As filed with the Securities and Exchange Commission on May 4, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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MARKET HUB PARTNERS STORAGE, L.P.
MARKET HUB PARTNERS FINANCE, INC.
(Exact names of registrants as specified in their charters)
<TABLE>
<S> <C> <C>
DELAWARE 4922 76-0558052
DELAWARE 4922 [APPLIED FOR]
(States or other jurisdictions of (Primary Standard Industrial (I.R.S. Employer Identification Nos.)
incorporation or organization) Classification Code Numbers)
</TABLE>
16420 PARK 10 PLACE
SUITE 420
HOUSTON, TEXAS 77084
(281) 597-6777
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
See "Table of Additional Registrants" on the following page for information
related to the Subsidiary Guarantors of the securities offered hereby.
-------------------------
ANTHONY J. CLARK
16420 PARK 10 PLACE
SUITE 420
HOUSTON, TEXAS 77084
(281) 597-6777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------
COPY TO:
STEPHEN A. MASSAD
BAKER & BOTTS, L.L.P.
910 LOUISIANA
HOUSTON, TEXAS 77002
-------------------------
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 and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
===============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF FEE(1)
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8 1/4% Senior Notes due 2008............. $115,000,000 100% $115,000,000 $33,925
- ---------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees (2)............. N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
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(1) Calculated in accordance with Rule 457(f)(2). For purposes of this
calculation, the Offering Price per Senior Note to be registered hereby
was assumed to be the stated principal amount of each Senior Note that may
be received in the exchange transaction in which the Senior Notes to be
registered hereby will be offered.
(2) Subsidiary Guarantees of the Senior Notes by certain directly and
indirectly wholly owned subsidiaries of Market Hub Partners Storage, L.P.
are also being registered hereby. Pursuant to Rule 457(n) under the
Securities Act, no registration fee is required with respect to such
Subsidiary Guarantees.
-------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
TO
FORM S-4 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOSS BLUFF HUB PARTNERS, L.P.
MOSS BLUFF HUB PARTNERS, L.L.C.
EGAN HUB PARTNERS, L.P.
EGAN HUB PARTNERS, L.L.C.
<TABLE>
<S> <C> <C>
DELAWARE 4922 76-0458010
DELAWARE 4922 [APPLIED FOR]
DELAWARE 4922 76-0458004
DELAWARE 4922 [APPLIED FOR]
(States or other jurisdictions of (Primary Standard Industrial (I.R.S. Employer Identification Nos.)
incorporation or organization) Classification Code Numbers)
</TABLE>
16420 PARK 10 PLACE
SUITE 420
HOUSTON, TEXAS 77084
(281) 597-6777
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
-------------------------
ANTHONY J. CLARK
16420 PARK 10 PLACE
SUITE 420
HOUSTON, TEXAS 77084
(281) 597-6777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------
COPY TO:
STEPHEN A. MASSAD
BAKER & BOTTS, L.L.P.
910 LOUISIANA
HOUSTON, TEXAS 77002
<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 , 1998
PROSPECTUS
MARKET HUB PARTNERS STORAGE, L.P.
MARKET HUB PARTNERS FINANCE, INC.
OFFER TO EXCHANGE 8 1/4% SENIOR NOTES DUE 2008 FOR ANY AND
ALL OUTSTANDING 8 1/4% SENIOR NOTES DUE 2008
($115,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED.
Market Hub Partners Storage, L.P., a Delaware limited partnership ("MHP
Storage"), and its wholly owned subsidiary, Market Hub Partners Finance, Inc., a
Delaware corporation ("Finance Corp.", and, together with MHP Storage, the
"Issuers"), hereby offer (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of their 8 1/4% Senior Notes due 2008 (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 their outstanding 8 1/4% Senior Notes due 2008
(the "Old Notes" and, together with the Exchange Notes, the "Notes"), of which
$115,000,000 principal amount is outstanding as of the date hereof. The form and
terms of the Exchange Notes are the same as the form and terms of the Old Notes
(which they are intended to replace) except for certain transfer restrictions
and registration rights relating to the Old Notes. See "The Exchange Offer". The
Exchange Notes will evidence the same debt as the Old Notes (which they are
intended to replace) and will be issued under and be entitled to the benefits of
the Indenture (the "Indenture") dated March 1, 1998 among the Issuers, the
Subsidiary Guarantors (as defined herein) and IBJ Schroder Bank & Trust Company,
as Trustee (the "Trustee"), governing the Notes. See "The Exchange Offer" and
"Description of Exchange Notes".
Interest on the Exchange Notes will be payable semi-annually in arrears on March
1 and September 1 of each year, commencing September 1, 1998. The Exchange Notes
will mature on March 1, 2008. The Issuers will not be required to make any
mandatory sinking fund or redemption payments with respect to the Exchange
Notes. The Exchange Notes will be redeemable at the option of MHP Storage, in
whole or in part, at any time on or after March 1, 2003, at the redemption
prices set forth herein. The Issuers may also redeem up to 35% of the aggregate
principal amount of Exchange Notes at MHP Storage's option, at any time on or
prior to March 1, 2001, at a redemption price equal to 108.25% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages (as
defined herein), if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings (as defined herein); provided, that at least
$74.75 million of the aggregate principal amount of Exchange Notes originally
issued remains outstanding after such redemption. See "Description of Exchange
Notes -- Optional Redemption".
Upon the occurrence of a Change of Control (as defined herein), the Issuers will
be required to make an offer to repurchase all or any part of each holder's
Exchange Notes at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase. See "Description of Exchange Notes--Certain Covenants--Change
of Control".
(COVER TEXT CONTINUED ON NEXT PAGE.)
SEE "RISK FACTORS" ON PAGE 16 FOR A DESCRIPTION OF CERTAIN RISKS TO 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 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 May 4, 1998.
<PAGE>
The Exchange Notes offered hereby (the "Exchange Offering") will be
general unsecured joint and several obligations of the Issuers and will be
unconditionally guaranteed, on a senior unsecured basis (the "Subsidiary
Guarantees"), by each of the Subsidiary Guarantors (as defined herein) to the
extent set forth in the Indenture. The Exchange Notes and each Subsidiary
Guarantee will be effectively subordinated to all secured obligations of the
Issuers and the applicable Subsidiary Guarantor to the extent of the assets
securing such obligations. MHP Storage has entered into the New Credit Facility
(as defined herein) pursuant to which MHP Storage is permitted to borrow up to
$20.0 million of secured Indebtedness (as defined herein) from time to time. At
December 31, 1997, on a pro forma basis assuming that the Old Notes Offering (as
defined herein) and the application of the net proceeds therefrom had occurred
on such date, the Issuers and the Subsidiary Guarantors would have had no
outstanding Indebtedness other than the Old Notes. The Indenture permits MHP
Storage and its subsidiaries (including Finance Corp. and the Subsidiary
Guarantors) to incur additional indebtedness, subject to certain limitations.
The Issuers will accept for exchange any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York time, on , 1998,
unless extended by the Issuers in their sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
The Old Notes were sold by the Issuers on March 4, 1998 to the Initial Purchaser
(as defined herein) in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act. The Initial Purchaser
subsequently placed the Old Notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold or otherwise transferred unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Issuers under the
Registration Rights Agreement (as defined herein) entered into by the Issuers in
connection with the Old Notes Offering. See "The Exchange Offer".
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuers believe the
Exchange Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Issuers or of any Subsidiary Guarantor
within the meaning of Rule 405 under 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 such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes. See "The
Exchange Offer -- Purpose and Effect of the Exchange Offer" and "-- Resale of
the Exchange Notes". Each broker-dealer (a "Participating 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 Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Notwithstanding the foregoing, any purchaser of Old Notes who is an "affiliate"
of the Issuers or of any Subsidiary Guarantor who intends to participate in the
Exchange Offer for the purpose of distributing the Exchange Notes may be deemed
to be 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 Participating Broker-Dealer as a result of market-making activities or
other trading activities. The Issuers have agreed that they will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution".
There has not previously been any public market for the Old Notes or the
Exchange Notes. Although the Initial Purchaser has informed the Issuers that it
currently intends to make a market in the Exchange Notes, it is not obligated to
do so, and any such market-making activities with respect to the Exchange Notes
may be discontinued at any time without notice. The Issuers do not intend to
list the Exchange Notes on any securities exchange or to seek approval for
quotation through any automated quotation system.
Any Old Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and will be subject to
the limitations applicable thereto under the Indenture. Following consummation
of the Exchange Offer, the holders of Old Notes will continue to be subject to
the existing restrictions upon transfer thereof, and the Issuers will have no
further obligation to such holders to provide for registration under the
Securities Act of the Old Notes held by such holders. To the extent that Old
Notes are tendered and accepted in the Exchange
2
<PAGE>
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. See "Risk Factors -- Exchange Offer Procedures" and "Exchange Offer --
Consequences of Failure to Exchange".
The Exchange Notes will be available initially only in book-entry form.
The Issuers expect that the Exchange Notes issued pursuant to this Exchange
Offer will be issued in the form of one or more Global Notes (as defined
herein), which will be deposited with, or on behalf of, The Depository Trust
Company (the "Depositary") and registered in its name or in the name of Cede &
Co., its nominee. Beneficial interests in a Global Note representing the
Exchange Notes will be shown on, and transfers thereof will be effected through,
records maintained by the Depositary and its participants. After the initial
issuance of the Global Notes, Exchange Notes in certificated form will be issued
in exchange for a Global Note only on the terms set forth in the Indenture. See
"Description of Exchange Notes -- Book Entry, Delivery and Form".
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Old Notes as of , 1998.
The Issuers will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. The Issuers will pay all expenses incurred by it
incident to the Exchange Offer. See "Use of Proceeds" and "Plan of
Distribution".
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF THE OLD NOTES IN ANY JURISDICTION IN WHICH THE
MAKING OF THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH
ANY PROVISION OF ANY APPLICABLE SECURITY LAW.
3
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on
Form S-4 (the "Exchange Offer Registration Statement", which term shall
encompass all amendments, exhibits and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Prospectus does not contain all of
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company (as defined herein) and the
Exchange Offer, reference is made to the Exchange Offer Registration Statement.
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 Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such statement
shall be deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; the
Chicago Regional Office, Suite 1400, 500 West Madison Street, Northwest Atrium
Center, Chicago, Illinois 60661; and the New York Regional Office, Suite 1300, 7
World Trade Center, New York, New York 10048. Copies of such material also can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site on the Internet that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of this site on the Internet is
http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement
with the Commission, the Issuers will become subject to the informational
requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, will be required to file
periodic reports and other information with the Commission for so long as they
are subject to such requirements. In addition, MHP Storage has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, it will file with the Commission (unless the Commission would not
accept such filing) and distribute to holders of the Notes, copies of the annual
reports and quarterly reports and other information, documents and reports that
MHP Storage would be required to file with the Commission pursuant to Section 13
of the Exchange Act, if it were subject to such requirements. MHP Storage will
also make such information available to prospective purchasers of the Old Notes
or the Exchange Notes, as applicable, securities analysts and broker-dealers
upon their request. In addition, the Issuers and the Subsidiary Guarantors have
agreed to furnish to holders of Old Notes, and prospective purchasers of Old
Notes designated by such holders, the information required to be delivered
pursuant to Rule 144A (d) (4) under the Securities Act, until such time as the
Issuers have exchanged such Old Notes for Exchange Notes.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements regarding
the intent, belief and current expectations of the Company's management.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Generally, these statements relate to
business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, or projections involving anticipated
revenues, expenses, earnings, levels of capital expenditures or other aspects of
operating results. The operations of the Company are subject to a number of
uncertainties, risks and other influences, many of which are outside the control
of the Company and any one of which, or a combination of which, could materially
affect the results of the Company's operations and whether the forward-looking
statements made by the Company ultimately prove to be accurate. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in "Risk Factors" and elsewhere in this Prospectus.
The Company assumes no obligation to update any forward-looking statements.
DEFINITIONS AND OTHER MATTERS
A "market hub" is a geographic location at which there is a natural gas
storage facility and a convergence of multiple pipeline interconnections. The
term "Bcf" means billion cubic feet of natural gas; "MMcf" means million cubic
feet of natural gas; and "Mcf" means thousand cubic feet of natural gas. The
term "MMBtu" means million British Thermal Units. For purposes of this
Prospectus, contract amounts assume one million Btu per thousand cubic feet of
4
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natural gas. "FERC" is the Federal Energy Regulatory Commission. Injection and
withdrawal capacities are presented in average volumes (Mcf, MMcf or Bcf) of
natural gas per day. A significant factor affecting injection capacity is the
pressure of the natural gas stored in the cavern. The nominal or average
injection rates are increased or decreased if actual cavern pressures are below
or above pressures used in determining the average injection rates. Withdrawal
capacity is limited by the capacity of pipeline metering stations that take
natural gas away from the storage facility, which in turn is limited by pipeline
operating pressures and sizes. Pad gas is a volume of gas needed as permanent
inventory in a salt cavern storage facility to maintain adequate pressure for
deliverability rates and cavern integrity. Storage capacities of salt caverns
are estimated by sonar and various other techniques and are presented herein on
an estimated basis.
5
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA,
INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO, APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS OTHERWISE STATED HEREIN, REFERENCES TO THE "COMPANY"
SHALL MEAN MARKET HUB PARTNERS STORAGE, L.P. ("MHP STORAGE") TOGETHER WITH MHP
STORAGE'S SUBSIDIARIES, MARKET HUB PARTNERS FINANCE, INC. ("FINANCE CORP."),
MOSS BLUFF HUB PARTNERS, L.P. ("MOSS BLUFF"), EGAN HUB PARTNERS, L.P. ("EGAN")
AND THE GENERAL PARTNERS OF MOSS BLUFF AND EGAN, TAKEN AS A WHOLE; REFERENCES TO
THE "ISSUERS" SHALL MEAN MHP STORAGE AND FINANCE CORP., COLLECTIVELY; AND
REFERENCES TO THE "SUBSIDIARY GUARANTORS" SHALL MEAN MOSS BLUFF, EGAN AND THEIR
RESPECTIVE GENERAL PARTNERS, COLLECTIVELY.
THE COMPANY
The Company believes it is the largest owner and operator of high
deliverability salt cavern natural gas storage capacity in North America. The
Company's Moss Bluff and Egan facilities, located near Houston, Texas and in
Acadia Parish, Louisiana, respectively, are strategically positioned at
industry-recognized market hubs near the convergence of major natural gas
pipelines and serve as aggregation points for natural gas collected along the
Texas and Louisiana Gulf Coast. Both of the Company's facilities have
bidirectional interconnects to five pipelines, which form hub and spoke systems
and enable the Company to provide its customers with storage and other services
that allow better management of their variable gas load requirements. At
December 31, 1997, the Company's two facilities maintained approximately 16.0
Bcf of natural gas storage capacity, 94% of which was leased under storage
contracts with major utilities, pipeline companies, local distribution
companies, natural gas producers and natural gas marketers. These storage
contracts provide a minimum level of revenues regardless of usage by the
customer. The Company supplements these revenues by providing a variety of load
management services ("hub services"). For the year ended December 31, 1997, the
Company had revenues of $27.5 million and Adjusted EBITDA (as defined herein) of
$19.1 million.
The Company is a wholly owned subsidiary of Market Hub Partners, L.P.
("MHP"), which was formed in December 1994. MHP is owned by subsidiaries of
PacifiCorp, NIPSCO Industries, Inc., DPL Inc. and Public Service Enterprise
Group, Inc., all of which are large utilities or utility holding companies.
MHP's owners currently lease approximately 50% of the Company's storage
capacity. The remaining storage capacity is leased to third parties under
contracts with, among others, subsidiaries or divisions of Houston Industries
Incorporated, El Paso Natural Gas Company, The Coastal Corporation and
Consolidated Natural Gas Company. In order to accommodate the current market
demand for the Company's services, the Company has recently commenced additional
construction at both of its facilities to expand the aggregate working gas
capacity from approximately 16.0 Bcf to approximately 24.0 Bcf. The Company
believes that incremental capacity expansions result in high rates of return due
to the relatively low capital expenditures required to add new capacity and
deliverability and the relatively low incremental costs associated with
operating the new capacity.
The Company's salt cavern storage facilities offer significant
advantages over conventional reservoir natural gas storage facilities. In
conventional reservoir storage, which includes both depleted natural gas
reservoirs and aquifers, natural gas is injected for approximately 200 to 250
days per year when demand is lower and withdrawn during the 100 to 150 days per
year in the winter months when demand is higher. While a reservoir storage
facility typically converts from injection to withdrawal once or twice a year, a
salt cavern facility is capable of switching from injection to withdrawal
several times a day. In addition, each of the Company's salt cavern facilities
is designed to permit withdrawal of all the working gas in such facility in
periods as short as ten days. This flexibility allows salt cavern storage
customers to better manage unpredictable load variances throughout the year,
including short duration load swings, such as those attributable to intraday
heating and air conditioning demand, and to serve peak demand during major
supply interruption events, such as hurricanes and the loss of production due to
extremely cold weather.
6
<PAGE>
INDUSTRY
The demand for the storage services provided by the Company has been
enhanced by the partial deregulation of the natural gas industry. In 1985, the
Federal Energy Regulatory Commission ("FERC") commenced restructuring the
regulation of interstate pipelines, requiring them to grant transportation
access to any creditworthy shipper, including producers and other marketers, on
an open access, nondiscriminatory basis. In April 1992, the FERC issued Order
636, which enabled a user to purchase natural gas from a number of sources and
arrange for transportation and delivery to one or more pipelines which act as
open access carriers and which do not take title to the natural gas transported.
This unbundling of services has created significant opportunities for the
Company to compete with pipelines and other providers of storage of natural gas
and has created opportunities for those who can help gas move most efficiently
to where it is needed. Strategic interconnects combined with storage in the
pipeline grid, or "market hubs", enhance transmission efficiency. Gas produced
can flow to a market hub, from which it can be dispatched to a variety of
locations. Since not all markets peak at the same time, serving the combined
peak loads of pipelines as a group requires substantially less total
deliverability than serving the peak deliverability needs of pipelines
individually.
BUSINESS STRATEGY
The Company plans to continue to grow its revenue base and to improve
its profitability and cash flow through the implementation of the following key
business strategies:
o OFFER SUPERIOR DELIVERABILITY AND FLEXIBILITY
The Company's marketing strategy emphasizes the high deliverability and
flexibility of its salt cavern storage facilities relative to conventional
reservoir natural gas storage and targets those customers whose storage and
delivery needs are more variable. For example, salt cavern storage can be
used by utilities as "peaking" facilities to rapidly meet short-swing surges
in demand. Salt cavern storage can allow local distribution companies to
reserve a supply of natural gas at a storage facility that can be delivered
quickly, reducing the need to purchase gas on short notice at peak prices.
Natural gas marketing companies and natural gas production companies can use
salt cavern facilities to store natural gas when prices are low and withdraw
natural gas when prices increase. A salt cavern's flexible injection and
withdrawal capabilities can allow pipeline companies to increase operating
efficiencies and reduce compressor fuel usage through physically balancing
pipeline receipts and deliveries.
o GENERATE STABLE REVENUES AND CASH FLOWS THROUGH DEMAND STORAGE CONTRACTS
The Company's primary source of revenues is demand storage contracts, in
which the Company leases storage capacity to customers on a firm basis for
periods ranging from one year to 20 years. Prices per Bcf of storage
capacity and the amount of storage capacity to be leased are generally fixed
at the inception of the contract. Accordingly, these storage contracts,
which have a remaining weighted average life of approximately 7.7 years as
of December 31, 1997, provide a relatively stable source of revenues and
cash flows, since the customer is required to pay a minimum level of storage
fees regardless of usage. In 1997, approximately 86% of the Company's total
revenues were generated from the minimum fees under demand storage
contracts.
o OPTIMIZE REVENUES AND OPERATING EFFICIENCIES BY OFFERING HUB SERVICES
The Company offers a variety of load management services to its customers on
a short-term and "interruptible" basis to supplement its storage revenues.
These hub services include: (i) balancing services, which allow customers to
borrow or park gas for a limited time, (ii) wheeling services, which allow
customers to transfer gas from one pipeline to another through the Company's
surface interconnects, (iii) title transfer services, which allow customers
to effect the transfer of natural gas from one storage facility or pipeline
to another without incurring unnecessary transportation charges, (iv)
imbalance services, which allow customers to trade imbalances on a
particular pipeline or between pipelines and (v) loaning services, which
allow customers to borrow natural gas from the Company.
7
<PAGE>
Since the Company's storage customers generally do not utilize 100% of
storage and/or withdrawal and injection capacities at all times, hub
services allow the Company to optimize revenues and operating efficiencies
through the use of unutilized and unsubscribed capacity. Hub services also
provide an opportunity to attract new customers and market longer-term
demand-type storage contracts to these new customers.
o CAPITALIZE ON FAVORABLE EXPANSION ECONOMICS BY SELECTIVELY EXPANDING
CAPACITY
Due to the favorable economics associated with capacity expansion, the
Company evaluates increasing capacity at its current facilities when it has
leased close to 100% of storage capacity and demand for additional capacity
remains strong. The Company has previously expanded capacity six times. The
Company plans to use approximately $20.0 million of the proceeds of the Old
Notes Offering to expand capacity by 50%, from approximately 16.0 Bcf to
approximately 24.0 Bcf, and approximately $6.0 million to purchase
incremental pad gas associated with such expansion. The Company believes
that incremental capacity expansions result in high rates of return due to
the relatively low capital expenditures required to add new capacity and
deliverability and the relatively low incremental costs associated with
operating the new capacity. For example, approximately $158.4 million has
been invested in fixed assets to develop the Company's approximately 16.0
Bcf of existing storage capacity, or approximately $9.9 million per Bcf. The
Company's current expansion plan projects an increase in capacity by 8.0 Bcf
for $20.0 million, requiring only $2.5 million per Bcf of additional
capacity.
o CONTINUE DEVELOPMENT OF INNOVATIVE TECHNOLOGY TO IMPROVE OPERATING
EFFICIENCIES
The Company plans to maintain its focus on developing salt cavern storage
techniques that it believes to be state-of-the-art. Through a subsidiary of
its majority owner, PacifiCorp, the Company has maintained an extensive
technical relationship with Sandia National Laboratories, a leading source
of technology for hydrocarbon storage, and previously had an extensive
technical relationship with Gaz de France, a world leader in natural gas
related research and development. The cooperative effort in technology has
been primarily focused on salt cavern design, construction and operation.
The use of Solution Mining Under Gas ("SMUG") technology, which allows the
expansion of existing caverns without interrupting operations, provides the
Company with what it believes are cost and safety advantages.
THE OLD NOTES OFFERING
<TABLE>
<CAPTION>
<S> <C>
Old Notes...................... The Old Notes were sold by the Issuers on March 4, 1998 to SBC Warburg
Dillon Read Inc. (the "Initial Purchaser") pursuant to a Purchase Agreement
(the "Purchase Agreement") dated February 27, 1998 (the "Old Notes
Offering" and, together with the Exchange Offering, the "Offering"). The
Initial Purchaser subsequently resold the Old Notes in the United States to
qualified institutional buyers in reliance upon Rule 144A under the Securities
Act.
Registration Rights Agreement.. Pursuant to the Purchase Agreement, the Issuers, the Subsidiary Guarantors and the Initial
Purchaser entered into a Registration Rights Agreement dated March 4, 1998 (the "Registration
Rights Agreement"), which grants the holders of the Old Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy such exchange rights, which terminate upon the
consummation of the Exchange Offer.
8
<PAGE>
THE EXCHANGE OFFER
Securities Offered............. $115,000,000 aggregate principal amount of 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"). The form and terms of the Exchange Notes are identical
in all material respects to the form and terms of the Old Notes except that the
Exchange Notes have been registered under the Securities Act and will not
contain certain transfer restrictions and hence are not entitled to certain rights
under the Registration Rights Agreement, including the provisions providing
for an increase in the interest rate in certain circumstances. The Exchange
Notes will evidence the same debt as the Old Notes and will be issued under
and be entitled to the benefits of the Indenture governing the Old Notes. See
"Description of Exchange Notes".
The Exchange Offer............. $1,000 principal amount of the Exchange Notes in exchange for each $1,000
principal amount of outstanding Old Notes. As of the date hereof,
$115,000,000 aggregate principal amount of Old Notes are issued and
outstanding. The Issuers will issue the Exchange Notes to holders of Old
Notes on or promptly after the Expiration Date.
Resale......................... Based on interpretations by the staff of the Commission set forth in no-action
letters issued to third parties, and subject to the immediately following
sentence, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than (i) a broker-dealer
who purchased such Old Notes directly from the Issuers for resale pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an "affiliate" of the Issuers or of any Subsidiary Guarantor
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that the holder is acquiring such Exchange Notes in its ordinary
course of business and does not intend to participate in, and has no
arrangement or understanding with any person to participate in, the
distribution of such Exchange Notes. However, any purchaser of Notes who
is an affiliate of the Issuers or of any Subsidiary Guarantor or who intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes, or any broker-dealer who purchased the Old Notes from the Issuers to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (i) will not be able to rely on the interpretations by the staff of
the Commission set forth in the above-mentioned no-action letters, (ii) will not
be able to tender its Old 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 Notes unless such sale or transfer
is made pursuant to an exemption from such requirements. The Issuers do not
intend to seek their own no-action letter, and there is no assurance that the staff
of the Commission would make a similar determination with respect to the
Exchange Notes as it has in such no-action letters to third parties. See "The
Exchange Offer-- Resale of Exchange Notes" and "Plan of Distribution".
Expiration Date................ 5:00 p.m., New York time, on , 1998, unless the Exchange Offer is
extended, in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended. See "The Exchange Offer -- Expiration
Date; Extensions; Amendments".
9
<PAGE>
Interest on the Notes.......... Each Exchange Note will bear interest from the most recent date to which
interest has been paid or duly provided for on the Old Note surrendered in
exchange for such Exchange Note or, if no interest has been paid or duly
provided for on such Old Note, from March 4, 1998. Interest on the Exchange
Notes is payable semi-annually on each March 1 and September 1,
commencing on September 1, 1998. Holders of Old Notes whose Old Notes
are accepted for exchange will not receive interest that is accrued and unpaid
on such Old Notes for any period from and after the last date to which interest
has been paid or duly provided for on the Old Notes prior to the original issue
date of the Exchange Notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such Old Notes, and will
be deemed to have waived the right to receive any interest on such Old Notes,
accrued from and after March 4, 1998. See "The Exchange Offer-- Interest
on the Exchange Notes".
Acceptance of Old Notes and Delivery
of Exchange Notes.......... The Issuers will accept for exchange, subject to the conditions described under
"The Exchange Offer-- Conditions", any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York time,
on the Expiration Date. The Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the Expiration Date. See "The
Exchange Offer-- Terms of the Exchange Offer".
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained herein and therein, and
mail or otherwise deliver such Letter of Transmittal, or such facsimile,
together with the Old Notes and any other required documentation to the
Exchange Agent (as defined herein) at the address set forth in the Letter of
Transmittal. By executing the Letter of Transmittal, each holder will represent
to the Issuers that, among other things, (i) it is not an affiliate of the Issuers or
of any Subsidiary Guarantor, (ii) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes and (iii) it is acquiring the
Exchange Notes in its ordinary course of business. See "The Exchange Offer
-- Purpose and Effect of the Exchange Offer" and "--Procedures for
Tendering".
Special Procedures for Beneficial
Holders.................... Any beneficial holder whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender in the Exchange Offer should contact the registered holder promptly
and instruct such registered holder to tender on such beneficial holder's behalf.
If such beneficial holder wishes to tender on such beneficial holder's own
behalf, such beneficial holder must, prior to completing and executing the
Letter of Transmittal and delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such beneficial
holder's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time. The
Issuers will keep the Exchange Offer open for not less than twenty days in
10
<PAGE>
order to provide for the transfer of registered ownership. See "The Exchange
Offer--Procedures for Tendering".
Guaranteed Delivery
Procedures.................. Holders of Old Notes who wish to tender their Old Notes and (i) whose Old Notes
are not immediately available, (ii) who cannot deliver their Old Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent or
(iii) who cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, must tender their Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --Guaranteed Delivery Procedures".
Withdrawal Rights.............. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York time, on the Expiration Date, unless previously accepted for exchange.
See "The Exchange Offer--Withdrawal of Tenders".
Untendered Old Notes........... Following the consummation of the Exchange Offer, holders of Old Notes
eligible to participate but who do not tender their Old Notes will not have any
further exchange rights, and such Old Notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
such Old Notes could be adversely affected. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer".
Consequences of Failure
to Exchange................. The Old Notes that are not exchanged pursuant to the Exchange Offer will
remain restricted securities. Accordingly, such Old Notes may be resold only
(i) to the Issuers, (ii) pursuant to an effective registration statement under the
Securities Act, (iii) pursuant to Rule 144A or Rule 144 under the Securities
Act, (iv) outside the United States to a foreign person pursuant to the
requirements of Rule 904 under the Securities Act, (v) to an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act who furnishes the Trustee with a letter containing certain
representations and agreements and, in the case of any transfer of aggregate
principal amount of Old Notes of $100,000 or less, an opinion of counsel, if
the Issuers so request, or (vi) pursuant to some other exemption under the
Securities Act (and based on an opinion of counsel, if the Issuers so request).
See "The Exchange Offer-- Consequences of Failure to Exchange".
Use of Proceeds................ There will be no cash proceeds to the Issuers from the exchange pursuant to
the Exchange Offer.
Exchange Agent................. IBJ Schroder Bank and Trust Company, the Trustee under the Indenture, is
serving as exchange agent (the "Exchange Agent") in connection with the
Exchange Offer. The mailing address of the Exchange Agent is IBJ Schroder
Bank & Trust Company, P.O. Box 84, Bowling Green Station, New York,
New York 10274-0084. The address for deliveries by overnight courier and
for hand deliveries is IBJ Schroder Bank & Trust Company, One State Street,
New York, New York 10004, Attn: Securities Processing Window, Subcellar
One, (SC-1). For assistance and requests for additional copies of this
Prospectus, the Letter of Transmittal or the Notice of Guaranteed Delivery, the
telephone number for the Exchange Agent is (212) 858-2103, and the
facsimile number for the Exchange Agent is (212) 858-2611.
11
<PAGE>
THE EXCHANGE NOTES
General........................ The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes (which they are intended to replace) except that: (i) the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof and (ii) the holders of
Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provision providing for an increase in the
interest rate on the Old Notes in certain circumstances relating to the timing
of the Exchange Offer, which rights will terminate when the Exchange Offer
is consummated. See "The Exchange Offer--Purpose and Effect of the
Exchange Offer". The Exchange Notes will evidence the same debt as the Old
Notes and will be entitled to the benefits of the Indenture. See "Description
of Exchange Notes". The Old Notes and the Exchange Notes are referred to
herein collectively as the "Notes".
Securities Offered............. $115,000,000 aggregate principal amount of 8 1/4% Senior Notes due 2008.
Interest Rate and Payment
Dates ...................... The Exchange Notes will bear interest at a rate of 8 1/4% per annum. Interest on
the Exchange Notes will accrue from the date of issuance thereof or from the most
recent Interest Payment Date (as defined herein) to which interest has been paid
or provided for, payable semi-annually in cash in arrears on March 1 and
September 1 of each year, commencing September 1, 1998.
Maturity Date.................. March 1, 2008.
Ranking........................ The Exchange Notes will be senior unsecured joint and several obligations of
the Issuers and will rank PARI PASSU in right of payment with all other existing
and future unsecured and unsubordinated Indebtedness (as defined herein) of
the Issuers and senior to all existing and future Subordinated Indebtedness (as
defined herein) of the Issuers. Each Subsidiary Guarantee (as defined herein)
will be a senior unsecured obligation of the applicable Subsidiary Guarantor
and will rank PARI PASSU in right of payment with all other existing and future
unsecured and unsubordinated Indebtedness of such Subsidiary Guarantor, and
senior to all existing and future Subordinated Indebtedness of the applicable
Subsidiary Guarantor. The Exchange Notes and Subsidiary Guarantees,
however, will be effectively subordinated to secured Indebtedness of the
Issuers and the Subsidiary Guarantors with respect to the assets securing that
Indebtedness. At December 31, 1997, on a pro forma basis assuming that the
Old Notes Offering and the application of the net proceeds therefrom had
occurred on such date, the Issuers and the Subsidiary Guarantors would have
had no Indebtedness outstanding other than the Old Notes. It is contemplated,
however, that MHP Storage may incur Indebtedness under the New Credit
Facility (as defined herein) which would be secured by a lien on substantially
all the assets of MHP Storage and certain of its Subsidiaries (as defined
herein). Subject to certain limitations, the Issuers and their Subsidiaries
(including the Subsidiary Guarantors) may incur additional Indebtedness in the
future. See "Description of Exchange Notes-- Ranking" and "--Certain
Covenants-- Limitation on Indebtedness and Disqualified Equity Interests".
Subsidiary Guarantors.......... The Exchange Notes will be unconditionally guaranteed on a senior unsecured basis
by Moss Bluff, Egan and their respective general partners.
12
<PAGE>
Optional Redemption............ The Issuers may, at the option of MHP Storage, redeem the Exchange Notes
in whole or from time to time in part, on or after March 1, 2003, at the
redemption prices set forth herein, together with accrued and unpaid interest
thereon and Liquidated Damages (as defined herein), if any, to the date of
redemption. At any time on or prior to March 1, 2001, the Issuers may redeem
up to 35% of the aggregate principal amount of Exchange Notes originally
issued from the Net Cash Proceeds (as defined herein) of one or more Public
Equity Offerings (as defined herein), at a redemption price equal to 108.25%
of the principal amount thereof, together with accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date of redemption, PROVIDED,
that at least $74.75 million of the aggregate principal amount of Exchange
Notes originally issued remains outstanding immediately after that redemption.
See "Description of Exchange Notes-- Optional Redemption".
Change of Control.............. If a Change of Control (as defined herein) occurs, the Issuers must make an
offer to purchase all the then-outstanding Exchange Notes, and purchase all
such Exchange Notes validly tendered pursuant to such offer, at a purchase
price equal to 101% of the principal amount thereof, together with accrued and
unpaid interest thereon and Liquidated Damages, if any, to the date of
purchase. See "Description of Exchange Notes-- Certain Covenants--
Change of Control".
Certain Covenants.............. The Indenture contains certain covenants, including covenants that limit (i)
incurrence of certain Indebtedness, (ii) issuance of Disqualified Equity
Interests (as defined herein), (iii) issuance of Preferred Equity Interests (as
defined herein) by Restricted Subsidiaries (as defined herein), (iv) Restricted
Payments (as defined herein), (v) issuances and sales of equity interests by
Restricted Subsidiaries, (vi) sale/leaseback transactions, (vii) transactions with
affiliates, (viii) liens, (ix) asset sales, (x) dividend and other payment
restrictions by Restricted Subsidiaries, (xi) conduct of business, (xii) activities
of Finance Corp. and (xiii) mergers, consolidations and sales of assets. See
"Description of Exchange Notes-- Certain Covenants" and "--Merger,
Consolidation and Sale of Assets".
</TABLE>
RISK FACTORS
See "Risk Factors" beginning on page 16 for a discussion of certain factors
that investors should consider before making an investment in the Exchange
Notes.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
The following summary financial information for each of the years in the
period ended December 31, 1997 is derived from the audited Consolidated
Financial Statements of Market Hub Partners Storage, L.P. The summary financial
information for the period from December 21, 1994 (inception) to December 31,
1994 was derived from the unaudited financial statements of the Company for this
period. Such unaudited financial statements have been prepared on a basis
consistent with the audited financial statements and in management's opinion
contains all adjustments necessary to fairly present such financial statements.
The audited Consolidated Financial Statements for MHP Storage, as of December
31, 1996 and 1997 and for each of the three years in the period ended December
31, 1997 and related notes thereto appear elsewhere in this Prospectus. The
operating data is derived from the historical operating records of the Company.
The selected pro forma income statement data for the year ended December 31,
1997 gives effect to the completion of the Old Notes Offering and the
application of the net proceeds therefrom as if the Old Notes Offering had been
consummated on January 1, 1997. The selected pro forma balance sheet data as of
December 31, 1997 gives effect to the completion of the Old Notes Offering and
the application of the net proceeds therefrom as if the Old Notes Offering had
been consummated on December 31, 1997. Neither the summary historical financial
data nor the summary pro forma financial data are necessarily indicative of
either the future results of operations or the results of operations that would
have occurred if those events had been consummated on the indicated dates. The
following summary financial information should be read in conjunction with, and
is qualified by reference to, the unaudited Pro Forma Condensed Consolidated
Financial Statements of the Company and notes thereto, "Management's Discussion
and Analysis of Financial Condition and Results of Operations", and the
Consolidated Financial Statements of the Company and notes thereto and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 21, 1994
(INCEPTION) YEARS ENDED DECEMBER 31,
TO DECEMBER 31, ------------------------------
1994 1995 1996 1997
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT
OPERATING INFORMATION)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................................... $ 115 $ 7,874 $ 18,586 $ 27,486
Operating expenses........................... 733 6,138 10,171 13,931
-------------- ---------- ---------- ----------
Operating income (loss)...................... (618) 1,736 8,415 13,555
Interest expense............................. 18 664 2,544 3,605
Interest income.............................. 14 98 139 99
Extraordinary item(1)........................ -- -- (452) --
-------------- ----------- ------------ -----------
Net income (loss)............................ (622) 1,170 5,558 10,049
============== ========== ========== ==========
SELECTED FINANCIAL DATA:
EBITDA(2).................................... $ (597) $ 3,356 $ 12,272 $ 18,483
EBITDA margin(3)............................. -- 42.6% 66.0% 67.2%
Depreciation and amortization(4)............. 21 1,620 3,857 4,928
Capital expenditures......................... -- 26,755 37,598 29,785
Ratio of earnings to fixed charges(5)........ -- 1.5x 3.0x 3.1x
SELECTED PRO FORMA DATA:
Adjusted EBITDA(6)........................... 19,083
Cash interest expense(7)..................... 9,488
Adjusted EBITDA/cash interest expense........ 2.0x
Total debt/Adjusted EBITDA................... 6.0x
Net debt/Adjusted EBITDA(8).................. 4.1x
Ratio of earnings to fixed charges(5)........ 1.5x
OPERATING DATA (AT END OF PERIOD; UNAUDITED)(9):
Working gas storage capacity (Bcf).......... 2.75 7.35 11.95 16.00
Injection capacity (MMcf/d).................. 70 270 600 800
Withdrawal and wheeling capacity (MMcf/d).... 225 1,650 2,500 3,350
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 21, 1994
(INCEPTION) YEARS ENDED DECEMBER 31,
TO DECEMBER 31, ------------------------------
1994 1995 1996 1997
---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT
OPERATING INFORMATION)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficiency)................. $ 4,793 $ (6,824) $ (4,245) $ (3,324)
Property and equipment, net.................. 57,721 82,228 123,116 147,973
Total assets................................. 74,183 88,184 131,916 159,887
Total debt................................... 11,200 9,814 57,692 53,492
Partners' capital............................ 41,436 68,994 68,487 99,913
- -----------------
</TABLE>
(1) Charge relating to early extinguishment of debt.
(2) EBITDA is defined as net income before extraordinary items plus interest
expense (net of interest income) plus depreciation and amortization.
EBITDA is presented not as an alternative measure of operating results
or cash flow from operations (as determined in accordance with generally
accepted accounting principles), but rather to provide additional
information related to the debt servicing ability of the Company.
Interest expense as reflected on the Company's financial statements
includes amortization of deferred financing fees.
(3) EBITDA margin means EBITDA divided by revenues.
(4) Excludes amortization of deferred financing costs, which amounts are
included in interest expense.
(5) For purposes of calculating the ratio of earnings to fixed charges,
fixed charges include interest expense (plus capitalized interest) and
that portion of non-capitalized rental expense deemed to be the
equivalent of interest. Earnings represent income from continuing
operations before income taxes and fixed charges. The deficiency in
earnings during the period from December 21, 1994 (inception) to
December 31, 1994 to cover fixed charges was $622,000.
(6) Adjusted EBITDA is EBITDA plus $600,000, the amount of a special bonus
payment to executives in connection with the development of the Moss
Bluff and Egan facilities.
(7) Cash interest expense represents the interest cost of the Old Notes,
which represented the entire amount of debt outstanding upon
consummation of the Old Notes Offering, at an interest rate of 8.25%.
(8) Net debt means total debt less cash and cash equivalents assuming the
consummation of the Old Notes Offering and the application of the net
proceeds therefrom as of such date.
(9) Operating data capacities represent capacities attributable to the
Company and, for December 31, 1994 and 1995, include only 50% of total
capacity at the Moss Bluff facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capacity
Expansions".
15
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN
INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company is highly leveraged and has significant debt service
requirements. At December 31, 1997, on a pro forma basis assuming that the Old
Notes Offering and the application of the net proceeds therefrom had occurred on
such date, the total consolidated indebtedness of the Company would have been
$115 million and the ratio of total consolidated indebtedness to total
capitalization would have been 60.3%. The degree to which the Company is
leveraged will have important consequences to holders of the Exchange Notes,
including: (i) the ability of the Company to obtain additional financing,
whether for working capital, capital expenditures or other purposes, may be
impaired; (ii) a substantial portion of the Company's cash flow from operations
will be required for debt service, thereby reducing funds available to the
Company for its operations; (iii) the Company's flexibility in planning for or
reacting to changes in market conditions may be limited; (iv) the Company may be
more vulnerable upon a downturn in its business; and (v) to the extent that the
Company incurs any indebtedness at variable rates, including under the New
Credit Facility (as defined herein), the Company will be vulnerable to increases
in interest rates.
The Exchange Notes will be senior unsecured obligations of the Issuers.
The Exchange Notes will rank PARI PASSU with all other unsecured and
unsubordinated indebtedness of the Issuers, but will be effectively subordinated
to secured indebtedness of the Issuers, including any amounts that may be
borrowed by MHP Storage under the New Credit Facility. At December 31, 1997, on
a pro forma basis assuming that the Old Notes Offering and the application of
the net proceeds therefrom had occurred on such date, the Issuers would have had
no Indebtedness outstanding other than the Old Notes. Future borrowings under
the New Credit Facility will be permitted, subject to the applicable terms,
conditions and limitations thereof and to the provisions of the Indenture.
Borrowings under the New Credit Facility will be secured by substantially all
the assets of MHP Storage and its subsidiaries. Accordingly, the Exchange Notes
will be effectively subordinated to the extent of such security interests. See
"Description of New Credit Facility" and "Description of Exchange Notes --
Ranking".
Based on current operations, the Company expects that it will be able to
meet the debt service requirements on its indebtedness, meet its working capital
needs and fund its capital expenditures and other operating expenses out of cash
flow from operations, proceeds of the Old Notes Offering and available
borrowings under the New Credit Facility. However, there can be no assurance
that the Company's business will generate cash flow at levels sufficient to meet
these requirements. If the Company is unable to generate sufficient cash flow
from operations to service its debt obligations and to meet other cash
requirements, it may be required to sell assets, reduce capital expenditures,
refinance all or a portion of its existing debt (including the Exchange Notes)
or obtain additional financing. There can be no assurance that any such asset
sales or refinancing would be possible or that any additional financing would be
available on terms acceptable to the Company. The Company's ability to meet its
debt service obligations will be dependent upon its future performance which, in
turn, will be subject to future economic conditions and to financial, business
and other factors, many of which are beyond the Company's control.
DEPENDENCE ON SUBSIDIARIES; HOLDING COMPANY STRUCTURE
MHP Storage is a holding company whose assets consist of ownership
interests in its subsidiaries. Consequently, MHP Storage's ability to repay its
indebtedness, including the Exchange Notes, depends on the earnings of its
subsidiaries and on its ability to receive funds from such subsidiaries through
dividends, repayment of intercompany notes or other payments. The ability of MHP
Storage's subsidiaries to pay dividends, repay intercompany notes or make other
advances to MHP Storage is subject to restrictions imposed by applicable law,
tax considerations and the terms of the partnership agreements or other
instruments governing the subsidiaries. Finance Corp. was organized solely for
the purpose of serving as a co-issuer of the Exchange Notes in order to
facilitate the Offering. Neither Finance Corp. nor the general partner of MHP
Storage has any meaningful operations or assets and should not be considered as
a source of revenues to pay the debt service requirements on the Exchange Notes.
16
<PAGE>
RESTRICTIONS IMPOSED BY CERTAIN COVENANTS
The Company has entered into an agreement with a bank providing for a
revolving loan facility to fund working capital requirements and for general
business purposes of the Company (the "New Credit Facility"). The New Credit
Facility and the Indenture contain a number of significant covenants that, among
other things, restrict the ability of the Company to dispose of assets, incur
additional indebtedness, incur liens on property or assets, repay other
indebtedness, pay dividends, enter into certain investments or transactions,
repurchase or redeem equity, engage in mergers or consolidations or engage in
certain transactions with subsidiaries and affiliates and otherwise restrict
business activities. There can be no assurance that such restrictions will not
adversely affect the Company's ability to finance its future operations or
capital needs or engage in other business activities that may be in the interest
of the Company. In addition, the New Credit Facility also requires MHP Storage
and the Subsidiary Guarantors to maintain compliance with certain financial
ratios. The ability of MHP Storage and the Subsidiary Guarantors to comply with
such ratios may be affected by events beyond their control. A breach of any of
these covenants or the inability of the Company to comply with the required
financial ratios could result in a default under the New Credit Facility. If any
such default occurred, the lender under the New Credit Facility could elect to
declare all borrowings outstanding under the New Credit Facility, together with
accrued interest and other fees, to be due and payable. If MHP Storage and the
Subsidiary Guarantors were unable to repay any such borrowings when due, the
lender under the New Credit Facility could proceed against the collateral. If
the indebtedness under the New Credit Facility or the Exchange Notes were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay such indebtedness in full. Any such default may have a
material adverse effect on the Company's financial condition and results of
operation. See "Description of New Credit Facility" and "Description of Exchange
Notes".
UNCERTAINTY OF INDUSTRY CONDITIONS
Prices for natural gas are seasonal and volatile, which has enhanced
demand for the Company's storage services. The Company has benefited from large
price swings and peaking resulting from seasonal price sensitivity through
increased withdrawal charges and demand for nonstorage hub services. There can
be no assurance that the market for natural gas will continue to experience
volatility and seasonal price sensitivity in the future at the levels previously
seen. In the event that volatility and seasonality in the natural gas industry
decrease, either as a result of increased storage capacity throughout the
pipeline system, increased production capacity or otherwise, the demand for the
Company's storage services and, therefore, the prices which the Company will be
able to charge for such services may decline.
RISKS OF OPERATIONS
The Company's operations are subject to all of the risks generally
associated with the transportation and storage of natural gas, a highly volatile
product, including personal injuries and damage to pipelines, storage
facilities, related equipment and surrounding properties caused by hurricanes,
weather and other acts of God, fires and explosions, subsidence, as well as
leakage of natural gas and spills of liquids and condensate. The Company's
facilities incorporate certain primary and backup equipment which, in the event
of mechanical failure, might take some time to replace. Any prolonged disruption
to the operations of either the Moss Bluff facility or the Egan facility,
whether due to mechanical failure, labor difficulties, destruction of or damage
to such facilities, severe weather conditions, interruption of transportation or
utilities service or other reasons, could have a material adverse effect on the
Company's business, results of operations and financial condition. Additionally,
certain of the Company's contracts obligate the Company to indemnify the
customer for any damage or injury occurring during the period in which the
customer's natural gas is in the Company's possession. In order to minimize the
effects of any such incident, the Company maintains insurance coverage which
includes, but is not limited to, property and business interruption insurance.
See "Business --Insurance". The Company believes that its insurance coverage is
adequate; however, there can be no assurance that the proceeds of any such
insurance would be paid in a timely manner or be in an amount sufficient to meet
the Company's needs if such an event were to occur.
DEPENDENCE ON MAJOR CUSTOMERS
The Company was a party to storage contracts with 18 customers as of
December 31, 1997. For 1997, approximately 56% of the Company's consolidated
revenues were derived from its three largest customers, Northern
17
<PAGE>
Indiana Public Service Company ("Northern Indiana"), a wholly owned subsidiary
of NIPSCO Industries, Inc., TPC Corporation ("TPC"), a wholly owned subsidiary
of PacifiCorp, and Channel Industries Gas Company ("Channel"). Northern Indiana,
TPC and Channel accounted for 32%, 14% and 10%, respectively, of the Company's
consolidated revenues for 1997. The Company believes that the services it
provides to its major customers, including partners of MHP, will continue to
account for a significant percentage of the Company's total revenues. The loss
or material adverse change in the financial condition of one or more of these
customers could have a material adverse effect on the Company's financial
condition and results of operations.
TERMINATION OR EXPIRATION OF FIRM STORAGE CONTRACTS
The Company's firm storage contracts expire at various times from 1998
through 2016. Certain of the current contracts provide that the customer has the
right to terminate the contract upon the occurrence of certain events of default
specified therein. No assurance can be given that these contracts will be
extended or that alternative contractual arrangements will be made upon the
expiration or termination of such contracts and, if the contracts are extended
or new contracts entered into, for what periods, at what prices and on what
terms. Accordingly, there can be no assurance that the net revenues generated
from customer contractual or other arrangements that the Company may enter into
upon termination or expiration of the existing contracts will be sufficient to
enable the Company to satisfy its obligations. See "Business -- Description of
Significant Contracts".
RISKS RELATED TO CAPITAL EXPANSION AND IMPROVEMENTS
The Company plans to apply approximately $26.0 million of the proceeds
of the Old Notes Offering over a 12-month period to fund the expansion of its
Moss Bluff and Egan storage facilities and to purchase incremental pad gas. The
Company believes that, after completion of the projects funded with the proceeds
of the Old Notes Offering, the Company will experience positive effects on its
revenues and operating income. However, there can be no assurance that such
capital expenditure plans will be implemented in the anticipated time frame,
that actual costs of planned projects will not exceed budgeted amounts or that
the projects will have such intended financial benefits. For example, there can
be no assurance that the Company will be able to economically lease the
increased storage capacity.
Changes in the economic or regulatory environments or delays in
implementing the capital expenditure plans may require modification of such
plans, increase the cost to complete such plans or otherwise make the completion
of such plans impracticable or uneconomical. In certain circumstances, the
Company may be required to obtain additional financing to complete its planned
projects, and there can be no assurance that such financing will be available on
acceptable terms, if at all.
TRANSPORTATION RISKS
The Moss Bluff and Egan facilities are dependent on the pipelines to
which they have access to transport gas to and from such facilities. These
pipelines are owned by parties not affiliated with the Company. Any interruption
of service on those pipelines or adverse change in their terms and conditions of
service could have a material adverse effect on the ability of the Company and
its customers to transport gas to and from the facilities and a corresponding
material adverse effect on the Company's revenues. In addition, the rates
charged by those interconnected pipelines for transportation to and from the
Moss Bluff and Egan facilities affect the utilization and value of the Company's
services. Significant changes in the rates charged by those pipelines or the
rates charged by other pipelines with which the interconnected pipelines compete
could also have a material adverse effect on the Company's revenues.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its operations depend to a significant degree
upon a relatively small group of management and key technical personnel.
Although the Company has entered into employment agreements with certain of
these individuals, the continued employment of such persons cannot be assured.
The loss of the services of certain management personnel or other key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management -- Employment Agreements".
