511 | 8739 0 | 8740 0 | 17.a.(2)
b. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8741 524 | 8742 0 | 8743 0 | 8744 1,452 | 17.b.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8745 2,834 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .................. | 8749 64,085 | 8750 0 | 8751 0 | 8752 100 | 17.c.(1)
(2) Gross negative | ///////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value ................... | 8753 111,703 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|__________________________________________________________________________________|
</TABLE>
<TABLE>
<CAPTION>
______________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_________________________________________________________________________________________________________________________
<S> <C> <C>
1. -2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ................................................ | 3833 16,829,602 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
exceeding one year conveyed to others ................................|RCFD 3834 | 1,310,691 | ////////////////// | M.3.a.
________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above .............. | 3377 341,139 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold without recourse (with servicing retained), amounts outstanding | ////////////////// |
by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only)....................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY)................................... | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans)(to be completed for the | ////////////////// |
September report only........................................................................ | 2743 N/A | M.5.c
|____________________|
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9| _____________
| C465 |
_________|___________|
Schedule RC-M--Memoranda | |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
______________________________________________________________________________________________________|____________________|
<S> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders and their related interests ..................................................... | 6164 605,294 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of all | ////////////////// |
extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________| ////////////////// |
of total capital as defined for this purpose in agency regulations. | RCFD 6165 | 24 | ////////////////// |
___________________________| ////////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 28,855,729 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 55,604 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 32,340,522 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 190,640 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 38,282,672 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 8,508,320 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 16,297 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 337 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing rights ..................................................................... | 3164 1,483,959 | 6.a.
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 126,463 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 672,992 | 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) ........................ | 2143 2,283,414 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt ...................................................................................| 3295 75,000 | 7.
______________________
</TABLE>
- ------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
Schedule RC-M--Continued ________________________
Dollar Amounts in Thousands | Bil Mil Thou|
_____________________________________________________________________________________________ |_______________________|
<S> <C> <C>
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 4,537 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 8,067 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 740 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 21,202 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 34,546 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies ................ | RCFD 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 125,000 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 55,245 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 108,359 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 13,250 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 0 | 10.d.
e. Annuities ........................................................................... | RCON 8430 102,292 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e. above) ........................................................................... | RCON 8784 150,100 | 10.f.
_________________________
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
| |
______________________
|Memorandum Dollar Amounts in Thousands | RCFD Bil Mil Thou | |
_________________________________________________________________________________________________ ____________________
<S> <C> <C>
|1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////////// | |
| a. Reciprocal holdings of banking organizations' capital instruments ........................ | 3836 N/A | M.1.a. |
| b. Nonreciprocal holdings of banking organizations' capital instruments ..................... | 3837 N/A | M.1.b. |
______________________
| |
_________________________________________________________________________________________________________________________________
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
The FFIEC regards the information reported in __________
all of Memorandum item 1, in items 1 through 10, | C470 |
column A, and in Memorandum items 2 through 4, ______________________________________________________ ________
column A, as confidential. | (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1245 | 1246 71,390 | 1247 223,962 | 1.a.
b. To non-U.S. addressees (domicile) ............ | 1248 | 1249 0 | 1250 0 | 1.b.
2. Loans to depository institutions and | ///// | ////////////////// | ////////////////// |
acceptances of other banks: | ///// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ///// | ////////////////// | ////////////////// |
institutions ................................. | 5377 | 5378 0 | 5379 0 | 2.a.
b. To foreign banks ............................. | 5380 | 5381 0 | 5382 0 | 2.b.
3. Loans to finance agricultural production and | ///// | ////////////////// | ////////////////// |
other loans to farmers .......................... | 1594 | 1597 385 | 1583 531 | 3.
4. Commercial and industrial loans: | ///// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ................ | 1251 | 1252 11,945 | 1253 108,334 | 4.a.
b. To non-U.S. addressees (domicile) ............ | 1254 | 1255 0 | 1256 0 | 4.b.
5. Loans to individuals for household, family, and | ///// | ////////////////// | ////////////////// |
other personal expenditures: | ///// | ////////////////// | ///////////////// |
a. Credit cards and related plans ............... | 5383 | 5384 1,187 | 5385 669 | 5.a.
b. Other (includes single payment, installment, | ///// | ////////////////// | ////////////////// |
and all student loans) ....................... | 5386 | 5387 22,600 | 5388 8,465 | 5.b.
6. Loans to foreign governments and official | ///// | ////////////////// | ////////////////// |
institutions .................................... | 5389 | 5390 0 | 5391 0 | 6.