18
<PAGE>
OTHER OPERATIONS OF MHP; CONFLICTS OF INTEREST
MHP, through a subsidiary, is developing a gas storage facility in Tioga
County, Pennsylvania. MHP does not have any direct employees. Accordingly, the
Company has allocated and will continue to allocate some of its resources,
including services of its employees, for the development of the Tioga facility
in lieu of allocating such resources to the Company and its operations. In the
future, MHP may acquire or develop other facilities. In such event, MHP may
elect to develop such facilities through the Company, at the MHP level or
through subsidiaries of MHP other than the Company. The development and
ownership of additional facilities by MHP independent of the Company, and the
possible integration of the operations of such facilities with the Company's
facilities in the future, may give rise to conflicts of interest between the
Company and MHP or another subsidiary of MHP. Neither MHP nor any of its direct
or indirect subsidiaries (other than the Company) will be an obligor on the
Exchange Notes.
A substantial portion of the revenues of the Company is derived from its
contracts to provide storage capacity to TPC and to Northern Indiana. TPC,
through a wholly owned subsidiary, has a majority ownership and voting interest,
and an affiliate of Northern Indiana has a substantial ownership and voting
interest, in MHP and its general partner. These interests, combined with
existing customer relationships with the Company, may present conflicts of
interest. The Indenture prohibits the Company from entering into any material
transactions with its affiliates unless certain conditions are satisfied. See
"Description of Exchange Notes -- Certain Covenants -- Limitations on
Transactions with Affiliates". In addition, the partnership agreements and other
governing documents of MHP, the Company and their respective general partners
contain provisions that require disinterested persons to act for such entities
in certain situations involving conflicts of interest with TPC.
GOVERNMENT REGULATION
The Company's business activities are, and will continue to be, affected
by government regulation. Historically, pipelines acted as wholesalers of
natural gas, purchasing it from producers and reselling it primarily to local
distribution companies, electric utilities and others. In 1985, the FERC
commenced restructuring the regulation of interstate pipelines, requiring those
who chose to perform transportation service to grant transportation access to
any creditworthy shipper, including producers and other marketers of natural
gas, on an open access, nondiscriminatory basis. In the current market, a user
may purchase natural gas from a number of sources, and arrange for
transportation and delivery on one or more pipelines which act as open access
carriers and which do not take title to the natural gas transported. The
unbundling of services brought about by this restructuring has created
significant opportunities for the Company. The scope and nature of future
benefits to the Company of restructuring, however, depend on the manner in which
restructuring evolves. The continued course of restructuring or other future
regulatory actions cannot be predicted at this time and is likely to be beyond
the control of the Company.
The Company's operations at the Moss Bluff facility involve both
intrastate and interstate services. The Moss Bluff facility's intrastate
services are not subject to FERC regulation. These activities are, however,
subject to Texas Railroad Commission ("TRC") regulation. Pursuant to the Texas
Gas Utility Regulatory Act, intrastate rates are deemed to be just and
reasonable and approved by the TRC if they have been negotiated at arm's length
with pipeline companies or large industrial customers. Moss Bluff's interstate
services are subject to FERC regulation, but the FERC has issued an order
permitting the Moss Bluff facility to charge market-based rates for all services
provided in interstate commerce.
The Company's Egan facility received all necessary permits and approvals
from the State of Louisiana allowing it to commence operations in September
1995. Additionally, in October 1996, Egan received a certificate of public
convenience and necessity from FERC authorizing construction and operation of
the Egan facility and market-based pricing of its services. FERC subsequently
authorized expansion of Egan's facilities.
There is no assurance that the orders permitting the Moss Bluff and Egan
Facilities to charge market-based rates will not be modified or revoked and, if
the Company constructs new facilities providing interstate services, the Company
may be subject to more extensive FERC regulation. For a more detailed
description of the effect of government regulation on the Company's business,
see "Business -- Regulation and Environmental Considerations".
19
<PAGE>
ENVIRONMENTAL REGULATION
Certain aspects of the Company's activities are also subject to
environmental regulation. The cost of compliance with environmental laws that
affect the Company can be substantial and could have a materially adverse effect
on the Company's financial condition. Environmental regulations frequently
impose "strict liability" on property owners, facility operators and certain
other persons, which means that in some situations the Company could be liable
for cleanup costs resulting from improper conduct or conditions caused by
previous property owners, operators, lessees or other persons not associated
with the Company. In the event of an accident or breakage in any of the
Company's natural gas storage facilities, the Company could be liable for
substantial cleanup costs for resulting spills or leaks of condensate or other
damage to the environment or other property. While the Company maintains
insurance it believes to be adequate for such claims, no assurance can be given
that the Company will not incur liability in excess of the policy limits of such
policies. See "Business -- Regulation and Environmental Considerations".
COMPETITION
The Company's current competitors include affiliates of major interstate
and intrastate pipelines and natural gas storage operators of varying size,
financial resources and experience. Additionally, an increase in competition in
the market could arise from new ventures or expanded operations from existing
competitors. Many of these current and potential competitors, particularly those
affiliated with interstate and intrastate pipeline companies, have financial and
other resources substantially greater than those of the Company. See "Business
- -- Competition".
CHANGE OF CONTROL
Upon a Change of Control (as defined herein), the Issuers must make an
offer to purchase all the then-outstanding Exchange Notes, and purchase all such
Exchange Notes validly tendered pursuant to such offer, at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date of purchase. There can be no
assurance that the Company will have sufficient funds available or will be
permitted by its other debt agreements to purchase the Exchange Notes upon the
occurrence of a Change of Control. In addition, a Change of Control may require
the Company to offer to purchase other outstanding indebtedness and may cause a
default under the New Credit Facility. The inability to purchase all of the
tendered Exchange Notes would constitute an Event of Default (as defined herein)
under the Indenture. See "Description of Exchange Notes -- Change of Control".
ABSENCE OF PUBLIC MARKET
Prior to the Exchange Offer, there has not been any public market for
the Old Notes. The Old Notes have not been registered under the Securities Act
and will be subject to restrictions on transferability to the extent that they
are not exchanged for Exchange Notes by holders who are entitled to participate
in the Exchange Offer. The holders of Old Notes (other than any such holder that
is an "affiliate" of the Issuers or of any Subsidiary Guarantor within the
meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Issuers and the Subsidiary Guarantors are required to file a Shelf
Registration Statement with respect to such Old Notes.
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Exchange Notes will not be listed on any
securities exchange. The Company has been advised by the Initial Purchaser that
it intends to make a market in the Exchange Notes; however, the Initial
Purchaser is not obligated to do so, and any such market making activities may
be discontinued at any time without notice. In addition, such market making
activity may be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statement. Therefore, there can be no assurance that an
active market for the Exchange Notes will develop or as to liquidity of a
trading market for the Exchange Notes. The liquidity of, and trading market for,
the Exchange Notes may also be materially and adversely affected by declines in
the market for high-yield securities generally. Such a decline may materially
and adversely affect such liquidity trading independent of the financial
performance of, and prospects for, the Company.
20
<PAGE>
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after a timely receipt by the Issuers of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Issuers are under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof and, upon
consummation of the Exchange Offer, registration rights under the Registration
Rights Agreement generally will terminate. In addition, any holder of Old Notes
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transactions. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such Participating 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". To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer".
FRAUDULENT CONVEYANCE; UNENFORCEABILITY OF SUBSIDIARY GUARANTEES
The Company believes that the indebtedness represented by the Subsidiary
Guarantees is being incurred for proper purposes and in good faith and each
Subsidiary Guarantor is, and after the consummation of the Exchange Offering
will be, solvent, will have sufficient capital for carrying on its business and
will be able to pay its debts as they mature. Revenues of the Subsidiary
Guarantors accounted for 100% of the Company's consolidated revenues for 1997,
and the assets of such Subsidiary Guarantors represented approximately 100% of
the assets of the Company on a consolidated basis. If a court of competent
jurisdiction in a suit by a creditor or representative of creditors of any
Subsidiary Guarantor (such as a trustee in bankruptcy or a debtor-in-possession)
were to find that, at the time of the incurrence of the indebtedness represented
by the Subsidiary Guarantee, such Subsidiary Guarantor was insolvent, was
rendered insolvent by reason of the incurrence of such guarantee, was engaged in
a business or transaction for which its remaining assets constituted
unreasonably small capital, intended to incur, or believes that it would incur,
debts beyond its ability to pay such debts as they matured, or intended to
hinder, delay or defraud its creditors, and that the indebtedness was incurred
for less than fair consideration or reasonably equivalent value, then such court
could, among other things, (i) void all or a portion of such Subsidiary
Guarantor's obligations to the holders of the Notes, the effect of which could
be that the holders of Notes may not be repaid in full and/or (ii) subordinate
such Subsidiary Guarantor's obligations to the holders of the Notes to other
existing and future indebtedness of such Subsidiary Guarantor, the effect of
which would be to entitle such other creditors to be paid in full before any
payment could be made on the Notes. The guarantee of the Notes by a Subsidiary
Guarantor will be released in certain circumstances. See "Description of
Exchange Notes -- Subsidiary Guarantees".
21
<PAGE>
MARKET HUB PARTNERS, L.P. AND THE COMPANY
MARKET HUB PARTNERS, L.P. In December 1994, TPC (then-named Tejas Power
Corporation) formed Market Hub Partners, L.P. ("MHP") with subsidiaries of
NIPSCO Industries, Inc. ("NIPSCO"), DPL Inc. ("DPL"), Public Service Enterprise
Group, Inc. ("PSEG") and one other company. TPC contributed to MHP its interest
in the market hub assets and facilities, market hub locations, development
plans, permits, leases and signed storage service contracts relating to its five
market hub projects, including the Moss Bluff and Egan facilities. TPC's four
partners contributed in the aggregate the agreed-upon sum of $45.0 million in
cash to MHP over the period from 1994 through July 1996. In April 1997, TPC was
acquired by PacifiCorp, an electric utility, and currently operates as a wholly
owned subsidiary of PacifiCorp. In addition to its interest in MHP, TPC is
principally engaged in gas marketing. Also in 1997, DPL acquired the ownership
interest of the original fifth partner in MHP. Direct and indirect subsidiaries
of PacifiCorp, NIPSCO, DPL and PSEG are the limited partners of MHP and own the
stock of the general partner of MHP.
In addition to the Company, MHP owns a subsidiary which is developing a
10.0 Bcf salt cavern storage facility in Tioga County, Pennsylvania. It is
anticipated that the Tioga facility will become operational in the year 2000.
The Company believes that the affiliation of its market hub facilities with the
Tioga facility or with other market hub facilities developed by MHP in the
future will benefit the Company by allowing it to offer services related to an
integrated system of market hubs.
THE COMPANY. MHP Storage was formed on December 31, 1997, at which time
MHP contributed its interest in Moss Bluff and Egan to MHP Storage. MHP Storage,
Moss Bluff and Egan are Delaware limited partnerships and their respective
general partners are Delaware limited liability corporations. The Company's
principal executive offices are located at 16420 Park Ten Place, Suite 420,
Houston, Texas 77084, and its main telephone number is (281) 597- 6777.
22
<PAGE>
The following chart illustrates the relationships among MHP Storage, its
subsidiaries, MHP and MHP's owners, subsidiaries of PacifiCorp, DPL, NIPSCO and
PSEG. For purposes of this Prospectus, except as otherwise specified under the
caption "Description of Exchange Notes", references to the "Company" mean the
entities represented by the shaded boxes below, taken as a whole. Only the
shaded entities are issuers or guarantors of the Notes, and the other entities
shown are neither issuers nor guarantors.
(1) denotes a shaded box.
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------
| |
| Subsidiaries of PacifiCorp (66.0%), |
| DPL (17.0%), NIPSCO (11.3%) |
| and PSEG (5.7%) |
| |
-------------------------------------------------------------------------
| |
100% |
| |
------------------------ |
| Market Hub | |
| Partners, Inc. | |
------------------------ |
| |
Approximately Approximately
2% 98%
GP LP
| |
--------------------------------------------------------------------------------------------------------------------------
| |
| Market Hub Partners, L.P. |
| |
--------------------------------------------------------------------------------------------------------------------------
| | |
100% | 100%
| | |
------------------------ | |
| Market Hub Partners | | |
| Storage, L.L.C. | | |
------------------------ | |
| | |
0.01% 99.99% |
GP LP |
| | |
------------------------------------------------------------------------------------------ |
| | |
| Market Hub Partners Storage, L.P. | |
| Issuer of the Senior Notes | |
| | |
------------------------------------------------------------------------------------------ |
| (1) | | | | |
100% 100% | 100% | |
| | | | | |
| ------------------------ | ------------------------ | |
| | Moss Bluff Hub | | | Egan Hub | | |
| | Partners, L.L.C. | | | Partners, L.L.C. | | |
| | Subsidiary Guarantor | | | Subsidiary Guarantor | | |
| ------------------------ | ------------------------ | |
| (1) | | (1) | | |
| | | | | |
| 0.01% 99.99% 0.01% 99.99% |
| GP LP GP LP |
| | | | | |
- ------------------------------- ------------------------------- ------------------------------- -------------------------------
| | | | | | | |
| Market Hub Partners | | Moss Bluff Hub | | Egan Hub | | Other Subsidiaries, |
| Finance, Inc. | | Partners, L.P. | | Partners, L.P. | | including the owner of |
| Issuer of the Senior Notes | | Subsidiary Guarantor | | Subsidiary Guarantor | | the Tioga project |
| | | | | | | |
- ------------------------------- ------------------------------- ------------------------------- -------------------------------
(1) (1) (1)
</TABLE>
Note: "GP" denotes general partnership interests; "LP" denotes limited
partnership interests.
23
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. The Exchange Offer is intended to satisfy certain
of the Company's obligations under the Registration Rights Agreement.
The net proceeds from the Old Notes Offering were approximately $111.4
million. Of such amount, the Company used approximately $59.3 million to repay
the entire outstanding principal amount of certain secured indebtedness owed to
third parties (the "Secured Notes"), including accrued interest and prepayment
penalties. Approximately $26.0 million will be dedicated to capital expenditures
for the continued expansion and development of its facilities and to purchase
incremental pad gas. On March 5, 1998, the Company distributed to MHP
approximately $17.6 million of the net proceeds from the Old Notes Offering,
which proceeds were used by MHP to repay debt owed by MHP to its partners,
including accrued interest. In March 1998, the company loaned $4.0 million of
the net proceeds of the Old Notes Offering to a subsidiary of MHP to develop
another project. The Company intends to loan an additional $1.0 million to this
subsidiary in the future. All remaining proceeds from the Old Notes Offering
will be used to fund the Company's working capital requirements and for other
general business purposes. In the interim, the Company has invested unused
proceeds in short-term, interest-bearing investments.
24
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997, and as adjusted to reflect the sale of the Old
Notes offered by the Company hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds".
AS OF DECEMBER 31, 1997
-----------------------
(IN THOUSANDS)
AS
ACTUAL ADJUSTED
-------- --------
Cash and cash equivalents ............................ $ 2,153 $ 37,631
======== ========
Long-term debt, including current maturities:
New Credit Facility(1) .......................... $ -- $ --
Secured Notes ................................... 53,492 --
8 1/4% Old Notes due 2008 ....................... -- 115,000
-------- --------
Total long-term debt, including current
maturities ............................ 53,492 115,000
-------- --------
Partners' Capital(2) ................................. 99,913 75,870
-------- --------
Total capitalization ........................ $153,405 $190,870
======== ========
- -----------
(1) MHP Storage and the Subsidiary Guarantors have entered into an agreement
with Bank One, Texas, N.A. for the New Credit Facility, pursuant to which
Bank One, Texas, N.A. will provide MHP Storage with a revolving line of
credit of up to $20.0 million through December 31, 2000 to fund working
capital requirements and for general business purposes. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
--Liquidity and Capital Resources" and "Description of New Credit
Facility".
(2) Partners' capital, as adjusted, includes adjustments to reflect (i) a
distribution of $17.3 million for the repayment of the Partner Notes, which
includes $0.3 million of accrued interest thereon as of December 31, 1997,
and (ii) an extraordinary loss of $6.7 million to be recognized upon the
extinguishment of the Secured Notes. The distribution to MHP upon the
consummation of the Old Notes Offering for the repayment of the Partner
Notes was $17.6 million due to additional accrued interest incurred
subsequent to December 31, 1997. See "Use of Proceeds".
25
<PAGE>
SELECTED FINANCIAL AND OTHER OPERATING DATA
The following selected financial information for each of the years in the
period ended December 31, 1997 is derived from the audited Consolidated
Financial Statements of Market Hub Partners Storage, L.P. The selected financial
information for the period from December 21, 1994 (inception) to December 31,
1994 was derived from the unaudited financial statements of the Company for this
period. Such unaudited financial statements have been prepared on a basis
consistent with the audited financial statements and in management's opinion
contains all adjustments necessary to fairly present such financial statements.
The audited Consolidated Financial Statements for MHP Storage, as of December
31, 1996 and 1997 and for each of the three years in the period ended December
31, 1997 and related notes thereto appear elsewhere in this Prospectus. The
operating data is derived from the historical operating records of the Company.
The selected pro forma income statement data for the year ended December 31,
1997 gives effect to the completion of the Old Notes Offering and the
application of the net proceeds therefrom as if the Old Notes Offering had been
consummated on January 1, 1997. The selected pro forma balance sheet data as of
December 31, 1997 gives effect to the completion of the Old Notes Offering and
the application of the net proceeds therefrom as if the Old Notes Offering had
been consummated on December 31, 1997. Neither the summary historical financial
data nor the summary pro forma financial data are necessarily indicative of
either the future results of operations or the results of operations that would
have occurred if those events had been consummated on the indicated dates. The
following summary financial information should be read in conjunction with, and
is qualified by reference to, the unaudited Pro Forma Condensed Consolidated
Financial Statements of the Company and notes thereto, "Management's Discussion
and Analysis of Financial Condition and Results of Operations", and the
Consolidated Financial Statements of the Company and notes thereto and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 21,
1994
(INCEPTION) YEARS ENDED DECEMBER 31,
TO DECEMBER 31, ----------------------------------
1994 1995 1996 1997
-------- -------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT
OPERATING INFORMATION)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ...................................... $ 115 $ 7,874 $ 18,586 $ 27,486
Operating expenses ............................ 733 6,138 10,171 13,931
-------- -------- --------- ---------
Operating income (loss) ....................... (618) 1,736 8,415 13,555
Interest expense .............................. 18 664 2,544 3,605
Interest income ............................... 14 98 139 99
Extraordinary item(1) ......................... -- -- (452) --
-------- -------- --------- ---------
Net income (loss) ............................. (622) 1,170 5,558 10,049
========= ======== ========= =========
SELECTED FINANCIAL DATA:
EBITDA(2) ..................................... $ (597) $ 3,356 $ 12,272 $ 18,483
EBITDA margin(3) .............................. -- 42.6% 66.0% 67.2%
Depreciation and amortization(4) .............. 21 1,620 3,857 4,928
Capital expenditures .......................... -- 26,755 37,598 29,785
Ratio of earnings to fixed charges(5) ......... -- 1.5x 3.0x 3.1x
SELECTED PRO FORMA DATA:
Adjusted EBITDA(6) ............................ 19,083
Cash interest expense(7) ...................... 9,488
Adjusted EBITDA/cash interest expense ......... 2.0x
Total debt/Adjusted EBITDA .................... 6.0x
Net debt/Adjusted EBITDA(8) ................... 4.1x
Ratio of earnings to fixed charges(5) ......... 1.5x
OPERATING DATA (AT END OF PERIOD; UNAUDITED)(9)
Working gas storage capacity (Bcf) ............ 2.75 7.35 11.95 16.00
Injection capacity (MMcf/d) ................... 70 270 600 800
Withdrawal and wheeling capacity (MMcf/d) ..... 225 1,650 2,500 3,350
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficiency) .................. $ 4,793 $ (6,824) $ (4,245) $ (3,324)
Property and equipment, net ................... 57,721 82,228 123,116 147,973
Total assets .................................. 74,183 88,184 131,916 159,887
Total debt .................................... 11,200 9,814 57,692 53,492
Partners' capital ............................. 41,436 68,994 68,487 99,913
</TABLE>
26
<PAGE>
(FOOTNOTES ON FOLLOWING PAGE)
27
<PAGE>
- ----------------
(1) Charge related to early extinguishment of debt.
(2) EBITDA is defined as net income before extraordinary items plus interest
expense (net of interest income) plus depreciation and amortization.
EBITDA is presented not as an alternative measure of operating results
or cash flow from operations (as determined in accordance with generally
accepted accounting principles), but rather to provide additional
information related to the debt servicing ability of the Company.
Interest expense as reflected on the Company's financial statements
includes amortization of deferred financing fees.
(3) EBITDA margin means EBITDA divided by revenues.
(4) Excludes amortization of deferred financing costs, which amounts are
included in interest expense.
(5) For purposes of calculating the ratio of earnings to fixed charges,
fixed charges include interest expense (plus capitalized interest) and
that portion of non-capitalized rental expense deemed to be the
equivalent of interest. Earnings represent income from continuing
operations before income taxes and fixed charges. The deficiency in
earnings during the period from December 21, 1994 (inception) to
December 31, 1994 to cover fixed charges was $622,000.
(6) Adjusted EBITDA is EBITDA plus $600,000, the amount of a special bonus
payment to executives in connection with the development of the Moss
Bluff and Egan facilities.
(7) Cash interest expense represents the interest cost of the Old Notes,
which represented the entire amount of debt outstanding upon
consummation of the Old Notes Offering, at an interest rate of 8.25%.
(8) Net debt means total debt less cash and cash equivalents assuming the
consummation of the Old Notes Offering and the application of the net
proceeds therefrom as of such date.
(9) Operating data capacities represent capacities attributable to the
Company and, for December 31, 1994 and 1995, include only 50% of total
capacity at the Moss Bluff facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capacity
Expansions".
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Consolidated Financial
Statements have been prepared based on the historical financial statements of
the Company as of and for the year ended December 31, 1997. The pro forma
financial statements give effect to the issuance of the Old Notes including
interest expense on the Old Notes which replaces interest expense historically
recognized.
The Pro Forma Condensed Consolidated Balance Sheet was prepared assuming
issuance of the Old Notes on December 31, 1997 and gives effect to events
directly attributable to the issuance of the Old Notes. The Pro Forma Condensed
Consolidated Income Statement was prepared assuming the Old Notes were issued at
the beginning of the period and gives effect to events directly attributable to
the issuance of the Old Notes which are expected to have a continuing impact on
the Company. The Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the audited consolidated financial statements of the
Company included elsewhere in this Prospectus. The Pro Forma Condensed
Consolidated Financial Statements are presented for illustrative purposes only
and are not necessarily indicative of actual results that would have been
achieved had the issuance of the Old Notes been consummated on such dates, and
are not necessarily indicative of future results.
29
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY
ACTUAL ADJUSTMENT PRO FORMA
---------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................. $ 2,153 $ 35,478(1) $ 37,631
Accounts receivable ....................... 3,418 3,418
Inventory and other current assets ........ 2,036 2,036
--------- --------- ---------
Total current assets .................. 7,607 35,478 43,085
Property and Equipment:
Natural gas storage facilities ............ 136,586 136,586
Construction in progress .................. 21,778 21,778
Less accumulated depreciation ......... (10,391) (10,391)
--------- ---------
147,973 147,973
Other Assets ................................... 4,307 1,987(1)(2) 6,294
--------- --------- ---------
Total Assets .......................... $ 159,887 $ 37,465 $ 197,352
========= ========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current portion of long-term debt ......... $ 4,449 $ (4,449)(1) $ --
Accounts payable:
Trade and other ....................... 3,955 3,955
Partners and affiliates ............... 943 943
Accrued liabilities ....................... 1,584 1,584
--------- --------- ---------
Total current liabilities ............. 10,931 (4,449) 6,482
Secured Notes, net of current portion .......... 49,043 (49,043)(1) --
Old Notes ...................................... -- 115,000 (1) 115,000
Partners' capital .............................. 99,913 (24,043)(3) 75,870
--------- --------- ---------
Total Liabilities and Partners' Capital $ 159,887 $ 37,465 $ 197,352
========= ========= =========
</TABLE>
30
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
COMPANY
ACTUAL ADJUSTMENT PRO FORMA
------ ---------- ---------
Revenues:
Salt cavern storage revenues ......... $23,743 $ 23,743
Hub services revenues ................ 3,743 3,743
------ ------
Total revenues ....................... 27,486 27,486
Operating expense:
Operations and maintenance ........... 2,196 2,196
Plant administrative ................. 2,996 2,996
Property taxes ....................... 810 810
Royalty payments ..................... 203 203
General and administrative ........... 2,798 2,798
Depreciation ......................... 4,928 4,928
------ ------
Total operating expenses ............. 13,931 13,931
------ ------
Operating income .......................... 13,555 13,555
Interest expense(4) ....................... 3,605 5,094 8,699
Interest income ........................... 99 99
------ -------- ------
Net income ................................ $10,049 $ (5,094) $4,955
======= ======== ======
31
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Adjustment for the net proceeds from the issuance of the Old Notes,
repayment of amounts outstanding under the Secured Notes and distribution to MHP
for repayment of Partner Notes. Net Proceeds are calculated as follows (in
thousands):
Proceeds of the Old Notes Offering.................. $ 115,000
Less cash used for:
Debt issuance costs........................... 3,587
Retirement of Secured Notes................... 53,492
Penalty on Secured Notes repayment............ 5,100
Distribution to MHP........................... 17,343
-------
Total..................................... 79,522
----------
Net Proceeds........................................ $ 35,478
==========
(2) Adjustment reflects debt issuance costs associated with the Old Notes
Offering of $3.6 million less the elimination of debt issuance costs of $1.6
million related to the Secured Notes which is included in the extraordinary
charge of $6.7 million discussed in (3) below.
(3) Adjustment reflects the $17.3 million distribution to MHP and an
extraordinary loss of $6.7 million recognized upon the extinguishment of the
Secured Notes, of which $1.6 million represents a non-cash charge.
(4) Adjustment to record incremental interest expense related to the Old
Notes Offering. The interest expense on the Old Notes is computed at a rate of
8.25%. Amount shown as pro forma interest expense is net of $1.1 million of
capitalized interest and includes $0.4 million of pro forma debt issuance costs
amortization.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company markets its natural gas storage services to utilities,
pipeline companies, local distribution companies, producers and natural gas
marketers. The Company receives fees for use of its salt cavern storage
facilities, which generally include a contractual demand charge for the
reservation of storage space and, in some instances, injection and withdrawal
fees for the actual use of the space. A relatively stable source of revenues
exists from several long-term, demand charge contracts with customers at the
Company's two operating facilities. These contracts provide a minimum level of
revenue regardless of usage by the customer. Salt cavern storage revenues as a
percentage of total revenues for the year ended December 31, 1995, 1996 and 1997
were 95%, 84% and 86%, respectively.
The Company also offers short-term firm and interruptible hub services to
its customers. These services include balancing, wheeling, title transfer,
imbalance trading and loaning natural gas. See "Business -- Description of
Services". The Company is currently using hub services to generate incremental
revenue and to provide existing and potential long-term customers with an
inexpensive way to incorporate these services in their natural gas portfolios.
The Company believes that hub service transactions may lead to additional
long-term storage contracts over time. Short-term hub services were provided to
over 35 customers in 1997. Hub services revenues as a percentage of total
revenues for the year ended December 31, 1995, 1996 and 1997 were 5%, 16% and
14%, respectively.
CAPACITY EXPANSIONS
The Company's financial condition and results of operations are directly
related to the working storage capacity of the Company's storage facilities. The
Company has increased capacity at its facilities six times to meet market demand
for storage services. As of December 31, 1997, capacity at the Moss Bluff
facility was approximately 9.5 Bcf, and capacity at the Egan facility was
approximately 6.5 Bcf, for a total storage capacity of approximately 16.0 Bcf.
The Company is currently in the process of expanding the capacity of the Moss
Bluff and Egan facilities. See "Business --Storage Facilities".
At the time of the formation of MHP, the Moss Bluff facility was held by
Moss Bluff Gas Storage Systems ("MBGSS"), a partnership controlled by MHP and
owned 50% by MHP and 50% by CMS Energy Corporation ("CMS"). On July 3, 1996, CMS
transferred (the "MBGSS Transaction") the 50% partner interest in MBGSS owned by
CMS to MHP for, principally, a net cash payment of approximately $26.6 million
and the assumption of liabilities of approximately $6.4 million. The MBGSS
Transaction effectively doubled the storage capacity at the Moss Bluff facility
attributable to the Company.
As a result of the MBGSS Transaction and the continued expansion of the
Moss Bluff and Egan facilities, average storage capacity attributable to the
Company has increased each year since the formation of MHP. Storage capacity
attributable to the Company was approximately 7.35 Bcf, 11.95 Bcf and 16.00 Bcf
as of December 31, 1995, 1996 and 1997, respectively.
RESULTS OF OPERATIONS
MHP Storage was formed by MHP on December 31, 1997 to hold the equity
interests of Moss Bluff, Egan and their respective general partners. Financial
and operating data for the periods presented have been restated to reflect the
financial position and results of operations as if the formation of MHP Storage
had occurred at the beginning of the earliest period presented.
The following table sets forth a summary of material income statement line
items as a percentage of total revenues for the years ended December 31, 1995,
1996 and 1997.
33
<PAGE>
YEAR ENDED DECEMBER 31,
1995 1996 1997
---- ---- ----
Revenues
Salt cavern storage revenues.......... 94.5% 83.6% 86.4%
Hub services revenues................. 5.5 16.4 13.6
------- ------ ------
Total revenues................... 100.0 100.0 100.0
Operating expenses.......................... 78.0 54.7 50.7
------ ------ ------
Operating income............................ 22.0 45.3 49.3
Net interest expense........................ 7.2 12.9 12.8
------- ------ ------
Net income before extraordinary item........ 14.8% 32.4% 36.5%
====== ====== ======
COMPARISON OF 1997 AND 1996
REVENUES. Revenues were $27.5 million in 1997 compared to $18.6 million in
1996, an increase of $8.9 million, or 48%. This $8.9 million increase was
attributable to an $8.2 million increase in salt cavern storage revenues and to
a $0.7 million increase in hub services revenues. The increase in salt cavern
storage revenues was principally due to the effects of the MBGSS Transaction,
which added approximately 4.0 Bcf of capacity attributable to the Company, and
additions and expansions of storage caverns. Increased hub services revenues
reflect increased provision of such services and expanded surface infrastructure
at the Company's facilities.
OPERATING EXPENSES. Operating expenses were $13.9 million in 1997 compared
to $10.2 million in 1996, an increase of $3.7 million, or 36%. The majority of
this increase related to the transfer of the CMS interest in the Moss Bluff
facility pursuant to the MBGSS Transaction in July 1996. Depreciation expense
increased $1.1 million as a result of capital expenditures and the MBGSS
Transaction.
OPERATING INCOME. As a result of the factors described above and the
economies of scale associated with capacity expansions, operating income
increased to $13.6 million in 1997 from $8.4 million in 1996, an increase of
$5.2 million, or 62%, and also increased as a percentage of total revenues to
49% in 1997 from 45% in 1996.
NET INTEREST EXPENSE. Net interest expense was $3.5 million in 1997
compared to $2.4 million in 1996, an increase of $1.1 million, or 46%, resulting
from a full year's interest on the Secured Notes in 1997.
COMPARISON OF 1996 AND 1995
REVENUES. Revenues were $18.6 million in 1996 compared to $7.9 million in
1995, an increase of $10.7 million, or 135%. Of such increase, $8.1 million was
attributable to increased salt cavern storage revenues and $2.6 million was
attributable to increased hub services revenues. Significant events contributing
to these increases during the period were (i) the commencement of operations at
the Egan facility, which came on line in September 1995 with 3.6 Bcf of working
gas capacity and (ii) the MBGSS Transaction in July 1996, an event which
increased working gas capacity net to the Company from the Moss Bluff facility
from 3.75 Bcf at the end of 1995 to 7.75 Bcf at the end of 1996. Increased hub
services revenues reflect increased provision of such services and expanded
surface infrastructure at the Company's facilities.
OPERATING EXPENSES. Operating expenses were $10.2 million in 1996 compared
to $6.1 million in 1995, an increase of $4.1 million, or 67%. This increase was
attributable to a $2.2 million increase in depreciation as a result of increased
capital expenditures relating to capacity expansions and a $0.8 million increase
in operations and maintenance expense that were primarily related to the
commencement of operations at the Egan facility in September 1995 and the MBGSS
Transaction in July 1996.
OPERATING INCOME. As a result of the factors described above, operating
income increased to $8.4 million in 1996 from $1.7 million in 1995, an increase
of $6.7 million, or 394%, and also increased as a percentage of total revenues
to 45.3% in 1996 from 22.0% in 1995.
34
<PAGE>
NET INTEREST EXPENSE. Net interest expense was $2.4 million in 1996
compared to $0.6 million in 1995, an increase of $1.8 million, or 300%. This
increase was attributable to the issuance of $60.0 million principal amount of
Secured Notes in a private placement transaction on July 3, 1996. Proceeds of
the private placement were distributed to MHP and used to facilitate the
transfer of the remaining 50% interest in the Moss Bluff facility owned by a
third party, to retire an outstanding bank loan on the Moss Bluff facility and
to repay a portion of the promissory note owed by MHP to TPC.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's working capital and capital expenditure requirements have
historically been funded from contributions of partners' capital, the issuance
of debt securities and net cash provided by operations. In connection with the
formation of MHP, TPC contributed to MHP its market hub assets, development
plans, permits, leases and storage contracts, and MHP's partners contributed to
MHP the agreed-upon sum of $45.0 million in the aggregate in cash over the
period from December 1994 through July 1996.
In 1993, to fund the development of the Moss Bluff facility, MBGSS, a
partnership then owned 50% by TPC and 50% by CMS, entered into a project
financing facility (the "Construction Facility") with a third-party lender for
$25.0 million. Borrowings under this facility provided construction financing
for the first two salt caverns at the Moss Bluff facility and for related
surface equipment. At the time of the MBGSS Transaction on July 3, 1996, Moss
Bluff and Egan completed the issuance of $60.0 million of Secured Notes in a
private placement transaction. Proceeds of the offering of the Secured Notes
were used primarily to facilitate the transfer of CMS's 50% interest in MBGSS
for $26.6 million, to retire the outstanding balance of the Construction
Facility of $16.7 million and to repay intercompany indebtedness of Egan to MHP
in the amount of $14.1 million. Proceeds received from the Old Notes Offering
were used, in part, by the Company to repay the entire outstanding principle
amount of the Secured Notes of $53.5 million, with accrued interest of
approximately $0.7 million and prepayment penalties of approximately $5.1
million.
MHP has from time to time borrowed money from TPC and the other partners
of MHP to finance capital expenditures for the development of the Moss Bluff and
Egan facilities. On March 5, 1998, the Company distributed approximately $17.6
million of the net proceeds from the Old Notes Offering to MHP, which MHP used
to repay the outstanding principal amount of $17.0 million of the Partner Notes
issued by MHP to its partners, together with accrued interest thereon of $0.6
million. There are no remaining amounts owed to the partners of MHP by MHP or
the Company.
In April 1998, the Company executed a credit facility (the "New Credit
Facility") with Bank One, Texas, N.A. that expires December 2000. The New Credit
Facility provides for revolving credit borrowings up to $20.0 million in the
aggregate outstanding at any time. Borrowings under the credit facility will
bear interest at a rate per annum, at the Company's option, equal to: (i) the
bank's prime rate or (ii) the London Interbank Offered Rate plus 2%. The New
Credit Facility is secured by substantially all the assets of the Company and
includes certain covenants applicable to the Company, including requirements
that the Company comply with certain financial ratios.
CASH FLOWS
COMPARISON OF 1997 AND 1996. Net cash provided by operating activities was
$18.1 million in 1997 and $5.2 million in 1996. The primary source of additional
cash flow was increased net income, in addition to increases in trade payable
and accrued liabilities of $4.0 million, as compared to a $4.2 million decrease
in trade payables and accrued liabilities during 1996.
Net cash used in investing activities in 1997 and 1996 consisted entirely
of capital expenditures. The Company spent $29.8 million in 1997 and $37.6
million in 1996 on the continued development of its Moss Bluff and Egan
facilities. During 1996, capacity at Moss Bluff net to the Company was expanded
to approximately 7.8 Bcf, primarily through the transfer of CMS's interest in
the facility, and capacity at Egan was increased to 4.2 Bcf. At year end 1997,
the Company had expanded capacity to approximately 9.5 Bcf and approximately 6.5
Bcf at Moss Bluff and Egan, respectively.
35
<PAGE>
Net cash provided by financing activities was $13.5 million in 1997 and
$31.9 million in 1996. Sources of financing consisted of the issuance of $60.0
million of Secured Notes in 1996, and $17.7 million of partners' contributions
during 1997. A portion of the proceeds of the Secured Notes and of partner
contributions was used to repay indebtedness.
COMPARISON OF 1996 AND 1995. Net cash provided by operating activities in
1996 and 1995 was $5.2 million and $1.4 million, respectively. The increase in
1996 is primarily attributable to increased revenues and net income from
operations.
Net cash flows from investing activities in 1996 and 1995 consisted
entirely of capital expenditures. During 1996 and 1995, the Company spent $37.6
million and $26.8 million, respectively, on the development of its storage
facilities. During 1995, the Company continued its expansion of the Moss Bluff
facility, reaching a capacity of approximately 3.75 Bcf (owned capacity) at year
end. The Company commenced operations at the Egan facility in September 1995
with approximately 3.6 Bcf of capacity in service. At year end 1996, capacity at
the Moss Bluff and Egan facilities was approximately 7.75 Bcf (owned capacity)
and approximately 4.2 Bcf, respectively.
Net cash provided by financing activities in 1996 and 1995 was $31.9
million and $25.0 million, respectively. Sources of financing consisted of $26.4
million of partners' contributions during 1995 and the issuance of $60.0 million
of Secured Notes during 1996.
CAPITAL EXPENDITURES
Following consummation of the Old Notes Offering, the Company expects that
its primary capital requirements will be for debt service, working capital and
capital expenditures. The Company plans to use approximately $26.0 million of
the net proceeds of the Old Notes Offering to expand the capacity of its current
facilities at Moss Bluff and Egan and to purchase incremental pad gas. After
this additional capacity has been added, management expects that capital
expenditures needed to maintain these facilities will be relatively low. The
Company projects that its maintenance capital expenditures for 1998 will be less
than $1.0 million. The Company believes that funds generated from operations and
funds available under the New Credit Facility will be sufficient to meet its
liquidity requirements for the foreseeable future.
YEAR 2000 COMPLIANCE
The Company is conducting a program to review and, if necessary, resolve
data processing issues relating to whether its computer systems will recognize
the year 2000 or will treat any date after December 31, 1999 as a date during
the twentieth century. The Company does not currently have any information
concerning the year 2000 compliance status of its customers or vendors. Although
the Company currently anticipates that it will not incur material expenditures
or disruption of operations relating to year 2000 processing issues, if the
Company or its customers or vendors are unable to resolve any significant
processing issues that may arise in a timely manner, such inability could have
an adverse effect on the Company's business, financial condition and results of
operations. Accordingly, the Company plans to devote the necessary resources to
resolve all significant year 2000 issues in a timely manner.
36
<PAGE>
INDUSTRY OVERVIEW
There are three principal types of underground natural gas storage sites:
(i) depleted oil or gas reservoirs; (ii) aquifers, which are water-only
reservoirs conditioned to hold natural gas; and (iii) salt cavern formations.
Salt cavern storage facilities, such as those operated by the Company, offer
significant advantages compared to depleted reservoirs and aquifers. Due to the
physical qualities of the salt formations in which these caverns are
constructed, the salt cavern storage facilities generally have higher average
daily deliverability rates than storage facilities that utilize depleted
reservoirs or aquifers. For example, each of the Company's salt cavern storage
facilities is designed to permit withdrawal of all the working gas in such
facility in periods as short as ten days. They are also typically less costly to
operate and more flexible than other competing storage methods. While a
reservoir storage facility typically converts from injection to withdrawal once
or twice per year, salt cavern storage facilities are capable of being switched
from injection to withdrawal, and vice versa, several times a day. Accordingly,
the Company believes that salt cavern storage facilities are better suited to
meet short-duration load swings (E.G., intra-day heating and air-conditioning
demand) and to serve peak demand during major supply interruption events, such
as hurricanes and loss of production due to extremely cold weather.
Several types of customers typically utilize salt cavern storage,
including local distribution companies, gas-fired electric utilities, gas
marketing companies, gas producers and gas pipelines. For example, local
distribution companies can reduce their costs by maintaining a reserve supply of
natural gas at a storage facility. The salt cavern's high deliverability
capability allows distribution companies to access supply quickly, eliminating
the need to purchase gas on short notice at peak prices. Gas-fired electric
utilities typically use other sources of supply for baseload demand, but utilize
gas storage facilities as "peaking" facilities to rapidly meet short-swing
surges in demand. Gas marketing companies use salt cavern storage as a tool to
maximize arbitrage profits when the total cost of purchasing gas at off-peak
times and storing it is less than the price at which they can sell gas during
periods of tight supply. Likewise, gas producers can increase profits by storing
gas until prices increase, with the advantage of quick access to that stored
supply in a salt cavern facility. Finally, salt cavern storage allows gas
pipeline companies to increase operating efficiency by physically balancing
pipeline receipts and deliveries with the salt cavern's flexible injection and
withdrawal capabilities, thereby enabling companies to reduce compressor fuel
usage through improved balancing.
Market hubs, or strategic interconnects combined with storage in the
pipeline grid, can be used for a number of purposes. A market hub can be an
advantageous location to make or take delivery of gas, as it provides receipt
point security because all purchase and supply contracts can be written with a
known point of delivery. A market hub with salt cavern storage can improve
efficiency of gas transportation management. Scheduling and imbalance penalties
can be avoided, while pooling supply from different sources at one location can
reduce transportation costs. In addition, high-deliverability storage can be
used to minimize risks created by counterparty failures by eliminating the need
for a party to enter the "spot" market. Finally, salt cavern storage permits
producers, purchasers, marketers and pipelines to take advantage of pricing
differentials. Both commodity and transportation costs can be reduced: commodity
cost through purchases at off-peak prices for use during peak periods, and
transportation cost through access at off-peak "interruptible" rates, compared
to more expensive "firm" transportation.
Changes in the industry have created the need for more efficient methods
of managing the supply of natural gas throughout the pipeline grid. Prior to the
issuance of FERC Order 636 in April 1992, users of natural gas were able to
purchase sufficient natural gas from pipelines, on short notice, to meet
substantially all their natural gas supply needs, and pipelines were largely
obligated by contract to supply these needs. The Company believes that if
general consumption of natural gas begins to more closely match supply, natural
gas may not be available in sufficient quantities on a timely basis to satisfy
short-duration peak usage needs caused by seasonal temperature variation or
supply interruptions, and such events may increase the demand for flexible,
reliable natural gas supply services.
37
<PAGE>
BUSINESS
GENERAL
The Company believes it is the largest owner and operator of high
deliverability salt cavern natural gas storage capacity in North America. The
Company's Moss Bluff and Egan facilities, located near Houston, Texas and in
Acadia Parish, Louisiana, respectively, are strategically positioned at
industry-recognized market hubs near the convergence of major natural gas
pipelines and serve as aggregation points for natural gas collected along the
Texas and Louisiana Gulf Coast. Both of the Company's facilities have
bidirectional interconnects to five pipelines, which form hub and spoke systems
and enable the Company to provide its customers with storage and other services
that allow better management of their variable gas load requirements. At
December 31, 1997, the Company's two facilities maintained approximately 16.0
Bcf of natural gas storage capacity, 94% of which was leased under storage
contracts with major utilities, pipeline companies, local distribution
companies, natural gas producers and natural gas marketers. These storage
contracts provide a minimum level of revenues regardless of usage by the
customer. The Company supplements these revenues by providing a variety of load
management services ("hub services"). For the year ended December 31, 1997, the
Company had revenues of $27.5 million and Adjusted EBITDA of $19.1 million.
The Company is a wholly owned subsidiary of MHP, which was formed in
December 1994. MHP is owned by subsidiaries of PacifiCorp, NIPSCO Industries,
Inc., DPL Inc. and Public Service Enterprise Group, Inc., all of which are large
utilities or utility holding companies. MHP's owners currently lease
approximately 50% of the Company's storage capacity. The remaining storage
capacity is leased to third parties under contracts with, among others,
subsidiaries or divisions of Houston Industries Incorporated, El Paso Natural
Gas Company, The Coastal Corporation and Consolidated Natural Gas Company. In
order to accommodate the current market demand for the Company's services, the
Company has recently commenced additional construction at both of its facilities
to expand the aggregate working gas capacity from approximately 16.0 Bcf to
approximately 24.0 Bcf. The Company believes that incremental capacity
expansions result in high rates of return due to the relatively low capital
expenditures required to add new capacity and deliverability and the relatively
low incremental costs associated with operating the new capacity.
The Company's salt cavern storage facilities offer significant advantages
over conventional reservoir natural gas storage facilities. In conventional
reservoir storage, which includes both depleted natural gas reservoirs and
aquifers, natural gas is injected for approximately 200 to 250 days per year
when demand is lower and withdrawn during the 100 to 150 days per year in the
winter months when demand is higher. While a reservoir storage facility
typically converts from injection to withdrawal once or twice a year, a salt
cavern facility is capable of switching from injection to withdrawal several
times a day. In addition, each of the Company's salt cavern facilities is
designed to permit withdrawal of all the working gas in such facility in periods
as short as ten days. This flexibility allows salt cavern storage customers to
better manage unpredictable load variances throughout the year, including short
duration load swings, such as those attributable to intraday heating and air
conditioning demand, and to serve peak demand during major supply interruption
events, such as hurricanes and the loss of production due to extremely cold
weather.
BUSINESS STRATEGY
The Company plans to continue to grow its revenue base and to improve its
profitability and cash flow through the implementation of the following key
business strategies:
o OFFER SUPERIOR DELIVERABILITY AND FLEXIBILITY
The Company's marketing strategy emphasizes the high deliverability and
flexibility of its salt cavern storage facilities relative to conventional
reservoir natural gas storage and targets those customers whose storage
and delivery needs are more variable. For example, salt cavern storage can
be used by utilities as "peaking" facilities to rapidly meet short-swing
surges in demand. Salt cavern storage can allow local distribution
companies to reserve a supply of natural gas at a storage facility that
can be delivered quickly, reducing the need to purchase gas on short
notice at peak prices. Natural gas marketing companies and natural gas
production companies can use salt cavern facilities to store natural gas
when prices are low and withdraw natural gas when prices increase.
38
<PAGE>
A salt cavern's flexible injection and withdrawal capabilities can allow
pipeline companies to increase operating efficiencies and reduce
compressor fuel usage through physically balancing pipeline receipts and
deliveries.
o GENERATE STABLE REVENUES AND CASH FLOWS THROUGH DEMAND STORAGE CONTRACTS
The Company's primary source of revenues is demand storage contracts, in
which the Company leases storage capacity to customers on a firm basis for
periods ranging from one year to 20 years. Prices per Bcf of storage
capacity and the amount of storage capacity to be leased are generally
fixed at the inception of the contract. Accordingly, these storage
contracts, which have a remaining weighted average life of approximately
7.7 years as of December 31, 1997, provide a relatively stable source of
revenues and cash flows, since the customer is required to pay a minimum
level of storage fees regardless of usage. In 1997, approximately 86% of
the Company's total revenues were generated from the minimum fees under
demand storage contracts.
o OPTIMIZE REVENUES AND OPERATING EFFICIENCIES BY OFFERING HUB SERVICES
The Company offers a variety of load management services to its customers
on a short-term and "interruptible" basis to supplement its storage
revenues. These hub services include: (i) balancing services, which allow
customers to borrow or park gas for a limited time, (ii) wheeling
services, which allow customers to transfer gas from one pipeline to
another through the Company's surface interconnects, (iii) title transfer
services, which allow customers to effect the transfer of gas from one
storage facility or pipeline to another without incurring unnecessary
transportation charges, (iv) imbalance services, which allow customers to
trade imbalances on a particular pipeline or between pipelines and (v)
loaning services, which allow customers to borrow natural gas from the
Company. Since the Company's storage customers generally do not utilize
100% of storage and/or withdrawal and injection capacities at all times,
hub services allow the Company to optimize revenues and operating
efficiencies through the use of unutilized and unsubscribed capacity. Hub
services also provide an opportunity to attract new customers and market
longer-term demand-type storage contracts to these new customers.
o CAPITALIZE ON FAVORABLE EXPANSION ECONOMICS BY SELECTIVELY EXPANDING
CAPACITY
Due to the favorable economics associated with capacity expansion, the
Company evaluates increasing capacity at its current facilities when it
has leased close to 100% of storage capacity and demand for additional
capacity remains strong. The Company has previously expanded capacity six
times. The Company plans to use approximately $20.0 million of the
proceeds of the Old Notes Offering to expand capacity by 50%, from
approximately 16.0 Bcf to approximately 24.0 Bcf, and approximately $6.0
million to purchase incremental pad gas associated with such expansion.
The Company believes that incremental capacity expansions result in high
rates of return due to the relatively low capital expenditures required to
add new capacity and deliverability and the relatively low incremental
costs associated with operating the new capacity. For example,
approximately $158.4 million has been invested in fixed assets to develop
the Company's approximately 16.0 Bcf of existing storage capacity, or
approximately $9.9 million per Bcf. The Company's current expansion plan
projects an increase in capacity by 8.0 Bcf for $20.0 million, requiring
only $2.5 million per Bcf of additional capacity.
o CONTINUE DEVELOPMENT OF INNOVATIVE TECHNOLOGY TO IMPROVE OPERATING
EFFICIENCIES
The Company plans to maintain its focus on developing salt cavern storage
techniques that it believes to be state-of-the-art. Through a subsidiary
of its majority owner, PacifiCorp, the Company has maintained an extensive
technical relationship with Sandia National Laboratories, a leading source
of technology for hydrocarbon storage, and previously had an extensive
technical relationship with Gaz de France, a world leader in natural gas
related research and development. The cooperative effort in technology has
been primarily focused on salt cavern design, construction and operation.
The use of Solution Mining Under Gas ("SMUG") technology, which allows the
expansion of existing caverns without interrupting operations, provides
the Company with what it believes are cost and safety advantages.
39
<PAGE>
STORAGE FACILITIES
GENERAL. A salt cavern is formed by drilling and leaching an underground
cavern in a naturally existing salt formation and installing related surface
equipment. The typical salt cavern storage facility consists of a solution
mining plant, which provides fresh water to dissolve cavities within the
underlying salt, brine handling and disposal facilities, and the necessary
surface facilities to compress natural gas into the cavity and allow it to flow
back into a pipeline. Natural gas is injected under pressure and is generally
not subject to loss because salt is essentially impermeable. All storage
facilities which the Company owns and all storage facility projects which MHP is
planning or developing are salt cavern storage facilities.
MOSS BLUFF FACILITY. The Moss Bluff facility consists of three storage
caverns located in Liberty and Chambers Counties near Houston, Texas that
provide approximately 9.5 Bcf of working storage capacity. The facility
typically provides 10-day withdrawal service (950 MMcf/day) and 20-day injection
service (475 MMcf/day), although it is capable of providing up to approximately
1,200 MMcf/day of withdrawal capacity and additional wheeling capacity of
approximately 300 MMcf/day. The Moss Bluff facility occupies what the Company
believes to be an ideal location on the pipeline grid, with access to five
pipelines, three of which are intrastate and two of which are interstate. The
three intrastate pipeline interconnects are with Channel (which is owned and
operated as two pipelines), MidCon Texas and Tejas Gas. The interstate pipeline
interconnects are with NGPL and Texas Eastern Transmission ("TETCO"). The
interconnections to Channel, TETCO, MidCon Texas and Tejas Gas are via a 4.9
mile dual header system of 16-inch and 20-inch pipe, which runs south from the
facility to the main metering facility location near the Liberty and Chambers
Counties border. The interconnection to NGPL is a 16-inch, 9.7-mile pipe, which
was added with the development of the second cavern.
Operations at the Moss Bluff facility were commenced in 1990 with a single
storage cavern providing approximately 1.75 Bcf of working storage capacity. At
the time operations were commenced, the Moss Bluff facility was wholly owned by
a partnership controlled by TPC. TPC contributed its interest in the Moss Bluff
facility to MHP at the time of its formation in 1994. Moss Bluff completed
construction of the second storage cavern at the Moss Bluff facility in 1994,
which initially provided 3.15 Bcf of working gas storage. During 1994, an
estimated 0.6 Bcf of storage capacity was added to the second cavern at the Moss
Bluff facility. The new capacity was placed in service on September 1, 1994.
Effective September 18, 1995, Moss Bluff completed construction and commenced
operations of the third storage cavern at the Moss Bluff facility, adding an
estimated initial 2.00 Bcf of working gas storage capacity. In 1997, the Company
undertook a major expansion of the Moss Bluff facility, adding an equivalent of
2.75 Bcf of working storage capacity using SMUG technology and increasing
average injection capability to 475 MMcf/day by placing a fifth compressor in
service.
The Company has budgeted capital expenditures of approximately $6.0
million in 1998 for the further expansion of the Moss Bluff facility. The
Company currently intends to utilize SMUG technology to increase working storage
capacity in caverns 2 and 3 by an aggregate of 2.5 Bcf for total facility
storage capacity of 12.0 Bcf. The Company also intends to add a sixth compressor
to the facility, which is expected to increase average injection capability to
approximately 600 MMcf/day, and to add an additional disposal well to enhance
cavern expansion and de-watering capabilities. Additional meter capacity will
also be added to improve take-away capacity to correspond to market demands.
EGAN FACILITY. The Egan facility consists of two storage caverns located
in Acadia Parish in the south central part of Louisiana that provide
approximately 6.5 Bcf of working storage capacity. The Egan facility typically
provides 10-day withdrawal service (650 MMcf/day) and 20-day injection service
(325 MMcf/day), although it is capable of providing up to approximately 1,500
MMcf/day of withdrawal capacity and additional wheeling capacity of
approximately 350 MMcf/day. Because of the Egan facility's location in the
supply area and proximity to the interstate and intrastate pipeline grid, the
Company believes the Egan facility is the best located market hub for matching
Gulf Coast production to market demand in the midwestern and northeastern United
States. The Egan facility provides services to customers on five interstate
pipelines: Tennessee Gas, Texas Gas, ANR, Trunkline and Columbia Gas. The Egan
facility interconnects to pipelines owned by Tennessee Gas and Texas Gas through
3.5 miles of dual 24-inch pipes, to pipelines owned by ANR and Trunkline through
1.5 miles of dual 20-inch pipes and to a Columbia Gas pipeline through 6.7 miles
of a single 24-inch pipe.
40
<PAGE>
Operations at the Egan facility were commenced in 1995 with a single
storage cavern providing approximately 3.6 Bcf of working storage capacity. The
second cavern well was drilled and leaching operations commenced during 1997,
effectively increasing total working storage capacity to 6.5 Bcf by December 31,
1997.
The Company has budgeted capital expenditures of approximately $14.0
million in 1998 for the further expansion of the Egan facility. The Company
anticipates the Egan facility will have a total facility storage capacity of
12.0 Bcf by December 1998. Additionally, the Company intends to add a fifth,
sixth and seventh compressor to the Egan facility, which are expected to
increase average injection capability to approximately 600 MMcf/day. Additional
meter capacity will also be added to improve take-away capacity to correspond to
market demands.
STORAGE SYSTEM SUMMARY
The following table sets forth storage system information for the Company as of
December 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED
WITHDRAWAL
CAPACITY ESTIMATED
ESTIMATED PLUS WORKING
INJECTION WHEELING GAS STORAGE PROJECTED
CAPACITY CAPACITY CAPACITY IN-SERVICE
(MMCF/DAY) (MMCF/DAY) (BCF) DATE
--------- -------- ----------- ---------
<S> <C> <C> <C>
EXISTING
Moss Bluff..................... 475 1,500 9.5 In Service
Egan........................... 325 1,850 6.5 In Service
------ ----- -----
Subtotal................. 800 3,350 16.0
PLANNED EXPANSIONS
Moss Bluff..................... 125 150 2.5 September 1998
Egan........................... 275 150 5.5 December 1998
--- --- -----
Subtotal................. 400 300 8.0
------ ------ -----
Total............... 1,200 3,650 24.0
===== ===== ====
</TABLE>
DESCRIPTION OF SERVICES
STORAGE SERVICES. Storage services are marketed by the Company on an
unbundled basis to utilities, pipeline companies, local distribution companies,
producers and natural gas marketers and permit customers to contract for
injection, storage space and withdrawal capacities. These unbundled services are
currently offered on firm, secondary firm and interruptible bases. The majority
of the Company's contracts are on a firm basis, where the user pays a demand
charge for the availability of the storage space and for injection and
withdrawal rights regardless of usage. In a secondary firm arrangement, the user
customarily pays a lower demand fee than in a firm contract because the facility
has the right to make the storage capacity or injection and withdrawal
facilities unavailable to the secondary firm customer if a customer with a firm
contract requires the space or facilities. Interruptible contracts are similar
to secondary firm contracts, except that no demand fee is paid and the facility
is allowed to give prior access to both firm and secondary firm customers. Since
customers with firm contracts generally do not utilize 100% of storage and/or
withdrawal and injection capacity at all times, the Company can increase
revenues and operating efficiencies by offering secondary firm and interruptible
services to maximize capacity utilization. The facility may charge fees for the
actual use of its storage capacity and of its injection and withdrawal
facilities in addition to the demand fees charged to reserve availability of
capacities. The number of contracts and their terms for a given storage cavern
depend upon the physical limitations of available space and injection and
withdrawal capacity at the relevant storage cavern.
41
<PAGE>
HUB SERVICES. The Company also offers short-term and interruptible "hub"
services to its customers.
o BALANCING SERVICES. Balancing services allow the Company's customers
to borrow natural gas from a storage facility or to park their own
natural gas at the facility within specified volumetric ranges for a
limited time. A shipper using this service can continually keep its
transportation obligations in balance.
o WHEELING SERVICES. Wheeling services are the transportation of
natural gas at a market hub from one pipeline to another over the
surface interconnects and involve no storage service. Wheeling allows
the Company's customers to reach markets or suppliers not normally
available to them. A hub customer can deliver or purchase gas on one
pipeline and have the hub transfer it to another for further
shipping.
o TITLE TRANSFER SERVICES. Title transfer services allow the Company's
customers to effect the transfer of natural gas from one storage
facility or pipeline to another without incurring unnecessary
transportation charges.
o IMBALANCE SERVICES. Imbalance services facilitate the trading of
imbalances by shippers on a particular pipeline or between pipelines
with interconnects to a market hub. The hub handles the physical gas
movement, if needed, and the nominations necessary to complete the
transaction.
o LOAN SERVICES. Loaning services involve the loaning of non-critical
pad gas and "extra" gas that the Company has obtained title to
through in-kind fuel payments. The Company enters into loaning
transactions only with counterparties it considers creditworthy.
The Company began offering hub services on a short-term firm and
interruptible basis at Moss Bluff in late 1994 and at Egan in late 1995. Using
inventory management techniques common to many producing-manufacturing firms,
the Company has developed hub services to enable better management of
incremental, unsubscribed and rollover capacity at the operating facilities.
Market hub services typically provide higher margins than demand storage;
however, they are less predictable.
42
<PAGE>
DESCRIPTION OF SIGNIFICANT CONTRACTS
As of December 31, 1997, Moss Bluff and Egan had 22 contracts with 18
customers for an aggregate of 9.0 Bcf and 6.1 Bcf of storage capacity at the
Moss Bluff facility and the Egan facility, respectively. The following chart
sets forth certain terms with respect to firm storage capacity based on the
Company's agreements with its most significant customers:
MOSS BLUFF FACILITY
<TABLE>
<CAPTION>
CAPACITY LEASED
CUSTOMER TERMINATION DATE (IN MMCF)
- ----------------- ------------------------------------
<S> <C> <C>
Northern Indiana Public Service Company
(NIPSCO Industries, Inc.).................................. April 2013 4,000
Houston Lighting & Power Company
(Houston Industries Incorporated).......................... April 2000(1) 1,000
Channel Industries Gas Company (El Paso Natural Gas Company)... April 2000 750
TPC (PacifiCorp)............................................... April 2002 600
TPC (PacifiCorp)............................................... September 1998 500
Inventory Management and Distribution Company, L.L.C.
(Joint venture owned by Marathon Oil Company, NIPSCO
Energy Services, Inc. and Inventory Management and
Distribution Company, Inc.)................................ April 1998 500
Texaco Natural Gas, Inc. (Texaco Inc.)......................... April 1999 500
PNM Energy Marketing
(Public Service Company of New Mexico)..................... July 2000 500
All Other Contracts............................................ 650
------
TOTAL...................................................... 9,000
=====
</TABLE>
- ---------------
(1) Pursuant to an early termination provision, Houston Lighting & Power gave
notice in March 1998 of its intention to terminate this contract.
EGAN FACILITY
<TABLE>
<CAPTION>
CUSTOMER CAPACITY LEASED
- -------------------- TERMINATION DATE ---(IN-MMCF)-----
----------------- -----------------
<S> <C> <C>
Northern Indiana Public Service Company
(NIPSCO Industries, Inc.).................................. April 2016(1) 1,500
ANR Pipeline Company (The Coastal Corporation)................. November 1999 1,000
The East Ohio Gas Company
(Consolidated Natural Gas Company)......................... April 2008 900
Columbia Energy Services, Inc.
(The Columbia Gas System, Inc.)............................ September 2000 500
TPC (PacifiCorp)............................................... April 2006 500
TPC (PacifiCorp)............................................... April 1998 400
The Dayton Power & Light Company (DPL Inc.).................... October 2000 432
All Other Contracts............................................ 850
------
TOTAL...................................................... 6,082
=====
</TABLE>
- ---------------
(1) This contract has a primary term expiring April 1, 2016 but may be
terminated by the customer effective April 1, 2006 on 12 months' notice.
Certain of the current contracts provide that the customer has the right to
terminate the contract upon the occurrence of certain events of default
specified therein. Additionally, certain of the Company's contracts obligate the
Company to indemnify the customer for any damage or injury occurring during the
period in which the customer's natural gas is in the Company's possession.
43
<PAGE>
MARKETING AND SALES EFFORTS
GENERAL. The Company targets sales efforts on utilities, pipeline
companies, local distribution companies, producers and natural gas marketers. As
of December 31, 1997, available capacity at the Moss Bluff and Egan facilities
for firm demand contracts was effectively sold out. Nonetheless, in light of
planned expansions and the expirations of several firm basis contracts in 1998,
the Company will continue to market firm storage service. In addition, the
Company's increasing sales of hub services have allowed the Company to expand
its customer base and maximize inventory value.
TARGET CUSTOMERS. Local distribution companies have been the primary
focus of the Company's marketing efforts. These companies have traditionally
developed long-term gas supply plans and acquired the necessary storage under
long-term contracts to meet those plans. However, in response to changes in the
industry caused by deregulation, the Company has increased its marketing of
specialized services to local distribution companies. Likewise, incentive rates
have increased customers' focus on the cost of the gas supply. In response, the
Company has highlighted the benefits of salt cavern storage and simple hedging
strategies which permit customers to purchase natural gas supplies at off-peak
prices.
The number of natural gas marketers and producers contracting for the
Company's services has steadily increased over the last two years. These
customers have traditionally purchased under shorter-term contracts of two to
three years. However, recent regulatory initiatives designed to encourage
greater accountability among the unregulated merchants, such as the imposition
of more restrictive balancing and scheduling requirements and larger penalties
for noncompliance with such requirements, have made these customers more open to
longer-term contracts.
Interstate pipeline companies represent the Company's smallest customer
base. To date, the Company has had limited success with this market because
prospective pipeline customers have their own low deliverability storage
facilities. In addition, current FERC policy limits rate recovery by pipelines
interested in contracting for upstream capacity in third-party storage
facilities. However, the Company continues to market its services to interstate
pipelines. The Company believes that without a merchant function or an incentive
to manage customer inventories, interstate pipelines are not well positioned to
ensure that existing reservoir storage facilities are filled and cycled by their
transportation customers in a manner that assures satisfactory peak (withdrawal)
and off-peak (injection) performance and full cost recovery for storage
operations. The Company believes that third-party high deliverability storage is
an increasingly viable option for pipelines attempting to maximize the value of
their seasonal storage capabilities.
ON-LINE INVENTORY TRACKING. The nature of high deliverability salt
cavern storage operations and the services provided by the Company require that
the Company have a reliable and efficient system in place to track the physical
flow of natural gas throughout its facilities. The Company utilizes at Moss
Bluff and Egan an on-line inventory tracking system developed by MHP. This
system tracks customer nominations and allocations and provides the Company with
accurate fuel accounting for both customer and Company accounts. By automating
what used to be a manual accounting process, the Company has increased
efficiency and reduced the risk of errors.
SERVICE PRICING TECHNIQUES. The Company intends to continue to price its
services under a market based rate design authorized by applicable state and
federal regulatory bodies. Prices are based upon what the market will bear at a
given time for a particular service. Full consideration is given to operational
and value factors associated with providing a service such as capacity, cycling
rights, pipeline access, current contractual commitments to the surface
facilities, pipeline and cavern pressures and the firm or interruptible nature
of the service.
TECHNOLOGY AND INTELLECTUAL PROPERTY
At the time of formation of MHP, MHP and TPC entered into an agreement
pursuant to which TPC has maintained an extensive technical development program
for the benefit of MHP and its subsidiaries. Key elements in this program
include an existing technical relationship with Sandia National Laboratories
("Sandia"), a leading source of technology for hydrocarbon storage, and
previously included a technical relationship with Gaz de France, the French
state-owned natural gas company ("GDF"). The cooperative effort in technology
has been primarily focused on natural
44
<PAGE>
gas storage cavern design, construction and operation and has enabled TPC to
gain recognition for technical leadership within the industry.
Sandia originally developed technology for the United States Department
of Energy for the Strategic Petroleum Reserve, which stores crude oil in salt
caverns. As a result of this work, the Company believes Sandia is the leading
source in the United States of technology for hydrocarbon storage. Under an
agreement with Sandia, TPC receives three-dimensional computer simulation,
long-term creep and stress relaxation studies, mineral property testing, linear
programming and other advanced support. The Sandia contract was originally
entered into in May 1990 for an initial 12-month period and was subsequently
amended and extended several times, most recently through November 1998.
GDF is recognized as a world leader in natural gas related research and
development, with related expenditures of approximately $200.0 million per year.
Over several decades, GDF has constructed dozens of salt cavern storage
facilities and acquired an extensive patent estate and a depth of operating
skill. GDF was a major shareholder of TPC until PacifiCorp acquired TPC in April
1997. During that time, GDF provided technological assistance to TPC (and
indirectly to MHP) through its ownership relationship and an exclusive
technology agreement that was in effect from 1991 through 1997. Although neither
TPC nor MHP currently has such a relationship or agreement with GDF, MHP
continues to benefit from the experience gained in connection with TPC's and
MHP's dealings with GDF.
REGULATION AND ENVIRONMENTAL CONSIDERATIONS
Various aspects of the transportation, sale and marketing of natural gas
are subject to or affected by extensive federal regulation under the Natural Gas
Act ("NGA"), the Natural Gas Policy Act of 1978 ("NGPA"), the Natural Gas
Wellhead Decontrol Act of 1989 ("Decontrol Act"), regulations promulgated by the
FERC and certain statutes and regulations promulgated as state law.
NATURAL GAS TRANSMISSION INDUSTRY. Historically, interstate pipeline
companies acted as wholesale merchants by purchasing natural gas from producers,
transporting the natural gas from production areas to markets and reselling that
natural gas to local distribution companies and large end users. Prior to the
enactment of the NGPA in 1978 and the Decontrol Act of 1989, all sales of
natural gas for resale in interstate commerce, including sales by producers,
were subject to the rates and service jurisdiction of the FERC under the NGA and
NGPA. However, as a result of the NGPA and the Decontrol Act, by no later than
January 1, 1993 all so-called the "first sales" of natural gas were federally
deregulated, thus allowing all types of sellers, other than pipelines, local
distribution companies and their affiliates, to market their natural gas free
from federal controls. Moreover, pursuant to Section 311 of the NGPA and under
Section 7 of the NGA, the FERC promulgated regulations by which wholly
intrastate natural gas pipeline companies and local distribution companies
served by interstate pipelines may engage in interstate transactions without
becoming subject to the FERC's full rates and service jurisdiction under the
NGA. At the same time, however, the FERC has retained its traditional
jurisdiction over the activities of interstate pipelines. Under the NGA and the
NGPA, the transportation and sale of natural gas by interstate pipeline
companies have been subject to extensive regulation, including rate regulation,
regulation of relations with marketing affiliates and accounting and reporting
requirements. In addition, the construction of new facilities, the extension or
modification of existing facilities and the commencement and cessation of sales
or transportation services by interstate pipeline companies generally have
required prior FERC authorization. Such authorizations can be denied or
conditioned to include public interest protections that may be unfavorable to
the interstate pipeline.
Commencing in 1985, the FERC adopted regulatory changes that have
significantly altered the transportation, sale and marketing of natural gas.
These changes were intended to foster competition in the natural gas industry
by, among other things, transforming the primary role of the interstate pipeline
companies from that of wholesale marketers to that of natural gas transporters
and by mandating that interstate pipeline companies provide open and
nondiscriminatory transportation services to all producers, distributors,
marketers and other shippers seeking such services (so-called "open access"
requirements). To provide interstate pipeline companies with the incentive to
revamp their services, the FERC also sought to expedite, for pipeline companies
providing "open access" services, the certification process for new services,
facilities and operations. Throughout the early years of this process, the
FERC's actions in these areas were subject to extensive judicial review and
generated significant industry comment and proposals for modification to
existing regulations.
45
<PAGE>
In April 1992, the FERC issued its latest and most comprehensive
restructuring ruling, Order No. 636, a complex regulation that has had a major
impact on natural gas pipeline operations, services and rates. Among other
things, Order No. 636 generally required each interstate pipeline company to
unbundle its traditional wholesale services and make available on an open and
nondiscriminatory basis numerous constituent services (such as gathering
services, storage services and firm and interruptible transportation services)
and to adopt a new rate-making methodology to determine appropriate rates for
those services. To the extent the pipeline company or its sales affiliate made
natural gas sales as a merchant in the future, it would do so pursuant to a
blanket sales certificate that placed such entity in direct competition with all
other sellers pursuant to private contracts. However, pipeline companies were
not required by Order No. 636 to remain merchants of natural gas, and many of
the interstate pipeline companies have elected to become transporters only. The
FERC required that each interstate pipeline company, in an individual
restructuring proceeding, set forth in detail its new terms of service in a
filing with the FERC. The FERC and the federal appellate courts have largely
affirmed the significant features of Order No. 636 and the numerous related
orders pertaining to the individual interstate pipelines. Nevertheless, because
the FERC continues to review and modify its open access regulations, the outcome
of any such later proceedings and their ultimate impact on MHP's business is
uncertain.
In addition, the FERC has announced its intention to reexamine certain
of its transportation related policies, including the appropriate manner in
which interstate pipelines release transportation capacity under Order No. 636
and, more recently, the price that firm service shippers can charge for released
capacity. The FERC has also recently requested comments on the financial outlook
of the gas pipeline industry, including, among other matters, whether the FERC's
current ratemaking policies are suitable in the current industry environment.
Finally, the FERC has recently issued a notice of proposed rulemaking to further
standardize pipeline transportation tariffs which, if implemented as proposed,
would adversely affect the reliability of scheduled interruptible service.
REGULATION OF THE COMPANY'S FACILITIES. Certain of the operations of the
Moss Bluff facility are subject to FERC regulation and other of its activities
are subject to regulation by the Texas Railroad Commission ("TRC"). The Moss
Bluff facility is classified by the FERC as a so-called "Hinshaw pipeline",
exempt from the FERC's interstate pipeline rates and service jurisdiction under
the NGA. The Moss Bluff facility is subject to regulation under the utility
statutes of Texas as to its intrastate activity. Under regulations promulgated
by the FERC, Hinshaw pipelines can engage in other interstate transactions by
complying with certain reporting and other regulations applicable to such
transactions. In this regard, the FERC has issued a limited-jurisdiction
certificate to Moss Bluff under Section 7 of the NGA authorizing Moss Bluff to
engage in the sale, transportation (including storage) or assignment of natural
gas that is subject to the FERC's jurisdiction under the NGA to the same extent
that intrastate pipelines are authorized to engage in such activities pursuant
to Section 311 of the NGPA. The FERC has authorized Moss Bluff to charge
market-based rates for its interstate storage and interruptible hub services.
Such market-based rate authorization does not apply to stand-alone
transportation service, for which Moss Bluff would require additional
authorization. Further, it is based upon the FERC's determination, in light of
Moss Bluffs' and its affiliates' activities described in its rate application,
that Moss Bluff is not able to exercise market power in the provision of its
storage and interruptible hub services. Such authorization is subject to
reexamination in the event there is a significant future change to Moss Bluff's
market power status. Such a change could include, for example, the addition by
Moss Bluff or its affiliates of significant additional storage capacity or
access to significant market area storage or transportation. Moss Bluff is
required to report to the FERC circumstances that could significantly affect its
market power status. Such market-based rate authorization could be limited or
revoked prospectively in the event of any such change. Pursuant to the Texas Gas
Utility Regulatory Act, intrastate rates are deemed to be just and reasonable
and approved by the TRC if they have been negotiated at arm's length with
pipeline companies or large industrial customers, which is the case with respect
to Moss Bluff's rates for wholly interstate services.
Egan is an interstate pipeline and storer of natural gas subject to FERC
regulation under the NGA and NGPA. In October 1996, Egan received a certificate
of public convenience and necessity from the FERC for its storage facility. This
certificate grants Egan the authority under Section 7 of the NGA to own and
operate its then-existing facilities and to build a second salt cavern storage
facility at the Egan site. The FERC subsequently authorized Egan to expand its
originally certificated facilities. Egan's natural gas storage and hub services
are offered at market-based rates. Egan is the first hub in the United States
with FERC authorization to charge market-based rates for natural gas hub
services. Such market-based rate authorization is, however, based upon the
FERC's determination, in light of Egan's and its affiliates' activities
described in its certificate applications, that Egan is not able to exercise
market power in the
46
<PAGE>
provision of its services. Such authorization is subject to reexamination in the
event a significant change occurs to Egan's market power status; for example, if
Egan adds storage capacity or storage caverns beyond the two caverns
contemplated, or an affiliate enters the interstate storage or transportation
business, and Egan is required to report to the FERC any such future
circumstances that could significantly affect its market power status. Such
market-based rate authorization could be limited or revoked prospectively in the
event of any such change.
ENVIRONMENTAL AND SAFETY MATTERS. The Company is subject to
environmental risks normally incident to the operation and construction of
pipelines and other facilities for processing, storing and transporting natural
gas and other products, including, but not limited to, uncontrollable flows of
natural gas, fluids and other substances into the environment, fires, pollution
and other environmental and safety risks. The following is a discussion of
certain environmental safety concerns related to the Company. It is not intended
to constitute a complete discussion of the various federal, state and local
statutes, rules, regulations or orders to which the Company's operations may be
subject. For example, the Company, without regard to fault, could incur
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or state counterparts, in connection with the
disposal or other releases of hazardous substances. Further, the recent trend in
environmental legislation and regulations is toward stricter standards, and this
will likely continue in the future.
The Company's activities in connection with the operation and
construction of pipelines, injection wells, storage caverns and other facilities
for storing and transporting natural gas and other products are subject to
environmental and safety regulation by federal and state authorities, including,
without limitation, the Texas Natural Resource Conservation Commission
("TNRCC"), the Louisiana Office of Conservation, the TRC and the Federal
Environmental Protection Agency ("EPA"), which can increase the costs of
designing, installing and operating such facilities. In most instances, the
regulatory requirements relate to the discharge of substances into the
environment and include measures to control water and air pollution.
Environmental laws and regulations may require the acquisition of a
permit before certain activities may be conducted by the Company. Further, these
laws and regulations may limit or prohibit activities on certain lands lying
within wilderness areas, wetlands, areas providing habitat for certain species
or other protected areas. The Company is also subject to other federal, state
and local laws covering the handling, storage or discharge of materials used by
the Company, or otherwise relating to protection of the environment, safety and
health.
An example of state environmental regulation affecting the Company is
the Texas Clean Air Act ("TCA Act"), as administered by the TNRCC. The TCA Act
restricts emission of air pollutants from natural gas pipeline facilities, and
the TNRCC may curtail operations not meeting applicable standards. Additionally,
the TRC has the authority to take any steps necessary to ensure compliance with
applicable safety regulations through pipeline construction standards and to
issue permits and regulations necessary to prevent environmental pollution by
pipeline operations. These regulations are subject to change from time to time.
The design, construction, operation and maintenance of the Company's natural gas
pipeline facilities are subject to the safety regulations established by the
Secretary of the Department of Transportation pursuant to the Natural Gas
Pipeline Safety Act of 1968, as amended ("1968 Act"), or by state agency
regulations meeting the requirements of the 1968 Act. The Moss Bluff facility is
subject to environmental regulations monitored by the TRC that pertain to
natural gas storage, disposal of salt water, brine pit operations and noxious
emissions.
Management believes the Company has obtained and is in current
compliance with all necessary and material permits and that the Company is in
substantial compliance with applicable material environmental and safety
regulations.
INSURANCE
Although it is not fully insured against all environmental, safety and
other risks, the Company maintains insurance coverages it considers appropriate,
including replacement insurance for surface equipment, gas inventory insurance,
business interruption insurance, leaching insurance and general liability
insurance.
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COMPETITION
The natural gas storage industry is highly competitive. The Company
competes most directly with other independent, stand-alone storage facilities
and interstate pipelines which offer storage services. Additionally, an increase
in competition in the market could arise from new ventures or expanded
operations from existing competitors. Many of the Company's competitors have
capital and other resources far greater than those of the Company. Competitive
factors include (i) the quantity, location and physical flow characteristics of
interconnected pipelines, (ii) the costs of service and rates of the Company's
competitors, (iii) the ability to offer service from multiple locations and (iv)
ancillary services, such as title tracking and electronic bulletin boards.
EMPLOYEES
As of January 1, 1998, the Company had 38 full-time employees. The
Company is not a party to any collective bargaining agreement and has not
experienced work stoppages or strikes as a result of labor disputes. The Company
considers relations with its employees to be excellent.
Through June 30, 1996, many of the day-to-day operating activities at
Moss Bluff and Egan were performed under contract by employees of TPC and its
affiliates and were governed by various service agreements between TPC and MHP.
See "Certain Transactions". Effective July 1, 1996, the TPC employees who were
previously involved in providing project development services, construction
management services, storage sales services, gas title information and
administrative services to MHP became employees of MHP, and contracts relating
to such services were terminated. The remaining service contracts between TPC
and MHP for accounting, financial, field operating and technology access
services were canceled as of December 31, 1997, and the TPC employees who were
previously involved in these areas became employees of MHP effective January 1,
1998. Since January 1, 1998, all employees of MHP have become employees of the
Company.
LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened material legal
claims or proceedings.
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MANAGEMENT
MANAGERS, DIRECTORS AND EXECUTIVE OFFICERS
The management structure of the Company is the same as that of MHP and
of its sole general partner, Market Hub Partners, Inc., a Delaware corporation
("MHP GP"). Subsidiaries of PacifiCorp, NIPSCO, DPL and PSEG, each a limited
partner of MHP, own percentages of MHP GP equal to their interests in MHP and
have the right under the Certificate of Incorporation of MHP GP to appoint
representatives to its Board of Directors. MHP GP, through its Board of
Directors and executive officers, controls the management and affairs of MHP.
The management structure for MHP GP, MHP and each of MHP's wholly owned
subsidiaries, including Finance Corp. and MHP Storage, Moss Bluff, Egan and
their respective general partners (collectively, the "MHP Entities") is
substantially identical, and the directors and executive officers of MHP GP
serve in the same or substantially identical capacities for each of the MHP
Entities.
The following table sets forth certain information with respect to the
managers, directors and executive officers of the MHP Entities:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C>
Donald B. Russell................... 50 President and Chief Executive Officer
David W. Hooker..................... 42 Executive Vice President and Chief Operating Officer
Anthony J. Clark.................... 43 Vice President and Chief Financial Officer
Patrick B. Lorio.................... 37 Vice President, Business Development
Jack Gatewood....................... 47 Vice President, Engineering
Mark Cook........................... 38 Vice President, Sales
Donald N. Furman.................... 41 Director and Chairman of the Board
James W. Tomasiak................... 38 Director
Jeffrey W. Yundt.................... 52 Director
Eileen A. Moran..................... 43 Director
M. Scott Jones...................... 43 Director
Lon C. Mitchell .................... 45 Director
</TABLE>
DONALD B. RUSSELL is President and Chief Executive Officer of the MHP
Entities. He has served in this capacity since MHP's inception in December 1994.
Prior to joining MHP, Mr. Russell was the President and Chief Executive Officer
of Vanir Construction Management, Inc., a company he founded in 1981. In
addition, from 1983 through 1993, Mr. Russell served as Executive Vice President
of the Vanir Group Companies, Inc., which was engaged in various areas of the
real estate development and construction business. Mr. Russell has spent 25
years in the field of construction, construction management and real estate
development. He is a past President of the Construction Management Association
of America and, from 1990 through 1995, served as one of its directors.
DAVID W. HOOKER is the Executive Vice President and Chief Operating
Officer of the MHP Entities. He has held these positions since November 1997.
Prior to this, Mr. Hooker was Vice President of Operations of MHP. From 1992
through 1994, he worked for TPC in various marketing and business development
capacities. From 1987 to 1992, Mr. Hooker was employed by NICOR, Inc. in various
positions involving natural gas marketing, sales and governmental relations.
Prior to joining NICOR, Inc., he practiced law in Denver, Colorado. Mr. Hooker
has spent 17 years in the energy sector.
ANTHONY J. CLARK is Vice President and Chief Financial Officer of the
MHP Entities. He has held these positions since joining MHP in September 1997.
From 1992 to 1996, Mr. Clark was employed by Transfuel, Inc., a wholly owned
subsidiary of Mitsubishi, Inc., serving as a Senior Vice President from 1992 to
1993 and as President and Chief Operating Officer from 1993 to 1996. He came to
Transfuel from Norfolk Holdings, Inc., where he held the
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<PAGE>
positions of Senior Vice President and Chief Financial Officer from 1984 to
1991. Mr. Clark has spent 22 years in the energy sector.
PATRICK B. LORIO is Vice President of Business Development of the MHP
Entities and has held this position since February 1998. From 1996 to 1998, Mr.
Lorio was Manager of the Commercial Group for Amoco in the United Kingdom,
responsible for all hydrocarbon sales, transportation and processing activities
as well as for establishing Amoco's UK/European gas trading operations. From
1994 to 1996, Mr. Lorio was Director of Amoco's East Region gas trading
operations and also held the position of Director of Business Development. Prior
to joining Amoco, he was employed by Tejas Power Corporation as Director of
Business Development. Mr. Lorio has over 15 years in the energy sector and has
worked in all areas of the natural gas value chain.
JACK GATEWOOD is Vice President of Engineering of the MHP Entities and
has held this position since July 1996. From 1989 through 1996, Mr. Gatewood
worked for TPC, developing and expanding the Moss Bluff and Egan facilities.
Prior to joining TPC, he was a project manager for CBS Engineering, where he led
design teams developing offshore oil and gas production in the Gulf of Mexico,
the Gulf of Suez and the South China Sea. Mr. Gatewood has spent 23 years in the
energy sector.
MARK COOK is Vice President of Sales of the MHP Entities and is
responsible for marketing storage services and directing the daily commercial
operations of the Moss Bluff and Egan facilities. He has held this position
since August 1997. He came to MHP in 1995 from TPC, where he worked to develop
interruptible hub services. From 1987 through 1994, Mr. Cook was employed by NGC
Corporation, where he served in various capacities, including as Director of Gas
Accounting. Mr. Cook has spent 14 years in the energy sector.
DONALD N. FURMAN is a director and the Chairman of the Board of the MHP
Entities. He has served in this capacity since May 1997 and is an appointee of
TPC, a subsidiary of PacifiCorp. Since July 1995, Mr. Furman has been President
of PacifiCorp Power Marketing, Inc., PacifiCorp's unregulated marketing
subsidiary, and Vice President of PacifiCorp. Prior to joining PacifiCorp, he
was Senior Vice President of Operations of Citizens Lehman Power L.P. A former
practicing attorney, Mr. Furman has extensive experience in the utility
industry, particularly in bulk power markets and transactions.
JAMES W. TOMASIAK is a director of the MHP Entities. He has served in
this capacity since April 1998 and is an appointee of Miami Valley Market Hub,
Inc., a subsidiary of DPL. Since 1996, Mr. Tomasiak has been a Managing Director
of Dayton Power & Light Company, responsible for Environmental and Information
Systems and for supplies of electricity and natural gas. He joined DPL in 1990.
Prior to that time, Mr. Tomasiak held several positions with Wisconsin Public
Service Corporation.
JEFFREY W. YUNDT is a director of the MHP Entities. He has served in
this capacity since the formation of MHP in 1994 and is an appointee of NIPSCO
Energy Services, Inc., a subsidiary of NIPSCO. Mr. Yundt has been an Executive
Vice President and Chief Operating Officer of NIPSCO since 1994.
EILEEN A. MORAN is a director of the MHP Entities. She has served in
this capacity since the formation of MHP in 1994 and is an appointee of PSRC
Del., Inc. ("PSRC"), a subsidiary of PSEG. Ms. Moran has served as President and
Chief Executive Officer of PSRC, which is a subsidiary of New Jersey public
utility, Public Service Electric & Gas Company, since May 1990.
M. SCOTT JONES is a director of the MHP Entities. He has served in this
capacity since November 1997 and is an appointee of TPC, a subsidiary of
PacifiCorp. Mr. Jones is TPC's Vice President of Financial Structuring. He
joined TPC in 1992 as Vice President, General Counsel and Secretary. Prior to
joining TPC, he was a shareholder of the Houston law firm of Dickerson,
Carmouche & Jones.
LON C. MITCHELL is a director of the MHP Entities. He has served in this
capacity since March 1998 and is an appointee of TPC, a subsidiary of
PacifiCorp. Mr. Mitchell has been the Assistant Controller of PacifiCorp since
1996. In 1994 and 1995, he served as a financial consultant. From 1990 through
1993, Mr. Mitchell served as the Vice President and Controller of NERCO Oil &
Gas, a former subsidiary of PacifiCorp. Prior to joining PacifiCorp in 1990, Mr.
Mitchell held a various finance and accounting positions with Pennzoil Company.
50
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
the compensation paid during the year ended December 31, 1997 to the Company's
Chief Executive Officer and to the four most highly compensated executive
officers whose combined salary and bonus for services rendered to MHP Storage
and its subsidiaries for such period exceeded $100,000, or would have exceeded
such amount if paid during the full fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- ------ -----
<S> <C> <C>
Donald B. Russell............................................... $164,920 $594,900(1)
President and Chief Executive Officer
David W. Hooker................................................. $123,692 $319,388(1)
Executive Vice President and Chief Operating Officer
Anthony J. Clark (2)............................................ $ 46,668 $ 36,332
Vice President, Chief Financial Officer and Secretary
Jack Gatewood................................................... $ 86,587 $ 75,000
Vice President, Engineering
Mark Cook.......................................................
Vice President, Sales $ 99,712 $ 39,350
</TABLE>
- ---------------
(1) Includes special bonus payments of $360,000 to Mr. Russell and $240,000 to
Mr. Hooker paid in connection with the Moss Bluff and Egan facilities.
(2) Salary and bonus information reflects compensation from September 1997,
when Mr. Clark joined the Company, through December 31, 1997.
EMPLOYMENT AGREEMENTS
Each of Messrs. Russell, Hooker, Clark, Lorio, Gatewood and Cook
(collectively, the "Executives") has entered into an employment agreement
(collectively, the "Agreements") with MHP, MHP Storage and Market Hub Partners
Storage, L.L.C. ("MHP Storage GP" and, collectively with MHP and MHP Storage,
the "Employers"). The Agreements provide for an annual base salary of
approximately $160,000, $160,000, $140,000, $120,000 and $120,000 for Messrs.
Russell, Hooker, Clark, Lorio, Gatewood and Cook, respectively. In addition, on
an annual basis, Messrs. Hooker, Clark, Lorio and Gatewood shall receive between
65% and 135% of a Target Bonus equal to 1.5%, 1.25%, 1.0% and 1.0%,
respectively, of the before-tax net income of MHP and its subsidiaries,
including the Company. The amount of a bonus, if any, paid to Mr. Russell shall
be at the discretion of the Boards of Directors of the Employers.
Each Agreement may be terminated at any time by the Employers, with or
without Cause (as defined therein), or by the Executive, for any reason. In the
event of a termination without Cause or a resignation for Good Reason (as
defined therein), the Company shall pay the Executive 65% of the Target Bonus
for the calendar year, pro rated for the number of days in the year prior to the
termination date. If such termination or resignation is involuntary, the
Executive shall receive, in addition to the aforementioned amount, a lump sum
cash payment equal to two years' base
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<PAGE>
salary. In addition, the Agreements provide that, in the event of a Change of
Control (as defined therein), Messrs. Hooker, Clark, Cook, Lorio, Gatewood and
Russell shall receive incentive bonuses equal to 2.0%, 1.25%, 1.25%, 1.0%, 1.0%
and 1.0%, respectively, of the increase in value of MHP after January 1, 1998,
as calculated pursuant to the Employment Agreements. Each Agreement expires on
December 31, 2000, with the exception of that of Mr. Russell, which expires on
December 31, 1998.
52
<PAGE>
CERTAIN TRANSACTIONS
SERVICES AGREEMENTS
At the time of formation of MHP on December 20, 1994, MHP and certain of
its subsidiaries entered into a series of service agreements with TPC and with
the other limited partners of MHP. Pursuant to various agreements, each of which
terminated on or before December 31, 1997, TPC provided MHP and its subsidiaries
(i) business support services, including financial reporting and accounting,
insurance, payroll and tax preparation services, (ii) financial planning
services, including the arrangement of long-term and construction borrowing,
(iii) operating services, including the maintenance, repair and administration
of the Moss Bluff and Egan facilities, (iv) gas title and administrative
services for the Egan facility, including the calculation of allocations of gas
flows and the coordination of pipeline nominations and confirmations, and (v)
construction management, administrative and permitting services in connection
with the development of the Egan facility. The Company no longer contracts for
these services, as they are performed by employees of MHP Storage, many of whom
were employees of TPC and performed these services for the benefit of MHP prior
to the termination of the aforementioned services agreements. See
"Business--Employees".
Certain other services agreements, with the limited partners of MHP
remain in force. Under a technology agreement with TPC, MHP and its
subsidiaries, including the Company, have access to certain technology relating
to the design, construction and operation of the Moss Bluff and Egan facilities,
including technology made available to TPC through an agreement with Sandia
National Laboratories. In addition, the Company uses, and will continue to use,
certain software provided by TPC. MHP is also a party to storage sales services
agreements with each of its limited partners. These agreements are substantially
identical and provide that employees of the MHP limited partner party thereto
will assist MHP by identifying prospective clients, coordinating sales efforts,
reporting on client credit-worthiness and performing post-sales follow-up
services.
In connection with the services described above, MHP paid TPC
approximately $4.7 million, $2.0 million and $2.2 million in 1995, 1996 and
1997, respectively. Amounts paid to MHP's other limited partners have been de
minimis.
STORAGE SERVICE CONTRACTS
In addition to the services agreements described above, the Company is
party to storage service contracts with several of MHP's limited partners and
their affiliates. Certain summary information with respect to these contracts is
provided below:
TPC CORPORATION. Pursuant to two contracts for gas storage services at
each of the Moss Bluff and Egan facilities, TPC paid the Company an aggregate of
approximately $1.1 million, $2.8 million and $3.7 million in 1995, 1996 and
1997, respectively. The contracts related to services at the Moss Bluff facility
terminate in April 2002 and September 1998, respectively. One of the contracts
for services at the Egan facility terminated in April 1998. The other terminates
in April 2006. See "Business -- Description of Significant Contracts".
NORTHERN INDIANA PUBLIC SERVICE COMPANY. Northern Indiana, an affiliate
of NIPSCO Energy Services, Inc., has contracted with the Company for gas storage
services at both the Moss Bluff and Egan facilities. Pursuant to two agreements,
Northern Indiana paid the Company an aggregate of approximately $3.6 million,
$7.5 million and $9.1 million in 1995, 1996 and 1997, respectively. Northern
Indiana's contract with Moss Bluff terminates in April 2013. The agreement for
services at the Egan facility has a primary term expiring in April 2016 but may
be terminated by Northern Indiana effective April 2006 on 12 months' notice. See
"Business -- Description of Significant Contracts".
MIAMI VALLEY RESOURCES, INC. Pursuant to an agreement entered into in
1995, Miami Valley Resources, Inc. ("Miami Valley"), an affiliate of Miami
Valley Market Hub, Inc., contracted for gas storage services at the Company's
Egan facility. Under this agreement, Miami Valley paid the Company an aggregate
of $37,000, $0.2 million and $0.3 million in 1995, 1996 and 1997, respectively.
This agreement terminates, at Miami Valley's option, in March 1999 or in March
2004.
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<PAGE>
THE DAYTON POWER AND LIGHT COMPANY. In September 1997, the Dayton Power
and Light Company ("Dayton Power and Light"), an affiliate of Miami Valley
Market Hub, Inc. and a subsidiary of DPL Inc., signed an agreement providing for
gas storage services at the Egan facility. Pursuant to this agreement, Dayton
Power and Light paid the Company an aggregate of approximately $0.1 million in
1997. This agreement terminates in October 2000. See "Business --Description of
Significant Contracts".
PARTNER NOTES
On March 5, 1998, the Company distributed approximately $17.6 million of
the net proceeds from the Old Notes Offering to MHP, which MHP used to repay the
outstanding principal amount of $17.0 million of the Partner Notes, together
with accrued interest thereon of $0.6 million. Accrued interest on the Partner
Notes as of December 31, 1997 was $0.3 million. The Partner Notes were issued by
MHP in April and October 1997 to its partners pro rata for the purpose of
funding capital expenditures for the development of the Moss Bluff and Egan
facilities. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
TIOGA LOAN
In March 1998, the Company loaned $4.0 million of the net proceeds of
the Old Notes Offering to another subsidiary of MHP which owns and is developing
MHP's Tioga project. The loan to Tioga is unsecured and is evidenced by a note
maturing in three years and bearing interest at prime rate plus 2.0%. The
Company intends to loan an additional $1.0 million to Tioga in the future. It is
anticipated that such loan will be under the same terms as the $4.0 million
loan. See "Use of Proceeds".
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<PAGE>
OWNERSHIP
The sole general partner of MHP Storage is Market Hub Partners Storage,
L.L.C., a wholly owned subsidiary of MHP. The sole limited partner of MHP
Storage is MHP. See "The Company". The following table sets forth certain
information regarding the beneficial ownership of the equity of MHP as of
December 31, 1997.
NAME OF BENEFICIAL OWNER PERCENTAGE(1)
- ------------------------ -------------
TPC Corporation, a subsidiary of PacifiCorp(2).................. 66.0%
Miami Valley Market Hub, Inc., a subsidiary of DPL Inc.......... 17.0%
NIPSCO Energy Services, Inc., a subsidiary of NIPSCO
Industries, Inc. .......................................... 11.3%
Public Service Resources Corporation, a subsidiary of
Public Service
Enterprise Group, Inc................................... 5.7%
-------
Total................................................... 100.0%
=======
- -------------------
(1) Includes limited partner interest and proportionate share of general
partner interest. The member interests in the general partner of MHP are
owned by the partners of MHP proportionately in accordance with their
limited partner interests in MHP.
(2) TPC owns its interest through a wholly owned subsidiary, Tioga Gas Storage
Company.
Under the terms of MHP's Partnership Agreement, certain decisions by MHP
require the approval of PacifiCorp subsidiary, TPC, and at least two other
partners. Such matters principally involve decisions relating to financing,
acquisitions or divestitures and approval of operating budgets. The terms of the
limited liability company agreements of the general partners of MHP Storage,
Moss Bluff and Egan, as well as of the charter and bylaws of Finance Corp. and
MHP's general partner, require approval for certain decisions by a supermajority
of such entities' managers or directors, as the case may be, representing 80% of
the ownership interests of such entity. Such decisions include, but are not
limited to, decisions with respect to acquisitions or divestitures in excess of
$1.0 million, certain expansions and financings, budgets, mergers and other
similar transactions, regulatory filings and certain contracts and agreements.
The limited liability company agreements also require approval by disinterested
managers of the general partner for loans or agreements between a limited
partner of MHP, on the one hand, and MHP Storage, Moss Bluff or Egan, on the
other hand.
DESCRIPTION OF NEW CREDIT FACILITY
MHP Storage and the Subsidiary Guarantors have entered into an agreement
with Bank One, Texas, N.A., as lender, for a new bank credit facility. The New
Credit Facility provides for revolving credit borrowings up to $20.0 million in
the aggregate outstanding at any time. Borrowings under the New Credit Facility
bear interest at a rate per annum, at MHP Storage's option, equal to: (i) the
bank's prime rate or (ii) a LIBOR rate plus 2.00%. The New Credit Facility is
secured by substantially all the assets of the Company. It includes certain
covenants that, among other things, restrict the ability of MHP Storage and of
the Subsidiary Guarantors to incur indebtedness, incur certain contingent
obligations, incur liens, dispose of assets, make loans or advances, enter into
certain investments, pay dividends or distributions, issue stock, engage in
mergers, consolidations or otherwise significantly alter corporate structure,
engage in transactions with affiliates, expand into other lines of business and
otherwise restrict business activities. In addition, the New Credit Facility
also requires that MHP Storage and the Subsidiary Guarantors maintain compliance
with certain financial ratios. The New Credit Facility expires on December 31,
2000.
55
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Issuers on March 4, 1998 to
the Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities Act. As a condition to the completion of the
Old Notes Offering, the Issuers and the Subsidiary Guarantors entered into the
Registration Rights Agreement with the Initial Purchaser pursuant to which the
Issuers and the Subsidiary Guarantors agreed to file with the Commission the
Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to an offer to exchange the Old Notes for Exchange
Notes. The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Issuers and the Subsidiary Guarantors under the Registration
Rights Agreement.
The Registration Rights Agreement provides that, unless due to a change
in law or Commission policy the Exchange Offer is not permissible under
applicable federal law or Commission policy, the Issuers and the Subsidiary
Guarantors shall (i) cause to be filed with the Commission as soon as
practicable on or prior to 60 days after the date of the Old Notes Offering (or,
if such 60th day is not a Business Day, then the first Business Day thereafter),
a Registration Statement under the Securities Act relating to the Exchange Notes
and the Exchange Offer, (ii) use their best efforts to cause such Registration
Statement to be declared effective by the Commission as soon as practicable on
or prior to 120 days after the Closing Date (or, if such 120th day is not a
Business Day, then the first Business Day thereafter), (iii) upon the
effectiveness of such Registration Statement, promptly commence the Exchange
Offer and use their best efforts to issue on or prior to 45 days after the
Exchange Offer Effective Date, Exchange Notes in exchange for all Old Notes
tendered in the Exchange Offer, (iv) cause the Exchange Offer Registration
Statement to be effective continuously and keep the Exchange Offer open for a
period not less than 20 business days and (v) use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of the Registration Rights Agreement to
the extent necessary to ensure that it is available for resales of Notes
acquired by broker-dealers for their own accounts as a result of market-making
activities or other trading activities.
Under existing interpretations of the staff of the Commission, the
Exchange Notes would, in general, be freely transferable after the Exchange
Offer without further registration under the Securities Act. However, any
purchaser of Old Notes who is an "affiliate" of the Issuers or of any Subsidiary
Guarantor or intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretations of the staff of the Commission, (ii) will not be able to tender
its Old 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 Old Notes, unless such sale or transfer is made
pursuant to an exemption from such requirements. See "-- Resale of Exchange
Notes".
Each holder who wishes to exchange such Old Notes for Exchange Notes in
the Exchange Offer will be required to make certain representations, including
representations that (i) it is not an affiliate of the Issuers or of any
Subsidiary Guarantor, (ii) it is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes and (iii) it is acquiring the Exchange Notes
in its ordinary course of business. In addition, broker-dealers receiving
Exchange Notes in the Exchange Offer will have a prospectus delivery requirement
with respect to resales of Exchange Notes. The Commission has taken the position
that such broker-dealers may fulfill their prospectus delivery requirements with
respect to the Exchange Notes (other than a resale of an unsold allotment from
the original sale of Old Notes) with this Prospectus. Under the Registration
Rights Agreement, the issuers or any Subsidiary Guarantor is required to allow
such broker-dealers to use this Prospectus in connection with the resale of such
Exchange Notes. See "-- Resale of Exchange Notes".
If (i) the Issuers and the Subsidiary Guarantors are not required to
file the Exchange Offer Registration Statement or to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy, (ii) any holder of Transfer Restricted Securities (as defined
herein) notifies MHP Storage within 20 business days of the commencement of the
Exchange Offer that such holder (a) is prohibited by applicable law or
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<PAGE>
Commission policy from participating in the Exchange Offer or (b) may not resell
the Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and this Prospectus is not appropriate or available for
such resales by such holder or (c) is a broker-dealer and owns Old Notes
(including the Initial Purchaser who holds Old Notes as part of an unsold
allotment from the original offering of the Notes) acquired directly from MHP
Storage or an affiliate of MHP Storage or (iii) the Issuers and the Subsidiary
Guarantors do not consummate the Exchange Offer within 45 days following the
effectiveness date of the Exchange Offer Registration Statement, then MHP
Storage and the Subsidiary Guarantors shall (x) cause to be filed a shelf
registration statement pursuant to Rule 415 under the Securities Act, which may
be an amendment to the Exchange Offer Registration Statement (in either event,
the "Shelf Registration Statement"), on or prior to the earliest to occur of (1)
the 45th day after the date on which MHP Storage determines that it is not
required to file the Exchange Offer Registration Statement or (2) the 45th day
after the date on which MHP Storage receives notice from a holder of Transfer
Restricted Securities as contemplated by clause (ii) above (such earliest date
being the "Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the holders of which
shall have provided the information required pursuant to Section 4(b) of the
Registration Rights Agreement, and (y) use their best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission on or
before the 90th day after the Shelf Filing Deadline. For purposes of the
Exchange Offer, "Transfer Restricted Securities" means each Note until the
earliest to occur of (i) the date on which each such Old Note has been exchanged
by a person other than a broker-dealer for an Exchange Note in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of
an Old 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 this Prospectus, (iii) the date on which such 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 Note is
distributed to the public pursuant to Rule 144 under the Securities Act. The
Issuers and the Subsidiary Guarantors shall use their best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended as
required by the Registration Rights Agreement to the extent necessary to ensure
that it is available for resales of Notes by the holders of Transferred
Restricted Securities entitled to the benefit of such agreement, the Securities
Act and the policies, rules and regulations of the Commission as announced from
time to time, for a continuous period of two years following the date on which
such Shelf Registration Statement becomes effective under the Securities Act or
such shorter period that will terminate when all the Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement.