7. All other loans ................................. | 5459 | 5460 14,909 | 5461 1,919 | 7.
8. Lease financing receivables: | ///// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ................ | 1257 | 1258 95 | 1259 6,544 | 8.a.
b. Of non-U.S. addressees (domicile) ............ | 1271 | 1272 0 | 1791 0 | 8.b.
9. Debt securities and other assets (exclude other | ///// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets) . | 3505 | 3506 0 | 3507 85,778 | 9.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
________________________________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
10. Loans and leases reported in items 1 | | | |
through 8 above which are wholly or partially | ///// | ////////////////// | ////////////////// |
guaranteed by the U.S. Government ............... | 5612 | 5613 18,447 | 5614 21,415 | 10.
a. Guaranteed portion of loans and leases | ///// | ////////////////// | ////////////////// |
included in item 10 above .................... | 5615 | 5616 18,250 | 5617 16,952 | 10.a.
________________________________________________________________
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-N--Continued
__________
| C473 |
______________________________________________________ ________
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccrual |
| 30 through 89 | days or more | |
| days and still | and still | |
Memoranda | accruing | accruing | |
____________________ ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 1 through 8, above (and not | ///// | //// | |
reported in Schedule RC-C, part I, Memorandum | ///// | //// | |
item 2) ......................................... | 1658 | 1659 | | M.1.
2. Loans to finance commercial real estate, | ///// | //// | |
construction, and land development activities | ///// | //// | |
(not secured by real estate) included in | ///// | /////////////////// | ///////////////// |
Schedule RC-N, items 4 and 7, above ............. | 6558 | 6559 826 | 6560 7,043 | M.2.
|____________________|____________________ |___________________
3. Loans secured by real estate in domestic offices | RCON | RCON Bil Mil Thou | RCON Bil Mil Thou|
|___________________ |____________________ ____________________
(included in Schedule RC-N, item 1, above): | ///// | ////////////////// | ////////////////// |
a. Construction and land development ............ | 2759 | 2769 1,100 | 3492 26,422 | M.3.a.
b. Secured by farmland .......................... | 3493 | 3494 161 | 3495 0 | M.3.b.
c. Secured by 1-4 family residential properties: | ///// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ///// | ////////////////// | ////////////////// |
1-4 family residential properties and | ///// | ////////////////// | ////////////////// |
extended under lines of credit ........... | 5398 | 5399 5,114 | 5400 17,374 | M.3.c.(1)
(2) All other loans secured by 1-4 family | ///// | ////////////////// | ////////////////// |
residential properties ................... | 5401 | 5402 58,079 | 5403 75,430 | M.3.c.(2)
d. Secured by multifamily (5 or more) | ///// | ////////////////// | ////////////////// |
residential properties ....................... | 3499 | 3500 521 | 3501 12,491 | M.3.d.
e. Secured by nonfarm nonresidential properties . | 3502 | 3503 6,415 | 3504 92,245 | M.3.e.
________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other | ///// | ////////////////// |
commodity and equity contracts: | ///// | ////////////////// |
a. Book value of amounts carried as assets ...... | 3522 | 3528 0 | M.4.a.
b. Replacement cost of contracts with a | ///// | ////////////////// |
positive replacement cost .................... | 3529 | 3530 0 | M.4.b.
___________________________________________
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
______________________
Schedule RC-O--Other Data for Deposit Insurance Assessments | C475 |
|____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________ ____________________
<S> <C> <C>
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits ...................................................... | 0030 216 | 1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits ................................... | 0031 N/A | 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ...................... | 0032 N/A | 1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits ..................................................... | 3510 216 | 2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits .................................. | 3512 N/A | 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ..................... | 3514 N/A | 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 3520 101,763 | 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in | ////////////////// |
Puerto Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries .............................................. | 2211 206,111 | 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ................................. | 2351 20,089 | 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ...................... | 5514 8 | 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) .................. | 2229 0 | 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ..... | 2383 0 | 5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b) ..................................................... | 5515 0 | 5.c.
______________________
______________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the | ////////////////// |
Federal Reserve to act as pass-through correspondents. | ////////////////// |
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B)..... | 2314 0 | 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 | 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) | ////////////////// |
a. Unamortized premiums ...................................................................... | 5516 769 | 7.a.
b. Unamortized discounts ..................................................................... | 5517 0 | 7.b.