If (i) any of the registration statements required by the Registration
Rights Agreement are not filed with the Commission on or before the date
specified for such filing, (ii) any of such registration statements are not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Exchange Offer has
not been consummated within 165 days after the date of the Old Notes Offering or
(iv) any registration statement required by the Registration Rights Agreement is
filed and declared effective but shall thereafter cease to be effective or
usable in connection with resales of Transfer Restricted Securities in
accordance with and during the periods required by the Registration Rights
Agreement (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Issuers and the Subsidiary Guarantors have agreed
to pay liquidated damages to each holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Notes constituting Transfer Restricted Securities held by such holder
for each week or portion thereof that the Registration Default continues. The
amount of the liquidated damages shall increase each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.30 per week per $1,000 in principal amount of Notes
constituting Transfer Restricted Securities. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
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, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Old Notes will not have any further registration rights, and such
Old
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Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Issuers will accept any and all
Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York time,
on the Expiration Date. The Issuers will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes, except that (i) the Exchange Notes bear a different
CUSIP Number from the Old Notes, (ii) the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (iii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the Old Notes
in certain circumstances relating to the timing of the Exchange Offer, all of
which rights generally will terminate when the Exchange Offer is terminated. The
Exchange Notes will evidence the same debt as the Old Notes and will be entitled
to the benefits of the Indenture.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered. As of the date of this Prospectus, $115,000,000 aggregate
principal amount of Old Notes were outstanding. The Issuers and the Subsidiary
Guarantors intend 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 Issuers shall be deemed to have accepted validly
tendered Old Notes when, as and if the Issuers have given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders for the purpose of receiving the Exchange Notes from the
Issuers. If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than transfer taxes in certain circumstances, 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 time, on
,1998, unless the Issuers, in their sole discretion, extend 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
Issuers will notify the Exchange Agent of any extension by oral or written
notice and will mail to the registered holders an announcement thereof, each
prior to 9:00 a.m., New York time, on the next business day after the previously
scheduled expiration date. The Issuers reserve the right, in their sole
discretion, (i) to delay accepting any Old Notes, to extend the Exchange Offer
or to terminate the Exchange Offer if any of the conditions set forth below
under " -- Conditions" shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. Without
limiting the manner in which the Issuers may choose to make public announcements
of any delay in acceptance, extension, termination or amendment of the Exchange
Offer, the Issuers shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
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INTEREST ON THE EXCHANGE NOTES
Each Exchange Note will bear interest from the most recent date to which
interest has been paid or duly provided for on the Old Note surrendered in
exchange for such Exchange Note or, if no interest has been paid or duly
provided for on such Old Note, from March 4, 1998. Interest on the Exchange
Notes is payable semi-annually on each March 1 and September 1, commencing on
September 1, 1998.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest that is accrued and unpaid on such Old Notes for any period
from and after the last date to which interest has been paid or duly provided
for on the Old Notes prior to the original issue date of the Exchange Notes or,
if no such interest has been paid or duly provided for, will not receive any
accrued interest on such Old Notes and will be deemed to have waived, the right
to receive any interest on such Old Notes accrued from and after March 4, 1998.
PROCEDURES FOR TENDERING
For a holder of Old Notes to tender Old Notes validly pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer), an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents, must be received by the Exchange Agent at the
address set forth in the Letter of Transmittal prior to 5:00 p.m., New York
time, on the Expiration Date. In addition, prior to 5:00 p.m., New York time, on
the Expiration Date, either (i) certificates for tendered Old Notes must be
received by the Exchange Agent at such address, (ii) such Old Notes must be
transferred pursuant to the procedures for book-entry transfer described below
(and a confirmation of such tender received by the Exchange Agent, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal), or (iii) the holder must comply with the guaranteed delivery
procedures described below.
The term "Agent's Message" means a message transmitted by the
Depositary, received by the Exchange Agent and forming part of the confirmation
of a book-entry transfer, which states that the Depositary has received an
express acknowledgment from the participant in the Depositary tendering Old
Notes which are the subject of such book-entry confirmation that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Issuers may enforce such agreement against such
participant. In the case of an Agent's Message relating to guaranteed delivery,
the term means a message transmitted by the Depositary and received by the
Exchange Agent, which states that the Depositary has received an express
acknowledgment from the participant in the Depositary tendering Old Notes that
such participant has received and agrees to be bound by the Notice of Guaranteed
Delivery.
By tendering Old Notes pursuant to the procedures set forth above, each
holder will make to the Issuers the representations set forth above in the
fourth paragraph under the heading " -- Purpose and Effect of the Exchange
Offer". The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial holder whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial holder's behalf. If such
beneficial holder wishes to tender on such beneficial holder's own behalf, such
beneficial holder must, prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
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beneficial holder's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time. The Issuers will keep the Exchange Offer open for not less than twenty
days in order to provide for the transfer of registered ownership. See
"Instruction to Registered Holder and/or Book-Entry Transfer Facility
Participant from Owner" included with the Letter of Transmittal. Signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by an Eligible Institution (as defined below) unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be guaranteed,
such guarantee must be by a member firm of the Medallion System (an "Eligible
Institution"). If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution. If the Letter
of Transmittal or any Old Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, offices of corporations
or others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and evidence satisfactory to the Issuers of their
authority to so act must be submitted with the Letter of Transmittal.
The Issuers understand that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the book-entry transfer facility, The Depository Trust Company
("DTC" or the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility, an appropriate Letter of Transmittal properly completed and
duly executed with any required signature guarantee, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal and
all other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth in the Letter of
Transmittal on or prior to the Expiration Date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuers' acceptance
of which would, in the opinion of counsel for the Issuers, be unlawful. The
Issuers also reserve the right in their sole discretion to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Issuers'
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuers shall determine.
Although the Issuers intend to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Issuers, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent or (iii)
who cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
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(b) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder, the
certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes (or
a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal
(of facsimile thereof), as well as the certificates representing all
tendered Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility), and all other documents required
by the Letter of Transmittal are received by the Exchange Agent upon
five New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth in the Letter of Transmittal prior
to 5:00 p.m., New York time, on the Expiration Date, unless previously accepted
for exchange. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number(s) and
principal amount of such Old Notes, or, in the case of Old Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes into the name of the
person withdrawing the tender and (iv) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Issuers, whose determination shall be
final and binding on all parties. Any Old 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 Old Notes so
withdrawn are validly retendered. Any Old Notes which have been tendered but
which are not accepted for exchange will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following one of the procedures described above under " --
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall
not be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect to the
Exchange Offer which, in the Issuers' reasonable discretion, might
materially impair the ability of the Issuers to proceed with the
Exchange Offer or any material adverse development has occurred in any
existing action or proceeding with respect to the Issuers or any of
their subsidiaries; or
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(b) any law, statute, rule, regulation or interpretation by the
staff of the Commission is proposed, adopted or enacted, which, in the
Issuers' reasonable discretion, might materially impair the ability of
the Issuers to proceed with the Exchange offer or materially impair the
contemplated benefits of the Exchange offer to the Issuers; or
(c) any governmental approval has not been obtained, which
approval the Issuers shall, in the Issuers' reasonable discretion, deem
necessary for the consummation of the Exchange Offer as contemplated
hereby.
If the Issuers determine in their reasonable discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "-- Withdrawal of Tenders"), or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent
for the Exchange Offer. The mailing address of the Exchange Agent is IBJ
Schroder Bank & Trust Company, P.O. Box 84, Bowling Green Station, New York, New
York 10274-0084. The address for deliveries by overnight courier and for hand
deliveries is IBJ Schroder Bank & Trust Company, One State Street, New York, New
York 10004, Attn: Securities Processing Window, Subcellar One, (SC-1). For
assistance and requests for additional copies of this Prospectus, the Letter of
Transmittal or the Notice of Guaranteed Delivery, the telephone number for the
Exchange Agent is (212) 858-2103, and the facsimile number for the Exchange
Agent is (212) 858-2611. Delivery to an address other than as set forth herein
and in the Letter of Transmittal will not constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. 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 Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it 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 Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Old Notes, which is face value, as reflected in MHP Storage's accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by MHP Storage. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Issuers (upon redemption thereof or otherwise),
(ii) pursuant to an effective registration statement under the Securities Act,
(iii) so long as the Old Notes are
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eligible for resale pursuant to Rule 144A, to a person inside the United States
whom the seller reasonably believes is a qualified institutional buyer within
the meaning of Rule 144A under the Securities Act in a transaction meeting the
requirements of Rule 144A, in accordance with Rule 144 under the Securities Act,
(iv) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (v) to an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act who furnishes the Trustee with a letter containing certain
representations and agreements (and, in the case of any transfer of aggregate
principal amount of Old Notes of $100,000 or less, an opinion of counsel, if the
Issuers so request) or (vi) pursuant to some other exemption from the
registration requirements of the Securities Act (and based on an opinion of
counsel, if the Issuers so request), in each case in accordance with any
applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties (for example, the letters of the Commission to (i) Exxon Capital
Holdings Corporation, available May 13, 1988, (ii) Morgan Stanley & Co., Inc.
available June 5, 1991 and (iii) Shearson & Sterling, available July 2, 1993),
the Issuers believe that a holder or other person (other than a person that is
an affiliate of the Issuers or of any Subsidiary Guarantor within the meaning of
Rule 405 under the Securities Act) who receives Exchange Notes in exchange for
Old Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes, will be
allowed to resell the Exchange Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the
Exchange Notes a prospectus that satisfies the requirements of Section 10 of the
Securities Act. However, if any holder acquires Exchange Notes in the Exchange
Offer for the purpose of distributing or participating in a distribution of the
Exchange Notes, such holder cannot rely on the position of the staff of the
Commission enunciated in such no-action letters or any similar interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Further, each
Participating broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such Participating
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.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Issuers or of any Subsidiary Guarantor, (ii) it is not engaged
in, and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Exchange Notes and
(iii) it is acquiring the Exchange Notes in its ordinary course of business.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act 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. Based on the position taken by the staff of
the Division of Corporation Finance of the Commission in the interpretive
letters referred to above, the Issuers believe that Participating Broker-Dealers
who acquired Old Notes for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the Exchange Notes received upon exchange of such
Old Notes (other than Old Notes which represent an unsold allotment from the
original sale of the Old Notes) with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Notes. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or such other
trading activities. Subject to certain provisions set forth in the Registration
Rights Agreement, the Issuers have agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such Exchange Notes. However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Notes received in exchange for Old Notes pursuant to
the Exchange Offer must notify the Issuers, or cause the Issuers to be notified,
on or prior to the Expiration Date, that it is a Participating Broker-Dealer.
Such
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notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth in the Letter of Transmittal. See "Plan of Distribution". Any
Participating Broker-Dealer who is an "affiliate" of the Issuers or of any
Subsidiary Guarantor may not rely on such interpretive letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction.
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DESCRIPTION OF EXCHANGE NOTES
The Old Notes were issued and the Exchange Notes will be issued pursuant
to an indenture (the "Indenture") among Market Hub Partners Storage, L.P., as
issuer, Market Hub Partners Finance, Inc. ("Finance Corp"), a wholly owned
subsidiary of Market Hub Partners Storage, L.P., as co-issuer, the Subsidiary
Guarantors, as guarantors, and IBJ Schroder Bank & Trust Company, as trustee
(the "Trustee"). The terms of the Notes include those set forth or referred to
in the Indenture and those made part of the Indenture by the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). The Notes are subject to all
such terms, and Holders of Old Notes and prospective Holders of Exchange Notes
are referred to the Indenture and the Trust Indenture Act. The following summary
does not purport to be a complete description of the Notes or the Indenture and
is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Notes and the Indenture. The definitions of certain
capitalized terms used in the following summary are set forth below under " --
Certain Definitions". Capitalized terms that are used but not otherwise defined
herein have the meanings assigned to them in the Indenture, and those
definitions are incorporated herein by reference. As used in the following
summary, the term "Company" means Market Hub Partners Storage, L.P. and does not
include any subsidiary of Market Hub Partners Storage, L.P., the term "Issuers"
refers to the Company and Finance Corp., the term "Notes" includes the Old Notes
and Exchange Notes and the term "Offering" refers to the Old Notes Offering.
Copies of the Indenture are available from the Company on request.
Finance Corp. is a wholly owned subsidiary of the Company that was
incorporated in Delaware in January, 1998 for the purpose of serving as a
co-issuer of the Notes in order to facilitate the Offering. The Company believes
that certain prospective purchasers of the Notes may be restricted in their
ability to purchase debt securities of partnerships, such as the Company, unless
such debt securities are jointly issued by a corporation. Finance Corp. has no
and will have no business operations, assets or revenues. Consequently, Holders
of Old Notes and prospective Holders of Exchange Notes should not expect Finance
Corp. to participate in servicing the interest and principal obligations on the
Notes.
GENERAL
The form and terms of the Exchange Notes are the same as the form and
terms of the Old Notes (which they are intended to replace) except that (i) the
Exchange Notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and (ii) the
holders of Exchange Notes will not be entitled to certain rights under the
Registration Rights Agreement, including the provisions providing for an
increase in the interest rate on the Old Notes in certain circumstances relating
to the timing of the Exchange Offer, which rights will terminate when the
Exchange Offer is consummated. The Exchange Notes will be issued solely in
exchange for an equal principal amount of Old Notes. As of the date hereof, $115
million aggregate principal amount of Old Notes is outstanding. See "The
Exchange Offer".
The Old Notes are and the Exchange Notes will be (i) senior unsecured
joint and several obligations of the Issuers, (ii) unconditionally guaranteed by
the Subsidiary Guarantors and (iii) limited to $115 million aggregate principal
amount. The Exchange Notes will be issued only in registered form, without
coupons, in denominations of $1,000 and integral multiples thereof. The Exchange
Notes will mature on March 1, 2008 and bear interest at the rate per annum shown
on the front cover hereof from the date they are originally issued under the
Indenture or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semi-annually in cash in arrears on March 1
and September 1 of each year, commencing September 1, 1998, to the Persons in
whose names the Exchange Notes are registered at the close of business on the
preceding February 15 or August 15, as the case may be (whether or not a
business day). Interest on the Exchange Notes will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal of and premium, if any, interest and Liquidated Damages, if
any, on the Exchange Notes will be Payable (i) in same-day funds on or prior to
the payment dates with respect to those amounts in the case of Exchange Notes
held of record by The Depository Trust Company ("DTC") or its nominee and (ii)
at the corporate trust office of the Trustee in New York, New York, in the case
of Exchange Notes held of record by Holders other than DTC or its nominee, and
the Exchange Notes may be surrendered for registration of transfer or exchange
at the corporate trust office of the Trustee in New York, New York. The Company
may, at its option, pay interest on Exchange Notes held
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of record by Holders other than DTC or its nominee by check mailed to the
addresses of the Persons entitled thereto as they appear in the Note Register on
the Regular Record Date for that interest or by wire transfer of immediately
available funds to an account located in the United States designated by the
Holder.
No service charge will be made for the exchange of Old Notes for
Exchange Notes or for any registration of transfer the Exchange Notes, but the
Company or the Trustee may require payment of a sum sufficient to cover any tax
or other governmental charge and any other expenses (including the fees and
expenses of the Trustee) payable in connection therewith. The Company is not
required (i) to issue or register the transfer of Exchange Notes during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption and ending at the close of business on the day of that
mailing or (ii) to register the transfer of Exchange Notes selected for
redemption in whole or in part, except the unredeemed portion of Old Notes being
redeemed in part.
OPTIONAL REDEMPTION
The Issuers may, at the Company's option, redeem the Exchange Notes in
whole or from time to time in part, on or after March 1, 2003, on not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, together with accrued and
unpaid interest thereon and Liquidated Damages, if any, to the date of
redemption (subject to the right of Holders of record on the relevant record
date to receive interest due on an interest payment date that is on or prior to
the date of redemption), if redeemed during the 12-month period beginning on
March 1 of the year indicated below:
REDEMPTION
YEAR PRICE
- ---- ------
2003.................................................... 104.125%
2004.................................................... 102.750%
2005.................................................... 101.375%
2006 and thereafter..................................... 100.000%
Notwithstanding the foregoing, at any time on or prior to March 1, 2001,
the Issuers may redeem up to 35% of the aggregate principal amount of Exchange
Notes originally issued from the Net Cash Proceeds of one or more Public Equity
Offerings, at a redemption price equal to 108.25% of the principal amount
thereof, together with accrued and unpaid interest thereon and Liquidated
Damages, if any, to the date of redemption, PROVIDED that (i) at least $74.75
million of the aggregate principal amount of Exchange Notes originally issued
remains outstanding immediately after that redemption and (ii) the Company
effects that redemption within 60 days after the Public Equity Offering closes.
If less than all the Exchange Notes are to be redeemed, the Trustee
will, not less than 30 nor more than 60 days prior to the redemption date,
select the particular Exchange Notes (or any portion thereof that is an integral
multiple of $ 1,000) to be redeemed, pro rata, by lot or by any other method
permitted in the Indenture.
No sinking fund or mandatory redemption is provided for the Exchange
Notes.
RANKING
The Exchange Notes will be senior unsecured joint and several
obligations of the Issuers and will rank pari passu in right of payment with all
other existing and future unsecured and unsubordinated Indebtedness of the
Issuers and senior to all existing and future Subordinated Indebtedness of the
Issuers. Each Subsidiary Guarantee will be a senior unsecured obligation of the
applicable Subsidiary Guarantor and will rank pari passu in right of payment
with all other existing and future unsecured and unsubordinated Indebtedness of
such Subsidiary Guarantor, and senior to all existing and future Subordinated
Indebtedness of the applicable Subsidiary Guarantor. The Exchange Notes and
Subsidiary Guarantees, however, will be effectively subordinated to secured
Indebtedness of the Issuers and the Subsidiary Guarantors with respect to the
assets securing that Indebtedness. At December 31, 1997, on a pro forma basis
assuming that Old Notes Offering and the application of the net proceeds
therefrom had occurred on such date, the Issuers and the Subsidiary Guarantors
would not have had any Indebtedness outstanding other than the Old Notes.
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It is contemplated, however, that the Company may incur Indebtedness under the
New Credit Facility, which will be secured by a lien on substantially all the
assets of the Company and its Subsidiaries (including the Subsidiary
Guarantors). Subject to certain limitations, the Company and its Subsidiaries
(including the Subsidiary Guarantors) may incur additional Indebtedness in the
future. See "-- Certain Covenants -- Limitation on Indebtedness and Disqualified
Equity Interests".
SUBSIDIARY GUARANTEES
Each Restricted Subsidiary, other than Finance Corp., will
unconditionally guarantee (each, a "Subsidiary Guarantee"), jointly and
severally, to each Holder of Exchange Notes and the Trustee, the full and
punctual performance of the Company's obligations under the Indenture and the
Exchange Notes, including the payment of principal of and premium, if any,
interest and Liquidated Damages, if any, on the Exchange Notes. As of the Issue
Date, all of the Company's Subsidiaries will be Restricted Subsidiaries. Under
certain circumstances, the Board of Directors will be able to designate the
Company's existing or future Subsidiaries as Unrestricted Subsidiaries. See " --
Certain Covenants -- Future Designation of Restricted and Unrestricted
Subsidiaries" below. Unrestricted Subsidiaries will not be subject to the
restrictive covenants set forth in the Indenture.
The obligations of each Subsidiary Guarantor under a Subsidiary
Guarantee are limited to the maximum amount that, after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of that other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, will result in the obligations of that Subsidiary Guarantor under the
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal law or state law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee will be entitled to a pro
rata contribution from each other Subsidiary Guarantor based on the net assets
of each Subsidiary Guarantor, determined in accordance with GAAP.
Each Subsidiary Guarantor may consolidate with or merge with or into or
sell or otherwise dispose of all or substantially all of its property and assets
to the Company or another Subsidiary Guarantor without limitation, except to the
extent any such transaction is subject to the "Merger, Consolidation and Sale of
Assets" covenant of the Indenture. Each Subsidiary Guarantor may consolidate
with or merge with or into or sell all or substantially all of its properties
and assets to a Person other than the Company or another Subsidiary Guarantor
(whether or not affiliated with the Subsidiary Guarantor), if (i) the Person
formed by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all of the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form and substance
satisfactory to the Trustee, under the Exchange Notes and the Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists; and (iii) immediately after giving effect to such transaction
the Company could incur at least $1.00 of additional Indebtedness, not
constituting Permitted Indebtedness, pursuant to the Consolidated Fixed Charge
Coverage Ratio test set forth in the covenant described under "Certain Covenants
- -- Limitation on Indebtedness and Disqualified Equity Interests".
The Indenture will provide that in the event of sale or other
disposition of all the properties and assets of any Subsidiary Guarantor in
accordance with the preceding paragraph or a sale or other disposition of all
the Equity Interests of any Subsidiary Guarantor, then that Subsidiary Guarantor
will be released and relieved of any obligations under its Subsidiary Guarantee,
PROVIDED that, in the case of a sale of such Equity Interests not constituting a
sale governed by the covenant in the Indenture described under "Merger,
Consolidation and Sale of Assets", the Net Available Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "-- Certain Covenants -- Limitation on Asset Sales". In
addition, any Subsidiary Guarantor that is designated by the Board of Directors
as an Unrestricted Subsidiary in accordance with the terms and conditions of the
Indenture will be released and relieved of any obligation under its Subsidiary
Guarantee.
Separate financial statements of the Subsidiary Guarantors have not been
provided because the Subsidiary Guarantors are jointly and severally liable for
the obligations of the Issuers under the Exchange Notes and the aggregate
assets, earnings and equity of the Subsidiary Guarantors are substantially
equivalent to the consolidated assets, earnings and equity of the Company.
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CERTAIN COVENANTS
The Indenture will contain, among others, the covenants described below.
LIMITATION ON INDEBTEDNESS AND DISQUALIFIED EQUITY INTERESTS. The
Company will not, and will not permit any Restricted Subsidiary to, (a) create,
incur, assume, guarantee or in any manner become directly or indirectly liable
for the payment of (collectively, "incur") any Indebtedness (including any
Acquired Indebtedness, but excluding any Permitted Indebtedness), or (b) issue
any Disqualified Equity Interests, unless, on a pro forma basis after giving
effect to that incurrence or issuance and the application of the net proceeds
therefrom, the Company's Consolidated Fixed Charge Coverage Ratio for the four
most recent consecutive fiscal quarters of the Company prior to the date of the
proposed incurrence or issuance (and for which consolidated financial statements
are available) would be at least 2.0 to 1.0.
The Company will not, and will not permit Finance Corp. or any
Subsidiary Guarantor to, incur any Indebtedness that is expressly subordinated
to any other Indebtedness of the Company, Finance Corp. or such Subsidiary
Guarantor unless such Indebtedness by its terms is also expressly made
subordinated to the Exchange Notes, in the case of the Company or Finance Corp.,
or to the Subsidiary Guarantees, in the case of a Subsidiary Guarantor.
LIMITATION ON PREFERRED EQUITY INTERESTS OF SUBSIDIARIES. The Company
will not permit any Restricted Subsidiary to issue any Preferred Equity
Interests (other than to the Company or to a Wholly Owned Restricted Subsidiary)
or permit any Person (other than the Company or a Wholly Owned Restricted
Subsidiary) to own any Preferred Equity Interests of any Restricted Subsidiary.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, make any Restricted
Payment unless, at the time of and after giving effect to the proposed
Restricted Payment: (i) no Default or Event of Default has occurred and is
continuing; (ii) the Company and its Restricted Subsidiaries would be permitted
to incur at least $1.00 of additional Indebtedness not constituting Permitted
Indebtedness in accordance with the Consolidated Fixed Charge Coverage Ratio
test described under "-- Limitation on Indebtedness and Disqualified Equity
Interests" above; and (iii) the amount of that Restricted Payment, when added to
the aggregate amount of all other Restricted Payments made after the Issue Date,
does not exceed the sum (without duplication) of the following:
(a) 50% of the Consolidated Net Income (or, if Consolidated Net
Income is a loss, minus 100% of such loss) accrued on a cumulative basis
during the period beginning on January 1, 1998 and ending on the last
day of the Company's last fiscal quarter for which quarterly or annual
consolidated financial statements are available next preceding the date
of payment of the proposed Restricted Payment;
(b) the aggregate Net Cash Proceeds received by the Company after
the Issue Date from the issuance or sale (other than to any Restricted
Subsidiary) of Qualified Equity Interests of the Company or from the
issuance, sale or exercise of any options, warrants or rights to
purchase Qualified Equity Interests of the Company;
(c) the aggregate net cash proceeds received after the Issue Date
by the Company from the issuance of sale (other than to any of its
Restricted Subsidiaries) of Indebtedness or shares of Disqualified
Equity Interests that have been converted into or exchanged for
Qualified Equity Interests of the Company to the extent such
Indebtedness or Disqualified Equity Interests were originally sold for
cash, together with the aggregate cash received by the Company at the
time of such conversion or exchange; and
(d) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or repaid
for cash, the cash return of capital (to the extent not otherwise
included in Consolidated Net Income) with respect to that Restricted
Investment (less the cost of disposition, if any).
The foregoing provisions (ii) and (iii) will not prohibit: (i) the
payment of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration the payment would have complied with the provisions
of
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the Indenture; (ii) the redemption, repurchase, retirement or other acquisition
of any Qualified Equity Interests of the Company in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to any Restricted
Subsidiary) of, other Qualified Equity Interests of the Company; (iii) the
defeasance, redemption, repurchase or other retirement of Subordinated
Indebtedness in exchange for, or out of the proceeds of the substantially
concurrent issue and sale of, (a) Subordinated Indebtedness so long as the new
Subordinated Indebtedness has (1) an Average Life equal to or longer than the
Average Life of the Subordinated Indebtedness being defeased, redeemed,
repurchased or otherwise retired and (2) terms of subordination no less
favorable to the Holders of the Exchange Notes than those applicable to the
Subordinated Indebtedness being defeased, redeemed, repurchased or otherwise
retired or (b) Qualified Equity Interests of the Company (other than to any
Restricted Subsidiary); (iv) repurchases, acquisitions or retirements of shares
of Qualified Equity Interests of the Company deemed to occur upon the exercise
of stock options or similar rights issued under employee benefit plans of the
Company if such shares represent all or a portion of the exercise price or are
surrendered in connection with satisfying any Federal income tax obligations;
(v) the application by the Company of the net proceeds from the Offering in the
manner described in the third paragraph under the caption "Use of Proceeds" in
this Prospectus; (vi) Permitted Distributions in an amount which, when added to
the aggregate amount of all Permitted Distributions made after the Issue Date,
does not exceed the Permitted Distribution Amount accrued on a cumulative basis
during the period beginning on January 1, 1998 and ending on the last day of the
Company's last fiscal quarter for which quarterly or annual consolidated
financial statements are available next preceding the date of payment of such
Permitted Distribution; and (vii) Restricted Payments which, when added to the
aggregate amount of Restricted Payments previously or contemporaneously made
pursuant to this clause (vii) after the Issue Date, do not exceed $5.0 million.
The amounts referred to in clauses (i), (ii) and (iii)(b) of the
immediately preceding paragraph will be included as Restricted Payments in any
computation made pursuant to clause (iii) of the second preceding paragraph
PROVIDED, that any dividend paid pursuant to clause (i) of the immediately
preceding paragraph shall reduce the amount that would otherwise be available
under clause (iii) of the second preceding paragraph when declared, but not also
when subsequently paid pursuant to such clause (i), and the actions described in
clauses (iii)(a), (iv), (v), (vi) and (vii) of the immediately preceding
paragraph shall be Restricted Payments that shall be permitted to be made in
accordance with the immediately preceding paragraph and shall not reduce the
amount that would otherwise be available for Restricted Payments under clause
(iii) of the second preceding paragraph.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors, whose determination shall be conclusive)
on the date of the Restricted Payment of the asset(s) proposed to be transferred
by the Company or a Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than the date of making any Restricted Payment,
the Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted by and complies with the Indenture and
setting forth in reasonable detail the basis on which the required calculations
were computed, which calculations will be based upon the Company's latest
available financial statements. If the Company makes a Restricted Payment which,
at the time of the making of such Restricted Payment, would in the good faith
determination of the Company be permitted under the requirements of the
Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Net
Income of the Company for any period.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS OF RESTRICTED
SUBSIDIARIES. The Company (i) will not, and will not permit any Restricted
Subsidiary to, issue, sell or otherwise dispose of any Equity Interests of any
Restricted Subsidiary to any Person other than the Company or another Restricted
Subsidiary and (ii) will not permit any Person other than the Company or a
Restricted Subsidiary to own any Equity Interests of any Restricted Subsidiary.
This covenant will not restrict (i) dispositions of all of the Equity Interests
of a Restricted Subsidiary, but any such disposition would be subject to the
covenant described below under "Limitation on Asset Sales" or (ii) the ownership
by any Person of Equity Interests of a Restricted Subsidiary that were owned by
a Person at the time such Restricted Subsidiary became a Restricted Subsidiary
(including any Equity Interests issued as a result of a stock split, a dividend
of Equity Interests to holders of such Equity Interests, a recapitalization
affecting such Equity Interests, or similar event).
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company will not, and
will, not permit any Restricted Subsidiary to, directly or indirectly, enter
into, assume, guarantee or otherwise become liable with respect to any
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Sale/Leaseback Transaction unless (i) the Company would be permitted to incur
Indebtedness not constituting Permitted Indebtedness in accordance with the
Consolidated Fixed Charge Coverage Ratio test described under " -- Limitation on
Indebtedness and Disqualified Equity Interests" above in an amount equal to the
Attributable Indebtedness arising from the Sale/Leaseback Transaction, (ii) the
Company or the Restricted Subsidiary receives proceeds from the Sale/Leaseback
Transaction at least equal to the fair market value of the property or assets
subject thereto (as determined in good faith by the Board of Directors, whose
determination in good faith and evidenced by a Board Resolution will be
conclusive), (iii) the Company applies an amount in cash equal to the Net
Available Proceeds of the Sale/Leaseback Transaction in accordance with the
provisions of the covenant described under " Limitation on Asset Sales" below as
if the Sale/Leaseback Transaction were an Asset Sale and (iv) the Sale/Leaseback
Transaction would not result in a violation of the covenant described under "--
Limitation on Liens" below.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any Restricted Subsidiary to, enter into, renew or extend any
contract, agreement, transaction or arrangement with or for the benefit of an
Affiliate of the Company (including, without limitation, the sale, purchase or
lease of assets, property or services from or to any Affiliate of the Company)
(each of the foregoing, an "Affiliate Transaction") (i) on terms less favorable
to the Company or the Restricted Subsidiary, as the case may be, than would be
available in a comparable transaction with a Person not an Affiliate of the
Company or (ii) on terms that are not fair from a financial point of view to the
Company or the Restricted Subsidiary, as the case may be, in the event no
comparable transaction with a Person not an Affiliate of the Company is
available; PROVIDED, that the Company will not, and will not permit any
Restricted Subsidiary to, enter into, renew or extend any Affiliate Transaction
or series of related Affiliate Transactions involving aggregate payments, value,
remuneration or other consideration in excess of $1.0 million after the Issue
Date unless the prior approval thereof by the Board of Directors (including a
majority of the Disinterested Directors, if any) has been obtained and the
Company delivers to the Trustee an Officers' Certificate (i) certifying that the
Affiliate Transaction or series of related Affiliate Transactions complies with
the foregoing restriction and (ii) in the case of transactions other than
storage contracts, hub services contracts or similar contracts entered into in
the ordinary course of business, if the Affiliate Transaction or series of
related Affiliate Transactions involves aggregate payments, value, remuneration
or other consideration in excess of $5.0 million after the Issue Date, to which
is attached a copy of a written opinion of an Independent Financial Advisor
specializing or having a speciality in the type and subject matter of the
transaction or series of related transactions at issue, to the effect that such
transaction or series of related transactions is fair from a financial point of
view to the Company or the Restricted Subsidiary, as the case may be; PROVIDED,
HOWEVER, that the foregoing restriction will not apply to: (i) transactions
between or among (a) the Company and one or more of Wholly Owned Restricted
Subsidiaries or (b) Wholly Owned Restricted Subsidiaries; (ii) transactions
between the Company or any Restricted Subsidiary and any qualified employee
stock or equity ownership plan established for the benefit of the Company's
employees, or the establishment or maintenance of any such plan; (iii)
reasonable compensation and other benefit arrangements for the benefit of
Persons in their capacity as officers and employees of the Company (but not
Persons in their capacity as officers and employees of an Affiliate) and
directors, officers and employees of the General Partner of the Company, in each
case approved by the Board of Directors; (iv) transactions permitted by the
covenant described under " -- Limitation on Restricted Payments" above; (v)
Permitted Investments of the character described in clause (vi) of the
definition of Permitted Investments; (vi) making any indemnification or similar
payment to any director or officer (a) in accordance with the charter,
partnership agreement, bylaws, or other constituent document of the Company or
any Restricted Subsidiary, (b) under any indemnification agreement or (c) under
applicable law; or (vii) the transactions contemplated by the storage contracts,
as in effect on the date of the Indenture, between certain Restricted
Subsidiaries and the Principals which are described under the caption "Business
- --Description of Significant Contracts".
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume, affirm
or suffer to exist or become effective any Lien upon any of its property or
assets, whether owned on or acquired after the Issue Date, or upon any income,
profits or proceeds therefrom, or assign or otherwise convey any right to
receive income or profits therefrom, except Permitted Liens, unless prior to, or
contemporaneously therewith, the Exchange Notes (and, in the case of Liens upon
the property or assets of a Restricted Subsidiary, the Subsidiary Guarantee of
such Restricted Subsidiary) are equally and ratably secured with (or prior to)
the obligation or liability secured by that Lien; PROVIDED, HOWEVER, that if a
Lien is granted to secure Indebtedness and that Indebtedness is expressly
subordinated to the Exchange Notes or a Subsidiary Guarantee, the Lien securing
that Indebtedness must be expressly subordinated and junior to the Lien securing
the Exchange Notes or such Subsidiary
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Guarantee, as the case may be, with the same relative priority as such
Indebtedness has with respect to the Exchange Notes or the applicable Subsidiary
Guarantee. The incurrence of additional secured Indebtedness by the Company and
the Restricted Subsidiaries is subject to further limitations on the incurrence
of Indebtedness as described under " -- Limitation on Indebtedness and
Disqualified Equity Interests" above.
CHANGE OF CONTROL. If a Change of Control occurs, the Issuers must make
an offer to purchase all the then outstanding Exchange Notes (a "Change of
Control Offer") and purchase, on a business day (the "Change of Control Purchase
Date") not more than 60 nor less than 30 days following the date notice is
mailed, as provided below, all the then outstanding Exchange Notes validly
tendered pursuant to that Change of Control Offer and not withdrawn, at a
purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount thereof, together with accrued and unpaid interest thereon and
Liquidated Damages, if any, to the Change of Control Purchase Date. The Issuers
must keep the Change of Control Offer open for at least 20 business days (or
such longer period as is required by law) and until the close of business on the
fifth business day prior to the Change of Control Purchase Date.
To effect a Change of Control Offer, the Issuers will, not later than
the 30th day after a Change of Control occurs, send, by first class mail, to the
Trustee and each Holder a notice of the Change of Control Offer, which notice
will govern the terms of the Change of Control Offer and state the procedures
Holders must follow to accept the Change of Control Offer.
There can be no assurance the Issuers will have available funds
sufficient to fund the purchase of the Exchange Notes that might be tendered by
Holders seeking to accept a Change of Control Offer, if one is made. If a Change
of Control occurs at a time when the Issuers do not have available funds
sufficient to pay the Change of Control Purchase Price for all the Exchange
Notes tendered by Holders seeking to accept the Change of Control Offer, an
Event of Default would occur under the Indenture. The occurrence of the events
constituting a Change of Control under the Indenture may result in an event of
default under the New Credit Facility or in respect of other Indebtedness of the
Company and its Subsidiaries and, consequently, the lenders thereof may have the
right to require repayment of such Indebtedness in full and to foreclose on the
collateral, if any, securing such Indebtedness if such repayment is not made.
The Issuers will not be required to make a Change of Control Offer
following the occurrence of a Change of Control if another Person (i) makes the
Change of Control Offer (a) at the same purchase price, (b) at the same time and
(c) otherwise in substantial compliance with the requirements applicable to a
Change of Control offer to be made by the Issuers and (ii) purchases all
Exchange Notes validly tendered and not withdrawn under that Person's Change of
Control Offer. The existence of a Holder's right to require, subject to certain
conditions, the Issuers to repurchase its Exchange Notes following the
occurrence of a Change of Control may deter a third party from acquiring the
Company in a transaction that constitutes, or results in, a Change of Control.
The Issuers will be obligated to comply with Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any other
securities laws and regulations thereunder, if applicable, if a Change of
Control occurs and the Issuers are required to purchase Exchange Notes as
described above.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any
Restricted Subsidiary to, consummate any Asset Sale unless (i) the Company or
the Restricted Subsidiary, as the case may be, receives consideration at the
time of the Asset Sale at least equal to the fair market value of the assets and
properties sold or otherwise disposed of pursuant to the Asset Sale (as
determined by the Board of Directors, whose determination in good faith will be
conclusive and evidenced by a Board Resolution), (ii) at least 80% of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, in respect of the Asset Sale consists of cash or Cash Equivalents and
(iii) the Company delivers to the Trustee an Officers' Certificate certifying
that the Asset Sale complies with clauses (i) and (ii) of this sentence. The
amount (without duplication) of any Indebtedness (other than Subordinated
Indebtedness) of the Company or any Restricted Subsidiary that is expressly
assumed by the transferee in an Asset Sale and with respect to which the Company
or the Restricted Subsidiary, as the case may be, is unconditionally released by
the holder of that Indebtedness, will be deemed (i) to be cash or Cash
Equivalents for purposes of clause (ii) of the preceding sentence and (ii) to
constitute a repayment of, and a permanent reduction in, the amount of that
Indebtedness for purposes of the following paragraph. If at any time any
non-cash consideration received by the Company or any Restricted Subsidiary, as
the case may be, in connection with any Asset Sale is converted into or sold or
otherwise
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disposed of for cash (other than interest received with respect to any such
non-cash consideration) or Cash Equivalents, then such conversion or disposition
will constitute an Asset Sale and the Net Available Proceeds therefrom must be
applied in accordance with this covenant. A transfer of assets by the Company to
a Wholly Owned Restricted Subsidiary or by a Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary will not constitute an
Asset Sale, and a transfer of assets that constitutes a Restricted Investment
and that is permitted under the covenant described under "-- Limitation on
Restricted Payments" above will not constitute an Asset Sale.
If the Company or any Restricted Subsidiary consummates an Asset Sale,
the Company or that Restricted Subsidiary, as the case may be, may either, no
later than 365 days after that Asset Sale, (i) apply all or any of the Net
Available Proceeds therefrom to repay Indebtedness (other than Subordinated
Indebtedness) of the Company or any Restricted Subsidiary, provided, in each
case, that the related loan commitment (if any) is thereby permanently reduced
by the amount of the Indebtedness so repaid or (ii) invest all or any part of
the Net Available Proceeds therefrom in properties or assets that replace the
properties or assets that were the subject of the Asset Sale or in other
properties or assets that are being, or will be, used in the business of the
Company and the Restricted Subsidiaries. The amount of the Net Available
Proceeds not applied or invested as provided in this paragraph will constitute
"Excess Proceeds." Pending application of such Net Available Proceeds pursuant
to this paragraph, the Company or such Restricted Subsidiary may invest such Net
Available Proceeds in Cash Equivalents or may apply such Net Available Proceeds
to temporarily reduce amounts outstanding under the Working Capital Agreement.
If substantially all (but not all) the property and assets of the
Company and its Restricted Subsidiaries are transferred as an entirety to a
Person in a transaction permitted under the covenant described under "-- Merger,
Consolidation and Sale of Assets" below, and the Company or a Restricted
Subsidiary receives cash or Cash Equivalents in such transaction, then the
successor entity will be deemed to have sold the properties and assets of the
Company and its Subsidiaries not so transferred for purposes of this covenant
and cash at least equal to the fair market value of the assets deemed to be sold
must be applied in accordance with the preceding paragraph.
NET PROCEEDS OFFER. When the aggregate amount of Excess Proceeds from
one or more Asset Sales equals or exceeds $5.0 million, the Company must make an
offer to purchase, from all Holders of the then outstanding Exchange Notes and
the holders of any then outstanding Pari Passu Indebtedness required to be
repurchased or repaid on a permanent basis in connection with an Asset Sale, an
aggregate principal amount of Exchange Notes and any then outstanding Pari Passu
Indebtedness equal to such Excess Proceeds as follows:
(i)(A) The Company must make an offer to purchase (a "Net
Proceeds Offer") from all Holders of the Exchange Notes in accordance
with the procedures set forth in the Indenture the maximum aggregate
principal amount (expressed as a multiple of $ 1,000) of Exchange Notes
that may be purchased out of the amount (the "Payment Amount") of such
Excess Proceeds, multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Exchange Notes and the denominator
of which is the sum of the outstanding principal amount of the Exchange
Notes and such Pari Passu Indebtedness, if any, (subject to proration in
the event such amount is less than the aggregate Offered Price (as
defined below) of all Exchange Notes tendered), and (B) to the extent
required by such Pari Passu Indebtedness and provided there is a
permanent reduction in the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase Pari Passu
Indebtedness (a "Pari Passu Indebtedness Offer") in an amount (the "Pari
Passu Indebtedness Amount") equal to the excess of the Excess Proceeds
over the Payment Amount;
(ii) The offer price for the Exchange Notes will be payable in
cash in an amount equal to 100% of the principal amount of the Exchange
Notes tendered pursuant to a Net Proceeds Offer, together with accrued
and unpaid interest thereon and Liquidated Damages, if any, to the date
that Net Proceeds Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture. To the extent
that the aggregate Offered Price of Exchange Notes tendered pursuant to
a Net Proceeds Offer is less than the Payment Amount relating thereto or
the aggregate amount of the Pari Passu Indebtedness that is purchased or
repaid pursuant to the Pari Passu Indebtedness Offer is less than the
Pari Passu Indebtedness Amount (such shortfall constituting a "Net
Proceeds Deficiency"), subject to the limitations of the covenant
described under " -- Limitation on Restricted Payments" above, the
Company may use any or all of such Net Proceeds Deficiency for general
business purposes;
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(iii) If the aggregate Offered Price of Exchange Notes validly
tendered and not withdrawn by Holders thereof exceeds the Payment
Amount, the Trustee will select the Exchange Notes to be purchased on a
PRO RATA basis in accordance with the relative aggregate principal
amounts of the Exchange Notes so tendered and not withdrawn; and
(iv) When a Net Proceeds Offer and the Pari Passu Indebtedness
Offer are completed, the amount of Excess Proceeds will be zero.
The Company will not, and will not permit any Restricted Subsidiary to,
enter into or suffer to exist any agreement that would place any restriction of
any kind (other than pursuant to law or regulation and other than the terms of
any agreement relating to Pari Passu Indebtedness requiring the making of a Pari
Passu Indebtedness Offer consistent with the foregoing) on the ability of the
Company to make a Net Proceeds Offer following any Asset Sale. The Company will
comply with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder, if applicable, if an Asset Sale occurs and the Company
is required to purchase Exchange Notes as described above.
The events that require a Net Proceeds Offer in connection with certain
asset sales under the Indenture may also require a Pari Passu Indebtedness Offer
or constitute events of defaults under the New Credit Facility or other
Indebtedness of the Company. Such events may permit the lenders under such debt
instruments to accelerate the Indebtedness and, if the Indebtedness is not paid,
to foreclose on their collateral which could ultimately result in a sale of
substantially all the assets of the Company to satisfy the Indebtedness, thereby
limiting the Company's ability to raise cash to repurchase the Exchange Notes
and reducing the practical benefit to the holders of the Exchange Notes of the
offer to purchase provisions contained in the Indenture.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES. The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or allow to become effective any Payment Restriction with
respect to any Restricted Subsidiary, except for any such Payment Restriction
existing under or by reason of (i) applicable law, (ii) customary non-assignment
provisions in leases or other contracts entered into in the ordinary course of
business, (iii) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired, (iv)
customary restrictions imposed on the transfer of copyrighted or patented
materials, (v) the entering into of a contract for the sale or other disposition
of assets, directly or indirectly, so long as such restrictions do not extend to
assets that are not subject to such sale or other disposition, (vi) the terms of
any agreement evidencing any Indebtedness of Restricted Subsidiaries that was
permitted by the Indenture to be incurred that only restrict the transfer of the
assets purchased with the proceeds of such Indebtedness, (vii) the terms of any
merger agreement, stock purchase agreement, asset sale agreement or similar
agreement that limit the transfer of properties and assets pending consummation
of the subject transaction, (viii) Permitted Liens which are customary
limitations on the transfer of collateral and (ix) the terms of any agreement
evidencing any Acquired Indebtedness that was permitted by the Indenture to be
incurred, provided that such Payment Restriction only applies to assets that
were subject to such restrictions prior to the acquisition of such assets by the
Company or any Restricted Subsidiary.
LIMITATION ON CONDUCT OF BUSINESS. The Company will not, and will not
permit any Restricted Subsidiary to, engage in the conduct of any business other
than any Related Business.
RESTRICTIONS ON NATURE OF DEBT AND ACTIVITIES OF FINANCE CORP. In
addition to the restrictions set forth under "Limitation on Indebtedness and
Disqualified Equity Interests" above, Finance Corp. may not incur any
Indebtedness unless (i) the Company is a co-obligor or guarantor of such
Indebtedness or (ii) the net proceeds of such Indebtedness are lent to the
Company, used to acquire debt securities of the Company or used directly or
indirectly to refinance or discharge Indebtedness permitted under the foregoing
limitations. Finance Corp. may not engage in any business not related directly
or indirectly to obtaining money or arranging financing for the Company.
FUTURE DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The
foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by the designation by the Company of any existing or future Subsidiary
of the Company, other than Finance Corp., as an Unrestricted Subsidiary. Finance
Corp. will be required to remain designated as a Restricted Subsidiary.
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The definition of "Unrestricted Subsidiary" set forth under the caption "--
Certain Definitions" below describes the circumstances under which the Board of
Directors may designate a Subsidiary of the Company as an Unrestricted
Subsidiary. Any Investment made by the Company or any Restricted Subsidiary in a
Subsidiary that is redesignated from a Restricted Subsidiary to an Unrestricted
Subsidiary will be subject to the covenant described under "-- Limitation on
Restricted Payments" above and will be treated as a Restricted Payment (to the
extent not previously included as a Restricted Payment) made on the day of
redesignation in an amount equal to the greater of (i) the fair market value (as
determined by the Board of Directors in good faith) of the Equity Interests of
such redesignated Subsidiary held by the Company and its Restricted Subsidiaries
on that date and (ii) the amount of the Investments determined in accordance
with GAAP made by the Company and its Restricted Subsidiaries in that
redesignated Subsidiary.
ADDITIONAL SUBSIDIARY GUARANTORS. If the Company or any Restricted
Subsidiary acquires or creates another Subsidiary of the Company after the Issue
Date, that newly acquired or created Subsidiary must execute a Subsidiary
Guarantee and deliver an Opinion of Counsel, in accordance with the terms of the
Indenture, unless the Board of Directors has duly designated that Subsidiary as
an Unrestricted Subsidiary in accordance with the definition of "Unrestricted
Subsidiary" under the caption "-- Certain Definitions" below.
ADDITIONAL COVENANTS. The Indenture also contains covenants with respect
to the following matters: (i) payment of principal, premium, if any, and
interest and Liquidated Damages, if any; (ii) maintenance of an office or agency
in the City of New York; (iii) arrangements regarding the handling of money held
in trust; (iv) maintenance of corporate existence; (v) payment of taxes and
other claims; and (vi) maintenance of properties.
REPORTS. As a result of the filing of the Exchange Offer Registration
Statement with the Commission, the Issuers will become subject to the
informational requirements of Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith, will be
required to file periodic reports and other information with the Commission for
so long as they are subject to such requirements. In addition, MHP Storage has
agreed that, whether or not it is required to do so by the rules and regulations
of the Commission, it will file with the Commission (unless the Commission would
not accept such filing) and distribute to holders of the Notes, copies of the
annual reports and quarterly reports and other information, documents and
reports that MHP Storage would be required to file with the Commission pursuant
to Section 13 of the Exchange Act if it were subject to such requirements. The
Company also will (i) file with the Trustee (with exhibits), and provide to each
Holder (without exhibits), without cost to that Holder, copies of such reports
and documents within 15 days after the date on which the Company files such
reports and documents with the SEC and (ii) if filing such reports and documents
with the SEC is not accepted by the SEC or is prohibited under the Exchange Act,
supply at its cost copies of such reports and documents (including any exhibits
thereto) to any Holder promptly on its written request. For so long as the Old
Notes remain outstanding, the Issuers and the Subsidiary Guarantors will also
furnish to the Holders and beneficial holders of Old Notes and to prospective
purchasers of Old Notes designated by the Holders of Transfer Restricted
Securities (as defined in the Registration Rights Agreement) and to
broker-dealers, on their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Company will not, in any single transaction or series of related
transactions, consolidate or merge with any other Person, or sell, assign,
convey, transfer, lease or otherwise dispose of the properties and assets of the
Company and the Restricted Subsidiaries on a consolidated basis substantially as
an entirety to any Person or group of Persons that are Affiliates of each other
(an "Affiliated Group"), and the Company will not permit any of the Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
the sale, assignment, conveyance, transfer, lease or other disposition of the
properties and assets of the Company and the Restricted Subsidiaries on a
consolidated basis substantially as an entirety to any other Person or
Affiliated Group, unless: (i) either (a) if the transaction is a merger, the
Company will be the surviving Person of that merger, or (b) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person or Affiliated Group that acquires the properties and assets
of the Company and the Restricted Subsidiaries on a consolidated basis
substantially as an entirety (any such surviving Person or acquiring Person or
member of an acquiring Affiliated Group being the "Surviving Entity") is a
corporation, limited liability company,
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partnership or similar entity organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia and
expressly assumes by a supplemental indenture to the Indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company or the Restricted Subsidiary, as the case may be,
with respect to the Exchange Notes and the Indenture, including with respect to
any Restricted Subsidiary that is a Subsidiary Guarantor, the obligations under
the Subsidiary Guarantees, and, in any case, the Indenture remains in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or any Restricted
Subsidiary that becomes an obligation of the Company or any Restricted
Subsidiary in connection with or as a result of such transaction or transactions
as having been incurred at the time of such transaction or transactions), no
Default or Event of Default has occurred and is continuing; (iii) except in the
case of the consolidation or merger of (x) the Company with or into a Restricted
Subsidiary or any Restricted Subsidiary with or into the Company or another
Restricted Subsidiary or (y) the Company with or into any Person that has no
Indebtedness outstanding, immediately before and immediately after giving effect
to such transaction or series of transactions on a pro forma basis (assuming
that the transaction or series of transactions occurred on the first day of the
most recent period of four consecutive fiscal quarters of the Company prior to
the consummation of such transaction or series of transactions for which
consolidated financial statements of the Company are available, with the
appropriate adjustments with respect to the transaction or transactions being
included in such pro forma calculation to the extent permitted by Regulation
S-X), the Company (or the Surviving Entity if the Company is not the continuing
obligor under the Indenture) could incur at least $1.00 of additional
Indebtedness not constituting Permitted Indebtedness in accordance with the
Consolidated Fixed Charge Coverage Ratio test described under "-- Certain
Covenants -- Limitation on Indebtedness and Disqualified Equity Interests"
above; (iv) if any of the properties or assets of the Company or any Restricted
Subsidiary would on such transaction or series of transactions become subject to
any Lien (other than a Permitted Lien), the creation and imposition of that Lien
complies with the covenant described under "-- Certain Covenants -- Limitation
on Liens" above; (v) each Subsidiary Guarantor, unless it is the other party to
the transaction or series of transactions, confirms by amendment to its
Subsidiary Guarantee that its guarantee of the Exchange Notes will apply to the
obligations of the Company (or the Surviving Entity if the Company is not the
continuing obligor tinder the Indenture) under the Exchange Notes and the
Indenture; and (vi) the Company (or the Surviving Entity if the Company is not
the continuing obligor under the Indenture) delivers to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate and
an Opinion of Counsel, each stating that such transaction or series of
transactions and any supplemental indenture in respect thereof comply with the
requirements under the Indenture and that all conditions precedent in the
Indenture relating to such transaction or series of transactions have been
satisfied.
When any consolidation or merger or any sale, assignment, lease,
conveyance, transfer or other disposition of the properties and assets of the
Company and its Restricted Subsidiaries on a consolidated basis substantially as
an entirety becomes effective in accordance with the foregoing in which the
Company is not the Surviving Entity, the Surviving Entity will succeed to, and
be substituted for, and may exercise every right and power of, the Company under
the Indenture with the same effect as if the Surviving Entity had been named as
the Company in the Indenture, and thereafter the Company, except in the case of
a lease, will be discharged from all obligations and covenants under the
Indenture and the Exchange Notes and may be liquidated and dissolved.
Upon the effectiveness of any such transaction, subject to the
satisfaction of the conditions of clause (ii) and the other clauses of the
second preceding paragraph, any Person that was a Restricted Subsidiary of the
Company immediately prior to such transaction shall be a Restricted Subsidiary
and each other Subsidiary of the Surviving Entity shall be an Unrestricted
Subsidiary unless designated a Restricted Subsidiary (subject, in each case, to
future redesignation as described above).
The consolidation, merger and sale of substantially all the assets of a
Subsidiary Guarantor are also limited by the provisions described under "--
Subsidiary Guarantees". Finance Corp. may not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all of its assets to,
any person unless (i) the resulting, surviving or transferee person is a
corporation that is a Wholly Owned Subsidiary and assumes the obligations of
Finance Corp. under the Notes and the Indenture, (ii) immediately after giving
effect to such transaction, no Event of Default has occurred and is continuing,
(iii) immediately after giving effect to such transaction, the resulting,
surviving or transferee person would be able to issue an additional $1.00 of
Debt, not constituting Permitted Indebtedness, pursuant to the first sentence
under "Limitation on Indebtedness and Disqualified Equity Interests"; and (iv)
Finance Corp. delivers to the
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Trustee an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) any default in the payment of the principal of or premium, if
any, on any of the Exchange Notes, whether such payment is due at Stated
Maturity or on redemption, repurchase pursuant to a Change of Control
Offer or a Net Proceeds Offer, acceleration or otherwise; or
(ii) any default in the payment of any installment of interest or
Liquidated Damages, if any, on any Exchange Note, when due, and the
continuance of that default for a period of 30 days; or
(iii) any default in the performance or breach by the Company or
any Restricted Subsidiary of the covenants described under " -- Merger,
Consolidation and Sale of Assets" above, or any failure of the Issuers
to make or consummate either a Change of Control Offer, or any failure
of the Company to make or consummate a Net Proceeds Offer, in accordance
with the applicable provisions of the Indenture; or
(iv) any failure of the Company, Finance Corp. or any Subsidiary
Guarantor to perform or observe any other term, covenant or agreement
applicable to it and contained in the Exchange Notes, the Indenture
(other than a default specified in clause (i), (ii) or (iii) above) or
the Subsidiary Guarantees, as the case may be, for a period of 30 days
after written notice of that failure is given (a) to the Company,
Finance Corp. and the Subsidiary Guarantor, by the Trustee or (b) to the
Company, Finance Corp., the Subsidiary Guarantor and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Exchange
Notes then outstanding; or
(v) the occurrence and continuation beyond any applicable grace
period of any default in any payment of the principal of, premium, if
any, or interest on any Indebtedness of the Company (other than the
Exchange Notes or any Non-Recourse Purchase Money Indebtedness) or any
Restricted Subsidiary for money borrowed when due, or any other default
resulting in acceleration of any Indebtedness (other than Non-Recourse
Purchase Money Indebtedness) of the Company or any Restricted Subsidiary
for money borrowed, provided, that the aggregate principal amount of
such Indebtedness exceeds $5.0 million; or
(vi) one or more final judgments or orders rendered against the
Company or any Restricted Subsidiary that are unsatisfied and require
the payment in money, either individually or in an aggregate amount, in
excess of $5.0 million over the coverage of applicable insurance
policies are not paid, discharged or stayed for a period of 60 days; or
(vii) certain events of bankruptcy or insolvency with respect to
the Company or any Restricted Subsidiary; or
(viii) except as permitted by the Indenture and the Exchange
Notes, the cessation of the effectiveness of any Subsidiary Guarantee or
the repudiation by any Subsidiary Guarantor (or by any Person acting on
behalf of any Subsidiary Guarantor) of its obligations under its
Subsidiary Guarantee.
If an Event of Default (other than one of the types described in clause
(vii) above) occurs and is continuing, the Trustee, by written notice to the
Company, or the Holders of at least 25% in aggregate principal amount of the
Exchange Notes then outstanding by written notice to the Trustee and the
Company, may, and the Trustee on the request of the Holders of not less than 25%
in aggregate principal amount of the Exchange Notes then outstanding will,
declare the principal of and premium, if any, accrued and unpaid interest and
Liquidated Damages, if any, on all of the Exchange Notes due and payable
immediately, on which declaration all amounts payable in respect of the Exchange
Notes will be immediately due and payable. If an Event of Default of any type
described in clause (vii) above occurs and is continuing, then the principal of
and premium, if any, and accrued and unpaid interest and Liquidated Damages,
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if any, on all Exchange Notes will become and be immediately due and payable, to
the extent permitted by applicable law, without any declaration, notice or other
act on the part of the Trustee or any Holder.
After a declaration of acceleration under the Indenture, but before the
Trustee obtains a judgment or decree for payment of the money due, the Holders
of a majority in aggregate principal amount of the outstanding Exchange Notes,
by written notice to the Company and the Trustee, may, under certain
circumstances, rescind and annul that declaration and its consequences if all
Events of Default, other than the nonpayment of principal of and premium, if
any, or interest and Liquidated Damages, if any, on the Exchange Notes that has
become due solely because of that declaration, have been cured or waived. No
such rescission will affect any subsequent Default or Event of Default or impair
any right consequent thereto.
No Holder will have any right to institute any proceeding with respect
to the Indenture or any remedy thereunder, unless (i) that Holder has notified
the Trustee of a continuing Event of Default and the Holders of at least 25% in
aggregate principal amount of the outstanding Exchange Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute that
proceeding as Trustee under the Exchange Notes and the Indenture, (ii) the
Trustee has failed to institute that proceeding within 60 days after receipt of
that notice and offer and (iii) the Trustee, within that 60-day period, has not
received directions inconsistent with that written request by Holders of a
majority in aggregate principal amount of the outstanding Exchange Notes. These
limitations will not apply, however, to a suit instituted by any Holder to
enforce the payment of the principal of and premium, if any, interest or
Liquidated Damages, if any, on that Holder's Exchange Note on or after the
respective due dates expressed in that Exchange Note or in the Registration
Rights Agreement described below.
The Holders of a majority in principal amount of the Exchange Notes may
waive any existing Default or Event of Default under the Indenture and its
consequences, except a default (i) in the payment of the principal of or
premium, if any, interest or Liquidated Damages, if any, on any Exchange Notes
or (ii) in respect of any provision that cannot be modified or amended without
the consent of the Holder of each Exchange Note.
The Company has agreed (i) to furnish to the Trustee annual and
quarterly statements as to the performance by the Company and Finance Corp. of
their obligations under the Indenture and as to any default in that performance
and (ii) to notify the Trustee within 30 days after Senior Management becomes
aware of any Default or Event of Default.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Issuers may, at the Company's option and at any time, terminate
their obligations respecting the outstanding Exchange Notes (that action being a
"legal defeasance"). If legal defeasance occurs, the Issuers will be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Exchange Notes and to have been discharged from all their other obligations with
respect to the Exchange Notes (and the Subsidiary Guarantors will be deemed to
be released from the Subsidiary Guarantees), except for (i) the rights of
Holders to receive payment, from the trust described below in respect of the
principal of and premium, if any, interest and Liquidated Damages, if any, on
their outstanding Exchange Notes when those payments are due, (ii) the Issuers'
obligations to replace any temporary Exchange Notes, register the transfer or
exchange of any Exchange Notes, replace mutilated, destroyed, lost or stolen
Exchange Notes and maintain an office or agency for payments in respect of the
Exchange Notes, (iii) the rights, powers, trusts, duties and immunities of the
Trustee and (iv) the legal defeasance provisions of the Indenture. In addition,
the Company may, at its option and at any time, elect to terminate its
obligation to comply with certain covenants in the Indenture, some of which are
described under " -- Certain Covenants" above, and any omission to comply with
those covenants will not constitute a Default or an Event of Default respecting
the Exchange Notes (that action being a "covenant defeasance"). If covenant
defeasance occurs, certain events (not including nonpayment, bankruptcy,
insolvency and reorganization events) described under "Events of Default" will
no longer constitute Events of Default respecting the Exchange Notes.
In order to exercise either the legal defeasance or the covenant
defeasance option: (i) the Issuers must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient,
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in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium, if any, interest and
Liquidated Damages, if any, on the outstanding Exchange Notes to redemption or
maturity; (h) the Company must deliver to the Trustee an Opinion of Counsel to
the effect that the Holders of the outstanding Exchange Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such legal
defeasance or 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 legal defeasance or covenant defeasance had not occurred (in
the case of legal defeasance, this opinion must refer to and be based on a
published ruling of the Internal Revenue Service or a change in applicable
federal income tax laws); (iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clauses
(vii) and (viii) under the first paragraph of "-- Events of Default" above are
concerned, at any time during the period ending on the 91st day after the date
of deposit; (iv) such legal defeasance or covenant defeasance must not cause the
Trustee to have a conflicting interest under the Indenture or the Trust
Indenture Act with respect to any securities of the Company; (v) such legal
defeasance or covenant defeasance will not result in a breach or violation of,
or constitute a default under, any material agreement or instrument to which the
Company or any Restricted Subsidiary is a party or by which the Company or any
Restricted Subsidiary is bound; (vi) the Company must deliver to the Trustee an
Opinion of Counsel experienced in bankruptcy matters to the effect that the use
of the trust funds to pay the principal of and premium, if any, interest and
Liquidated Damages, if any, on the outstanding Exchange Notes would not be
avoidable as a preferential payment under Section 547 of the Bankruptcy Law or
recoverable under Section 550 of the Bankruptcy Law in the event the Company or
Finance Corp. became a debtor in a proceeding commenced thereunder; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Issuers with the intent of preferring the Holders
over other creditors of the Company and Finance Corp. with the intent of
defeating, hindering, delaying or defrauding creditors of the Company, Finance
Corp. or others; and (viii) the Company must deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel, satisfactory to the Trustee, each stating
that all conditions precedent under the Indenture to either legal defeasance or
covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes when: (i) either (a) all the Exchange Notes
theretofore authenticated and delivered (except lost, stolen, mutilated or
destroyed Exchange Notes that have been replaced or paid and Exchange Notes for
whose payment money or certain U.S. Government Obligations have been deposited
in trust or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the Trustee
for cancellation or (b) all Exchange Notes not theretofore delivered to the
Trustee for cancellation have become due and payable or will become due and
payable at their Stated Maturity within one year, or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the serving of notice of redemption by the Trustee in the name, and at the
expense, of the Issuers, and the Issuers have irrevocably deposited or caused to
be deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Exchange Notes not theretofore delivered to the
Trustee for cancellation, for principal of and premium, if any, interest and
Liquidated Damages, if any, on the Exchange Notes to the date of deposit (in the
case of Exchange Notes that have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be, together with instructions from
the Company irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Issuers have
paid all other sums payable under the Indenture by the Issuers; and (iii) the
Company has delivered to the Trustee an Officers' Certificate stating and an
Opinion of Counsel opining that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
AMENDMENTS AND WAIVERS
From time to time, the Issuers and the Trustee may, without the consent
of any Holder, amend or supplement the Indenture or the Exchange Notes to: (i)
evidence the succession of another Person to the Company, Finance Corp. or any
Subsidiary Guarantor and the assumption by any such successor of the covenants
of the Company, Finance Corp. or the Subsidiary Guarantor, as the case may be,
in the Indenture and the Exchange Notes; (ii) add to the covenants of the
Company or Finance Corp. for the benefit of Holders; (iii) comply with any
requirement of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act; (iv) secure the Exchange Notes; (v)
provide
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for uncertificated Exchange Notes in addition to or in place of certificated
Exchange Notes; (vi) reflect the release of any Subsidiary Guarantor from its
Subsidiary Guarantee or add any Subsidiary of the Company pursuant to and in the
manner provided by the Indenture; and (vii) cure any ambiguity or omission in
the Indenture or the Exchange Notes, correct or supplement any provision in the
Indenture or the Exchange Notes that may be defective or inconsistent with any
other provision in the Indenture or the Exchange Notes and make any other
provisions with respect to matters or questions arising under the Indenture;
provided, however, that no modification or amendment described in this clause
(vii) may adversely affect the interests of the Holders in any material respect.
Other amendments and modifications of the Indenture or the Exchange Notes may be
made by the Issuers and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the outstanding Exchange
Notes; provided, however, that no such modification or amendment may, without
the consent of the Holder of each outstanding Exchange Note affected thereby:
(i) change the Stated Maturity of the principal of, or any installment of
interest on, any Exchange Note or alter the provisions with respect to
redemption of the Exchange Notes; (ii) reduce the principal amount of or
premium, if any, interest or Liquidated Damages, if any, on any Exchange Note;
(iii) change the coin or currency in which principal of, premium, if any,
interest or Liquidated Damages, if any, on any Exchange Note is payable; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Exchange Note; (v) reduce the above-stated percentage of
aggregate principal amount of outstanding Exchange Notes necessary to modify or
amend the Indenture; (vi) reduce the percentage of aggregate principal amount of
outstanding Exchange Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults; (vii) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past Defaults or covenants, except as otherwise
specified, or the rights of any Holder to receive payments of principal of or
premium, if any, interest or Liquidated Damages, if any, on the Exchange Notes,
(viii) change the ranking of the Exchange Notes in a manner adverse to the
Holders or expressly subordinate in right of payment the Exchange Notes to any
other Indebtedness; (ix) amend, change or modify the obligation of the Issuers
to make and consummate a Change of Control Offer if a Change of Control occurs
or make and consummate a Net Proceeds Offer with respect to any Asset Sale or
modify any of the provisions or definitions in the Indenture insofar as they
relate thereto; or (x) release any security that may have been granted in
respect of the Exchange Notes except as expressly provided in the Indenture.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Exchange Notes may, on behalf of the Holders, of all Exchange
Notes, waive any past default under the Indenture, except a default in the
payment of principal of or premium, if any, interest or Liquidated Damages, if
any, on the Exchange Notes, or in respect of a covenant or provision that under
the Indenture cannot be modified or amended without the consent of the Holder of
each Exchange Note outstanding.
THE TRUSTEE
IBJ Schroder Bank & Trust Company will serve as Trustee under the
Indenture.
The Indenture (including provisions of the Trust Indenture Act
incorporated therein) will contain limitations on the rights of the Trustee
thereunder, if it becomes 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. The Company and certain of its
Affiliates may maintain banking, borrowing and other relations with the Trustee
and certain of its affiliates. The Trustee may own Exchange Notes. The Indenture
will permit the Trustee to engage in other transactions; provided, however, if
it acquires any conflicting interest (as defined in the Trust Indenture Act), it
must eliminate such conflict or resign.
The Trustee, prior to default, undertakes to perform only such duties as
are specifically set forth in the Indenture and, after default, is required to
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Trustee is
under no obligation to exercise any of the powers vested in it by the Indenture
at the request of any Holder of Exchange Notes, unless offered reasonable
indemnity by such Holder against the costs, expenses and liabilities which might
be incurred thereby. The Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it. The Indenture contains other provisions limiting the
responsibilities and liabilities of the Trustee.
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GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE
The Indenture and the Exchange Notes will be governed by the laws of the
State of New York, without regard to the principles of conflicts of law. The
Issuers and the Subsidiary Guarantors will expressly submit to the nonexclusive
jurisdiction of the State of New York and the U.S. federal courts sitting in The
City of New York for the purposes of any suit, action or proceeding with respect
to the Indenture, the Exchange Notes and the Subsidiary Guarantees and for
actions brought under federal or state securities laws with respect to the
Exchange Notes. The Issuers and the Subsidiary Guarantors will appoint CT
Corporation as their agent upon which process may be served in any such action
or proceeding with respect to the Indenture, the Exchange Notes or the
Subsidiary Guarantees.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person (i) existing, at the time that other Person
merges or consolidates with the specified Person or becomes a Restricted
Subsidiary of such specified Person, including Indebtedness incurred in
connection with, or in contemplation of, that other Person merging with or into
the specified Person or becoming a Restricted Subsidiary of that specified
Person or (ii) assumed in connection with an acquisition of properties or assets
from such Person. A specified Person will be deemed to incur Indebtedness
constituting its Acquired Indebtedness on the date (i) the obligor respecting
that Indebtedness merges or consolidates with the specified Person, (ii) the
obligor of that Indebtedness becomes a Restricted Subsidiary of that specified
Person or (iii) the specified Person assumes that Indebtedness.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the specified Person. For purposes of this
definition: (i) "control," when used with respect to any Person, means the power
to direct the management and policies of that 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; (ii) beneficial ownership at any time of 10% or more of the
outstanding voting common equity of a Person (including voting common equity
subject to being acquired pursuant to the exercise of options, warrants or other
rights exercisable within 60 days of that time) will be deemed to constitute
control of that Person at that time; and (iii) without limiting other Persons
who may be deemed to control a limited partnership, the general partner of a
limited partnership and each limited partner holding 10% or more of the limited
partnership interests in such limited partnership will be deemed to control such
limited partnership.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or a Wholly
Owned Restricted Subsidiary (including, without limitation, by means of a
Sale/Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (i) any Equity Interests of
any Restricted Subsidiary held by the Company or any other Restricted Subsidiary
or (ii) any other properties or assets of the Company or any Restricted
Subsidiary. Notwithstanding the preceding sentence, the following do not
constitute "Asset Sales": (i) transfers of cash, Cash Equivalents, accounts
receivable (including the sale of accounts receivable without recourse to the
Company or any Restricted Subsidiary pursuant to a bona fide factoring
arrangement with a Person not an Affiliate of the Company), inventories or other
properties or assets in the ordinary course of business and issuances of
Qualified Equity Interests of the Company; (ii) any transfer of properties or
assets (including Equity Interests) that is governed by, and made in accordance
with, the covenant described under "-- Merger, Consolidation and Sale of
Assets", the covenant described in the third paragraph under "-- Subsidiary
Guarantees" or the covenant described under "-- Certain Covenants -- Change in
Control" above; (iii) any transfer of properties or assets from the Company or a
Restricted Subsidiary to another Restricted Subsidiary or to any other Person if
such transfer to a Restricted Subsidiary or other Person is permitted under the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments" above; (iv) transfers of damaged, worn-out or obsolete equipment or
assets that, in the Company's reasonable judgment, are either (a) no longer used
or (b) no longer useful in the business of the Company and the Restricted
Subsidiaries; (v) the loan or sale of natural gas in the ordinary course of
business; and (vi) any transfer of property or assets in a single transaction or
a series of related transactions having a fair market value of less than
$500,000.
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"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable, whether or not accounted for as a
Capitalized Lease Obligation, and at any date as of which the amount thereof is
to be determined, the present value of the total net amount of lease payments
required to be paid by such Person under the lease during the primary term
thereof, without giving effect to any renewals at the option of the lessee,
discounted from the respective due dates thereof to the date of determination at
a rate per annum equal to the discount rate that would be applicable to a
Capitalized Lease Obligation with a like term in accordance with GAAP. As used
in the preceding sentence, the "net amount of lease payments" under any such
lease for any such period means the sum of lease, rental and other payments
required to be paid with respect to such period by the lessee thereunder,
excluding any amounts required to be paid by such lessee on account of
maintenance and repairs, insurance and taxes, assessments or similar charges. If
a lessee under any lease may terminate that lease by paying a penalty, the "net
amount of lease payments" under that lease will include the amount of that
penalty, but will exclude all lease payments after the first date on which that
lease may be so terminated.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (i) the sum of the products
of (a) the number of years (and any portion thereof) from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund or mandatory redemption
payment requirements) of that Indebtedness multiplied by (b) the amount of each
such principal payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 22 of the United States Code or any similar
or successor federal law in effect from time to time for the relief of debtors.
"Board of Directors" means, with respect to the Company, either the
board of directors of the Company or any duly authorized committee of such board
of directors, and, with respect to any Subsidiary, the board of directors of
such Subsidiary or any duly authorized committee of that board. When used in
this Prospectus, the term "Board of Directors" means the Board of Directors of
the Company unless the context requires otherwise. For this purpose, (i) if the
Company or a Subsidiary is a corporation, Board of Directors means the board of
directors of such corporation, (ii) if the Company or a Subsidiary is a limited
partnership, Board of Directors means the board of directors of the general
partner (or, if more than one, the managing general partner) of such partnership
(or, if such general partner is not a corporation, then the managers, trustees
or other body that govern the policies of such entity and has a function
corresponding to that of the board of directors of a corporation), or (iii) if
the Company or a Subsidiary is not a corporation or a limited partnership, the
managers, trustees or other body that govern the policies of such entity and has
a function corresponding to that of the board of directors of a corporation.
"Capitalized Lease Obligation" means, with respect to any Person, any
obligation of that Person to pay lease payments, rent or other amounts under a
lease of (or other similar agreement conveying the right to use) any property
(whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of the
Indenture, the amount of that obligation at any date will be the capitalized
amount thereof at that date, as determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable obligations with a maturity of
180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof; provided that
the full faith and credit of the United States of America is pledged in support
thereof; (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million or any commercial
bank that is organized under the laws of any country that is a member of the
Organization for Economic Cooperation and Development, and has total assets in
excess of $500 million or its equivalent in another currency; (iii) commercial
paper maturing no more than 180 days from the date of creation thereof issued by
a corporation that is not an Affiliate of the Company and is organized under the
laws of any state of the United States or the District of Columbia and rated at
least A-1 by Standard & Poor's Rating Group or at least P-1 by Moody's Investors
Service Inc.; (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any commercial bank meeting the specifications of clause (ii)
above; and (v) investments in money market or other mutual funds substantially
all of whose assets comprise securities of the types
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described in clauses (i) through (iv) above. For purposes of this definition,
the maturity of a security will be determined when it is acquired by the Company
or a Restricted Subsidiary.
"Change of Control" means the occurrence of any event or series of
events (whether or not otherwise in compliance with the provisions of the
Indenture) by which: (i) Market Hub Partners Storage, L.L.C., or a successor
entity at least a majority of the Voting Equity Interests of which are owned
directly or indirectly by the Principals, ceases to be the General Partner
having the primary responsibility of managing the Company; (ii) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
(other than the Principals) is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of a majority of the
total Voting Equity Interests of the Company or a majority of the Voting Equity
Interests of the General Partner; (iii) the Company consolidates with or merges
into another Person or any Person consolidates with, or merges into, the
Company, pursuant to a transaction in which the outstanding Voting Equity
Interests of the Company are changed into or exchanged for cash, securities or
other property or assets, other than any such transaction pursuant to which (a)
the outstanding Voting Equity Interests of the Company are changed into or
exchanged for Voting Equity Interests of the surviving or resulting Person that
are Qualified Equity Interests and (b) the beneficial owners (as defined in Rule
13d-3 under the Exchange Act) of the Voting Equity Interests of the Company
immediately prior to such transaction beneficially own, directly or indirectly,
not less than a majority of the Voting Equity Interests of the surviving or
resulting Person immediately after such transaction; (iv) the Company, either
individually or in conjunction with one or more Restricted Subsidiaries, sells,
assigns, conveys, transfers, leases or otherwise disposes of, or the Restricted
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of, the
properties and assets of the Company and its Restricted Subsidiaries
substantially as an entirety (either in one transaction or a series of related
transactions), including Equity Interests of the Restricted Subsidiaries, to any
Person (other than the Company or a Wholly Owned Restricted Subsidiary or an
entity majority-owned, directly or indirectly, by the Principals); (v) during
any consecutive two-year period (which period need not be calendar years),
individuals who at the beginning of that period constituted the Board of
Directors (together with any new directors designated by a Principal or whose
election was approved by a vote of two-thirds of the directors then still in
office who were either directors at the beginning of that 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
(vi) any plan or proposal for liquidation or dissolution of the Company is
approved by the vote or other consent of the holders of Equity Interests of the
Company.
"Common Equity Interests" of any Person means Equity Interests of that
Person that do not rank prior, as to the payment of dividends or other
distributions or the distribution of assets on any voluntary or involuntary
liquidation, dissolution or winding up of that Person, to Equity Interests of
any other class of that Person.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
period of four consecutive fiscal quarters of the Company (each such period of
four consecutive fiscal quarters, a "computation period"), the ratio of (i) the
sum of Consolidated Net Income, Consolidated Fixed Charges, Consolidated Income
Tax Expense and Consolidated Non-cash Charges of the Company and the Restricted
Subsidiaries, on a consolidated basis for that computation period, all
determined in accordance with GAAP, plus the Permitted Distribution Amount for
such period that is deducted in determining Consolidated Net Income for such
period in accordance with clause (ii) of the definition of Consolidated Net
Income, to (ii) Consolidated Fixed Charges for that computation period. For
purposes of this computation, acquisitions or dispositions that have been made
by the Company or any Restricted Subsidiary, including through mergers or
consolidations and including any related financing transactions, during the
computation period or subsequent to the computation period but on or prior to
the date of computation will be deemed to have occurred on the first day of the
computation period and will give pro forma effect to such acquisitions or
dispositions and any related financing transactions with appropriate
adjustments, without duplicative adjustments, to Consolidated Net Income,
Consolidated Fixed Charges, Consolidated Income Tax Expense, Consolidated
Non-cash Charges and the Permitted Distribution Amount. In each computation of
the Consolidated Fixed Charge Coverage Ratio, the computation will be made as of
the date Indebtedness (other than Permitted Indebtedness) is proposed to be
incurred or Disqualified Equity Interests are proposed to be issued (the
"determination date") for the then most recent computation period (the "current
period") on a pro forma basis assuming that (i) the Indebtedness to be incurred
or the Disqualified Equity Interests to be issued (and all other Indebtedness
incurred or Disqualified Equity Interests issued after the first day of the
current period through and including the determination date), and (if
applicable) the application of the net proceeds therefrom (and from any other
such Indebtedness or Disqualified Equity Interests), including to refinance
other Indebtedness, had been
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incurred, issued or applied, as the case may be, on the first day of the current
period and, in the case of Acquired Indebtedness, on the assumption that the
related transaction (whether by means of purchase, merger or otherwise) also had
occurred on the first day of the current period with the appropriate adjustments
with respect to such acquisition being included in such pro forma calculation
and (ii) any acquisition or disposition by the Company or any Restricted
Subsidiary of any properties or assets outside the ordinary course of business
and any related financing transactions, or any repayment of any principal amount
of any Indebtedness of the Company or any Restricted Subsidiary, in either case
since the first day of the current period through and including the
determination date, had been consummated on the first day of the current period.
The Consolidated Fixed Charges representing interest on Indebtedness outstanding
on any determination date and assumed in accordance with the preceding sentence
to have been outstanding throughout the then current period will be computed as
follows: (i) if that Indebtedness bears interest only at a floating rate, that
floating rate as of the determination date will be assumed to have been in
effect throughout that current period; (ii) if that Indebtedness bears interest,
at the option of the primary obligor, at either a floating rate or, for one or
more periods of varying durations, fixed rates, either that floating rate or, at
the option of the Company, that fixed rate for the longest period available to
the primary obligor, in each case as of the determination date, will be assumed
to have been in effect throughout that current period; (iii) if that
Indebtedness is incurred under a revolving credit facility, the principal amount
of that Indebtedness assumed to have been outstanding throughout that current
period will be the lesser of (a) the average daily outstanding principal balance
of that Indebtedness during that current period or such shorter period as
amounts have been available to be borrowed or reborrowed under that facility or
(b) the total revolving credit commitment under that facility as of the
determination date; and (iv) if (a) that Indebtedness bears interest at a
floating rate, (b) that floating rate is used pursuant to clause (i) or (ii) of
this sentence to determine the Consolidated Fixed Charges attributable to that
Indebtedness and (c) that interest is covered by agreements relating to Hedging
Obligations, that interest, to the extent so covered, will be assumed to have
accrued at the rate per annum resulting after giving effect to the operation of
those agreements.
"Consolidated Fixed Charges" means, for any period, without duplication,
(i) the remainder of the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for that period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, any amortization of debt
discount, the net cost under Hedging Obligations (including any amortization of
discounts), the interest portion of any deferred payment obligation constituting
Indebtedness, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and all accrued
interest, in each case to the extent attributable to that period, (b) if any
Indebtedness of any Person (other than the Company or a Restricted Subsidiary)
is guaranteed by the Company or any Restricted Subsidiary during that period,
the aggregate amount of interest paid (to the extent not accrued in a prior
period) or accrued by such other Person during that period attributable to any
such Indebtedness, in each case to the extent required by GAAP to be recognized
during that period as an expense of the Company or any Restricted Subsidiary,
(c) the aggregate amount of the interest component of Capitalized Lease
Obligations paid (to the extent not accrued in a prior period), accrued or
scheduled to be paid or accrued by the Company and the Restricted Subsidiaries
during that period and (d) the aggregate amount of dividends (except dividends
paid or payable in additional shares of Qualified Equity Interests) paid (to the
extent not accrued in a prior period) or accrued on Preferred Equity Interests
or Disqualified Equity Interests of the Company and the Restricted Subsidiaries,
to the extent such Preferred Equity Interests or Disqualified Equity Interests
are owned by Persons other than the Company or any Restricted Subsidiary, minus
(ii) to the extent included in clause (i) above, amortization of capitalized
debt issuance costs of the Company and the Restricted Subsidiaries during that
period.
"Consolidated Income Tax Expense" means, for any period, the provision,
if any, for federal, state, local and foreign income taxes (including state
franchise taxes accounted for as income taxes in accordance with GAAP) of the
Company and the Restricted Subsidiaries for the period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the remainder of (i)
consolidated net income (or loss) of the Company and the Restricted Subsidiaries
for such period as determined in accordance with GAAP, as adjusted by excluding,
without duplication, (a) net after-tax extraordinary gains or losses (less all
fees and expenses relating thereto), (b) if not treated as an extraordinary
item, the make whole or premium payment required to be paid upon the repayment
of the Secured Notes as contemplated under "Use of Proceeds" in this Prospectus
and related debt extinguishment costs, (c) net after-tax gains or losses (less
all fees and expenses relating thereto) attributable to Asset Sales, (d) net
income
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(or net loss) of any Person (other than the Company or any Restricted
Subsidiary) in which the Company or any Restricted Subsidiary has an ownership
interest, except to the extent of the amount of dividends or other distributions
actually paid to the Company or any Restricted Subsidiary in cash or property by
such other Person during that period (regardless of whether such cash dividends
or other distributions are attributable to net income (or net loss) of such
other Person during such period or during any prior period), (e) net income (or
net loss) of any Person combined with the Company or any Restricted Subsidiary
on a "pooling of interests" basis attributable to any period prior to the date
of combination, (f) net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of its net income is not at the date of determination
permitted, directly or indirectly, by operation of the terms of its charter,
partnership agreement or other organizational document or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or the holders of its Equity Interests,
and (g) income resulting from transfers of assets during such period from an
Unrestricted Subsidiary to the Company or any Restricted Subsidiary, minus (ii)
the Permitted Distribution Amount for such period. For purposes of clause (d)
above, the amount of any distribution of property or assets will be equal to the
lesser of the fair market value or net book value of that property or assets as
determined in good faith by the Board of Directors.
"Consolidated Tangible Assets" means, at any date, the total of all
assets appearing on a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of that date prepared in conformity with GAAP,
after deducting therefrom, without duplication of deductions, all amounts shown
on such balance sheet in respect of good will, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any thereof, or
similar intangibles, and any other items which are treated as intangibles in
conformity with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the Company
and the Restricted Subsidiaries that are deducted in computing Consolidated Net
Income for that period, all determined on a consolidated basis in accordance
with GAAP (excluding any such non-cash charge in the ordinary course of business
for which an accrual of or reserve for cash charges for any future period is
required).
"Default" means any event, act or condition that, after notice or
passage of time or both, would become an Event of Default.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have, and is not an employee of any Person
who has, any material direct or indirect financial interest (other than an
interest arising solely from the beneficial ownership of Equity Interests of the
Company) in or with respect to that transaction or series of transactions.
"Disqualified Equity Interests" of any specified Person means any Equity
Interests of the specified Person that, either by their terms, by the terms of
any security into which they are convertible or for which they are exchangeable
by contract or otherwise is, or on the happening of an event or passage of time
or both would be, (i) required to be redeemed or repurchased (whether
mandatorily or at the option of the holder thereof), other than a redemption or
repurchase effected solely through the issuance of Qualified Equity Interests of
the specified Person, by the specified Person or any of its Subsidiaries or by
the Company or any Restricted Subsidiary prior to the final Stated Maturity of
the Exchange Notes or (ii) convertible into or exchangeable, at any time prior
to the final Stated Maturity of the Exchange Notes, for any Indebtedness of the
specified Person or any of its Subsidiaries or of the Company or any Restricted
Subsidiary.
"Equity Interests" means, with respect to any Person, any and all
shares, general partner, limited partner, membership and other interests, units,
participation rights or other equivalents in the equity interests (however
designated) in that Person, and any rights (other than debt securities
convertible into an equity interest), warrants or options exercisable or
exchangeable for or convertible into such an equity interest in that Person.
"Event of Default" has the meaning set forth above under the caption "--
Events of Default" above.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the senior notes issued pursuant to the Exchange
Offer.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in (i) the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, (ii) the statements and pronouncements of the Financial Accounting
Standards Board or (iii) such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America.
"General Partner" means Market Hub Partners Storage, L.L.C., a Delaware
limited liability company, the general partner of the Company, and its
successors in such capacity.
"Guarantee" or "guarantee" means, as applied to any Indebtedness, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of that Indebtedness and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of that Indebtedness, including, without
limiting the foregoing, the payment of amounts drawn down under letters of
credit. When used as a verb, "guarantee" has a corresponding meaning.
"Hedging Obligation" means, at any time as to any Person, any obligation
of that Person at that time that is incurred (i) in the ordinary course of its
business pursuant to any exchange agreement, swap, option, forward sales
contract, future contracts or other similar agreement or arrangement designed to
protect against or manage the exposure of that Person or any of its Subsidiaries
to fluctuations in foreign currency exchange rates or in the price of energy
related commodities, and (ii) pursuant to any arrangement with any other Person
whereby, directly or indirectly, the specified Person is entitled to receive
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated national amount and includes, without limitation, interest
rate swaps, caps, floors, collars and other similar agreements or arrangements
designed to protect against or manage the exposure of the specified Person or
any of its Subsidiaries to fluctuations in interest rates.
"Holder" means a Person in whose name an Exchange Note is registered in
the Note Register.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all liabilities of that Person, contingent or otherwise, for borrowed money
or for the deferred purchase price of property, assets or services (excluding
any trade accounts payable and other accrued current liabilities incurred in the
ordinary course of business of that Person) and all liabilities of that Person
incurred in connection with any letters of credit, bankers' acceptances or other
similar credit transactions or any agreement to purchase, redeem, exchange,
convert or otherwise acquire for value any Equity Interests of that Person, or
any warrants, rights or options to acquire that Equity Interest, outstanding on
the Issue Date or thereafter, or any obligations arising out of the sale of
accounts receivable of that Person if, and to the extent, any of the foregoing
would appear as a liability on a balance sheet of that Person prepared in
accordance with GAAP; (ii) all obligations of that Person evidenced by bonds,
notes, debentures or other similar instruments, if, and to the extent, any of
the foregoing would appear as a liability on a balance sheet of that Person
prepared in accordance with GAAP; (iii) all obligations of that Person created
or arising under any conditional sale or other title retention agreement with
respect to property or assets acquired by that Person (even if the rights and
remedies of the seller or lender under such agreement in the event of a default
are limited to repossession or sale of such property or assets); (iv) the
Attributable Indebtedness of any Capitalized Lease Obligation of that Person;
(v) all obligations of the types described in the preceding clauses and all
dividends and other distributions, the payment of which is secured by (or for
which the holder of such obligations has an existing right, contingent or
otherwise, to be secured by) any Lien upon property (including, without
limitation, accounts and contract rights) owned by that Person, even though that
Person has not assumed or become liable for the payment of such Indebtedness
(the amount of such obligation being deemed to be the lesser of the value of
such property or the amount of the obligation so secured); (vi) the maximum
fixed redemption or repurchase price, if any, of all Disqualified Equity
Interests of that Person; (vii) all obligations of that Person under or in
respect of Hedging Obligations; and (viii) all Guarantees by that Person of
obligations of the types referred to in clauses (i) through (vii) of this
definition.
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"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is disinterested
and independent with respect to the Company and its Affiliates and, in the
reasonable judgment of a majority of the Disinterested Directors, is qualified
to perform the task for which it has been engaged.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Exchange Notes.
"Investment" means, with respect to any specified Person, (i) any direct
or indirect advance, loan, guarantee of Indebtedness or other extension of
credit or capital contribution by the specified Person to (by means of any
transfer of cash or other property or assets to others or any payment for
property, assets or services for the account or use of others) any other Person,
(ii) any purchase or acquisition by the specified Person of any Equity
Interests, bonds, notes, debentures or other securities (including derivatives)
or evidences of Indebtedness issued by any other Person and (iii) all other
items that would be classified as investments on a balance sheet of such Person
prepared in accordance with GAAP. The following are not "Investments": (i)
extensions of trade credit or other advances to customers on commercially
reasonable terms in accordance with normal trade practices or otherwise in the
ordinary course of business; (ii) Hedging Obligations, but only to the extent
that the same constitute Permitted Indebtedness; and (iii) endorsements of
negotiable instruments and documents in the ordinary course of business. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of such sale or disposition equal
to the fair market value of the Equity Interests of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means March 4, 1998, the date the Old Notes were initially
issued.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any property or assets of any kind. A Person will be deemed to own
subject to a Lien any property or assets that the Person has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Maturity" means, with respect to any Exchange Note, the date on which
any principal of that Exchange Note becomes due and payable as therein or in the
Indenture provided, whether at the Stated Maturity with respect to that
principal or on redemption, repurchase pursuant to a Change of Control Offer or
a Net Proceeds Offer, by declaration of acceleration or otherwise.
"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds therefrom in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, consultants, accountants and investment banks) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale
(after taking into account available tax credits or deductions and any tax
sharing arrangements), (iii) amounts required to be paid to any Person (other
than the Company or any Restricted Subsidiary) (a) owning a beneficial interest
in the properties or assets subject to the Asset Sale, (b) having a Lien on such
properties or assets or (c) requiring such payment as a condition to providing
any consent necessary to consummate the Asset Sale and (iv) appropriate amounts
to be provided by the Company or any Restricted Subsidiary, as the case may be,
as a reserve required in accordance with GAAP against any liabilities associated
with that Asset Sale and retained by the Company or any Restricted Subsidiary,
as the case may be, after that Asset Sale, including, without limitation,
pensions and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with that Asset Sale, all as reflected in an Officers' Certificate;
provided, however, that any amounts remaining after adjustments, revaluations or
liquidations of those reserves shall constitute Net Available Proceeds.
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"Net Cash Proceeds" means, with respect to any issuance or sale of
Qualified Equity Interests or other securities, the cash proceeds of that
issuance or sale net of the fees of attorneys and accountants, fees, discounts
or commissions of underwriters and placement agents and brokerage, consultant
and other fees and expenses actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Non-Recourse Purchase Money Indebtedness" means Indebtedness of the
Company or any Restricted Subsidiary that is incurred to finance the purchase of
any assets of the Company or any Restricted Subsidiary within 90 days of such
purchase, as long as (i) the amount of Indebtedness thereunder does not exceed
100% of the purchase cost of such assets, (ii) that purchase cost is or should
be included in "additions to property, plant and equipment" in accordance with
GAAP, (iii) such Indebtedness is nonrecourse to the Company, and its Restricted
Subsidiaries and all their respective assets other than the assets so purchased
and (iv) the purchase of such assets is not part of an acquisition of any
Person.
"Note Register" means the register required by the Indenture to be
maintained by or on behalf of the Company for the registration of the Exchange
Notes and transfers of the Exchange Notes.
"Parent" means, with respect to the Company, the holder or holders of
all of the Equity Interests of the Company, other than not more than a two
percent interest owned by the General Partner.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
PARI PASSU in right of payment to the Exchange Notes.
"Payment Restriction" means, with respect to any Restricted Subsidiary,
any consensual encumbrance, restriction or limitation, whether by operation of
the terms of its charter or partnership agreement or other organizational
documents or by reason of any agreement, instrument, judgment, decree or order
on the ability of (i) such Restricted Subsidiary to (a) pay dividends or make
other distributions on its Equity Interests or make payments on any obligation,
liability or Indebtedness owed to the Company or any other Restricted
Subsidiary, (b) make loans or advances to the Company or any other Restricted
Subsidiary or (c) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary or (ii) the Company or any other Restricted
Subsidiary to receive or retain any such dividends, distributions or payments,
loans or advances or transfer of properties or assets.
"Permitted Distribution" means a dividend, distribution, loan, advance
or other Restricted Payment to the Parent of the Company to the extent it is
designated as such by the Company. Although not limited by the purpose of the
Restricted Payment, a primary purpose of Permitted Distributions is to provide
funds to the Parent (or the partners or members of the Parent) to pay the income
tax liability of the Parent (or such partners or members) resulting from the
taxable income of the Company.
"Permitted Distribution Amount" means, for any period, an amount equal
to 35% of the amount referred to in clause (i) of the definition of Consolidated
Net Income for such period, excluding any portion of such period during which
the Company is not a limited partnership, limited liability company or other
entity that is not subject to Federal income taxation.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company under Working Capital Agreements in an
aggregate principal amount at any time outstanding not to exceed the greater of
(a) $20.0 million, or (b) 15% of Consolidated Tangible Assets;
(ii) Indebtedness under the Senior Notes, the Exchange Notes and the
Subsidiary Guarantees;
(iii) Indebtedness outstanding, or to be incurred pursuant to
commitments in effect, on the Issue Date after giving effect to this Offering
and the application of the net proceeds therefrom;
(iv) Indebtedness under Hedging Obligations, PROVIDED that (a) those
Hedging Obligations are related to payment obligations on Permitted Indebtedness
or Indebtedness otherwise permitted by the Consolidated Fixed Charge
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Coverage Ratio test described under "Certain Covenants -- Limitation on
Indebtedness and Disqualified Equity Interests" above or, in the case of
currency or commodity Hedging Obligations, to the foreign currency cash flows or
energy requirements reasonably expected to be generated or required by the
Company and the Restricted Subsidiaries, (b) the notional principal amount of
the Hedging Obligations does not exceed 105% of the principal amount of that
Indebtedness or, in the case of currency or commodity Hedging Obligations, the
amount of those foreign currency cash flows or energy requirements to which
those Hedging Obligations relate and (c) in the case of currency or commodity
Hedging Obligations, those Hedging Obligations are entered into for the purpose
of limiting currency exchange rate risks or commodity price fluctuation risks in
connection with transactions entered into in the ordinary course of business;
(v) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary; PROVIDED, HOWEVER, that upon either (a) the
subsequent issuance (other than directors' qualifying shares), sale, transfer or
other disposition of any Equity Interests or any other event that results in a
Wholly Owned Restricted Subsidiary ceasing to be a Wholly Owned Restricted
Subsidiary or (b) the transfer or other disposition of any such Indebtedness
(except to the Company or a Wholly Owned Restricted Subsidiary), the provisions
of this clause (v) will no longer apply to such Indebtedness and such
Indebtedness shall be denied, in each case, to be incurred and shall be treated
as an incurrence for purposes of the Consolidated Fixed Charge Coverage Ratio
test described under "-- Certain Covenants -- Limitation on Indebtedness and
Disqualified Equity Interests" above at the time the transfer or other
disposition occurred;
(vi) Guarantees of Permitted Indebtedness or Indebtedness incurred in
accordance with the Consolidated Fixed Charge Coverage Ratio test described
under "Certain Covenants -- Limitation on Indebtedness and Disqualified Equity
Interests" above;
(vii) Indebtedness in respect of bid, performance or surety bonds issued
or other reimbursement obligations for the account of the Company in the
ordinary course of business, including guarantees and letters of credit
supporting such bid, performance, surety bonds or other reimbursement
obligations (in each case other than for an obligation for money borrowed);
(viii) Non-Recourse Purchase Money Indebtedness;
(ix) other Indebtedness outstanding at any time in an aggregate
principal amount not to exceed $5.0 million; and
(x) any renewals, amendments, extensions, supplements, modifications,
deferrals, substitutions, refinancing or replacements (each, for purposes of
this clause (x), a "refinancing") by the Company or a Restricted Subsidiary of
any Indebtedness incurred in accordance with the Consolidated Fixed Charge
Coverage Ratio test described under "-- Certain Covenants -- Limitation on
Indebtedness and Disqualified Equity Interests" above or referred to above in
clauses (ii) through (ix) or this clause (x), so long as (a) any such new
Indebtedness shall be in a principal amount that does not exceed the principal
amount (or, if such Indebtedness being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination) so
refinanced plus the amount of any premium required to be paid in connection with
such refinancing pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by the Company or such Restricted
Subsidiary as necessary to accomplish such refinancing, plus the amount of
expenses of the Company or such Restricted Subsidiary incurred in connection
with such refinancing; (b) in the case of any refinancing of Indebtedness
(including the Exchange Notes) that is PARI PASSU with or subordinated in right
of payment to the Exchange Notes, then such new Indebtedness is PARI PASSU with
or subordinated in right of payment to the Exchange Notes at least to the same
extent as the Indebtedness being refinanced; and (c) such new Indebtedness has
an Average Life equal to or longer than the Average Life of the Indebtedness
being refinanced and a final Stated Maturity that is not earlier than the final
Stated Maturity of the Indebtedness being refinanced.
"Permitted Investments" means any of the following:
(i) Investments in Cash Equivalents;
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(ii) Investments in the Company or any of its Wholly Owned
Subsidiaries;
(iii) an Investment or series of related Investments by the
Company or any Restricted Subsidiary in another Person, if as a result
of that Investment or series of related Investments (a) that other
Person becomes a Wholly Owned Restricted Subsidiary or (b) that other
Person is merged or consolidated with or into, or transfers or conveys
its properties and assets substantially as an entirety to, the Company
or a Wholly Owned Restricted Subsidiary;
(iv) Investments of Net Available Proceeds permitted by the
covenant described under "-- Certain Covenants -- Limitation on Asset
Sales" above;
(v) Investments consisting of loans and advances to employees,
officers and directors of the Company or any Restricted Subsidiary for
travel, entertainment, relocation or other expenses in the ordinary
course of business;
(vi) Investments consisting of loans and advances by the Company
or any Restricted Subsidiary to employees, officers and directors of the
Company or any Restricted Subsidiary in an aggregate principal amount at
any one time outstanding not exceeding $750,000;
(vii) Investments acquired by the Company or any Restricted
Subsidiary in the ordinary course of business (a) in exchange for any
other Investment or account receivable held by the Company or any
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or the obligor with respect to such account receivable or (b)
as a result of a foreclosure by the Company or any Restricted Subsidiary
with respect to any secured Investment or other transfer of title with
respect to any secured Investment in default;
(viii) Investments the payment for which consists exclusively of
Qualified Equity Interests PROVIDED that (a) any such Investment must be
made in accordance with the other requirements of the Indenture,
including (A) with respect to any Acquired Indebtedness relating to such
an Investment, the Consolidated Fixed Charge Coverage Ratio test
described under "-- Certain Covenants -- Limitation on Indebtedness and
Disqualified Equity Interests" above and (B) with respect to any Lien on
properties or assets acquired in connection with any such Investment,
the covenant described under "-- Certain Covenants --Limitation on
Liens" above and (b) such Qualified Equity Interests shall not be
considered in any Qualified Equity Interests referred to in clause
(iii)(b) of the first sentence under "-- Certain Covenants -- Limitation
on Restricted Payments";
(ix) Investments consisting of the loan of natural gas made in
the ordinary course of business; or
(x) Investments by the Company or any Restricted Subsidiary in
any Person that is not a Restricted Subsidiary in an aggregate amount at
any one time outstanding not exceeding $5 million.
"Permitted Liens" means the following types of Liens:
(i) Liens existing as of the Issue Date;
(ii) Liens securing the Exchange Notes or the Subsidiary
Guarantees;
(iii) Liens in favor of the Company or, with respect to a
Restricted Subsidiary, Liens in favor of another Restricted Subsidiary;
(iv) Liens securing Permitted Indebtedness of the Company and the
Restricted Subsidiaries of the type described in clause (i) of the
definition of Permitted Indebtedness;
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(v) Liens securing Indebtedness that constitutes Permitted
Indebtedness of the type described in clause (x) of the definition of
"Permitted Indebtedness" incurred as a refinancing of any Indebtedness
secured by Liens described in clauses (i), (iv), (xi), (xii) and (xiii)
of this definition; PROVIDED, HOWEVER, that (a) if any Lien securing
Indebtedness being refinanced is subordinated or junior to any Lien
granted for the benefit of the Holders, then the Lien securing the new
Indebtedness must be subordinated or junior to any Lien granted for the
benefit of the Holders at least to the same extent as the Lien securing
the Indebtedness being refinanced and (b) such Liens do not extend to or
cover any property or assets of the Company or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced;
(vi) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by
appropriate proceedings and as to which the Company or a Restricted
Subsidiary, as the case may be, has set aside on its books such
reserves, or has made such other appropriate provision, if any, as is
required by GAAP;
(vii) Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other similar Liens incurred in
the ordinary course of business for sums not delinquent or being
contested in good faith, and as to which the Company or a Restricted
Subsidiary, as the case may be, has set aside on its books such
reserves, or has made such other appropriate provision, if any, as is
required by GAAP;
(viii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the payment
or performance of tenders, statutory or regulatory obligations, surety
and appeal bonds, bids, government contracts and leases, performance and
return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(ix) Liens securing any judgment not giving rise to a Default or
Event of Default and so long as any appropriate legal proceedings that
may have been duly initiated for the review of the judgment has not been
finally terminated or the period within which those proceedings may be
initiated has not expired;
(x) easements, rights-of-way, reservations, zoning and other
restrictions and other similar encumbrances not interfering in any
material respect with the ordinary conduct of business of the Company or
any Restricted Subsidiary;
(xi) any interest or title of a lessor under any Capitalized
Lease Obligation or operating lease; PROVIDED that (a) the Attributable
Indebtedness related thereto constitutes Indebtedness permitted to be
incurred under the terms of the Indenture and (b) with respect to any
Capitalized Lease Obligation, such Liens do not extend to any property
or assets that is not leased property or assets subject to such
Capitalized Lease Obligation;
(xii) Liens securing Non-Recourse Purchase Money Indebtedness;
PROVIDED, HOWEVER, that (a) the Non-Recourse Purchase Money Indebtedness
shall not be secured by any property or assets of the Company or any
Restricted Subsidiary other than the property or assets so acquired and
any proceeds therefrom and (b) the Lien securing such Non-Recourse
Purchase Money Indebtedness shall be created within 90 days of such
acquisition;
(xiii) Liens securing Acquired Indebtedness incurred in
accordance with the Consolidated Fixed Charge Coverage Ratio test
described under "-- Certain Covenants -- Limitation on Indebtedness and
Disqualified Equity Interests" above; PROVIDED that (a) such Liens
secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary and were not granted in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary and (b) such Liens do not extend to or cover any
property or assets of the Company or of any Restricted Subsidiary other
than the property or assets that secured the Acquired Indebtedness prior
to the time such Indebtedness became Acquired Indebtedness of the
Company or a
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Restricted Subsidiary and are no more favorable to the lienholder than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary;
(xiv) leases or subleases granted to others that do not interfere
with the ordinary conduct of business of the Company or any Restricted
Subsidiary;
(xv) rights of a common owner of any interest in property held by
the Company or any Restricted Subsidiary and that common owner as
tenants in common or through other common ownership; and
(xvi) Liens or equitable encumbrances deemed to exist by reason
of (a) fraudulent conveyance or transfer laws or (b) negative pledge or
other agreements to refrain from giving Liens.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Equity Interests" means, with respect to any Person, any and
all Equity Interests of such Person that are not Common Equity Interests,
whether outstanding on or after the Issue Date.