______________________
_______________________________________________________________________________________________________________________________
| |
|8. To be completed by banks with "Oakar deposits." |
______________________
| Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of | ////////////////// | |
| the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .... | 5518 2,188,589 | 8. |
______________________
| |
_______________________________________________________________________________________________________________________________
______________________
9. Deposits in lifeline accounts ................................................................ | 5596 ///////////// | 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices) ................................................................ | 8432 0 | 10.
______________________
______________
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction
accounts and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-O--Continued
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
<S> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for | ////////////////// |
certain reciprocal demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if reciprocal demand balances | ////////////////// |
between the reporting bank and savings associations were reported on a net basis | ////////////////// |
rather than a gross basis in Schedule RC-E .................................................. | 8785 0 | 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances | ////////////////// |
between the reporting bank and U.S. branches and agencies of foreign banks were | ////////////////// |
reported on a gross basis rather than a net basis in Schedule RC-E .......................... | A181 0 | 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of | ////////////////// |
collection were included in the calculation of net reciprocal demand balances between | ////////////////// |
the reporting bank and the domestic offices of U.S. banks and savings associations | ////////////////// |
in Schedule RC-E ............................................................................ | A182 0 | 11.c.
____________________
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands | RCON Bil Mil Thou |
_____________________________________________________________________ ___________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum it ems 1.a. (1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposits accounts of $100,000 or less: | ////////////////// |
(1) amount of deposit accounts of $100,000 or less ....................................... | 2702 19,755,631 | M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number | ////////////////// |
completed for the June report only) .............................|RCON 3779 3,742,107 | ////////////////// | M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000 ..................................... | 2710 14,354,949 | M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................|RCON 2722 27,062 | ////////////////// | M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by mutiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or
procedure for determining a better estimate of uninsured deposits than the ____________YES_______NO__
estimated described above .................................................................. | 6861| |///| x | M.2.a.
____________________
b. If the box marked YES has been checked, report the estimate of uninsured deposits |RCON Bil Mil Thou|
determined by using your bank's method or procedure .................................... | 5597 N/A | M.2.b.
_____________________________________________________________________________________________________________________________
| C477 |
Person to whom questions about the Reports of Condition and Income should be directed: __________
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
___________________________________________________________________________________ ______________________________________
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than
$1 billion must complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C>
____________
| C480 |
1. Test for determining the extent to which Schedule RC-R must be completed. To be completed _____|__________|
only by banks with total assets of less than $1 billion. Indicate in the appropriate | YES NO |
box at the right whether the bank has total capital greater than or equal to eight percent___________ _______________
of adjusted total assets ............................................................... | RCFD 6056 | |////| | 1.
_____________________________
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
</TABLE>
<TABLE>
<CAPTION>
___________________________________________
| (Column A) | (Column B) |
|Subordinated Debt(1)| Other |
_________________________________________________________________ | and Intermediate | Limited- |
| NOTE: All banks are required to complete items 2 and 3 below | | Term Preferred | Life Capital |
| See optional worksheet for items 3.a through 3.f. | | Stock | Instruments |
|________________________________________________________________| ____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original | | |
weighted average maturity of at least five years) with a remaining | | |
maturity of: | | |
a. One year or less ...................................................... | 3780 25,737 | 3786 0 | 2.a.
b. Over one year through two years ....................................... | 3781 737 | 3787 0 | 2.b.
c. Over two years through three years .................................... | 3782 10,745 | 3788 0 | 2.c.
d. Over three years through four years ................................... | 3783 0 | 3789 0 | 2.d.
e. Over four years through five years .................................... | 3784 0 | 3790 0 | 2.e.
f. Over five years ....................................................... | 3785 1,101,000 | 3791 0 | 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// | ////////////////// |
determined by the bank for its own internal regulatory capital analyses): | ////////////////// | RCFD Bil Mil Thou |
a. Tier 1 capital......................................................... | ////////////////// | 8274 3,590,367 | 3.a.
b. Tier 2 capital......................................................... | ////////////////// | 8275 1,755,646 | 3.b.
c. Total risk-based capital............................................... | ////////////////// | 3792 5,346,013 | 3.c.
d. Excess allowance for loan and lease losses............................. | ////////////////// | A222 297,250 | 3.d.
e. Risk-weighted assets................................................... | ////////////////// | A223 45,718,856 | 3.e.
f. "Average total assets"................................................. | ////////////////// | A224 51,482,775 | 3.f.
___________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(2) |
____________________ ____________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
____________________ ____________________
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned | | |
to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Securities issued by, other claims on, and claims unconditionally | ////////////////// | ////////////////// |
guaranteed by, the U.S. Government and its agencies and other | ////////////////// | ////////////////// |
OECD central governments .......................................... | 3794 2,147,648 | ////////////////// | 4.a.(1)
(2) All other ......................................................... | 3795 1,115,265 | ////////////////// | 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 101,488 | 4.b.
___________________________________________
</TABLE>
_____
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: |0|2|4|9|9|
___________
</TABLE>
<TABLE>
<CAPTION>
Schedule RC-R--Continued
___________________________________________
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
____________________ ____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________________________________________________ ____________________ ____________________
<S> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet: | ////////////////// | ////////////////// |
(1) Claims conditionally guaranteed by the U.S. Government and its | ////////////////// | ////////////////// |
agencies and other OECD central governments ....................... | 3798 714,375 | ////////////////// | 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Govern- | ////////////////// | ////////////////// |
ment and its agencies and other OECD central governments; by | ////////////////// | ////////////////// |
securities issued by U.S. Government-sponsored agencies; and | ////////////////// | ////////////////// |
by cash on deposit ................................................ | 3799 0 | ////////////////// | 5.a.(2)
(3) All other ......................................................... | 3800 8,774,345 | ////////////////// | 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3801 791,065 | 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3802 5,265,173 | ////////////////// | 6.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3803 409,680 | 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 3804 31,799,547 | ////////////////// | 7.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3805 10,122,631 | 7.b.
8. On-balance sheet asset values excluded from the calculation of the | ////////////////// | ////////////////// |
risk-based capital ratio(2) .............................................. | 3806 83,713 | ////////////////// | 8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) .......................................... | 3807 49,900,066 | ////////////////// | 9.
___________________________________________
Memoranda
______________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________ ____________________
1.Current credit exposure across all off-balance sheet derivative contracts covered by the | ///////////////// |
risked-based capital standards .................................................................| 8764 135,825| M.1.
|___________________|
_____________________________________________________________________
| With a remaining maturity of |
|____________________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| | | |
| One year or less | Over one year | Over five years |
| | through five years | |
|______________________|______________________|______________________|
|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|RCFD Tril Bil Mil Thou|
|______________________|______________________|______________________|
2. Notional principal amounts of | | | |
off-balance sheet derivative contracts(3):| | | |
a. Interest rate contracts ................. | 3809 8,320,956 | 8766 18,597,686 | 8767 801,055 | M.2.a.
b. Foreign exchange contracts .............. | 3812 1,578,420 | 8769 101,907 | 8770 0 | M.2.b.
c. Gold contracts .......................... | 8771 15,291 | 8772 0 | 8773 0 | M.2.c.
d. Other precious metals contracts ......... | 8774 8,748 | 8775 0 | 8776 0 | M.2.d.
e. Other commodity contracts ............... | 8777 0 | 8778 0 | 8779 0 | M.2.e.
f. Equity derivative contracts ............. | A000 0 | A001 0 | A002 0 | M.2.f.
|____________________________________________________________________|
</TABLE>
_________________
1) Do not report in column B the risk-weighted amount of
assets reported in column A.
2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of these
securities in items 4 through 7 above. Item 8 also includes on-balance sheet
asset values (or portions thereof) of off-balance sheet interest rate, foreign
exchange rate, and commodity contracts and those contracts (e.g., futures
contracts) not subject to risk-based capital. Exclude from item 8 margin
accounts and accrued receivables as well as any portion of the allowance for
loan and lease losses in excess of the amount that may be included in Tier 2
capital. 3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
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<TABLE>
<S> <C>
Legal Title of Bank: FLEET NATIONAL BANK
Address: ONE MONARCH PLACE Call Date: 06/30/96 ST-BK: 25-0590 FFIEC 031
City, State, Zip: SPRINGFIELD, MA 01102 Page RC-25
FDIC Certificate No.: 02499
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1996
FLEET NATIONAL BANK SPRINGFIELD , MASSACHUSETTS
- ------------------- ----------------- -------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL
BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS
IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE
MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks
choosing not to make a statement may check the "No comment" box below and
should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement,"
"Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should
not exceed 100 words. Further, regardless of the number of words, the
statement must not exceed 750 characters, including punctuation, indentation,
and standard spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750 characters with
no notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
__________________________________________________________________________
No comment |X| (RCON 6979) | c471 | C472 |
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/__Gero DeRosa_______________________________ ___7/25/96________
Signature of Executive Officer of Bank Date of Signature
35
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