"Principals" means (i) Miami Valley Leasing, Inc., Nipsco Energy
Services, Inc., PSRC Del., Inc. and TPC Corporation, (ii) the respective
ultimate parent companies, if any, that control such Persons on the date of the
Indenture, (iii) wholly owned Subsidiaries of any such ultimate parent
companies, or (iv) any one or more of such Persons.
"Public Equity Offering" means an offer and sale of (i) Common Equity
Interests of the Company for cash pursuant to a registration statement that has
been declared effective by the SEC pursuant to the Securities Act (other than a
registration statement on Form S-8 or otherwise relating to equity securities
issuable under any employee benefit plan of the Company) or (ii) Common Equity
Interests of the Parent for cash pursuant to such a registration statement to
the extent that such cash is contributed by the Parent to the capital of the
Company without any obligation of the Company (other than that imposed by
applicable law) to return such contribution to the Parent.
"Qualified Equity Interests" of any Person means any and all Equity
Interests of that Person other than Disqualified Equity Interests of that
Person.
"Regular Record Date" means, with respect to the interest payable on any
Interest Payment Date, the February 15 or August 15 (whether or not a business
day), as the case may be, next preceding such Interest Payment Date.
"Related Business" means (i) the businesses of the Company and the
Restricted Subsidiaries on the Issue Date and any business related, ancillary or
complementary to the business of the Company and the Restricted Subsidiaries on
that date and (ii) any other business related to the production, gathering,
marketing, treating, storage, selling and/or transporting of natural gas as long
as the principal businesses of the Company and its Restricted Subsidiaries
remain the businesses described in the preceding clause (i).
"Restricted Investment" means (without duplication) (i) the designation
of a Subsidiary as an Unrestricted Subsidiary in the manner described in the
definition of "Unrestricted Subsidiary" and (ii) any Investment other than a
Permitted Investment.
"Restricted Payment" means, with respect to any Person:
(i) any declaration or payment of any dividend or distribution
(other than a dividend or distribution declared or paid by a Restricted
Subsidiary to the Company or a Wholly Owned Restricted Subsidiary), or
any other distribution with respect to any shares of Equity Interests of
that Person, including any payments to the general partner of such
Person to compensate such Person for any management or related services
provided by such general partner in its capacity as such or pursuant to
the applicable partnership agreement (but excluding dividends or
distributions payable solely in shares of Qualified Equity Interests of
that Person or in options, warrants or other rights to purchase
Qualified Equity Interests of that Person);
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(ii) any purchase, redemption, retirement or other acquisition
for value of any Equity Interests of that Person or any other payment or
distribution made in respect thereof, either directly or indirectly;
(iii) any principal payment on or repurchase, redemption,
defeasance or other acquisition or retirement for value, prior to any
scheduled principal payment, scheduled sinking fund payment or maturity,
of any subordinated indebtedness (including, with respect to the Company
and any Subsidiary Guarantor, Subordinated Indebtedness) of that Person;
or
(iv) any Restricted investment.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the Issue Date, unless that Subsidiary is designated as an
Unrestricted Subsidiary in the manner described in the definition of
"Unrestricted Subsidiary".
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which properties or assets are sold or transferred by the Company or
a Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or a Restricted Subsidiary.
"Senior Management" means, with respect to the Company, the Chairman of
the Board of Directors, the president, the chief operating officer, the chief
financial officer, the chief accounting officer, the treasurer, the controller
and any vice president of the Company or, if the Company has no such officers,
the comparable officers or managers of the General Partner.
"Stated Maturity" means, when used with respect to any Indebtedness or
any installment of interest thereon, the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of that Indebtedness or that installment of interest is due and
payable.
"Subordinated Indebtedness" means any Indebtedness of the Company,
Finance Corp. or a Subsidiary Guarantor that is expressly subordinated in right
of payment to the Exchange Notes or Subsidiary Guarantees, respectively.
"Subsidiary" means, with respect to any specified Person, (i) a
corporation a majority of whose Voting Equity Interests is at the time, directly
or indirectly, owned by the specified Person, by one or more Subsidiaries of the
specified Person or by the specified Person and one or more Subsidiaries thereof
or (ii) any other Person (other than a corporation), including, without
limitation, a partnership, joint venture or limited liability company, in which
the specified Person, one or more Subsidiaries thereof or the specified Person
and one or more Subsidiaries thereof, directly or indirectly, at the date of
determination thereof, has or have at least a majority of the Voting Equity
Interests or other ownership interests of such Person.
"Subsidiary Guarantors" means (i) Moss Bluff and Egan and the respective
general partners of Moss Bluff and Egan and (ii) any other Subsidiary of the
Company that executes a Subsidiary Guarantee in accordance with the provisions
of the Indenture, and their respective successors and assigns.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination will be designated an Unrestricted Subsidiary by
the Board of Directors as provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company, other than Finance Corp. and the Subsidiary Guarantors existing on
the date of the Indenture, as an Unrestricted Subsidiary so long as: (i) neither
the Company nor any Restricted Subsidiary is directly or indirectly liable for
the payment of any Indebtedness of that Subsidiary; (ii) no default with respect
to any Indebtedness of that Subsidiary would permit (upon notice, lapse of time
or otherwise) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on that other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its Stated Maturity or
require the Company or any Restricted Subsidiary to repurchase or secure that
other Indebtedness; (iii) such designation as an Unrestricted Subsidiary would
be permitted by the covenant described under " -- Certain Covenants --
Limitation on Restricted Payments" above; (iv) that designation would not result
in the creation or imposition of any
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Lien on any of the properties or assets of the Company or any Restricted
Subsidiary (other than any Permitted Lien); and (v) the Company could incur at
least $1.00 of additional Indebtedness not constituting Permitted Indebtedness
in accordance with the Consolidated Fixed Charge Coverage Ratio test described
under " -- Certain Covenants --Limitation on Indebtedness and Disqualified
Equity Interests," above; PROVIDED, HOWEVER, that with respect to clause (i) of
this sentence, the Company or a Restricted Subsidiary may be liable for the
payment of Indebtedness of an Unrestricted Subsidiary if (x) the liability
constituted a Permitted Investment or a Restricted Payment permitted by the
covenant described under " -- Certain Covenants -- Limitation on Restricted
Payments" above, in each case at the time of incurrence, or (y) the liability
would be a Permitted Investment at the time of designation of that Subsidiary as
an Unrestricted Subsidiary. Any such designation by the Board of Directors must
be evidenced to the Trustee by filing a Board Resolution with the Trustee giving
effect to that designation, together with an Officers' Certificate stating that
such designation complies with the requirements under the Indenture. The Board
of Directors may designate any Unrestricted Subsidiary as a Restricted
Subsidiary if, immediately after giving effect to such designation on a pro
forma basis, (i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness not
constituting Permitted Indebtedness in accordance with the Consolidated Fixed
Charge Coverage Ratio test described under " -- Certain Covenants -- Limitation
on Indebtedness and Disqualified Equity Interests" above and (iii) if any of the
properties and assets of the Company or any Restricted Subsidiary would on such
designation become subject to any Lien (other than a Permitted Lien), the
creation or imposition of that Lien must comply with the covenant described
under "-- Certain Covenants -- Limitation on Liens" above.
"Voting Equity Interests," with respect to any specified Person, (i)
means any class or classes of Equity Interests of the specified Person pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, partners,
managers or trustees of the specified Person (irrespective of whether or not, at
the time, stock of any other class or classes have, or might have, voting power
by reason of the happening of any contingency) that control the management and
policies of such Person, and (ii) if such specified Person is a limited
partnership, includes the general partner and limited partner interests of such
Person.
"Wholly Owned Subsidiary" means (i) a corporate Restricted Subsidiary
all the outstanding capital stock of which (other than directors' qualifying
shares) is owned by the Company or one or more Wholly Owned Subsidiaries, (ii) a
partnership Restricted Subsidiary all of the interests of which, other than not
more than a two percent interest owned by the general partner of such
partnership Subsidiary, are owned by the Company or one or more Wholly Owned
Subsidiaries or (iii) a Restricted Subsidiary that is neither a corporation or a
partnership all of the Equity Interests of which are owned by the Company or one
or more Wholly Owned Subsidiaries.
"Working Capital Agreement" means, with respect to any specified Person,
(i) any agreement providing for the making of loans or advances on a revolving
basis, the issuance of letters of credit and/or the creation of bankers'
acceptances to fund the general working capital and other business requirements
of that Person and one or more of its Subsidiaries and (ii) any refinancings,
renewals, replacements, modification and extensions of any of the agreements
described in clause (i) of this sentence. Initially, the Working Capital
Agreement means the New Credit Facility described under "Description of New
Credit Facility".
BOOK ENTRY; DELIVERY AND FORM
The Exchange Notes initially will be represented by one or more Global
Notes (the "Global Notes") in registered global form. The Global Notes will be
deposited with the Trustee as custodian for the Depositary and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder"). The Depositary will maintain the Exchange
Notes in denominations of $1,000 and integral multiples thereof through its
book-entry facilities.
The Depositary has advised the Company as follows: It is a
limited-purpose trust company which was created to hold securities for its
participating organizations (the "Participants") and to facilitate the clearance
and settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. Participants
include securities brokers and dealers (including the Initial Purchaser), banks,
trust companies, clearing corporations and certain other organizations. Access
to the Depositary'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
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Participant, either directly or indirectly ("Indirect Participants"). Persons
who are not Participants may beneficially own securities held by the Depositary
only through Participants or Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Notes and (ii) ownership of beneficial interests in the Notes evidenced by the
Global Notes will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary (with respect to
Participants' interests), the Participants and the Indirect Participants.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in the Global Notes is limited to such
extent. For certain other restrictions on the transferability of the Exchange
Notes, see "Transfer Restrictions".
Investors in the Global Notes may hold their interests therein directly
through the Depositary, if they are Participants in such system, or indirectly
through organizations that are Participants in such system.
So long as a nominee of the Depositary is the registered owner of the
Global Notes, such nominee will be considered the sole owner or holder of the
Exchange Notes for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in the Global Notes will not be entitled to have
Exchange Notes registered in their names, will not receive or be entitled to
receive physical delivery of Exchange Notes in definitive form and will not be
considered the owners or holders thereof under the Indenture, including with
respect to the giving of any directions, instructions or approvals to the
Trustee thereunder.
Neither the Issuers nor the Trustee, the paying agent or the Exchange
Notes registrar will 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 Notes, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Principal and interest payments on the Global Notes registered in the
name of the Depositary's nominee will be made by the Issuers, either directly or
through a paying agent, to the Depositary's nominee as the registered owner of
the Global Notes. Under the terms of the Indenture, the Issuers and the Trustee
will treat the persons in whose names the Exchange Notes are registered as the
owners of such Exchange Notes for the purpose of receiving payments of principal
and interest on such Exchange Notes and for all other purposes whatsoever.
Therefore, neither the Issuers, the Trustee nor any paying agent has any direct
responsibility or liability for the payment of principal or interest on the
Exchanger Notes to owners of beneficial interests in the Global Notes. The
Depositary has advised the Company and the Trustee that its present practice is,
upon receipt of any payment, to credit immediately the accounts of the
Participants with payment in amounts proportionate to their respective holdings
in principal amount of beneficial interest in the Global Notes as shown on the
records of the Depositary. Payments by Participants and Indirect Participants to
owners of beneficial interests in the Global Notes will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name" and
will be the responsibility of such Participants or Indirect Participants.
As long as the Exchange Notes are represented by Global Notes, the
Global Notes Holder will be the holder of the Exchange Notes and therefore will
be the only entity that can exercise a right to repayment or repurchase of the
Exchange Notes. See "-- Certain Covenants -- Change of Control" and " --
Limitation on Asset Sales". Notice by Participants or Indirect Participants or
by owners of beneficial interests in a Global Note held through such
Participants or Indirect Participants of the exercise of the option to elect
repayment of beneficial interests in Exchange Notes represented by a Global Note
must be transmitted to the Depositary in accordance with its procedures on a
form required by the Depositary and provided to Participants. In order to ensure
that the Depositary's nominee will timely exercise a right to repayment with
respect to a particular Exchange Note, the beneficial owner of such Exchange
Note must instruct the broker or other Participant or exercise a right to
repayment. Different firms have cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other Participant or Indirect Participant through which it holds an
interest in an Exchange Note in order to ascertain the cut-off time by which
such an instruction must be given in order for timely notice to be delivered to
the Depositary. Neither the
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Company nor Finance Corp. will be liable for any delay in delivery of notices of
the exercise of the option to elect repayment.
Subject to certain conditions, any person having a beneficial interest
in the Global Notes may, upon request to the Trustee, exchange such beneficial
interest for Exchange Notes in definitive form. Upon any such exchange, the
Trustee is required to register such Exchange Notes in the name of, and cause
the same to be delivered to, such Person or Persons (or the nominee of any
thereof). Such Exchange Notes would be issued in fully registered form and would
be subject to the legal requirements described herein under "Transfer
Restrictions." In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Exchange Notes in definitive form under the Indenture, then,
upon surrender by the relevant Global Note holder of its Global Note, Exchange
Notes in such form will be issued to each person that such Global Note holder
and the Depositary identifies as being the beneficial owner of the related
Exchange Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note holder or the Depositary in identifying the owners of beneficial
interests in the Global Notes and the Company and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the Global Note
holder or the Depositary for all purposes.
The Indenture will require that payments in respect of the Exchange
Notes represented by the Global Notes (including principal, premium, if any,
interest and Liquidated Damages) be made in same day funds. The Exchange Notes
are expected to be eligible to trade in the PORTAL Market and interests in the
Global Notes will trade in the Depositary's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in the Exchange Notes will,
therefore, be required by the Depositary to be settled in same-day funds.
Transfers between Participants in the Depositary will be effected in accordance
with the Depositary's procedures, and will be settled in same-day funds.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discusses the material United States federal income tax
consequences under generally applicable current law of the acquisition,
ownership and disposition of Exchange Notes by a person who acquires those
Exchange Notes in exchange for Old Notes pursuant to the Exchange Offer and who
holds those Exchange Notes as capital assets. This section does not discuss any
foreign, state or local tax law or the effect of special rules, such as those
which apply to tax-exempt organizations, insurance companies, financial
institutions, an individual who expatriates from the United States, or a person
who hold Exchange Notes as part of a straddle, hedge or conversion transaction.
Accordingly, each person who is considering the acquisition of Exchange Notes
pursuant to the Exchange Offer should consult with its own tax advisor regarding
the tax consequences of the acquisition, ownership and disposition of Exchange
Notes in light of its particular circumstances and the application of state,
local and foreign tax laws.
RECEIPT OF EXCHANGE NOTES; SURRENDER OF OLD NOTES
An Exchange Note which is received pursuant to the Exchange Offer in
exchange for an Old Note will be treated for federal income tax purposes as the
same debt instrument as the Old Note surrendered in exchange therefor. As a
result, no gain or loss will be recognized on the receipt of an Exchange Note in
exchange for an Old Note, and the Exchange Note so received will have the same
adjusted basis, the same adjusted issue price and the same holding period as the
Old Note which was delivered in exchange therefor.
OWNERSHIP BY U.S. HOLDER
The following applies to a person (a "U.S. Holder") who is either an
individual who is a citizen or resident of the United States within the meaning
of Section 7701(b) of the Code (which provides that an individual is a resident
of the United States if the number of days he is present in the United States
exceeds a formula contained therein), a corporation or partnership which is, in
either case, created or organized in the United States or any State thereof, a
trust which is described in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended (the "Code") or an estate which is not a foreign estate within
the meaning of Section 7701(a)(31) of the Code.
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INTEREST ON EXCHANGE NOTES. The stated interest on an Exchange Note will
be taxable as ordinary income at the time that such interest is received or
accrued in accordance with the U.S. Holder's method of accounting for United
States federal income tax purposes. An Exchange Note is held with market
discount to the extent that the amount which was paid for the Old Note which is
surrendered in exchange therefor is less than the sum of the stated principal
amount thereof and any accrued but unpaid interest thereon at the time of the
acquisition thereof.
The Exchange Notes do not, as a general matter, have amortizable
original issue discount, but if a Change of Control occurs, then the one percent
premium over par at which the Issuers are required to offer to repurchase the
Exchange Notes may be interest income accruable as original issue discount
between the occurrence of the Change of Control and the time at which the
Exchange Notes are to be repurchased.
SALE, EXCHANGE OR REDEMPTION OF EXCHANGE NOTES. Gain or loss will be
recognized on the sale, exchange or redemption of Exchange Notes in an amount
equal to the difference between (i) the amount of cash and the fair market value
of any other property received in the transaction (excluding however any amount
received in respect of accrued, but unrecognized interest which will be taxable
as such) and (ii) the adjusted basis of the Exchange Notes so sold, exchanged or
redeemed. The portion of any such gain which is in excess of any market discount
which has theretofore accrued on such Exchange Notes under the rules of Section
1276 of the Code but which has not theretofore been included in income and any
loss will be a capital gain or loss because of the assumption that the Exchange
Notes are held as a capital asset, and the balance of any such gain (which is in
respect of accrued but theretofore unrecognized market discount) is ordinary
income. For an individual, estate or trust, 20 percent is the maximum rate of
United States federal income tax on a capital gain which is recognized upon the
sale, exchange or redemption of an Exchange Note which was held as a capital
asset for more than 18 months, and 28 percent is the maximum rate in the case of
an Exchange Note which was held for more than one year but not more than 18
months.
OWNERSHIP BY NON-U.S. HOLDERS
The following applies to a person who is not a U.S. Holder (a "Non-U.S.
Holder") and for which interest income on, and gain on a sale, exchange or
redemption of, an Exchange Note which is held by such person are not effectively
connected with the conduct by such person of a trade or business within the
United States. Any such items of interest income or gain which are so
effectively connected will generally be subject to the United States federal
income tax that applies to U.S. Holders and, in the case of such a Non-U.S.
Holder that is a foreign corporation, those items also will be subject to the
branch profits tax. The following does not discuss the effect of any income tax
treaty or of rules which apply to individuals who expatriate from the United
States.
INTEREST ON EXCHANGE NOTES. Interest paid on an Exchange Note to a
Non-U.S. Holder will not be subject to United States federal income tax or to
withholding in respect thereof under the portfolio interest exemption if (i) the
beneficial owner of the Exchange Note (or in certain circumstances, a member of
a class of financial institutions) certifies, under penalties of perjury, that
the beneficial owner is not a U.S. Holder and provides the beneficial owner's
name and address; (ii) the Non-U.S. Holder is not a 10 percent shareholder,
within the meaning, of Section 871(h)(3)(B) of the Code, of the issuer for
United States federal income tax purposes of the Exchange Notes (which may be
MHP); (iii) the Non-U.S. Holder is not a controlled foreign corporation with
respect to which the issuer for United States federal income tax purposes of the
Exchange Notes (which may be MHP) is a "related person" within the meaning of
Section 864(d)(4) of the Code; and (iv) the Non-U.S. Holder is not a bank
holding the Exchange Notes as a result of an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of its trade or
business. If the portfolio interest exemption does not apply to interest on an
Exchange Note, then such interest will generally be subject to United States
federal income tax withholding at a rate of 30 percent (or any lower rate
provided by any applicable treaty).
SALE, EXCHANGE OR REDEMPTION OF EXCHANGE NOTES. A Non-U.S. Holder will
not generally be subject to United States federal income tax on gain recognized
on the sale, exchange or redemption of Exchange Notes unless the Non- U.S.
Holder is an individual who is present in the United States for 183 or more days
in the taxable year of the sale, exchange or redemption and certain other
conditions are satisfied.
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ESTATE TAX. An Exchange Note will not be included in the gross estate of
an individual Non-U.S. Holder for United States federal estate tax purposes if
interest received at the time of death would have been exempt from United States
income tax under the portfolio interest exemption (which is discussed above) if
the required statement that the beneficial owner is not a United States person
had been filed and such Exchange Note was not effectively connected with the
conduct by the decedent of a trade or business within the United States.
BACKUP WITHHOLDING; INFORMATION REPORTING
U.S. HOLDERS. A noncorporate U.S. Holder who owns Exchange Notes will be
subject to backup withholding at the rate of 31 percent as well as information
reporting with respect to both interest paid on the Exchange Notes and the
proceeds of any sale, exchange or redemption thereof if the payee fails to
furnish a taxpayer identification number and in certain other circumstances.
NON-U.S. HOLDERS. A noncorporate Non-U.S. Holder who delivers the
statement discussed above to establish the availability of the portfolio
interest exemption in respect of interest on an Exchange Note is not subject to
backup withholding or information reporting in respect of the interest paid on
that Exchange Note.
A Non-U.S. Holder will be exempt from backup withholding and from
information reporting with respect to a payment of proceeds from the sale or
exchange of an Exchange Note through a broker if such Non-U.S. Holder is an
"exempt foreign person", and provides the broker with a statement to that
effect, or the payment is made through a foreign office of certain foreign
brokers. A Non-U.S. Holder should consult with its own advisers as to the
exemptions discussed in this paragraph.
CREDITS AND REFUNDS OF BACKUP WITHHOLDING. Any amounts which are
withheld under the backup withholding rules will be allowed as a refund or a
credit against the Holder's United States federal income tax liability if
certain information is furnished to the Internal Revenue Service.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its
own account in connection with 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 Participating Broker- Dealers in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities (other than a resale of an unsold
allotment from the original sale of Old Notes). The Issuers have agreed that
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such
Exchange Notes. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Notes received in exchange
for Old Notes pursuant to the Exchange Offer must notify the Issuers, or cause
the Issuers to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth in the Letter of Transmittal. See "The
Exchange Offer -- Resales of Exchange Notes".
The Issuers will not receive any proceeds from the issuance of the
Exchange Notes offered hereby. Exchange Notes received by Participating
Broker-Dealers for their own accounts in connection with 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 at 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 and/or the
purchasers of any such Exchange Notes. Any Participating Broker-Dealer that
resells Exchange Notes that were received by it for its own account in
connection with 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 commissions 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 Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Issuers will send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal.
EXPERTS
The financial statements included in this Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The combined financial statements of Moss Bluff Hub Partners, L.P. and
Egan Hub Partners, L.P. as of December 31, 1996, and 1995 and for the years then
ended, referred to in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be
passed upon for the Issuers by Baker & Botts, L.L.P., Houston, Texas.
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INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Auditors......................................... F-2
Report of Independent Public Accountants............................... F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996........... F-4
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995................................... F-6
Consolidated Statements of Partners' Capital for the years ended
December 31, 1997, 1996 and 1995................................... F-7
Notes to Consolidated Financial Statements............................. F-8
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Market Hub Partners Storage, L.P.
We have audited the accompanying consolidated balance sheet of Market Hub
Partners Storage, L.P. and subsidiaries (the "Company"), a Delaware Limited
Partnership, as of December 31, 1997 and the related consolidated statement of
operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements give retroactive effect to the
formation of Market Hub Partners Storage, L.P., which has been accounted for in
a manner similar to a pooling of interests as described in Note 1 to the
consolidated financial statements. For the years ended December 31, 1996 and
1995, the combined statements were audited by other auditors whose report, dated
February 5, 1998, expressed an unqualified opinion on these combined financial
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such 1997 financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1997, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
As described in Note 1, the financial statements of the Company as of December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997 have been restated as if the formation of the Company had occurred at
the beginning of the earliest period presented. In our opinion, such restatement
is appropriate and has been properly reflected in the accompanying financial
statements.
DELOITTE & TOUCHE LLP
April 15, 1998
Houston, Texas
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Partners of Market Hub Partners:
We have audited the accompanying combined balance sheets of Moss Bluff Hub
Partners, L.P. (Moss Bluff), and Egan Hub Partners, L.P. (Egan) (see Note 1), as
of December 31, 1996 and 1995, and the related combined statements of
operations, capital and cash flows for the years then ended. These combined
financial statements are the responsibility of the management of Market Hub
Partners. Our responsibility is to express an opinion on these combined
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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
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 Moss Bluff
and Egan as of December 31, 1996 and 1995, and the combined results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 5, 1998
F-3
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-----------------------------
1997 1996
------------- ------------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents.................. $ 2,153 $ 326
Accounts receivable........................ 3,418 3,094
Inventory and other current assets......... 2,036 2,272
------------- ------------
Total current assets 7,607 5,692
Property and Equipment:
Natural gas storage facilities............. 136,586 124,719
Construction in progress................... 21,778 3,868
Less accumulated depreciation.............. (10,391) (5,471)
------------ -------------
147,973 123,116
Other Assets and Restricted Cash............... 4,307 3,108
------------ ------------
$ 159,887 $ 131,916
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current portion of long-term debt.......... $ 4,449 $ 4,200
Accounts payable:
Trade and other........................ 3,955 --
Partners and affiliates................ 943 4,157
Accrued liabilities........................ 1,584 1,580
------------ ------------
Total current liabilities.................. 10,931 9,937
Long-Term Debt, net of current portion......... 49,043 53,492
Partners' capital.............................. 99,913 68,487
----------- -----------
$ 159,887 $ 131,916
========= =========
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Revenues:
Salt cavern storage revenues........ $ 23,743 $ 15,539 $ 7,442
Hub services revenues............... 3,743 3,047 432
---------- ---------- ----------
Total revenues...................... 27,486 18,586 7,874
Operating Expense:
Operations and maintenance.......... 2,196 1,812 1,052
Plant administrative................ 2,996 1,926 1,455
Property taxes...................... 810 344 186
Royalty payments.................... 203 138 115
General and administrative.......... 2,798 2,094 1,710
Depreciation........................ 4,928 3,857 1,620
--------- --------- ----------
Total operating expenses............ 13,931 10,171 6,138
-------- -------- ----------
Operating income........................ 13,555 8,415 1,736
Interest expense 3,605 2,544 664
Interest income 99 139 98
---------- ---------- -----------
Net Income Before Extraordinary Item 10,049 6,010 1,170
Extraordinary loss on early
extinguishment of debt ............. -- (452) --
---------- ----------- ----------
Net Income.............................. $ 10,049 $ 5,558 $ 1,170
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income ................................................................. $ 10,049 $ 5,558 $ 1,170
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ........................................................... 4,928 3,857 1,620
Extraordinary loss on early extinguishment of debt ..................... -- 452 --
Changes in assets and liabilities:
Increase in accounts receivable ........................................ (324) (1,604) (757)
Decrease (increase) in inventory and other current assets .............. 236 (127) (1,796)
Decrease (increase) in other assets and restricted cash ................ (1,199) 1,104 (29)
Increase (decrease) in trade payables and accrued
liabilities ....................................................... 3,959 (4,208) (4,184)
Increase (decrease) in payable to partners, affiliates and
other ............................................................. 419 (489) 5,301
Other .................................................................. -- 649 113
-------- -------- --------
Net cash provided by operating activities .............................. 18,068 5,192 1,438
-------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures: ...................................................... (29,785) (37,598) (26,755)
Cash Flows from Financing Activities:
Issuance of long-term debt (net of expenses of $1,593) ..................... -- 58,407 --
Repayments of long-term debt ............................................... (4,200) (20,455) (1,386)
Capital contributions from partners ........................................ 17,744 -- 26,388
Capital distributions to partners .......................................... -- (6,065) --
-------- -------- --------
Net Cash provided by financing activities .............................. 13,544 31,887 25,002
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ....................... 1,827 (519) (315)
Cash and cash equivalents at beginning of period ........................... 326 845 1,160
-------- -------- --------
Cash and cash equivalents at end of period ................................. $ 2,153 $ 326 $ 845
======== ======== ========
Supplementary Non-Cash Investing and Financing Activities:
Non-Cash Capital Contribution .............................................. $ 3,633 -- --
Non-cash effect of acquisition (see Note 1):
Current assets ............................................................. -- $ 2,250 --
Other assets ............................................................... -- 706 --
Property, plant and equipments ............................................. -- 6,435 --
Current liabilities (excluding current maturities of long-term
debt) .................................................................. -- (1,058) --
Current portion of long term debt .......................................... -- (1,500) --
Long term debt ............................................................. -- (6,833) --
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
Partner Contributions (Distributions) .......... $21,377 $ (6,065) $26,388
Net Income ..................................... -- -- --
10,049 5,558 1,170
Net Increase (Decrease) in Capital ............. 31,426 (507) 27,558
Partners' Capital Balance, Beginning of Period . -- -- --
68,487 68,994 41,436
Partners' Capital Balance, End of Period ....... $99,913 $ 68,487 $68,994
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, UNLESS OTHERWISE NOTED)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Market Hub Partners Storage, L.P. (the "Company") was formed on December 31,
1997 as a Delaware limited partnership. The Company is wholly owned by Market
Hub Partners, L.P. ("MHP") through its direct 99.99% limited partner interest
and its subsidiary's, Market Hub Partners Storage, L.L.C., .01% general partner
interest. MHP is owned by TPC Corporation ("TPC"), a wholly owned subsidiary of
PacifiCorp, and subsidiaries of NIPSCO Industries, Inc. ("Nipsco"), DPL Inc.
("DPL"), and Public Service Enterprise Group, Inc. The Company conducts
operations through its wholly owned subsidiaries, Moss Bluff Hub Partners, L.P.
("Moss Bluff") and Egan Hub Partners, L.P. ("Egan"). On January 30, 1998, the
Company formed Market Hub Partners Finance, Inc. as a wholly owned subsidiary.
Prior to formation of the Company, Moss Bluff and Egan were owned by MHP.
Upon formation of the Company, MHP contributed its ownership of Moss Bluff and
Egan to the Company as a capital contribution. The consolidated financial
statements give retroactive effect to the formation of Market Hub Partners
Storage, L.P., which has been accounted for in a manner similar to a pooling of
interests.
The Company owns and operates natural gas market hubs near Houston, Texas
and in Acadia Parish, Louisiana, which provide producers, end-users, local
distribution companies, pipelines and natural gas marketers with "unbundled"
high deliverability storage services, cash market trading, real time title
tracking and other hub services. The Company's revenue, profitability and future
rate of growth are substantially dependent upon the supply and demand for
natural gas, the pace of natural gas industry deregulation at both the federal
and state levels, and the current and future positions regarding expiration of
customer contractual commitments for both firm transportation and storage
services. Such factors are largely beyond the Company's control.
The Moss Bluff facility, which is located in Liberty and Chambers Counties
near Houston, Texas, began operations in 1990, prior to TPC's formation of MHP.
Through July 3, 1996, Moss Bluff Gas Storage Systems ("MBGSS") was the
partnership that owned the facility, with MHP having a 50% partnership interest
in MBGSS. On July 3, 1996, MHP transferred the 50% remaining partnership
interest in MBGSS owned by CMS Energy Corporation ("CMS") for, principally, a
net cash payment of approximately $26.6 million and the assumption of
liabilities of approximately $6.4 million. Financing for this transaction was
provided through the issuance of $60 million of senior secured notes by MHP in a
private placement offering (see Note 3). MBGSS was effectively dissolved upon
the transfer of CMS's partnership interest to MHP. CMS had acquired its interest
in MBGSS in March of 1994. Due to certain options associated with that
arrangement, the transaction was accounted for by TPC as a financing. TPC and
CMS canceled their respective options to facilitate completion of the transfer.
Upon formation of the Company, MHP contributed its ownership of Moss Bluff to
the Company as a capital contribution.
The results of operations related to the additional 50% interest transferred
are reflected in the accompanying statements of operations since July 3, 1996.
As part of the transaction, the Company assumed net liabilities totaling
approximately $6,435. Had the transfer occurred on January 1, 1995, the Company
would have had revenues of $21,168 and $13,221 for 1996 and 1995, respectively,
and would have had net income of $6,440 and $2,125 for 1996 and 1995,
respectively.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION AND PRINCIPLES OF CONSOLIDATION -- The accompanying financial
statements include the consolidated financial statements of the Company and its
wholly owned subsidiaries. All intercompany transactions and balances among such
subsidiaries have been eliminated.
F-8
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents consist of demand
deposits and highly liquid investments purchased with an original maturity of
three months or less.
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject the Company to concentration of credit consist primarily of temporary
cash investments and trade receivables derived principally from uncollateralized
sales to customers in the pipeline and natural gas utility industries. The
concentration of credit risk in these industries affects the Company's overall
exposure to credit risk because customers may be similarly affected by changes
in economic and other conditions.
INVENTORIES -- Inventories of natural gas are carried at the lower of
weighted average cost or market value.
PROPERTY AND EQUIPMENT -- Depreciation of storage facilities and equipment
is provided using the straight-line method over estimated useful lives of the
assets ranging from fifteen to thirty years. Additions, renewals, and
betterments that materially add to productive capacity or extend the life of an
asset are capitalized. Construction in progress represents costs related to the
ongoing expansion of natural gas storage facilities and are transferred to
natural gas storage facilities and depreciation commenced once such expansion
projects are complete and operational. Expenditures for routine maintenance,
repairs and renewal costs are expensed as incurred. Interest is capitalized
during the construction period of major facilities and amounted to $1,147, $390
and $1,582 in the years ended December 31, 1997, 1996, and 1995, respectively.
In 1996, the Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". Since adoption, SFAS No. 121 has had
no impact on the Company's financial statements.
OTHER ASSETS -- Other assets consist primarily of deferred financing fees
related to private placement financing transactions completed in July 1996 and
restricted cash (see Note 3). The deferred financing fees include legal,
placement agency and other services and are being amortized on a straight-line
basis over the lives of the underlying loans. Restricted cash represents a cash
balance required to be maintained under the terms of the Company's senior
secured notes.
REVENUE RECOGNITION -- Salt cavern storage revenues consist of demand
charges for the reservation of storage space or the use of injection and
withdrawal facilities and usage fees for the actual use of storage space or
injection and withdrawal facilities. Demand fees are recognized as revenue over
the term of the related storage agreement while usage fees and hub services
revenues, which consist of a variety of other storage, injection and withdrawal
services, are recognized as the services are performed.
INCOME TAXES -- The Company is a limited partnership and the applicable tax
liability or benefit is the responsibility of the individual general or limited
partners. The Company's wholly owned subsidiary, Market Hub Partners Finance,
Inc., is subject to income taxes but had no operations in the periods presented
and, thus, no income tax provision or liability is included in the accompanying
financial statements.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported liabilities
and disclosure of contingent assets and liabilities and the amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates with regard to these financial statements
relate primarily to the depreciable lives of property and equipment.
F-9
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
NOTE 3. LONG-TERM DEBT
MOSS BLUFF FINANCING. -- MHP, through its half interest in MBGSS, was party
to a project financing agreement with a bank for an original amount of $25
million of debt through July 3, 1996. Borrowings under the agreement provided
for construction financing of the first two salt caverns and related surface
facilities. The outstanding loan balance at the time of payoff on July 3, 1996,
including assumption of the 50% attributable to CMS's former interest, was
$16,695 (a $452 extraordinary loss was incurred on the early extinguishment of
the debt). The loan bore interest, at the option of the Company, at the prime
rate plus 1% or a Eurodollar index rate plus 1.65%. Prior to June 30, 1996,
terms of the loan required MBGSS to deposit to accounts controlled by the lender
certain amounts from operating cash flow to equal certain future principal and
interest payments.
SECURED NOTES. -- On July 3, 1996, Moss Bluff and Egan completed the
issuance of $60 million of senior secured notes in a private placement
transaction (the "Secured Notes"). The Secured Notes bear interest at a rate of
8.10% per annum and are due in varying amounts through December 31, 2006.
Proceeds of the private placement were used by MHP to acquire the remaining 50%
interest in the Moss Bluff Facility owned by a third party (see Note 1), to
retire an outstanding bank loan on the Moss Bluff Facility, to fund construction
work in progress, to repay intercompany indebtedness of Egan to MHP in the
amount of $14.1 million, and to pay the costs of the financing transaction.
Under the terms of the Secured Notes, the Company is required to deposit 15%
of the quarterly debt service into a cash reserve account at a trustee bank. At
December 31, 1997 and 1996, the amounts on deposit at the trustee bank were
$2,084 and $721, respectively. The Company is also required to meet certain debt
service coverage ratios on a combined basis. At December 31, 1997, the Company
was in compliance with such coverage ratios. The Secured Notes were paid off in
March 1998 with the proceeds received from the offering of $115 million in 8.25%
senior unsecured notes, due in full in 2008 (see Note 8).
As of December 31, 1997, 1996 and 1995, the Company paid interest, net of
amounts capitalized of $3,404, $2,836, and $210, respectively.
NOTE 4. FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET RISK
The carrying value of the Company's financial instruments, consisting of
cash and cash equivalents, and trade receivables and payables, approximates the
fair value of these instruments at December 31, 1997, 1996, and 1995.
The fair value of long-term debt is estimated using discounted cash flow
analysis, based on the borrowing rate currently available to the Company for
loans with similar terms and maturities. The fair value of such debt was $52,639
and $57,692 at December 31, 1997 and 1996, respectively, the carrying value of
which was $53,492 and $57,692, respectively.
NOTE 5. RELATED PARTY TRANSACTIONS
Subsequent to the formation of MHP, TPC has received natural gas storage
services from the Company, and in turn, provided certain administrative,
financial and other services to MHP which benefited the Company. Storage fees
incurred by TPC to the Company were at contractual rates which were comparable
to those rates reflected in the Company's third-party storage contracts and
amounted to $3,733, $2,914 and $1,239 in the years ended December 31, 1997, 1996
and 1995, respectively. Included in accounts receivable are balances due from
TPC of $300 and $216 at December 31, 1997 and 1996, respectively. Charges for
services provided by TPC to MHP were based substantially upon contracts approved
by TPC and MHP and are meant to approximate the market rate for such services.
Contracts covering a portion of such services were canceled by mutual agreement
between TPC and MHP effective July 1, 1996,
F-10
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
and the TPC employees who were previously involved in providing these services
to the Company became employees of the Company at that date. Substantially all
of the remaining contracts were canceled effective December 31, 1997. As of
December 31, 1997 and 1996, the Company had an outstanding accounts payable
balance to TPC of $943 and $524, respectively, which primarily relates to the
canceled agreements. All services provided by TPC to MHP have been allocated to
the Company as it is the only operating subsidiary, of MHP. The aggregate
charges for contractual services provided by TPC to MHP (and allocated to the
Company) in the years ended December 31, 1997, 1996 and 1995 were $2,247, $1,953
and $4,673, respectively. These amounts are included in operating expenses in
the consolidated statements of operations. Additionally, all general and
administrative expenses in the consolidated statements of operations have been
allocated to the Company by MHP.
During the years ended December 31, 1997, 1996 and 1995, substantially all
employees of the Company were eligible to participate in TPC's defined
contribution 401(k) plan. The Company's matching contributions to the plan for
all such years are included in the aggregate charges for contractual services
provided by TPC.
The Company performs storage services under a long-term demand contract as
well as various other hub services for Nipsco. Under the provisions of the
contract, Nipsco reimburses the Company for a portion of the property taxes
incurred by the Company. Revenues recognized by the Company in relation to the
services performed for Nipsco totaled $8,769, $7,179 and $3,617 during the years
ended December 31, 1997, 1996 and 1995, respectively. Included in accounts
receivable are balances due from Nipsco of $988 and $1,078 at December 31, 1997
and 1996, respectively,
The Company performs storage services under long-term demand contracts as
well as various other hub services for DPL and its subsidiaries. Revenues
recognized by the Company in relation to such services performed totaled $419,
$229 and $37 during the years ended December 31, 1997, 1996 and 1995,
respectively. Included in accounts receivable are balances due from DPL and its
subsidiaries of $63 and $81 at December 31, 1997 and 1996, respectively.
NOTE 6. COMMITMENTS AND CONTINGENCIES
LEASES -- Effective December 1, 1997, MHP began leasing its main office
space in Houston, Texas from a third party in addition to maintaining office
space in Leesburg, Virginia. Prior to this time, MHP occupied office space in
Houston, Texas, leased by a TPC subsidiary from a third party. MHP's total
office lease expenses for the years ended December 31, 1997, 1996 and 1995 were
$128, $62 and $38, respectively. All such lease expense costs for MHP are
included in the financial statements of the Company because it is the only
operating subsidiary of MHP. Future minimum rental payments required to be made
by MHP under the Houston, Texas, and Leesburg, Virginia, offices are as follows:
AMOUNT
------
1998................................................. $ 162
1999................................................. 168
2000................................................. 128
2001................................................. 131
2002................................................. 120
Thereafter........................................... 0
------
Total minimum payments required.................. $ 709
======
F-11
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
NOTE 7. SIGNIFICANT CUSTOMERS
SIGNIFICANT CUSTOMERS -- Significant customers are those which individually
account for more than 10% of the Company's combined revenues. For the year ended
December 31, 1997, there were three such customers that accounted for 56% of
combined revenues. For the year ended December 31, 1996, there were four such
customers that accounted for 76% of combined revenues. For the year ended
December 31, 1995, there were three such customers that accounted for 77% of
combined revenues.
NOTE 8. SUBSEQUENT EVENTS
The Company completed an offering of $115 million in 8.25% senior unsecured
notes, due in full in 2008, in March 1998. Proceeds of the placement have been
used by the Company to repay the entire outstanding principle amount, $53,492,
of the 8.10% Secured Notes (see Note 3), with accrued interest of $758 and
prepayment penalties of $5,057, and to pay a distribution to MHP in the amount
of $17,617. It is anticipated that the remaining proceeds will be used for
capital expenditures for the continued expansion and development of the natural
gas storage facilities. As a result of the extinguishment of the Secured Notes,
the Company recorded an extraordinary loss in 1998 of approximately $6.7
million. In addition, the restricted cash balance of $2,084 at December 31, 1997
was made available to the Company.
MHP has adopted a 401(k) savings plan for all of its employees effective
January 1, 1998. Participation in the plan is optional. Employer contributions
are equal to 50% of employee contributions up to 6% of participants' elected
annual salary deferral contributions, subject to certain limitations.
On January 1, 1995, MHP entered into employment agreements with two of its
executives. The agreements provide for certain payments of bonuses upon meeting
certain objectives and incentive compensation payments based upon the increase
in the value of MHP. These agreements have been terminated as of December 31,
1997 and new employment agreements have been entered into with the key executive
management team. At December 31, 1997, $600 was reflected in the consolidated
statement of financial position and results of operations as payments due as a
result of the termination of the agreements.
In April 1998, the Company executed a credit facility (the "New Credit
Facility") with Bank One, Texas, N.A. that expires December 2000. The New Credit
Facility provides for revolving credit borrowings up to $20.0 million in the
aggregate outstanding at any time. Borrowings under the credit facility will
bear interest at a rate per annum, at the Company's option, equal to: (i) the
bank's prime rate or (ii) the London Interbank Offered Rate plus 2%. The New
Credit Facility is secured by substantially all the assets of the Company and
includes certain covenants applicable to the Company, including requirements
that the Company comply with certain financial ratios.
F-12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any Securities other than the
Exchange Notes offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the Exchange Notes to anyone or by anyone
offered hereby in any jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that the information herein is correct as of any time after the date
hereof or that there has not been a change in the affairs of the Company since
the date hereof.
<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS
PAGE
Summary................................. 6
Risk Factors............................ 16
Market Hub Partners, L.P. and the
Company............................... 22
Use of Proceeds......................... 24
Capitalization.......................... 25 Market Hub
Selected Financial and Other Operating Partners Storage, L.P.
Data.................................. 26
Unaudited Pro Forma Condensed Market Hub Partners
Consolidated Financial Statements..... 28 Finance, Inc.
Management's Discussion and Analysis
of Financial Condition and Results [MHP Logo]
of Operations......................... 32
Industry Overview....................... 36 Offer to Exchange
Business................................ 37 8 1/4 Senior Notes due 2008
Management.............................. 48 For Any and All Outstanding
Certain Transactions.................... 52 8 1/4% Senior Notes due 2008
Ownership............................... 54 ($115,000,000 in Principal Amount Outstanding)
Description of New Credit Facility...... 54 ----------
The Exchange Offer...................... 55 PROSPECTUS
Description of Exchange Notes........... 64 ----------
Certain Federal Income Tax
Consequences.......................... 94
Plan of Distribution.................... 97 , 1998
Experts................................. 97
Legal Matters........................... 97
Index to Financial Statements........... F-1
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is comprised of limited partnerships, limited liability
companies and a corporation, each formed or organized, as the case may be, under
the laws of the State of Delaware. In addition, each limited partnership
registering securities pursuant to this registration statement is managed by the
managers and officers of its general partner, a limited liability company. As
described below, the formation documents of each of these entities provide for
indemnification of certain persons.
Section 108 of the Delaware Revised Uniform Limited Partnership Act (the
"DRULPA") provides that, subject to any standards or restrictions set forth in
its partnership agreement, a limited partnership may, and has the power to,
indemnify and hold harmless any partner or any other person from and against any
and all claims and demands whatsoever. As permitted by Section 108, the limited
partnership agreements of MHP Storage, Moss Bluff and Egan state that no partner
of the partnership, or director, officer, partner or employee of a partner,
shall be liable to the partnership or to any partner for any losses sustained or
liabilities incurred as a result of any act or omission if (i) such person acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of the partnership, and (ii) its conduct did not constitute
gross negligence or willful or wanton misconduct.
In addition, the limited partnership agreements of MHP Storage, Moss
Bluff and Egan further provide that, to the fullest extent permitted by law,
each partner shall be indemnified and held harmless by the partnership from and
against, among other things, any and all losses, claims, damages, judgements,
fines, settlements or other expenses (including legal fees and expenses) arising
from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative (other than an action by or in the
right of the partnership), in which the partner may be involved, or threatened
to be involved, by virtue of its status as a partner. This indemnity is
available only if (i) the partner acted in good faith and in a manner it
reasonably believed to be in, or not opposed to, the best interests of the
partnership, and, with respect to any criminal proceeding, had no reasonable
cause to believe its conduct was unlawful, and (ii) the partner's conduct did
not constitute gross negligence or willful or wanton misconduct. The termination
of any action by, among other things, judgment, order settlement or conviction
shall not, of itself, create a presumption that the partner acted in a manner
contrary to that specified in (i) or (ii) above. However, in the case of actions
brought by and on behalf of the partnership, no indemnification may be made with
respect to any claim, demand, action, suit or proceeding as to which a partner
has been adjudged to be liable for gross negligence or willful or wanton
misconduct, unless and only to the extent that the court in which such claim,
demand, action, suit or proceeding was brought determine that the partner is
fairly and reasonably entitled to indemnity. Expenses incurred by an indemnified
person must be advanced by the partnership prior to the final disposition of any
claim upon the partnership's receipt of an undertaking to repay such amounts in
the event it is determined that the person is not entitled to indemnification.
Section 303 of the Delaware Limited Liability Company Act (the "DLLCA")
provides that, unless otherwise provided by law, the debts, obligations and
liabilities of a limited liability company, whether arising in contract, tort or
otherwise, are solely the debts, obligations and liabilities of the limited
liability company, and no member or manager of a limited liability company is
obligated personally for any such debt, obligation or liability of the limited
liability company solely by reason of being a member or acting as a manager of
the limited liability company. As permitted by Section 303, the limited
liability company agreements of Market Hub Partners Storage, L.L.C., the general
partner of MHP Storage ("MHP Storage GP"), of Moss Bluff Hub Partners, L.L.C., a
subsidiary guarantor and the general partner of Moss Bluff ("Moss Bluff GP") and
of Egan Hub Partners, L.L.C., a subsidiary guarantor and the general partner of
Egan ("Egan GP"), provide that a manager of MHP Storage GP, Moss Bluff GP or
Egan GP (each the "Company"), as the case may be, will not be liable under any
judgement, decree or order of a court, or in any other manner, for any debt,
obligation or liability of a Company be reason of his acting as a manager of the
Company. Nor will a manager of MHP Storage GP, Moss Bluff GP or Egan GP, as the
case may be, be personally liable to such Company or to its members for monetary
damages for breach of fiduciary duty as a manager, except for liability for any
acts or omissions that involve intentional misconduct, fraud or a knowing
violation of law or for a distribution in violation of the DLLCA as a result of
the willful or grossly negligent act or omission of a manager.
II-1
<PAGE>
Section 108 of the DLLCA provides that, subject to any standards or
restrictions set forth in its limited liability company agreement, a limited
liability company may, and has the power to, indemnify and hold harmless any
member or manager or other person from and against any and all claims and
demands whatsoever. As permitted by Section 108, the limited liability company
agreements of MHP Storage GP, Moss Bluff GP and Egan GP provide that managers,
officers, employees, agents or fiduciaries of MHP Storage GP, Moss Bluff GP or
Egan GP, as the case may be (or of any other enterprise which such person is or
was serving at the request of a Company) who is made, or is threatened to be
made, a witness in or a party to a proceeding whether civil, criminal,
administrative or investigative, shall be indemnified by the Company to the
fullest extent permitted by applicable law. A manager, officer, employee, agent
or fiduciary of the Company, who, by reason of such position, is a witness in a
proceeding, or is a party to and is successful in any proceeding or in any part
thereof, shall be indemnified against all expenses incurred in connection with,
as the case may be, such proceeding or a part thereof. A person with
indemnification rights under the limited liability company agreements of MHP
Storage GP, Moss Bluff GP or Egan GP must be advanced expenses within ten days
after requesting them to the fullest extent permitted by the DLLCA. The limited
liability company agreements of MHP Storage GP, Moss Bluff GP and Egan GP
further provide that, to the extent a Company maintains an insurance policy or
policies providing liability insurance for its managers or officers, any
employee, agent and fiduciary, as well as any officer or manager, entitled to
indemnification under the provisions described above shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of coverage available for any such manager or officer under such policy or
policies. However, no person shall be entitled to indemnification or advancement
of expenses with respect to any proceeding, or any matter therein brought or
made by such person against, as the case may be, MHP Storage GP, Moss Bluff GP
and Egan GP.
As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), the Certificate of Incorporation of Finance Corp. provides that, to the
fullest extent permitted by Delaware law, no director shall be liable to Finance
Corp. or its stockholders for monetary damages for breach of fiduciary duty. By
virtue of these provisions, a director of Finance Corp. is not personally liable
for monetary damages for breach of such director's fiduciary duty as director
involving any act or omission of any such director, except for liability for (i)
breach of duty of loyalty to Finance Corp. or its stockholders, (ii) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) dividends or stock repurchases or redemptions that are
unlawful under the DGCL, as it may be amended, supplemented or replaced, and
(iv) any transaction from which such director receives an improper personal
benefit. In addition, the Certificate of Incorporation provides that, if the
DGCL is amended to authorize the further elimination or limitation of liability
of a director, then the liability of the directors will be eliminated or limited
to the fullest extent permitted by the DGCL, as amended.
Section 145 of the DGCL permits indemnification upon a determination
that an officer or director has met the applicable standard of conduct. Such
officer or director is required to have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of a
corporation and, with respect to any criminal action, without reasonable cause
to believe his conduct was unlawful. Section 145 does not authorize
indemnification in actions brought by or in the right of the corporation with
respect to any claim, issue or matter as to which a director or officer is
adjudged to be liable to the corporation, unless specifically authorized by the
Delaware Court of Chancery or the court in which such action is brought. Section
145 also expressly provides that the power to indemnify authorized thereby is
not exclusive of any rights granted under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise. Finance Corp.'s
Certificate of Incorporation provides for the mandatory indemnification of any
and all persons who serve as officers and directors, and any other persons whom
Finance Corp. may have the power to indemnify under the DGCL, to the fullest
extent permitted under the DGCL, as the same may be amended or supplemented. In
addition, the Bylaws of Finance Corp. provide for indemnification to the fullest
extent permitted by Section 145 of the DGCL of persons who are or were serving
as directors, officers, employees or agents of Finance Corp. (or who are or were
serving at the request of Finance Corp. as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of another
entity or enterprise at the request of Finance Corp.). The Bylaws also authorize
the purchase and maintenance of insurance on behalf of any persons entitled to
indemnification as described above.
The above discussion of the DRULPA, DLLCA and DGCL, and of the various
formation documents of MHP Storage, Moss Bluff, Egan, their respective general
partners and Finance Corp. is not intended to be exhaustive and as qualified in
its entirety by reference to the relevant formation documents and Delaware
statutes.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
3.1 Certificate of Limited Partnership of Market Hub Partners Storage,
L.P., as amended as of January 30, 1998.
3.2 Limited Partnership Agreement of Market Hub Partners Storage, L.P., as
amended as of December 31, 1997. by and between Market Hub Partners
Finance, L.L.C. and Market Hub Partners, L.P.
3.3 Certificate of Incorporation of Market Hub Partners Finance, Inc., as
of January 30, 1998.
3.4 Amended and Restated By-Laws of Market Hub Partners Finance, Inc., as
of January 30, 1998.
4.1 Indenture dated March 1, 1998 by and among Market Hub Partners Storage,
L.P., Market Hub Partners Finance, Inc., the Subsidiary Guarantors and
IBJ Schroder Bank & Trust Company, as Trustee.
4.2 Registration Rights Agreement dated March 4, 1998 by and among Market
Hub Partners Storage, L.P., Market Hub Partners Finance, Inc., the
Subsidiary Guarantors and SBC Warburg Dillon Read Inc.
4.3 Note Purchase Agreement dated April 11, 1997 by and among Market Hub
Partners, L.P. and the Note Purchasers Party Thereto.
4.4 Waiver and Amendment Agreement dated February 11, 1998 by and among
Market Hub Partners, L.P. and the Note Purchasers Party Thereto of the
Note Purchase Agreement dated April 11, 1997.
5.1* Opinion of Baker & Botts, L.L.P.
10.1 Assumption Agreement dated March 1, 1998 by and among Market Hub
Partners Storage, L.P. and Market Hub Partners Finance, Inc.
10.2 Credit Agreement dated April 15, 1998 by and among Market Hub Partners
Storage, L.P., the Guarantors party thereto and Bank One, Texas,
National Association.
10.3* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Donald B. Russell.
10.4* Agreement dated February 24, 1998 by and between Market Hub Partners,
Inc. and Donald B. Russell.
10.5* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and David W. Hooker.
10.6* Agreement dated February 6, 1998 by and between Market Hub Partners,
Inc. and David W. Hooker.
10.7* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Anthony J. Clark.
10.8* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Jack W. Gatewood.
10.9* Employment Agreement dated February 8, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Patrick Lorio.
10.10* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Mark D. Cook.
12.1 Statement regarding computation of ratios.
21.1* Subsidiaries of Market Hub Partners Storage, L.P.
23.1 Consent of Deloitte & Touche LLP dated April 28, 1998.
23.2 Consent of Arthur Andersen LLP dated April 28, 1998.
23.3* Consent of Baker & Botts, L.L.P. (included in Exhibit 5.1).
24.1 Powers of attorney of directors and officers of the Company.
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Tender Instructions.
- ------------
*To be filed by amendment.
II-3
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned registrant 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;
(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 decrease 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) under the Securities
Act if, in the aggregate, the changes in volume and price
represent no more than a 20 percent 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:
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provision described under Item
20 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 Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the 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 or 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 Securities Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
(5) To respond to requests for information that is incorporated
by reference into the prospectus pursuant to Item 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.
(6) 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant had duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 1, 1998.
MARKET HUB PARTNERS STORAGE, L.P.
By: MARKET HUB PARTNERS STORAGE, L.L.C.,
its General Partner
By:/s/ANTHONY J. CLARK
Anthony J. Clark
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ DONALD N. FURMAN* Director and Chairman May 1, 1998
Donald N. Furman
/s/ DONALD B. RUSSELL* President and Chief Executive Officer May 1, 1998
Donald B. Russell (Principal Executive Officer)
/s/ DAVID W. HOOKER Executive Vice President and Chief May 1, 1998
David W. Hooker Operating Officer
/s/ ANTHONY J. CLARK Vice President and Chief Financial May 1, 1998
Anthony J. Clark Officer (Principal Financial and
Accounting Officer)
/s/ M. SCOTT JONES* Manager May 1, 1998
M. Scott Jones
/s/ LON C. MITCHELL* Manager May 1, 1998
Lon C. Mitchell
/s/ EILEEN A. MORAN*
Eileen A. Moran Manager May 1, 1998
/s/ JAMES W. TOMASIAK* Manager May 1, 1998
James W. Tomasiak
/s/ JEFFREY W. YUNDT* Manager May 1, 1998
Jeffrey W. Yundt
*By:/s/ ANTHONY J. CLARK
(pursuant to a power of
attorney filed herewith)
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant had duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 1, 1998.
MARKET HUB PARTNERS FINANCE, INC.
By:/s/ANTHONY J. CLARK
Anthony J. Clark
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ DONALD N. FURMAN* Director and Chairman May 1, 1998
Donald N. Furman
/s/ DONALD B. RUSSELL* President and Chief Executive Officer May 1, 1998
Donald B. Russell (Principal Executive Officer)
/s/ DAVID W. HOOKER Executive Vice President and Chief May 1, 1998
David W. Hooker Operating Officer
/s/ ANTHONY J. CLARK Vice President and Chief Financial May 1, 1998
Anthony J. Clark Officer (Principal Financial and
Accounting Officer)
/s/ M. SCOTT JONES* Manager May 1, 1998
M. Scott Jones
/s/ LON C. MITCHELL* Manager May 1, 1998
Lon C. Mitchell
/s/ EILEEN A. MORAN*
Eileen A. Moran Manager May 1, 1998
/s/ JAMES W. TOMASIAK* Manager May 1, 1998
James W. Tomasiak
/s/ JEFFREY W. YUNDT* Manager May 1, 1998
Jeffrey W. Yundt
*By:/s/ ANTHONY J. CLARK
(pursuant to a power of
attorney filed herewith)
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant had duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 1, 1998.
MOSS BLUFF HUB PARTNERS, L.P.
By: MOSS BLUFF HUB PARTNERS, L.L.C.,
its General Partner
By:/s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ DONALD N. FURMAN* Director and Chairman May 1, 1998
Donald N. Furman
/s/ DONALD B. RUSSELL* President and Chief Executive Officer May 1, 1998
Donald B. Russell (Principal Executive Officer)
/s/ DAVID W. HOOKER Executive Vice President and Chief May 1, 1998
David W. Hooker Operating Officer
/s/ ANTHONY J. CLARK Vice President and Chief Financial May 1, 1998
Anthony J. Clark Officer (Principal Financial and
Accounting Officer)
/s/ M. SCOTT JONES* Manager May 1, 1998
M. Scott Jones
/s/ LON C. MITCHELL* Manager May 1, 1998
Lon C. Mitchell
/s/ EILEEN A. MORAN*
Eileen A. Moran Manager May 1, 1998
/s/ JAMES W. TOMASIAK* Manager May 1, 1998
James W. Tomasiak
/s/ JEFFREY W. YUNDT* Manager May 1, 1998
Jeffrey W. Yundt
*By:/s/ ANTHONY J. CLARK
(pursuant to a power of
attorney filed herewith)
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant had duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 1, 1998.
MOSS BLUFF HUB PARTNERS, L.L.C.
By:/s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ DONALD N. FURMAN* Director and Chairman May 1, 1998
Donald N. Furman
/s/ DONALD B. RUSSELL* President and Chief Executive Officer May 1, 1998
Donald B. Russell (Principal Executive Officer)
/s/ DAVID W. HOOKER Executive Vice President and Chief May 1, 1998
David W. Hooker Operating Officer
/s/ ANTHONY J. CLARK Vice President and Chief Financial May 1, 1998
Anthony J. Clark Officer (Principal Financial and
Accounting Officer)
/s/ M. SCOTT JONES* Manager May 1, 1998
M. Scott Jones
/s/ LON C. MITCHELL* Manager May 1, 1998
Lon C. Mitchell
/s/ EILEEN A. MORAN*
Eileen A. Moran Manager May 1, 1998
/s/ JAMES W. TOMASIAK* Manager May 1, 1998
James W. Tomasiak
/s/ JEFFREY W. YUNDT* Manager May 1, 1998
Jeffrey W. Yundt
*By:/s/ ANTHONY J. CLARK
(pursuant to a power of
attorney filed herewith)
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant had duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 1, 1998.
EGAN HUB PARTNERS, L.P.
By: EGAN HUB PARTNERS, L.L.C.,
its General Partner
By:/s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ DONALD N. FURMAN* Director and Chairman May 1, 1998
Donald N. Furman
/s/ DONALD B. RUSSELL* President and Chief Executive Officer May 1, 1998
Donald B. Russell (Principal Executive Officer)
/s/ DAVID W. HOOKER Executive Vice President and Chief May 1, 1998
David W. Hooker Operating Officer
/s/ ANTHONY J. CLARK Vice President and Chief Financial May 1, 1998
Anthony J. Clark Officer (Principal Financial and
Accounting Officer)
/s/ M. SCOTT JONES* Manager May 1, 1998
M. Scott Jones
/s/ LON C. MITCHELL* Manager May 1, 1998
Lon C. Mitchell
/s/ EILEEN A. MORAN*
Eileen A. Moran Manager May 1, 1998
/s/ JAMES W. TOMASIAK* Manager May 1, 1998
James W. Tomasiak
/s/ JEFFREY W. YUNDT* Manager May 1, 1998
Jeffrey W. Yundt
*By:/s/ ANTHONY J. CLARK
(pursuant to a power of
attorney filed herewith)
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant had duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on May 1, 1998.
EGAN HUB PARTNERS, L.L.C.
By:/s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ DONALD N. FURMAN* Director and Chairman May 1, 1998
Donald N. Furman
/s/ DONALD B. RUSSELL* President and Chief Executive Officer May 1, 1998
Donald B. Russell (Principal Executive Officer)
/s/ DAVID W. HOOKER Executive Vice President and Chief May 1, 1998
David W. Hooker Operating Officer
/s/ ANTHONY J. CLARK Vice President and Chief Financial May 1, 1998
Anthony J. Clark Officer (Principal Financial and
Accounting Officer)
/s/ M. SCOTT JONES* Manager May 1, 1998
M. Scott Jones
/s/ LON C. MITCHELL* Manager May 1, 1998
Lon C. Mitchell
/s/ EILEEN A. MORAN*
Eileen A. Moran Manager May 1, 1998
/s/ JAMES W. TOMASIAK* Manager May 1, 1998
James W. Tomasiak
/s/ JEFFREY W. YUNDT* Manager May 1, 1998
Jeffrey W. Yundt
*By:/s/ ANTHONY J. CLARK
(pursuant to a power of
attorney filed herewith)
II-11
<PAGE>
INDEX TO EXHIBITS
3.1 Certificate of Limited Partnership of Market Hub Partners Storage,
L.P., as amended as of January 30, 1998.
3.2 Limited Partnership Agreement of Market Hub Partners Storage, L.P., as
amended as of December 31, 1997. by and between Market Hub Partners
Finance, L.L.C. and Market Hub Partners, L.P.
3.3 Certificate of Incorporation of Market Hub Partners Finance, Inc., as
of January 30, 1998.
3.4 Amended and Restated By-Laws of Market Hub Partners Finance, Inc., as
of January 30, 1998.
4.1 Indenture dated March 1, 1998 by and among Market Hub Partners Storage,
L.P., Market Hub Partners Finance, Inc., the Subsidiary Guarantors and
IBJ Schroder Bank & Trust Company, as Trustee.
4.2 Registration Rights Agreement dated March 4, 1998 by and among Market
Hub Partners Storage, L.P., Market Hub Partners Finance, Inc., the
Subsidiary Guarantors and SBC Warburg Dillon Read Inc.
4.3 Note Purchase Agreement dated April 11, 1997 by and among Market Hub
Partners, L.P. and the Note Purchasers Party Thereto.
4.4 Waiver and Amendment Agreement dated February 11, 1998 by and among
Market Hub Partners, L.P. and the Note Purchasers Party Thereto of the
Note Purchase Agreement dated April 11, 1997.
5.1* Opinion of Baker & Botts, L.L.P.
10.1 Assumption Agreement dated March 1, 1998 by and among Market Hub
Partners Storage, L.P. and Market Hub Partners Finance, Inc.
10.2 Credit Agreement dated April 15, 1998 by and among Market Hub Partners
Storage, L.P., the Guarantors party thereto and Bank One, Texas,
National Association.
10.3* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Donald B. Russell.
10.4* Agreement dated February 24, 1998 by and between Market Hub Partners,
Inc. and Donald B. Russell.
10.5* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and David W. Hooker.
10.6* Agreement dated February 6, 1998 by and between Market Hub Partners,
Inc. and David W. Hooker.
10.7* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Anthony J. Clark.
10.8* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Jack W. Gatewood.
10.9* Employment Agreement dated February 8, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Patrick Lorio.
10.10* Employment Agreement dated January 1, 1998 by and among Market Hub
Partners, L.P., Market Hub Partners Storage, L.P., Market Hub Partners
Storage, L.L.C. and Mark D. Cook.
12.1 Statement regarding computation of ratios.
21.1* Subsidiaries of Market Hub Partners Storage, L.P.
23.1 Consent of Deloitte & Touche LLP dated April 28, 1998.
23.2 Consent of Arthur Andersen LLP dated April 28, 1998.
23.3* Consent of Baker & Botts, L.L.P. (included in Exhibit 5.1).
24.1 Powers of attorney of directors and officers of the Company.
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Tender Instructions.
- ------------
*To be filed by amendment.
II-12
EXHIBIT 3.1
CONFORMED
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MARKET HUB PARTNERS FINANCE, L.P.
This Certificate of Limited Partnership of Market Hub Partners
Finance, L.P. (the "Partnership") is being executed by the undersigned for the
purpose of forming a limited partnership pursuant to the Delaware Revised
Uniform Limited Partnership Act (6 Del. Code ss. 17-101 ET SEQ.).
ARTICLE ONE
The name of the Partnership is Market Hub Partners Finance, L.P.
ARTICLE TWO
The address of the registered office of the Partnership in the State
of Delaware is 1209 Orange Street, New Castle County, Wilmington, Delaware
19801, and the name and address of the Partnership's registered agent for
service of process in the State of Delaware is The Corporation Trust Company,
1209 Orange Street, New Castle County, Wilmington, Delaware 19801.
ARTICLE THREE
The name and business address of the sole general partner of the
Partnership is Market Hub Partners Finance, L.L.C., 16420 Park Ten Place, Suite
420, Houston, Texas 77085.
- 1 -
<PAGE>
IN WITNESS WHEREOF, the undersigned, the sole general partner of the
Partnership, has caused this Certificate of Limited Partnership to be executed
on this 31st day of December, 1997.
MARKET HUB PARTNERS FINANCE, L.L.C.,
General Partner
By:MARKET HUB PARTNERS, L.P.
Member of Market Hub Partners Finance, L.L.C.
By:MARKET HUB PARTNERS, Inc.
General Partner of Market Hub Partners, L.P.
By:/s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President, Chief Financial Officer,
Secretary
- 2 -
<PAGE>
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF LIMITED PARTNERSHIP OF
MARKET HUB PARTNERS FINANCE, L.P.
Pursuant to the provisions of Section 17-202 of the Delaware Revised
Uniform Limited Partnership Act, this Certificate of Amendment to the
Certificate of Limited Partnership of Market Hub Partners Finance, L.P. (the
"Partnership"), is being duly executed and filed by Market Hub Partners Storage,
L.L.C., a Delaware limited liability company, as sole general partner of the
Partnership.
(i) NAME. The name of the Partnership was Market Hub Partners Finance,
L.P.
(ii) AMENDMENT. The Certificate of Limited Partnership of the Partnership
is hereby amended so as to change the name of the Partnership to MARKET
HUB PARTNERS STORAGE, L.P.
IN WITNESS WHEREOF, the undersigned has executed this certificate of
amendment as of January 30, 1998.
MARKET HUB PARTNERS STORAGE, L.L.C.
Sole General Partner of Market Hub Partners Finance, L.P.
By: MARKET HUB PARTNERS, L.P.
Sole Member of Market Hub Partners Finance, L.L.C.
By: MARKET HUB PARTNERS, Inc.
Sole General Partner of Market Hub Partners, L.P.
By: /s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President, Chief Financial Officer and Secretary
EXHIBIT 3.2
CONFORMED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MARKET HUB PARTNERS FINANCE, L.P.
Dated as of December 31, 1997
<PAGE>
INDEX
PAGE
ARTICLE I.
DEFINITIONS AND TERMS..................................................1
1.1 Definitions................................................1
1.2 Terms Generally............................................2
ARTICLE II.
THE PARTNERSHIP........................................................2
2.1 Continuation...............................................2
2.2 Name.......................................................2
2.3 Principal Office, Registered Office and Agent
for Service of Process.....................................2
2.4 Purpose....................................................3
2.5 Term.......................................................3
2.6 Partners...................................................3
ARTICLE III.
CONTRIBUTIONS..........................................................3
3.1 Contributions..............................................3
3.2 No Return..................................................3
ARTICLE IV.
DISTRIBUTIONS..........................................................4
ARTICLE V.
CONTROL OF THE PARTNERSHIP.............................................4
5.1 Power and Authority........................................4
5.2 Inquiries..................................................4
5.3 Compensation...............................................5
ARTICLE VI.
BOOKS AND RECORDS AND ACCOUNTING.......................................5
6.1 Financial Information......................................5
6.2 Fiscal Year................................................6
6.3 Access to Books and Records................................6
ARTICLE VII.
RESPONSIBILITIES OF PARTNERS...........................................6
7.1 Liability to Partners......................................6
7.2 Indemnification............................................6
7.3 Time Devoted to Affairs; Other Ventures....................9
7.4 Good Faith Reliance on Agreement...........................9
7.5 Certain Standards..........................................9
<PAGE>
PAGE
ARTICLE VIII.
DISSOLUTION AND TERMINATION...........................................10
8.1 Dissolution...............................................10
8.2 Winding Up................................................10
8.3 Waiver of Partition.......................................10
ARTICLE IX.
TAX MATTERS...........................................................10
9.1 Allocations of Tax Items..................................10
9.2 Tax Elections.............................................11
9.3 Preparation of Tax Returns................................11
9.4 Tax Matters Partner.......................................11
ARTICLE X.
MISCELLANEOUS.........................................................12
10.1 Notices...................................................12
10.2 Captions..................................................12
10.3 Further Assurances........................................12
10.4 Successors and Assigns....................................12
10.5 Governing Law.............................................13
10.6 Integration...............................................13
10.7 Amendments................................................13
10.8 No Third-Party Rights.....................................13
10.9 Relationship of the Partners..............................13
10.10 Counterparts..............................................14
10.11 Waiver....................................................14
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
MARKET HUB PARTNERS FINANCE, L.P.
This Agreement of Limited Partnership dated as of December 31, 1997
of Market Hub Partners Finance, L.P., a Delaware limited partnership, is entered
into by and between Market Hub Partners Finance, L.L.C., a Delaware limited
liability company ("Finance GP"), and Market Hub Partners, L.P., a Delaware
limited partnership ("MHP").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the parties
hereto intending to be legally bound, agree as follows:
ARTICLE I.
DEFINITIONS AND TERMS
1.1 DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
AGREEMENT: This Agreement, as the same may be amended from time to
time in accordance with the provisions hereof.
FACILITIES: The Moss Bluff and the Egan market hub and high
deliverability gas storage facilities which are located in Liberty and Chambers
Counties, Texas and in Acadia Parish, Louisiana, respectively, or the right to
own and develop such facilities, together with real-time nomination, allocation
and title tracking systems and gas trading platforms.
GENERAL PARTNER: The general partner of the Partnership.
LIMITED PARTNER: The limited partner of the Partnership.
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OWNERSHIP PERCENTAGE: With respect to Finance GP, .01%, and with
respect to MHP, 99.99%.
PARTNERS: The General Partner and the Limited Partner.
PARTNERSHIP: The limited partnership formed pursuant to this
Agreement.
1.2 TERMS GENERALLY. The definitions in this Agreement shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
ARTICLE II.
THE PARTNERSHIP
2.1 CONTINUATION. Subject to the provisions of this Agreement, the
parties hereto continue this Partnership pursuant to the Delaware Revised
Uniform Limited Partnership Act ("DRULPA"). The general partner of the
Partnership has heretofore caused to be filed the certificate of limited
partnership of the Partnership which is required by the DRULPA and shall cause
to be filed such other certificates or filings as may be required for the
formation and operation of the Partnership in the State of Delaware or any other
state in which the Partnership elects to do business.
2.2 NAME. The name of the Partnership shall be "Market Hub Partners
Finance, L.P." The Partnership may change its name or adopt such trade or
fictitious names as it may determine.
2.3 PRINCIPAL OFFICE, REGISTERED OFFICE AND AGENT FOR SERVICE OF
PROCESS. The principal office of the Partnership shall be 16420 Park Ten Place,
Suite 420, Houston, Texas 77084, or such other place as shall be determined by
the General Partner. The General Partner shall give
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the Partners prompt written notice of any change in the principal place of
business of the Partnership. The name of the registered agent for service of
process on the Partnership in Delaware is The Corporation Trust Company. The
address of the registered agent and the address of the registered office of the
Partnership in Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801.
2.4 PURPOSE. The principal purpose of the Partnership shall be to
develop, construct, own and operate the Facilities and to engage in such other
business and activities as shall be incidental to or related to the foregoing or
as may be determined by the General Partner from time to time and permitted by
law. Such activities may be undertaken directly by the Partnership or through
its subsidiaries.
2.5 TERM. The Partnership shall continue in effect under the terms
of this Agreement from the date hereof until dissolved and liquidated in the
manner provided herein.
2.6 PARTNERS.
(a) GENERAL PARTNER. The general partner of the Partnership is
Finance GP.
(b) LIMITED PARTNER. MHP is the limited partner of the
Partnership.
ARTICLE III.
CONTRIBUTIONS
3.1 CONTRIBUTIONS. Each Partner (or its predecessor in interest) has
heretofore made contributions to the Partnership.
3.2 NO RETURN. Except as otherwise expressly provided in this
Agreement, no Partner shall be entitled to a return of, or interest on, its
contributions or on any undistributed funds held by the Partnership.
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ARTICLE IV.
DISTRIBUTIONS
From time to time, the General Partner may determine the amount
which is to be distributed by the Partnership, and any such amount so
distributed shall be divided among the Partners in proportion to their Ownership
Percentages.
ARTICLE V.
CONTROL OF THE PARTNERSHIP
5.1 POWER AND AUTHORITY. Except as otherwise expressly provided by
this Agreement or by nonwaivable provisions of applicable law, (i) the
management and control of the business and affairs of the Partnership shall be
vested in the General Partner, which may act on behalf of the Partnership
without the consent of the individual Partners, (ii) all decisions respecting
any matter set forth herein or otherwise affecting or arising out of the conduct
of the business of the Partnership shall be made by the General Partner, (iii)
the General Partner shall have the exclusive right and full authority to manage,
conduct and control the Partnership's business and to effect the purposes and
provisions of this Agreement and (iv) the General Partner shall have full
authority to do all things in the conduct of the business of the Partnership
deemed necessary or desirable by the General Partner.
5.2 INQUIRIES. In no event shall any person, other than a Partner,
dealing with the General Partner with respect to any business or property of the
Partnership be obligated to ascertain that the provisions of this Agreement have
been complied with or be obligated to inquire into the necessity or expedience
of any act or action of the General Partner; and every contract, agreement,
deed, mortgage, security agreement, promissory note or other instrument or
document executed by the General Partner with respect to any business or
property of the Partnership shall be conclusive
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evidence in favor of any person relying on or claiming thereunder (in the
absence of such person's actual knowledge to the contrary) that (i) at the time
of the execution and delivery thereof, this Agreement was in full force and
effect, (ii) such instrument or document was duly executed in accordance with
the terms and provisions of this Agreement and is binding upon the Partnership,
and (iii) the General Partner was duly authorized and empowered to execute and
deliver any instrument or document for and on behalf of the Partnership. Any act
of the General Partner that purports to be on behalf of the Partnership shall be
binding on the Partnership as against all third parties who act in reliance
thereon and who do not have actual knowledge of such General Partner's lack or
abuse of authority.
5.3 COMPENSATION. The General Partner is not entitled to
compensation for its services as General Partner, but is entitled to be
reimbursed on a monthly basis for its reasonable operating, administrative and
office expenses related to the conduct of the Partnership's business including,
without limitation (i) costs of personnel employed by, or on loan to, the
General Partner to conduct the Partnership's business, (ii) expenditures for
office space and (iii) costs attributable to using existing office equipment or
purchasing new office equipment authorized in an approved budget, expenditures
for office supplies, expenses for communications, and other reasonable
out-of-pocket costs.
ARTICLE VI.
BOOKS AND RECORDS AND ACCOUNTING
6.1 FINANCIAL INFORMATION. The Partnership shall maintain adequate
books and records of account which shall be kept in accordance with the method
of accounting determined by the General Partner.
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6.2 FISCAL YEAR. The fiscal year for the Partnership shall be the
calendar year or such other fiscal year as may be determined by the General
Partner.
6.3 ACCESS TO BOOKS AND RECORDS. The General Partner shall permit,
after reasonable notice, access to all books, records and facilities of the
Partnership at any reasonable time to any Partner or its representative.
ARTICLE VII.
RESPONSIBILITIES OF PARTNERS
7.1 LIABILITY TO PARTNERS. No Partner of the Partnership or
director, officer, partner, or employee of a Partner shall be liable to the
Partnership or to any Partner for any losses sustained or liabilities incurred
as a result of any act or omission if (i) such person acted in good faith and in
a manner it reasonably believed to be in, or not opposed to, the best interests
of the Partnership, and (ii) its conduct did not constitute gross negligence or
willful or wanton misconduct.
7.2 INDEMNIFICATION.
(a) To the fullest extent permitted by law, each Partner
(individually, an "Indemnitee") shall be indemnified and held harmless by
the Partnership from and against any and all losses, claims, damages,
liabilities, joint and several, expenses (including legal fees and
expenses), judgments, fines, settlements and other amounts arising from
any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative (other than an action by or in
the right of the Partnership), in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise by reason of its status
as a Partner, regardless of whether the Indemnitee continues to be a
Partner of the Partnership at the time any such liability or expense is
paid or incurred, if (i) the Indemnitee acted in good faith and in a
manner it reasonably believed to be in, or not opposed to, the best
interests of
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the Partnership, and, with respect to any criminal proceeding, had no
reasonable cause to believe its conduct was unlawful, and (ii) the
Indemnitee's conduct did not constitute gross negligence or willful or
wanton misconduct. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere,
or its equivalent, shall not, of itself, create a presumption that the
Indemnitee acted in a manner contrary to that specified in (i) or (ii)
above.
(b) To the fullest extent permitted by law, each Indemnitee shall be
indemnified and held harmless by the Partnership against any and all
expenses (including legal fees and expenses) arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, brought by or in the right of the
Partnership, in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of its status as a Partner
regardless of whether the Indemnitee continues to be a Partner at the time
any such expense is paid or incurred, if the Indemnitee acted in good
faith and in a manner it reasonably believed to be in, or not opposed to,
the best interests of the Partnership, and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful,
except that no indemnification may be made with respect to any claim,
demand, action, suit or proceeding as to which such person shall have been
adjudged to be liable for gross negligence or willful or wanton misconduct
unless and only to the extent that the court in which such claim, demand,
action, suit or proceeding was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses that such court shall deem proper.
7
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(c) To the fullest extent permitted by law, expenses incurred by an
Indemnitee in defending any claim, demand, action, suit or proceeding
subject to this Section shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Partnership of any undertaking by
or on behalf of the Indemnitee to repay such amount unless it shall be
determined that such person is entitled to be indemnified as authorized in
this Section.
(d) The indemnification provided by this Section shall be in
addition to any other rights to which those indemnified may be entitled
under any agreement, vote of the Partners, as a matter of law or
otherwise, both as to action in the Indemnitee's capacity as a Partner and
to action in another capacity, and shall continue as to an Indemnitee who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.
(e) In no event may an Indemnitee subject any General Partner or
Limited Partner of the Partnership to personal liability by reason of
these indemnification provisions.
(f) An Indemnitee shall not be denied indemnification, in whole or
in part, under this Section because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(g) Any indemnification under this Section 8.2, unless ordered by a
court, shall be made by the Partnership only as authorized in the specific
case and only upon a determination that indemnification of the Indemnitee
is proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the pertinent subsection, such
determination to be made (i) by the General Partner, if the General
Partner
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is not a named defendant or respondent in the proceeding, (ii) by a
majority of the Limited Partners or (iii) in a written opinion of
independent legal counsel.
7.3 TIME DEVOTED TO AFFAIRS; OTHER VENTURES. No Partner shall be
required to devote its full time and effort to Partnership affairs, but only
such time and effort as each in such person's judgment deems to be reasonably
necessary and appropriate in pursuit of the affairs of the Partnership. Any
Partner may engage in any other business venture of every nature, independently
or with others, and no other Partner shall have any rights by virtue of this
Agreement in and to such ventures or to the revenues or profits derived
therefrom.
7.4 GOOD FAITH RELIANCE ON AGREEMENT. To the extent that, at law or
in equity, the Partners have duties (including fiduciary duties) and liabilities
relating thereto to the Partnership or to another Partner, the Partners acting
under this Agreement shall not be liable to the Partnership or to any such other
Partner for their good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they expand or restrict the
duties and liabilities of the Partners otherwise existing at law or in equity,
are agreed by the Partners to replace such other duties and liabilities of the
Partners.
7.5 CERTAIN STANDARDS. Whenever in this Agreement any Partner is
permitted or required to make a decision (i) in its "sole discretion" or
"discretion," or under a similar grant of authority or latitude, such Partner
shall be entitled to consider only such interests and factors as it desires and
may consider its own interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Partnership or the
other Partners, or (ii) in "good faith" or under another express standard, such
Partner shall be entitled to act under such express standard and shall not be
subject to any other or different standards imposed by this Agreement or by law
or any other agreement contemplated herein.
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ARTICLE VIII.
DISSOLUTION AND TERMINATION
8.1 DISSOLUTION. The Partnership shall be dissolved upon the first
to occur of December 31, 2028, or as provided by law, if earlier. After the
dissolution of the Partnership, the Partnership shall not terminate until its
affairs have been wound up and its assets distributed as provided in this
Article.
8.2 WINDING UP. After dissolution of the Partnership, the General
Partner shall wind up the affairs of the Partnership in accordance with
applicable law, and incident thereto, unless satisfactory arrangements are
otherwise made, shall sell sufficient Partnership assets to pay all Partnership
liabilities and shall sell or otherwise dispose of all other Partnership assets.
As soon as the actions contemplated by this Section have been
completed, the Partnership's assets shall be distributed by the General Partner
in accordance with Article IV hereof.
8.3 WAIVER OF PARTITION. Each Partner hereby waives any and all
rights that such Partner may have to maintain an action for partition of the
Partnership's assets.
ARTICLE IX.
TAX MATTERS
The parties hereto acknowledge that the Partnership is expected to
be disregarded for federal income tax purposes and so long as that is the case
the portion of this Article which relates to federal income tax matters will be
of no substantive effect.
9.1 ALLOCATIONS OF TAX ITEMS. Each item of income and deduction
recognized by the Partnership for federal, state or local income tax purposes
shall be allocated among the
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Partners in accordance with their Ownership Percentages except to the extent
that the General Partner determines that another allocation is required by law.
9.2 TAX ELECTIONS. The General Partner shall determine whether the
Partnership shall make any election (including any election which may be
permitted with respect to the Partnership's method of accounting and any
election for which provision is made in Section 168 and Section 754 of the
Internal Revenue Code or corresponding provisions of future law) which is
available to the Partnership for federal, state or local tax purposes.
Notwithstanding the foregoing, upon the transfer of an interest in MHP, the
Partnership shall, if requested by MHP, elect to adjust the basis of the
Partnership property as allowed by Sections 743(b) and 754 of the Internal
Revenue Code, or comparable provisions then in effect, and if any such election
is made, the Partnership shall make any tax accounting adjustments resulting
from such election in the information supplied to the Partners, and the
Partnership shall have the right to charge MHP for the Partnership's reasonable
expenses in making such adjustments.
9.3 PREPARATION OF TAX RETURNS. The General Partner shall use its
reasonable efforts to cause the Partnership to prepare and timely file, at the
expense of the Partnership, all tax returns of the Partnership and shall furnish
to the Partners the tax information reasonably required thereby for federal,
state and local tax reporting purposes.
9.4 TAX MATTERS PARTNER. The General Partner is hereby designated as
the tax matters partner, within the meaning of Section 6231(a)(7) of the
Internal Revenue Code, and is authorized to represent the Partnership at the
Partnership's expense (including the costs of professional services) in
connection with any examination of the Partnership's affairs by any tax
authority and is authorized so to represent the Partnership at the Partnership's
expense in any administrative or judicial proceedings in connection therewith.
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Prompt notice shall be given to the Partners upon receipt of advice
that the Internal Revenue Service or other taxing authority intends to examine
any income tax return or records or books of the Partnership. Any Partner may
participate at such Partner's expense in any such administrative or judicial
proceeding to the extent provided by applicable law.
ARTICLE X.
MISCELLANEOUS
10.1 NOTICES. All notices, offers or other communications required
or permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as properly given or made if mailed from within the United
States by first class United States mail, postage prepaid, or by prepaid
telegram or telex, and addressed, as the case may be, to the Partnership at
16420 Park Ten Place, Suite 420, Houston, Texas 77084, or to a Partner at its
address as set forth on the signature page of this Agreement. The Partnership
may change its address by giving a notice thereof stating its new address to the
Partners. Any Partner may change its address by giving a notice thereof stating
its new address to the Partnership.
10.2 CAPTIONS. Captions contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof.
10.3 FURTHER ASSURANCES. The Partners will execute and deliver such
further instruments and take or refrain from taking any action as may be
necessary or appropriate to carry out the intent and purpose of this Agreement.
10.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, all provisions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable
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by and against the respective heirs, executors, administrators, legal
representatives, successors and assigns of each of the Partners.
10.5 GOVERNING LAW. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT
MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT
ALL OF THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED UNDER THE SUBSTANTIVE
LAWS OF THE STATE OF DELAWARE AS NOW ADOPTED OR AS MAY HEREAFTER BE AMENDED.
10.6 INTEGRATION. This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection therewith.
10.7 AMENDMENTS. This Agreement, including the Appendices hereto,
may not be modified or amended unless a consent in writing setting forth the
amendment or modification shall be signed by a majority of the Partners.
10.8 NO THIRD-PARTY RIGHTS. Nothing in this Agreement shall be
deemed to create any right in any person not a party hereto (other than the
successors and assigns of a party hereto) and this instrument shall not be
construed in any respect to be a contract in whole or in part for the benefit of
any third party.
10.9 RELATIONSHIP OF THE PARTNERS. The relationship between each of
the Partners shall be limited to the performance of the transactions
contemplated by this Agreement. The relationship set forth in this Agreement
shall be construed and deemed to be a partnership created for the sole purpose
of carrying out the transactions contemplated hereby.
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10.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original of this Agreement, but all of
which, taken together, shall constitute one and the same Agreement.
10.11 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
GENERAL PARTNER:
MARKET HUB PARTNERS
FINANCE, L.L.C.
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
LIMITED PARTNER:
MARKET HUB PARTNERS, L.P.
By: MARKET HUB PARTNERS, INC.,
a general partner
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President and Chief Financial
Officer
15
EXHIBIT 3.3
CONFORMED
CERTIFICATE OF INCORPORATION
OF
MARKET HUB PARTNERS FINANCE, INC.
FIRST:The name of the Corporation is Market Hub Partners Finance,
Inc. (the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, New Castle County,
Delaware, 19801. The name and address of its registered agent for service of
process in the State of Delaware is The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware, 19801.
THIRD: The purpose of the Corporation is to engage in any lawful
business, act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware or any successor statute (the
"DGCL").
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is one thousand (1,000) shares of
common stock, par value $0.01 per share ("Common Stock"). Shares of any class of
capital stock of the Corporation may be issued for such consideration and for
such corporate purposes as the Board of Directors of the Corporation may from
time to time determine.
The following is a statement of the powers, preferences and rights
and the qualifications, limitations or restrictions, of the Common Stock.
SECTION I. COMMON STOCK
(a) DIVIDENDS. The holders of the Common Stock shall be entitled to
receive such dividends thereon, if any, as may be declared from time to
time by the Board of Directors of the Corporation.
(b) LIQUIDATION. In the event of liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, the
holders of the Common Stock shall be entitled to receive pro rata such
assets and properties of the Corporation, tangible and intangible, as are
available for distribution to stockholders.
(c) VOTING. Each share of Common Stock shall be entitled to one vote
on each matter submitted to a vote of holders of Common Stock. Shares of
Common Stock shall be entitled to vote on each matter submitted to a vote
of stockholders.
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SECTION II. CAPITAL STOCK
(a) REGARDING PREEMPTIVE RIGHTS. No stockholder of the Corporation
shall by reason of his holding shares of any class of capital stock of the
Corporation have any preemptive or preferential right to acquire or
subscribe for any additional, unissued or treasury shares (whether now or
hereafter acquired) of any class of capital stock of the Corporation now
or hereafter to be authorized, or any notes, debentures, bonds or other
securities convertible into or carrying any right, option or warrant to
subscribe for or acquire shares of any class of capital stock of the
Corporation now or hereafter to be authorized, whether or not the issuance
of any such shares, or such notes, debentures, bonds or other securities,
would adversely affect the dividends or voting or other rights of such
stockholder, and the Board of Directors of the Corporation may issue or
authorize the issuance of shares of any class of capital stock of the
Corporation, or any notes, debentures, bonds or other securities
convertible into or carrying rights, options or warrants to subscribe for
or acquire shares of any class of capital stock of the Corporation,
without offering any such shares of any such class, either in whole or in
part, to the existing stockholders of any such class.
(b) CUMULATIVE VOTING. Cumulative voting of shares of any capital
stock having voting rights is prohibited.
FIFTH: (a) DIRECTORS. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors of the
Corporation. In addition to the authority and powers conferred upon the Board of
Directors of the Corporation by the DGCL or by this Certificate of
Incorporation, the Board of Directors is hereby authorized and empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject to the provisions of the DGCL, this Certificate
of Incorporation and any Bylaws adopted by the Corporation; PROVIDED, HOWEVER,
that no Bylaws hereafter adopted by the stockholders of the Corporation, nor any
amendments thereto, shall invalidate any prior act of the Board of Directors
that would have been valid if such Bylaws or amendment had not been adopted.
(b) NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of directors
which shall constitute the whole Board of Directors of the Corporation shall be
one until otherwise established by resolution of the Board of Directors. Each
director shall hold office until the annual meeting at which such director's
term expires and, the foregoing notwithstanding, shall serve until his successor
shall have been duly elected and qualified or until his earlier death,
resignation or removal.
SIXTH: No director of the Corporation shall be personally liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director involving any act or omission of any such director;
PROVIDED, HOWEVER, that the foregoing provisions shall not eliminate or limit
the liability of a director (i) for any breach of such director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, as the same exists or as such
provision may hereafter be amended, supplemented or replaced,
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or (iv) for any transactions from which such director derived an improper
personal benefit. If the DGCL is amended after the filing of this Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by such law, as so
amended. Any repeal or modification of this Article SIXTH by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
SEVENTH: To the fullest extent permitted by the DGCL, as the same
may be amended and supplemented, the Corporation may indemnify any and all
persons who serve as officers or directors of the Corporation, and the
Corporation may indemnify any other persons whom it shall have the power to
indemnify under said law, from and against any and all of the expenses,
liabilities or other matters referred to in or covered by the DGCL. The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which any of those indemnified may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in the official capacity of such person and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
EIGHTH: The Bylaws of the Corporation may be adopted, amended or
repealed by the stockholders of the Corporation at any annual or special
meeting, by the affirmative vote of the holders of a majority of the voting
power of all outstanding shares of capital stock of the Corporation generally
entitled to vote in the election of directors, and, except as may be otherwise
required by law, the power to adopt, amend or repeal the Bylaws of the
Corporation is also vested in the Board of Directors of the Corporation.
NINTH: The name and mailing address of the person who is to serve as
the initial director of the Corporation until the first meeting of the
Stockholders or until his successor is duly elected and qualified, is as
follows:
NAME ADDRESS
---- -------
Anthony J. Clark 16420 Park 10 Place, Suite 420
Houston, Texas 77084
The name and address of the incorporator is as follows:
NAME ADDRESS
---- -------
Anthony J. Clark 16420 Park 10 Place, Suite 420
Houston, Texas 77084
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<PAGE>
I, the undersigned, being the incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the DGCL, do make this
certificate, hereby declaring that this is my act and deed and that the facts
herein stated are true, and accordingly have hereunto set my hand this 30th day
of January, 1998.
/s/ ANTHONY J. CLARK
Anthony J. Clark
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EXHIBIT 3.4
BYLAWS
OF
MARKET HUB PARTNERS FINANCE, INC.
Adopted and Effective
as of
January 30, 1998
<PAGE>
PAGE
TABLE OF CONTENTS
ARTICLE I
OFFICES
-------
Section 1. Registered Office..........................................1
Section 2. Other Offices..............................................1
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings..........................................1
Section 2. Annual Meetings............................................1
Section 3. Special Meetings...........................................2
Section 4. Quorum.....................................................2
Section 5. Adjournments...............................................2
Section 6. Voting.....................................................2
Section 7. List of Stockholders Entitled to Vote......................2
Section 8. Record Date................................................3
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors...........................3
Section 2. Vacancies..................................................4
Section 3. Duties and Powers..........................................4
Section 4. Meetings...................................................4
Section 5. Quorum.....................................................4
Section 6. Actions by Written Consent.................................4
Section 7. Meetings by Conference Telephone...........................5
Section 8. Committees.................................................5
Section 9. Compensation...............................................5
Section 10. Interested Directors......................................5
ARTICLE IV
OFFICERS
--------
Section 1. General....................................................6
Section 2. Election...................................................6
Section 3. Chairman of the Board of Directors.........................6
Section 4. President..................................................6
Section 5. Executive Vice Presidents and Vice Presidents..............7
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<PAGE>
PAGE
Section 6. Secretary..................................................7
Section 7. Treasurer..................................................7
Section 8. Assistant Secretaries......................................8
Section 9. Assistant Treasurers.......................................8
Section 10. Other Officers............................................8
ARTICLE V
STOCK
-----
Section 1. Form of Certificates.......................................8
Section 2. Signatures.................................................9
Section 3. Lost Certificates..........................................9
Section 4. Transfers..................................................9
ARTICLE VI
NOTICES
-------
Section 1. Notices....................................................9
Section 2. Waivers of Notice..........................................9
ARTICLE VII
INDEMNIFICATION
---------------
Section 1. General...................................................10
Section 2. Insurance.................................................10
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1. Dividends.................................................10
Section 2. Disbursements.............................................11
Section 3. Fiscal Year...............................................11
Section 4. Corporate Seal............................................11
Section 5. Amendments................................................11
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<PAGE>
BYLAWS
OF
MARKET HUB PARTNERS FINANCE, INC.
(hereinafter, the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. REGISTERED OFFICE. The Corporation's registered office in
the State of Delaware shall be located at 1209 Orange Street in the City of
Wilmington, County of New Castle, 19801. The name of its registered agent at
such address is The Corporation Trust Company.
Section 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as may be designated from
time to time by the Board of Directors and stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETINGS. The annual meeting of stockholders shall
be held on such date and at such time as may be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which meeting
the stockholders shall elect by a plurality vote a Board of Directors, and
transact such other business as may properly be brought before the meeting.
Written notice of the annual meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting. If
mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his or her address as it appears
on the records of the Corporation.
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<PAGE>
Section 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or
by the Corporation's Certificate of Incorporation as may be amended and restated
from time to time (the "Certificate of Incorporation"), special meetings of
stockholders, for any purpose or purposes, may be called by either (a) the
Chairman of the Board of Directors, if there be one, or (b) the President, and
shall be called by any officer of the Corporation at the instruction of a
majority of the Board of Directors. Written notice of a special meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is being called shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at his or her address as
it appears on the records of the Corporation.
Section 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
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 at which a quorum shall be present or represented, any
business may be transacted that might have been transacted at the meeting as
originally noticed.
Section 5. ADJOURNMENTS. Any meeting of stockholders may be
adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjournment meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. VOTING. Unless otherwise required by law, the Certificate
of Incorporation or these bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
voting power of the stock represented and entitled to vote thereat. Such votes
may be cast in person or by proxy but no proxy shall be voted or acted upon
after three years from its date, unless such proxy provides for a longer period.
The Board of Directors, in its discretion, or the officer of the Corporation
presiding at a meeting of stockholders, in his or her discretion, may require
that any votes cast at such meeting shall be cast by written ballot.
Section 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of
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<PAGE>
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder of the Corporation who is
present. The stock ledger of the Corporation shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list required
by this Section 7 of this Article II or the books of the Corporation, or to vote
in person or by proxy at any meeting of stockholders.
Section 8. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which in the
case of a meeting, shall not be less than the minimum nor more than the maximum
number of days prior to the scheduled date of such meeting permitted under the
laws of the State of Delaware or the rules of any exchange on which shares of
capital stock of the Company are listed for trading and which, in the case of
any other action, shall be not more than the maximum number of days prior to any
such action permitted by the laws of the State of Delaware. If no such record
date is fixed by the Board of Directors, the record date shall be that
prescribed by the laws of the State of Delaware. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE III
DIRECTORS
---------
Section 1. NUMBER AND ELECTION OF DIRECTORS. The business and
affairs of the Corporation shall be managed by a Board of Directors initially
consisting of not more than seven directors. The number of directors of the
Corporation may be increased or decreased from time to time by resolution
adopted by the Board of Directors, but no decrease by the Board of Directors
shall have the effect of shortening the term of any incumbent director. Except
as provided in Section 2 of this Article III, directors shall be elected by a
plurality of the votes cast at annual meetings of stockholders and each director
so elected shall hold office until the next annual meeting and until his or her
successor is duly elected and qualified or until his or her earlier resignation
or removal. Any director may resign at any time upon notice to the Corporation.
A director need not be a stockholder, a citizen of the United States or a
resident of the State of Delaware.
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<PAGE>
Section 2. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified or until their earlier resignation or removal. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
Section 3. DUTIES AND POWERS. The business of the Corporation shall
be managed by or under the direction of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
bylaws directed or required to be exercised or done by the stockholders.
Section 4. MEETINGS. Meetings of the Board of Directors shall be
held at such time as the Board of Directors shall fix, except that the first
meeting of a newly elected Board of Directors shall be held as soon as possible
after its election as the directors may conveniently assemble. Meetings shall be
held at such place within or without the State of Delaware as may be fixed by
the Board of Directors. No call shall be required for regular meetings for which
the time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the President or a majority of
the directors then in office. No notice shall be required for regular meetings
for which the time and place have been fixed. Written, oral or any other mode of
notice of the time and place shall be given for special meetings in sufficient
time for the convenient assembly of the directors thereat. Notice need not be
given to any director or to any member of a committee of directors who submits a
written waiver of notice signed by him or her before or after the time stated
therein. Attendance of any such person at a meeting shall constitute a waiver of
notice of such meeting, except when he or she attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors need be specified in any written waiver of notice.
Section 5. QUORUM. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these bylaws, at all meetings of the
Board of Directors, a majority of the entire Board of 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 a quorum is present shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board 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.
Section 6. ACTIONS BY WRITTEN CONSENT. Unless otherwise provided by
the Certificate of Incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all the members of the Board
of Directors or committee, as the case may be, consent thereto in writing, in
one document or in counterparts, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee.
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<PAGE>
Section 7. MEETINGS BY CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these bylaws, members of the
Board of Directors or any committee designated by the Board of Directors may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 7 shall constitute presence in person at such meeting.
Section 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
absent or disqualified member. Any committee, to the extent allowed by law and
provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
Section 9. COMPENSATION. Directors shall not receive a salary for
their services. A fixed sum and expenses of attendance, if any, may be allowed
for attendance at each regular or special meeting of the Board of Directors or
any committee thereof, as fixed by resolution of the Board of Directors.
Section 10. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose if (a) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum, (b) the material facts as to
his, her or their relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon and the
contract or transaction is specifically approved in good faith by vote of the
stockholders or (c) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a
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<PAGE>
meeting of the Board of Directors or a committee that authorizes, approves or
ratifies the contract or transaction.
ARTICLE IV
OFFICERS
--------
Section 1. GENERAL. The officers of the Corporation shall be
appointed by the Board of Directors and shall be a President and a Secretary.
The Board of Directors, in its discretion, may also appoint a Chairman of the
Board of Directors, a Treasurer and one or more Executive Vice Presidents, Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise prohibited by
law, the Certificate of Incorporation or these bylaws. The officers of the
Corporation need not be stockholders of the Corporation or directors of the
Corporation.
Section 2. ELECTION. The Board of Directors at its first meeting
held after each annual meeting of stockholders shall elect the officers of the
Corporation, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors and may be altered from time to time except as otherwise
provided by contract.
Section 3. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. If there is a Chairman of the Board
of Directors, he or she shall be the Chief Executive Officer of the Corporation,
unless the Board of Directors shall designate the President as the Chief
Executive Officer of the Corporation. Except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the powers
and discharge all the duties of the President. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these bylaws or by
the Board of Directors.
Section 4. PRESIDENT. The President shall, subject to the control of
the Board of Directors, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He or she shall be the Chief Operating
Officer of the Corporation and shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where
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<PAGE>
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these bylaws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors. The President shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him or her by
these bylaws or by the Board of Directors. In the absence of the appointment of
a Treasurer, the duties of the Treasurer, as described in Section 7 of this
Article IV, shall be performed by the President.
Section 5. EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. At the
request of the President or in his or her absence or in the event of his or her
inability or refusal to act, the Executive Vice President or the Executive Vice
Presidents if there be more than one, and the Vice President or the Vice
Presidents, if there be more than one (in the order designated by the Board of
Directors), shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Executive Vice President and each Vice President shall perform
such other duties and have such other powers as the Board of Directors from time
to time may prescribe. If there be no Executive Vice President or Vice
President, the Board of Directors shall designate the officer of the Corporation
who, in the absence of the President or in the event of the inability or refusal
of the President to act, shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President.
Section 6. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders 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 or she shall be. If the Secretary shall be
unable or shall refuse to cause notice to be given of all meetings of the
stockholders and special meetings of the Board of Directors, and if there be no
Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or an Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 7. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements 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. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of
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<PAGE>
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meeting, or when the
Board of Directors so requires, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the Corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his or her possession or under his
or her control belonging to the Corporation.
Section 8. ASSISTANT SECRETARIES. Except as may be otherwise
provided in these bylaws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the Chairman of the Board, if there be one, the
President, any Executive Vice President, if there be one, any Vice President, if
there be one, or the Secretary, and in the absence of the Secretary or in the
event of his or her disability or refusal to act, shall perform the duties of
the Secretary, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Secretary.
Section 9. ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Executive Vice
President, if there be one, any Vice President, if there be one, or the
Treasurer, and in the absence of the Treasurer or in the event of his or her
disability or refusal to act, an Assistant Treasurer shall perform the duties of
the Treasurer, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his or her office and
for the restoration to the Corporation, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his or her possession or under his
or her control belonging to the Corporation.
Section 10. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
-----
Section 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation (a) by the Chairman of the Board
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<PAGE>
or the President or an Executive Vice President or a Vice President and (b) by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by such
holder.
Section 2. SIGNATURES. Where a certificate is countersigned by (a) a
transfer agent other than the Corporation or its designated employees or (b) a
registrar other than the Corporation or its designated employees, any other
signature on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
Section 3. LOST 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 of stock 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, require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4. TRANSFERS. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his or her attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, which shall be cancelled before a new certificate
shall be issued.
ARTICLE VI
NOTICES
-------
Section 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these bylaws to be given to any director, member
of a committee or stockholder, such notice may be given by mail, addressed to
such director, member of a committee or stockholder, at his or her address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by facsimile transmission, telegram, telex or cable and such notice shall be
deemed given at the time when the same shall be sent.
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<PAGE>
Section 2. WAIVERS OF NOTICE. Whenever any notice is required by
law, the Certificate of Incorporation or these bylaws to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent to notice.
ARTICLE VII
INDEMNIFICATION
---------------
Section 1. GENERAL. Each person who at any time shall serve, or
shall have served, as a director, officer, employee or agent of the Corporation,
or any person who, while a director, officer, employee or agent 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,
shall be entitled to indemnification as, and to the fullest extent, permitted by
Section 145 of the Delaware General Corporation Law or any successor statutory
provision, as from time to time amended. The foregoing right of indemnification
shall not be deemed exclusive of any other rights to which those to be
indemnified may be entitled as a matter of law or under any agreement, vote of
shareholders or disinterested directors, or other arrangement.
Section 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, 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 against any liability asserted against him and incurred by him in
such capacity or arising out of his status as such a person, whether or not the
Corporation would have the power to indemnify him against that liability under
this Article VII or the Delaware General Corporation Law.
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property or in shares of the capital stock.
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 Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for any proper purpose, and the
Board of Directors may modify or abolish any such reserve.
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Section 2. DISBURSEMENTS. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall
end on the 31st day of December of each year, unless otherwise fixed by
resolution of the Board of Directors.
Section 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced.
Section 5. AMENDMENTS. These bylaws may be altered, amended or
repealed, in whole or in part, or new bylaws may be adopted by the stockholders
or by the Board of Directors of the Corporation.
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EXHIBIT 4.1
CONFORMED
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MARKET HUB PARTNERS STORAGE, L.P.
MARKET HUB PARTNERS FINANCE, INC.
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
------------------------
INDENTURE
Dated as of March 1, 1998
------------------------
$115,000,000
8 1/4% Senior Notes due 2008
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions..........................................1
SECTION 1.2 Other Definitions...................................27
SECTION 1.3 Incorporation by Reference of Trust Indenture Act...27
SECTION 1.4 Rules of Construction...............................28
ARTICLE II
SECURITY FORMS
SECTION 2.1 Forms Generally.....................................28
SECTION 2.2 Form of Securities..................................29
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms.....................................29
SECTION 3.2 Denominations.......................................30
SECTION 3.3 Execution, Authentication, Delivery and Dating......30
SECTION 3.4 Temporary Securities................................31
SECTION 3.5 Registration of Transfer and Exchange...............32
SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities....33
SECTION 3.7 Payment of Interest; Interest Rights Preserved......34
SECTION 3.8 Persons Deemed Owners...............................35
SECTION 3.9 Cancellation........................................35
SECTION 3.10 Computation of Interest.............................35
SECTION 3.11 CUSIP Numbers.......................................36
SECTION 3.12 Restrictions on Transfer; Book-Entry Procedures.....36
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture.............36
SECTION 4.2 Application of Trust Money..........................37
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ARTICLE V
REMEDIES
SECTION 5.1 Events of Default...................................38
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment..40
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.............................................41
SECTION 5.4 Trustee May File Proofs of Claim....................42
SECTION 5.5 Trustee May Enforce Claims Without Possession of
Securities..........................................43
SECTION 5.6 Application of Money Collected......................43
SECTION 5.7 Limitations on Suits................................43
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
Premium, Liquidated Damages and Interest............44
SECTION 5.9 Restoration of Rights and Remedies..................44
SECTION 5.10 Rights and Remedies Cumulative......................45
SECTION 5.11 Delay or Omission Not Waiver........................45
SECTION 5.12 Control by Holders..................................45
SECTION 5.13 Waiver of Past Defaults.............................45
SECTION 5.14 Waiver of Stay, Extension or Usury Laws.............46
SECTION 5.15 Undertaking for Costs...............................46
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Duties of Trustee...................................47
SECTION 6.2 Certain Rights of Trustee...........................48
SECTION 6.3 Trustee Not Responsible for
Recitals or Issuance of Securities..................49
SECTION 6.4 May Hold Securities.................................49
SECTION 6.5 Money Held in Trust.................................49
SECTION 6.6 Compensation and Reimbursement......................50
SECTION 6.7 Corporate Trustee Required; Eligibility.............50
SECTION 6.8 Conflicting Interests...............................51
SECTION 6.9 Resignation and Removal; Appointment of Successor...51
SECTION 6.10 Acceptance of Appointment by Successor..............52
SECTION 6.11 Merger, Conversion, Consolidation or Succession to
Business............................................53
SECTION 6.12 Notice of Defaults..................................53
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 Holders' Lists; Holder Communications; Disclosures
Respecting Holders..................................54
SECTION 7.2 Reports by the Trustee..............................54
SECTION 7.3 Reports by the Issuers..............................55
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 Company May Consolidate, Etc., Only on
Certain Terms.......................................55
SECTION 8.2 Finance Corp. May Consolidate, Etc.,
Only on Certain Terms ..............................57
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Holders..59
SECTION 9.2 Supplemental Indentures with Consent of Holders.....60
SECTION 9.3 Execution of Supplemental Indentures................61
SECTION 9.4 Effect of Supplemental Indentures...................61
SECTION 9.5 Conformity with Trust Indenture Act.................61
SECTION 9.6 Reference in Securities to Supplemental Indentures..61
SECTION 9.7 Notice of Supplemental Indentures and Waivers.......62
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium or Liquidated
Damages, if any, and Interest.......................62
SECTION 10.2 Maintenance of Office or Agency.....................62
SECTION 10.3 Money for Security Payments to be Held in Trust.....63
SECTION 10.4 Existence...........................................64
SECTION 10.5 Payment of Taxes; Maintenance of Properties;
Insurance...........................................64
SECTION 10.6 Limitation on Sale/Leaseback Transactions...........65
SECTION 10.7 Limitation on Conduct of Business...................65
SECTION 10.8 Statement by Officers as to Default.................66
SECTION 10.9 Provision of Financial Information..................66
SECTION 10.10 Limitation on Restricted Payments...................67
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SECTION 10.11 Limitation on Indebtedness and Disqualified
Equity Interests....................................69
SECTION 10.12 Limitation on Issuances and Sales of
Equity Interests of Restricted Subsidiaries.........69
SECTION 10.13 Limitation on Liens.................................70
SECTION 10.14 Offer to Purchase Securities Upon Change of
Control.............................................70
SECTION 10.15 Limitation on Asset Sales...........................72
SECTION 10.16 Net Proceeds Offer..................................73
SECTION 10.17 Limitation on Transactions with Affiliates..........75
SECTION 10.18 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries......76
SECTION 10.19 Limitation on Preferred Equity Interests of
Subsidiaries........................................77
SECTION 10.20 Certain Restrictions on Finance Corp................77
SECTION 10.21 Waiver of Certain Covenants.........................77
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption.................................77
SECTION 11.2 Applicability of Article............................78
SECTION 11.3 Election to Redeem; Notice to Trustee...............78
SECTION 11.4 Selection by Trustee of Securities to be Redeemed...78
SECTION 11.5 Notice of Redemption................................79
SECTION 11.6 Deposit of Redemption Price.........................80
SECTION 11.7 Securities Payable on Redemption Date...............80
SECTION 11.8 Securities Redeemed in Part.........................80
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1 Issuers' Option to Effect Defeasance or Covenant
Defeasance..........................................81
SECTION 12.2 Defeasance and Discharge............................81
SECTION 12.3 Covenant Defeasance.................................81
SECTION 12.4 Conditions to Defeasance or Covenant Defeasance.....82
SECTION 12.5 Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provisions.84
SECTION 12.6 Reinstatement.......................................85
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ARTICLE XIII
SUBSIDIARY GUARANTEES
SECTION 13.1 Unconditional Guarantee.............................85
SECTION 13.2 Execution and Delivery of Subsidiary Guarantees.....87
SECTION 13.3 Limitation on Merger or Consolidation...............87
SECTION 13.4 Release of Subsidiary Guarantors....................88
SECTION 13.5 Additional Subsidiary Guarantors....................89
SECTION 13.6 Limitation of Subsidiary Guarantor's Liability......89
SECTION 13.7 Contribution........................................89
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Compliance Certificates and Opinions................90
SECTION 14.2 Form of Documents Delivered to Trustee..............91
SECTION 14.3 Acts of Holders.....................................91
SECTION 14.4 Notices, Etc. to Trustee and the Company............92
SECTION 14.5 Notice to Holders; Waiver...........................93
SECTION 14.6 Effect of Headings and Table of Contents............93
SECTION 14.7 Successors and Assigns..............................93
SECTION 14.8 Severability........................................93
SECTION 14.9 Benefits of Indenture...............................94
SECTION 14.10 Governing Law; Trust Indenture Act Controls;
Consent to Jurisdiction and Service...............94
SECTION 14.11 Legal Holidays......................................94
SECTION 14.12 No Recourse Against Others..........................95
SECTION 14.13 Duplicate Originals.................................95
SECTION 14.14 No Adverse Interpretation of Other Agreements.......95
SECTION 14.15 Nature of Obligations of Issuers....................95
Appendix A - Provisions Relating to Initial Securities and Exchange
Securities
Exhibit 1 to Appendix A-Form of Initial Security
Exhibit 2 to Appendix A-Form of Assignment of Exchange Security
Exhibit 3 to Appendix A-Form of Certificate to be Delivered in Connection
with Transfers to Non-QIB Institutional Accredited
Investors
Exhibit 4 to Appendix A-Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S
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THIS INDENTURE, dated as of March 1, 1998, is among MARKET HUB PARTNERS
STORAGE, L.P., a Delaware limited partnership (hereinafter called the
"COMPANY"), MARKET HUB PARTNERS FINANCE, INC., a Delaware corporation ("FINANCE
CORP." and, together with the Company, the "ISSUERS"), the Subsidiary Guarantors
parties hereto (the "SUBSIDIARY GUARANTORS") and IBJ SCHRODER BANK & TRUST
COMPANY, a New York banking corporation, as Trustee (hereinafter called the
"TRUSTEE").
RECITALS OF THE COMPANY
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's and Finance
Corp.'s 8 1/4% Senior Notes due 2008 (the "INITIAL SECURITIES") and the debt
securities, if and when issued pursuant to a registered exchange for Initial
Securities (the "EXCHANGE SECURITIES") and, together with the Initial
Securities, the "SECURITIES" and each, individually, a "SECURITY").
All things necessary have been done on the part of the Company, Finance
Corp. and the Subsidiary Guarantors to make the Securities, when issued and
executed by the Issuers and the Subsidiary Guarantors and authenticated and
delivered by the Trustee as herein provided, the valid obligations of the
Issuers and the Subsidiary Guarantors, as the case may be, and to make this
Indenture a valid agreement of the Issuers, the Subsidiary Guarantors and the
Trustee, in accordance with their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 DEFINITIONS.
"Accounts Receivable" has the meaning specified for the term "accounts" in
Section 9-106 of the UCC.
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person (i) existing at the time that other Person
merges or consolidates with the specified Person or becomes a Restricted
Subsidiary of such specified Person, including Indebtedness incurred in
connection with, or in contemplation of, that other Person merging with or into
the specified Person or becoming a Restricted Subsidiary of that Person or (ii)
assumed in connection with an acquisition of Properties from such Person. A
specified Person shall be deemed to incur Indebtedness constituting its Acquired
Indebtedness on the date (i) the obligor respecting that Indebtedness merges or
consolidates with the specified Person, (ii) the obligor of that Indebtedness
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becomes a Restricted Subsidiary of that specified Person or (iii) the specified
Person assumes that Indebtedness.
"Act", when used with respect to any Holder, has the meaning specified in
Section 14.3.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the specified Person. For purposes of this definition: (i)
"control," when used with respect to any Person, means the power to direct the
management and policies of that 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; (ii)
beneficial ownership at any time of 10% or more of the outstanding voting common
equity of a Person (including voting common equity subject to being acquired
pursuant to the exercise of options, warrants or other rights exercisable within
60 days of that time) shall be deemed to constitute control of that Person at
that time; and (iii) without limiting other Persons who may be deemed to control
a limited partnership, the general partner of a limited partnership and each
limited partner holding 10% or more of the limited partnership interests in such
limited partnership will be deemed to control such limited partnership.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease,
assignment or other disposition to any Person other than the Company or a Wholly
Owned Restricted Subsidiary (including, without limitation, by means of a
Sale/Leaseback Transaction or a merger or consolidation) (collectively, for
purposes of this definition, a "transfer"), directly or indirectly, in one
transaction or a series of related transactions, of (i) any Equity Interests of
any Restricted Subsidiary held by the Company or any other Restricted Subsidiary
or (ii) any other Properties of the Company or any Restricted Subsidiary.
Notwithstanding the preceding sentence, the following do not constitute "Asset
Sales": (i) transfers of cash, Cash Equivalents, Accounts Receivable (including
the sale of Accounts Receivable without recourse to the Company or any
Restricted Subsidiary pursuant to a bona fide factoring arrangement with a
Person not an Affiliate of the Company), inventories or other Properties in the
ordinary course of business and issuances of Qualified Equity Interests of the
Company; (ii) any transfer of Properties (including Equity Interests) that is
governed by, and made in accordance with, Article VIII, Section 10.14 or Section
13.13; (iii) any transfer of Properties from the Company or a Restricted
Subsidiary to another Restricted Subsidiary or to any other Person if such
transfer is permitted under Section 10.10 hereof; (iv) transfers of damaged,
worn-out or obsolete equipment or assets that, in the Company's reasonable
judgment, are either (a) no longer used or (b) no longer useful in the business
of the Company and the Restricted Subsidiaries; (v) the loan or sale of natural
gas in the ordinary course of business; and (vi) any transfer of Properties in a
single transaction or a series of related transactions having a Fair Market
Value of less than $500,000.
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable, whether or not accounted for as a
Capitalized Lease Obligation, and at any date as of which the amount thereof is
to be determined, the present value of the total net amount of lease payments
required to be paid by such Person under the lease during the primary term
thereof, without giving effect to any renewals at the option of the lessee,
discounted from the
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respective due dates thereof to the date of determination at a rate per annum
equal to the discount rate that would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. As used in the preceding
sentence, the "net amount of lease payments" under any such lease for any such
period means the sum of lease, rental and other payments required to be paid
with respect to such period by such lessee thereunder, excluding any amounts
required to be paid by the lessee on account of maintenance and repairs,
insurance, and taxes, assessments or similar charges. If a lessee under any
lease may terminate that lease by paying a penalty, the "net amount of lease
payments" under that lease shall include the amount of that penalty, but shall
exclude all lease payments after the first date on which that lease may be so
terminated.
"Authorized Newspaper" has the meaning specified in Section 10.3.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of that Indebtedness multiplied by (b) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means, with respect to the Company, either the board
of directors of the Company or any duly authorized committee of such board of
directors, and, with respect to any Subsidiary, either the board of directors of
such Subsidiary or any duly authorized committee of that board. For the purpose
of the preceding sentence, (i) if the Company or a Subsidiary is a corporation,
the phrase "Board of Directors" in the preceding sentence means the board of
directors of such corporation and (ii) if the Company or a Subsidiary is a
limited partnership, such phrase means the board of directors of the general
partner (or, if more than one, the managing general partner) of such partnership
(or, if such general partner is not a corporation, then the managers, trustees
or other body that govern the policies of such entity and has a function
corresponding to that of the board of directors of a corporation), or (iii) if
the Company or a Subsidiary is not a corporation or a limited partnership, the
managers, trustees, or other body that govern the policies of such entity and
has a function corresponding to that of the board of directors of a corporation.
"Board Resolution" means a copy of a resolution certified by the secretary
or an assistant secretary of the Company to have been duly adopted by its Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee, and with respect to a Subsidiary, a
copy of a resolution certified by the secretary or an assistant secretary of
such Subsidiary to have been duly adopted by its Board of Directors and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
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"Capitalized Lease Obligation" means, with respect to any Person, any
obligation of that Person to pay lease payments, rent or other amounts under a
lease of (or other similar agreement conveying the right to use) any Property
(whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP and, for purposes of this
Indenture, the amount of that obligation at any date shall be the capitalized
amount thereof at that date, as determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable obligations with a maturity of 180
days or less issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof, PROVIDED that the
full faith and credit of the United States of America is pledged in support
thereof; (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million or any commercial
bank that is organized under the laws of any country that is a member of the
Organization for Economic Cooperation and Development and has total assets in
excess of U.S. $500 million or its equivalent in another currency; (iii)
commercial paper (a) maturing no more than 180 days from the date of creation
thereof issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and (b) rated at least A-1 by S&P or at least P-1 by Moody's; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any
commercial bank meeting the specifications of clause (ii) above; and (v)
investments in money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (i) through (iv).
For purposes of this definition, the maturity of a security shall be determined
when it is acquired by the Company or a Restricted Subsidiary.
"Change of Control" means the occurrence of any event or series of events
(whether or not otherwise in compliance with the provisions of this Indenture)
by which: (i) Market Hub Partners Storage, L.L.C., or a successor entity at
least a majority of the Voting Equity Interests of which are owned directly or
indirectly by the Principals, ceases to be the General Partner having the
primary responsibility of managing the Company; (ii) any "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (other than
the Principals) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of a majority of the total
Voting Equity Interests of the Company or a majority of the Voting Equity
Interests of the General Partner; (iii) the Company consolidates with or merges
into another Person or any Person consolidates with, or merges into, the
Company, pursuant to a transaction in which the outstanding Voting Equity
Interests of the Company is changed into or exchanged for cash, securities or
other Property, other than any such transaction pursuant to which (a) the
outstanding Voting Equity Interests of the Company are changed into or exchanged
for Voting Equity Interests of the surviving or resulting Person that are
Qualified Equity Interests and (b) the beneficial owners (as defined in Rule
13d-3 under the Exchange Act) of the Voting Equity Interests of the Company
immediately prior to such transaction beneficially own, directly or indirectly,
not less than a majority of the Voting Equity Interests of the surviving or
resulting Person immediately after such transaction; (iv) the Company, either
individually or in conjunction with one or more Restricted
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Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise disposes
of, or the Restricted Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, the Properties of the Company and its Restricted
Subsidiaries substantially as an entirety (either in one transaction or a series
of related transactions), including Equity Interests of the Restricted
Subsidiaries, to any Person (other than the Company or a Wholly Owned Restricted
Subsidiary or an entity majority owned, directly or indirectly, by the
Principals); (v) during any consecutive two-year period (which period need not
be calendar years), individuals who at the beginning of that period constituted
the Board of Directors of the Company (together with any new directors
designated by a Principal or whose election was approved by a vote of two-thirds
of the directors then still in office who were either directors at the beginning
of that period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (vi) any plan or proposal for
liquidation or dissolution of the Company is approved by the vote or other
consent of the holders of Equity Interests of the Company.
"Commission" or "SEC" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Equity Interests" of any Person means Equity Interests of that
Person that do not rank prior, as to the payment of dividends or other
distributions or the distribution of assets on any voluntary or involuntary
liquidation, dissolution or winding up of that Person, to Equity Interests of
any other class of that Person.
"Company" means Market Hub Partners Storage, L.P., a Delaware limited
partnership, until a successor entity replaces it pursuant to the applicable
provisions of this Indenture, and thereafter "Company" shall mean such successor
entity.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its chairman, its president, or any vice
president, and its treasurer or an assistant treasurer, controller, any
assistant controller, secretary or any assistant secretary (or, if the Company
has no such officers, the corresponding officers or managers of the General
Partner), and delivered to the Trustee.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
period of four consecutive fiscal quarters of the Company (each such period of
four consecutive fiscal quarters, a "computation period"), the ratio of (i) the
sum of Consolidated Net Income, Consolidated Fixed Charges, Consolidated Income
Tax Expense and Consolidated Non-cash Charges of the Company and the Restricted
Subsidiaries, on a consolidated basis for that computation period, all
determined in accordance with GAAP, plus the Permitted Distribution Amount for
such period that is deducted in determining Consolidated Net Income for such
period in accordance with clause (ii) of the definition of Consolidated Net
Income, to (ii) Consolidated Fixed Charges for that computation period. For
purposes of this computation, acquisitions or dispositions that have been made
by the Company or any Restricted Subsidiary, including through mergers or
consolidations and including
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any related financing transactions, during the computation period or subsequent
to the computation period but on or prior to the date of computation shall be
deemed to have occurred on the first day of the computation period and shall
give pro forma effect to such acquisitions or dispositions and any related
financing transactions with appropriate adjustments (without duplicative
adjustments) to Consolidated Net Income, Consolidated Fixed Charges,
Consolidated Income Tax Expense, Consolidated Non-cash Charges and the Permitted
Distribution Amount. In each computation of the Consolidated Fixed Charge
Coverage Ratio, the computation shall be made as of the date Indebtedness (other
than Permitted Indebtedness) is proposed to be incurred or Disqualified Equity
Interests are proposed to be issued (the "determination date") for the then most
recent computation period (the "current period") on a pro forma basis assuming
that (i) the Indebtedness to be incurred or the Disqualified Equity Interests to
be issued (and all other Indebtedness incurred or Disqualified Equity Interests
issued after the first day of the current period through and including the
determination date), and (if applicable) the application of the net proceeds
therefrom (and from any other such Indebtedness or Disqualified Equity
Interests), including to refinance other Indebtedness, had been incurred, issued
or applied, as the case may be, on the first day of the current period and, in
the case of Acquired Indebtedness, on the assumption that the related
transaction (whether by means of purchase, merger or otherwise) also had
occurred on the first day of the current period with the appropriate adjustments
with respect to such acquisition being included in such pro forma calculation
and (ii) any acquisition or disposition by the Company or any Restricted
Subsidiary of any Properties outside the ordinary course of business and any
related financing transactions, or any repayment of any principal amount of any
Indebtedness of the Company or any Restricted Subsidiary, in either case since
the first day of the current period through and including the determination
date, had been consummated on the first day of the current period. The
Consolidated Fixed Charges representing interest on Indebtedness outstanding on
any determination date and assumed in accordance with the preceding sentence to
have been outstanding throughout the then current period will be computed as
follows: (i) if that Indebtedness bears interest only at a floating rate, that
floating rate as of the determination date shall be assumed to have been in
effect throughout that current period; (ii) if that Indebtedness bears interest,
at the option of the primary obligor, at either a floating rate or, for one or
more periods of varying durations, fixed rates, either that floating rate or, at
the option of the Company, that fixed rate for the longest period available to
the primary obligor, in each case as of the determination date, shall be assumed
to have been in effect throughout that current period; (iii) if that
Indebtedness is incurred under a revolving credit facility, the principal amount
of that Indebtedness assumed to have been outstanding throughout that current
period shall be the lesser of (a) the average daily outstanding principal
balance of that Indebtedness during that current period or such shorter period
as amounts have been available to be borrowed or reborrowed under that facility
or (b) the total revolving credit commitment under that facility as of the
determination date; and (iv) if (a) that Indebtedness bears interest at a
floating rate, (b) that floating rate is used pursuant to clause (i) or (ii) of
this sentence to determine the Consolidated Fixed Charges attributable to that
Indebtedness and (c) that interest is covered by agreements relating to Hedging
Obligations, that interest, to the extent so covered, shall be assumed to have
accrued at the rate per annum resulting after giving effect to the operation of
those agreements.
"Consolidated Fixed Charges" means, for any period, without duplication,
(i) the remainder of the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for that period
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as determined on a consolidated basis in accordance with GAAP, including,
without limitation, any amortization of debt discount, the net cost under
Hedging Obligations (including any amortization of discounts), the interest
portion of any deferred payment obligation constituting Indebtedness, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and all accrued interest, in each
case to the extent attributable to that period, (b) if any Indebtedness of any
Person (other than the Company or a Restricted Subsidiary) is guaranteed by the
Company or any Restricted Subsidiary during that period, the aggregate amount of
interest paid (to the extent not accrued in a prior period) or accrued by such
other Person during that period attributable to any such Indebtedness, in each
case to the extent required by GAAP to be recognized during that period as an
expense of the Company or any Restricted Subsidiary, (c) the aggregate amount of
the interest component of Capitalized Lease Obligations paid (to the extent not
accrued in a prior period), accrued or scheduled to be paid or accrued by the
Company and the Restricted Subsidiaries during that period, and (d) the
aggregate amount of dividends (except dividends paid or payable in additional
shares of Qualified Equity Interests) paid (to the extent not accrued in a prior
period) or accrued on Preferred Equity Interests or Disqualified Equity
Interests of the Company and the Restricted Subsidiaries, to the extent such
Preferred Equity Interests or Disqualified Equity Interests are owned by Persons
other than the Company or any Restricted Subsidiary, less (ii), to the extent
included in clause (i) above, amortization of capitalized debt issuance costs of
the Company and the Restricted Subsidiaries during that period.
"Consolidated Income Tax Expense" means, for any period, the provision, if
any, for federal, state, local and foreign income taxes (including state
franchise taxes accounted for as income taxes in accordance with GAAP) of the
Company and the Restricted Subsidiaries for the period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the remainder of (i)
consolidated net income (or loss) of the Company and the Restricted Subsidiaries
for such period as determined in accordance with GAAP, as adjusted by excluding,
without duplication, (a) net after-tax extraordinary gains or losses (less all
fees and expenses relating thereto), (b) if not treated as an extraordinary
item, the make whole or premium payment required to be paid upon the repayment
of the Old Notes and related debt extinguishment costs, (c) net after-tax gains
or losses (less all fees and expenses relating thereto) attributable to Asset
Sales, (d) net income (or net loss) of any Person (other than the Company or any
Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an
ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any Restricted Subsidiary in cash
or Property by such other Person during that period (regardless of whether such
cash dividends or other distributions are attributable to net income (or net
loss) of such Person during that period or during any prior period), (e) net
income (or net loss) of any Person combined with the Company or any Restricted
Subsidiary on a "pooling of interests" basis attributable to any period prior to
the date of combination, (f) net income of any Restricted Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of its net income is not at the date of determination
permitted, directly or indirectly, by operation of the terms of its charter,
partnership agreement or other organizational document or any agreement or
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or the holders of its Equity
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Interests, and (g) income resulting from transfers of assets during such period
from an Unrestricted Subsidiary to the Company or any Restricted Subsidiary,
minus (ii) the Permitted Distribution Amount for such period. For purposes of
clause (d) above of, the amount of any distribution of Property will be equal to
the lesser of the Fair Market Value or net book value of that Property as
determined in good faith by the Board of Directors.
"Consolidated Tangible Assets" means, at any date, the total of all assets
appearing on a consolidated balance sheet of the Company and its consolidated
Subsidiaries as of that date prepared in conformity with GAAP, after deducting
therefrom, without duplication of deductions, all amounts shown on such balance
sheet in respect of good will, trademarks, trade names, copyrights, patents,
patent applications, licenses and rights in any thereof, or similar intangibles,
and any other items which are treated as intangibles in conformity with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the Company
and the Restricted Subsidiaries that are deducted in computing Consolidated Net
Income for that period, all determined on a consolidated basis in accordance
with GAAP (excluding any such non-cash charge in the ordinary course of business
for which an accrual of or reserve for cash charges for any future period is
required).
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at One State Street, New York, New York 10004.
"Default" means any event, act or condition that, after notice or passage
of time or both, would become an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7 hereof.
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does not have, and is not an employee of any Person
who has, any material direct or indirect financial interest (other than an
interest arising solely from the beneficial ownership of Equity Interests of the
Company) in or with respect to that transaction or series of transactions.
"Disqualified Equity Interests" of any specified Person means any Equity
Interests of the specified Person that, either by its terms, by the terms of any
security into which they are convertible or for which they are exchangeable by
contract or otherwise is, or on the happening of an event or passage of time or
both would be, (i) required to be redeemed or repurchased (whether mandatorily
or at the option of the holder thereof), other than a redemption or repurchase
effected solely through
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the issuance of Qualified Equity Interests of the specified Person, by the
specified Person or any of its Subsidiaries or by the Company or any Restricted
Subsidiary prior to the final Stated Maturity of the Securities or (ii)
convertible into or exchangeable for, at any time prior to the final Stated
Maturity of the Initial Securities, any Indebtedness of the specified Person or
any of its Subsidiaries or of the Company or any Restricted Subsidiary.
"Equity Interests" means, with respect to any Person, any and all shares,
general partner, limited partner, membership and other interests, units,
participation rights or other equivalents in the equity interests (however
designated) in that Person, and any rights (other than debt securities
convertible into an equity interest), warrants or options exercisable or
exchangeable for or convertible into such an equity interest in that Person.
"Event of Default" has the meaning specified in Section 5.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor act thereto.
"Exchange Security" or "Exchange Securities" has the meaning specified in
the first recital of this Indenture.
"Existing Storage Contracts" means the following:
(i) Firm Gas Storage Contract, effective September 1, 1994,
between Moss Bluff Gas Storage Systems and Tejas Power Corporation;
(ii) Gas Storage Contract, effective November 1, 1991, between Moss
Bluff Gas Storage Systems and Northern Indiana Public Service Company, as
amended by a First Amendment, effective May 1, 1992, and a Second
Amendment executed in May, 1993;
(iii) Gas Storage Contract, effective December 1, 1996, between Moss
Bluff Hub Partners, L.P. and Inventory Management & Distribution Company,
LLC;
(iv) Gas Storage Contract, effective April 1, 1997, between Market
Hub Partners, L.P. and Houston Lighting & Power Company;
(v) Gas Storage Contract, effective April 1, 1997, between Moss
Bluff Partners, L.P. and Texaco Natural Gas, Inc.;
(vi) Firm Gas Storage Agreement, effective November 1, 1995,
between Moss Bluff Gas Storage Systems and Wisconsin Natural Gas Company;
(vii) Gas Storage Contract, effective April 1, 1996, between Moss
Bluff Hub Partners, L.P. and Tejas Gas Marketing Company;
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(viii)Gas Storage Contract, effective April 1, 1997, between Moss
Bluff Hub Partners, L.P. and Producers Energy Marketing, LLC;
(ix) Gas Storage Contract, effective July 1, 1997, between Moss
Bluff Hub Partners, L.P. and Public Service Company of New Mexico;
(x) Preferred Interruptible Gas Storage Contract, effective
November 1, 1991, between Moss Bluff Gas Storage Systems and Channel
Industries Gas Company;
(xi) Gas Storage Contract, effective December 1, 1996, between Egan
Hub Partners, L.P. and ANR Pipeline Company;
(xii) Gas Storage Contract, effective April 1, 1997, between Egan
Hub Partners, L.P. and Aquila Energy Marketing Corporation;
(xiii)Gas Storage Contract, effective September 1, 1997, between
Egan Hub Partners, L.P. and Columbia Energy Services, Inc.;
(xiv) Gas Storage Contract, effective July 1, 1997, between Egan Hub
Partners, L.P. and Coral Energy Resources, L.P.;
(xv) Gas Storage Contract, effective October 1, 1997, between Egan
Hub Partners, L.P. and Dayton Power & Light Company;
(xvi) Gas Storage Contract, effective January 28, 1994, between Egan
Hub Partners, L.P. and East Ohio Gas Company;
(xvii)Gas Storage Contract, effective December 1, 1997, between Egan
Hub Partners, L.P. and Koch Energy Trading, Inc.;
(xviii)Gas Storage Contract, effective September 1, 1995, between
Egan Hub Partners, L.P. and Miami Valley Resources, Inc.;
(xix) Gas Balancing Contract, effective September 1, 1995, between
Egan Hub Partners, L.P. and Northern Indiana Public Services Company, as
amended by a First Amendment, effective May, 1995 and a Second Amendment,
effective December 1, 1996;
(xx) Gas Storage Contract, effective December 10, 1994, between Egan
Hub Partners, L.P. and Tejas Power Corporation, as amended by a First
Amendment, effective December 1, 1995; and
(xxi) Gas Storage Contract, effective September 1, 1996, between
Egan Hub Partners, L.P. and TPC Corporation.
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<PAGE>
"Fair Market Value" means, with respect to a Property, the fair market
value of that Property as determined in good faith by the Board of Directors of
the Company and evidenced by a Board Resolution, which determination shall be
conclusive for purposes of this Indenture. Unless otherwise specified herein,
the Board of Directors shall be under no obligation to obtain any valuation or
assessment from any investment banking firm, appraiser or other third party.
"Federal Bankruptcy Code" means Title 11 of the United States Code, as
amended from time to time, and any successor statute thereto.
"Finance Corp." means Market Hub Partners Finance, Inc., a Delaware
corporation, until a successor entity replaces it pursuant to the applicable
provisions of this Indenture, and thereafter "Finance Corp." shall mean such
successor entity.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in (i) the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants, (ii) the statements and pronouncements of the Financial Accounting
Standards Board or (iii) such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States of America.
"General Partner" means Market Hub Partners Storage, L.L.C., a Delaware
limited liability company, the general partner of the Company, and its
successors in such capacity.
"Global Security" has the meaning specified in Section 2.1.
"Guarantee" or "guarantee" means, as applied to any Indebtedness, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of that Indebtedness and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of that Indebtedness including, without
limiting the foregoing, the payment of amounts drawn down under letters of
credit. When used as a verb, "guarantee" has a corresponding meaning.
"Hedging Obligation" means, at any time as to any Person, any obligation
of that Person at that time that is incurred (i) in the ordinary course of its
business pursuant to any exchange agreement, swap, option, forward sales
contract, future contracts or other similar agreement or arrangement designed to
protect against or manage the exposure of that Person or any of its Subsidiaries
to fluctuations in foreign currency exchange rates or in the price of energy
related commodities , and (ii) pursuant to any arrangement with any other Person
whereby, directly or indirectly, the specified Person is entitled to receive
periodic payments calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic payments made by
the specified Person calculated by applying a fixed or floating rate of interest
on the same national amount and includes, without limitation, interest rate
swaps, caps, floors, collars and other similar agreements or arrangements
designed to protect against or manage the exposure of the specified Person or
any of its Subsidiaries to fluctuations in interest rates.
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<PAGE>
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all liabilities of that Person, contingent or otherwise, for borrowed money or
for the deferred purchase price of Property or services (excluding any trade
accounts payable and other accrued current liabilities incurred in the ordinary
course of business of that Person) and all liabilities of that Person incurred
in connection with any letters of credit, bankers' acceptances or other similar
credit transactions or any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Equity Interests of that Person, or any
warrants, rights or options to acquire that Equity Interest, outstanding on the
Issue Date or thereafter, or any obligations arising out of the sale of Accounts
Receivable of that Person if, and to the extent, any of the foregoing would
appear as a liability on a balance sheet of that Person prepared in accordance
with GAAP, (ii) all obligations of that Person evidenced by bonds, notes,
debentures or other similar instruments, if, and to the extent, any of the
foregoing would appear as a liability on a balance sheet of that Person prepared
in accordance with GAAP, (iii) all obligations of that Person created or arising
under any conditional sale or other title retention agreement with respect to
Property acquired by that Person (even if the rights and remedies of the seller
or lender under such agreement in the event of a default are limited to
repossession or sale of such Property), (iv) the Attributable Indebtedness of
any Capitalized Lease Obligation of that Person, (v) all obligations of the
types described in the preceding clauses of this definition and all dividends
and other distributions, the payment of which is secured by (or for which the
holder of such obligations has an existing right, contingent or otherwise, to be
secured by) any Lien upon Property (including, without limitation, accounts and
contract rights) owned by that Person, even though that Person has not assumed
or become liable for the payment of such Indebtedness (the amount of such
obligation being deemed to be the lesser of the value of such Property or the
amount of the obligation so secured), (vi) the maximum fixed redemption or
repurchase price, if any, of all Disqualified Equity Interests of that Person,
(vii) all obligations of that Person under or in respect Hedging Obligations,
and (viii) all Guarantees by that Person of obligations of the types referred to
in clauses (i) through (vii) of this definition.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is disinterested
and independent with respect to the Company and its Affiliates and, in the
reasonable judgment of a majority of the Disinterested Directors, is qualified
to perform the task for which it has been engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(a) an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or similar case or proceeding in connection
therewith, relative to such Person or its creditors, as such, or its assets or
(b) any liquidation, dissolution or other winding-up proceeding of such Person,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy or (c) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of such Person.
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<PAGE>
"Initial Security" or "Initial Securities" has the meaning specified in
the first recital to this Indenture.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Investment" means, with respect to any specified Person, (i) any direct
or indirect advance, loan, guarantee of Indebtedness or other extension of
credit or capital contribution by the specified Person 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) any other Person, (ii) any purchase
or acquisition by the specified Person of any Equity Interests, bonds, notes,
debentures or other securities (including derivatives) or evidences of
Indebtedness issued by any other Person and (iii) all other items that would be
classified as investments on a balance sheet of such Person prepared in
accordance with GAAP. The following are not "Investments": (i) extensions of
trade credit or other advances to customers on commercially reasonable terms in
accordance with normal trade practices or otherwise in the ordinary course of
business; (ii) Hedging Obligations, but only to the extent that the same
constitute Permitted Indebtedness; and (iii) endorsements of negotiable
instruments and documents in the ordinary course of business. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of.
"Issue Date" means the date the Initial Securities are initially issued,
which is March 4, 1998.
"Issuers" means the Company and Finance Corp.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant
any lease, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing) upon or with
respect to any Property of any kind. A Person will be deemed to own subject to a
Lien any Property that the Person has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
other title retention agreement.
"Liquidated Damages" means all liquidated damages due and owing pursuant
to Section 5 of the Registration Rights Agreement.
"Maturity" means, with respect to any Security, the date on which any
principal of that Security becomes due and payable as therein or in this
Indenture provided, whether at the Stated Maturity with respect to that
principal or on redemption, repurchase pursuant to a Change of Control Offer or
a Net Proceeds Offer, by declaration of acceleration or otherwise.
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"MHP" means Market Hub Partners, L.P., a Delaware partnership and its
successors.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means, with respect to any Asset Sale, the
proceeds therefrom in the form of cash or Cash Equivalents, including payments
in respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel, consultants, accountants and investment banks) related to such
Asset Sale, (ii) provisions for all taxes payable as a result of such Asset Sale
(after taking into account available tax credits or deductions and any tax
sharing arrangements), (iii) amounts required to be paid to any Person (other
than the Company or any Restricted Subsidiary) (a) owning a beneficial interest
in the Properties subject to the Asset Sale, (b) having a Lien on such
Properties or (c) requiring such payment as a condition to providing any consent
necessary to consummate the Asset Sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
that Asset Sale and retained by the Company or any Restricted Subsidiary, as the
case may be, after that Asset Sale, including, without limitation, pensions and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
that Asset Sale, all as reflected in an Officers' Certificate; PROVIDED,
HOWEVER, that any amounts remaining after adjustments, revaluations or
liquidations of those reserves shall constitute Net Available Proceeds.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Qualified Equity Interests or other securities, the cash proceeds of that
issuance or sale net of the fees of attorneys and accountants, fees, discounts
or commissions of underwriters and placement agents and brokerage, consultant
and other fees and expenses actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Net Proceeds Offer" has the meaning specified in Section 10.16(a)(i).
"Non-Recourse Purchase Money Indebtedness" means Indebtedness of the
Company or any Restricted Subsidiary that is incurred to finance the purchase of
any assets of the Company or any Restricted Subsidiary within 90 days of such
purchase, as long as (i) the amount of that Indebtedness does not exceed 100% of
the purchase cost of such assets, (ii) that purchase cost is or should be
included in "additions to property, plant and equipment" in accordance with
GAAP, (iii) such Indebtedness is non-recourse to the Company and its Restricted
Subsidiaries and all their respective assets other than the assets so purchased
and (iv) the purchase of such assets is not part of an acquisition of any
Person.
"Officers" means, with respect to any Person, the chief executive officer,
the president, any vice president, the chief financial officer, the chief
accounting officer and the treasurer of such Person, or if such Person is a
partnership and does not have such officers, then the corresponding officers of
the general partner of such Person.
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"Officers' Certificate" means a certificate signed by two Officers or by
any Officer and an assistant treasurer, controller, assistant controller, the
secretary or an assistant secretary of the Company (or, if the Company does not
have such officers, the corresponding officers of the General Partner) and
delivered to the Trustee.
"Old Notes" means the 8.10% Senior Secured Notes due 2006 of Moss Bluff
Hub Partners, L.P. and Egan Hub Partners, L.P. originally issued in the
aggregate principal amount of $60,000,000.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company including an employee of the Company, and who shall be
reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(2) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities, PROVIDED that, if
such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to the Indenture or provision therefor satisfactory to
the Trustee has been made;
(3) Securities, except to the extent provided in Sections 12.2 and
12.3 hereof, with respect to which the Company has effected legal
defeasance or covenant defeasance as provided in Article XII hereof; and
(4) Securities which have been paid pursuant to Section 3.6 hereof
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands the Securities are valid obligations of the
Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, consent, notice or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction
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of the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or such other obligor.
"Parent" means, with respect to the Company, the holder or holders of all
of the Equity Interests of the Company, other than not more than a two percent
interest owned by the General Partner.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
PARI PASSU in right of payment to the Securities.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of and premium, if any,
interest or Liquidated Damages, if any, on any Securities on behalf of the
Company.
"Payment Restriction" means, with respect to any Restricted Subsidiary,
any consensual encumbrance, restriction or limitation, whether by operation of
the terms of its charter or partnership agreement or other organizational
document or by reason of any agreement, instrument, judgment, decree or order on
the ability of (i) such Restricted Subsidiary to (a) pay dividends or make other
distributions on its Equity Interests or make payments on any obligation,
liability or Indebtedness owed to the Company or any other Restricted
Subsidiary, (b) make loans or advances to the Company or any other Restricted
Subsidiary or (c) transfer any of its Properties to the Company or any other
Restricted Subsidiary or (ii) the Company or any other Restricted Subsidiary to
receive or retain any such dividends, distributions or payments, loans or
advances or transfer of Properties.
"Permitted Distribution" means a dividend, distribution, loan, advance or
other Restricted Payment to the Parent of the Company to the extent that it is
designated as such by the Company. Although not limited by the purpose of the
Restricted Payment, a primary purpose of Permitted Distributions is to provide
funds to the Parent (or the partners or members of the Parent) to pay the income
tax liability of the Parent (or such partners or members) resulting from the
taxable income of the Company.
"Permitted Distribution Amount" means, for any period, an amount equal to
35% of the amount referred to in clause (i) of the definition of Consolidated
Net Income for such period, excluding any portion of such period during which
the Company is not a limited partnership, limited liability company or other
entity that is not subject to Federal income taxation.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company under Working Capital Agreements in
an aggregate principal amount at any time outstanding not to exceed the
greater of (a) $20,000,000, or (b) 15% of Consolidated Tangible Assets;
(ii) Indebtedness under the Securities and the Subsidiary
Guarantees;
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(iii) Indebtedness outstanding, or to be incurred pursuant to
commitments in effect, on the Issue Date after giving effect to the
issuance and sale of the Initial Securities and the application of the net
proceeds therefrom;
(iv) Indebtedness under Hedging Obligations, PROVIDED that (a) those
Hedging Obligations are related to payment obligations on Permitted
Indebtedness or Indebtedness otherwise permitted by the Consolidated Fixed
Charge Coverage Ratio test described under " Certain Covenants --
Limitation on Indebtedness and Disqualified Equity Interests" above or, in
the case of currency or commodity Hedging Obligations, to the foreign
currency cash flows or energy requirements reasonably expected to be
generated or required by the Company and the Restricted Subsidiaries, (b)
the notional principal amount of the Hedging Obligations does not exceed
105% of the principal amount of that Indebtedness or , in the case of
currency or commodity Hedging Obligations, the amount of those foreign
currency cash flows or energy requirements to which those Hedging
Obligations relate and (c) in the case of currency or commodity Hedging
Obligations, those Hedging Obligations are entered into for the purpose of
limiting currency exchange rate risks or commodity price fluctuation risks
in connection with transactions entered into in the ordinary course of
business;
(v) Indebtedness of the Company to a Wholly Owned Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary to the Company or
to another Wholly Owned Restricted Subsidiary; PROVIDED, HOWEVER, that
upon either (a) the subsequent issuance (other than directors' qualifying
shares), sale, transfer or other disposition of any Equity Interests or
any other event that results in a Wholly Owned Restricted Subsidiary
ceasing to be a Wholly Owned Restricted Subsidiary or (b) the transfer or
other disposition of any such Indebtedness (except to the Company or a
Wholly Owned Restricted Subsidiary), the provisions of this clause (v)
will no longer apply to such Indebtedness and such Indebtedness shall be
deemed, in each case, to be incurred and shall be treated as an incurrence
for purposes of Section 10.11(a) at the time the transfer or other
disposition occurred;
(vi) Guarantees of Permitted Indebtedness or Indebtedness incurred
in accordance with Section 10.11(a);
(vii) Indebtedness in respect of bid, performance or surety bonds
issued or other reimbursement obligations for the account of the Company
in the ordinary course of business, including guarantees and letters of
credit supporting such bid, performance, surety bonds or other
reimbursement obligations (in each case other than for an obligation for
money borrowed);
(viii)Non-Recourse Purchase Money Indebtedness;
(ix) other Indebtedness outstanding at any time in an aggregate
principal amount not to exceed $5,000,000; and
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(x) any renewals, amendments, extensions, supplements,
modifications, deferrals, substitutions, refinancing or replacements
(each, for purposes of this clause (x), a "refinancing") by the Company or
a Restricted Subsidiary of any Indebtedness incurred in accordance with
Section 10.11(a) or referred to above in clauses (ii) through (ix) of this
definition or this clause (x), so long as (a) any such new Indebtedness
shall be in a principal amount that does not exceed the principal amount
(or, if such Indebtedness being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by the Company or such Restricted Subsidiary as necessary to accomplish
such refinancing, plus the amount of expenses of the Company or such
Restricted Subsidiary incurred in connection with such refinancing, (b) in
the case of any refinancing of Indebtedness (including the Securities)
that is PARI PASSU with or subordinated in right of payment to the
Securities, then such new Indebtedness is PARI PASSU with or subordinated
in right of payment to the Securities at least to the same extent as the
Indebtedness being refinanced and (c) such new Indebtedness has an Average
Life equal to or longer than the Average Life of the Indebtedness being
refinanced and a final Stated Maturity that is not earlier than the final
Stated Maturity of the Indebtedness being refinanced.
"Permitted Investments" means any of the following:
(i) Investments in Cash Equivalents;
(ii) Investments in the Company or any of its Wholly Owned
Subsidiaries;
(iii) an Investment or series of related Investments by the Company
or any Restricted Subsidiary in another Person, if as a result of that
Investment or series of related Investments (a) that other Person becomes
a Wholly Owned Restricted Subsidiary or (b) that other Person is merged or
consolidated with or into, or transfers or conveys its Properties
substantially as an entirety to, the Company or a Wholly Owned Restricted
Subsidiary;
(iv) Investments of Net Available Proceeds permitted by Section
10.15;
(v) Investments consisting of loans and advances to employees,
officers and directors of the Company or any Restricted Subsidiary for
travel, entertainment, relocation or other expenses in the ordinary course
of business;
(vi) Investments consisting of loans and advances by the Company or
any Restricted Subsidiary to employees, officers and directors of the
Company or any Restricted Subsidiary in an aggregate principal amount at
any one time outstanding not exceeding $750,000;
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(vii) Investments acquired by the Company or any Restricted
Subsidiary in the ordinary course of business (a) in exchange for any
other Investment or account receivable held by the Company or any
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or the obligor with respect to such account receivable or (b)
as a result of a foreclosure by the Company or any Restricted Subsidiary
with respect to any secured Investment or other transfer of title with
respect to any such secured Investment in default; or
(viii)Investments the payment for which consists exclusively of
Qualified Equity Interests, PROVIDED that (a) any such Investment must be
made in accordance with the other requirements of the Indenture, including
(A) with respect to any Acquired Indebtedness relating to such an
Investment, Section 10.11(a) and (b) with respect to any Lien on
properties or assets acquired in connection with any such Investment,
Section 10.13 and (b) such Qualified Equity Interests shall not be
considered in any Qualified Equity Interests referred to in clause
(iii)(b) of the first sentence of Section 10.10;
(ix) Investments consisting of the loan of natural gas made in the
ordinary course of business; or
(x) Investments by the Company or any Restricted Subsidiary in any
Person that is not a Restricted Subsidiary in an aggregate principal
amount at any one time outstanding not exceeding $5,000,000.
"Permitted Liens" means the following types of Liens:
(i) Liens existing as of the Issue Date;
(ii) Liens securing the Securities or the Subsidiary Guarantees;
(iii) Liens in favor of the Company or, with respect to a Restricted
Subsidiary, Liens in favor of another Restricted Subsidiary;
(iv) Liens securing Permitted Indebtedness of the Company and the
Restricted Subsidiaries of the type described in clause (i) of the
definition of Permitted Indebtedness;
(v) Liens securing Indebtedness that constitutes Permitted
Indebtedness of the type described in clause (x) of the definition of
"Permitted Indebtedness" incurred as a refinancing of any Indebtedness
secured by Liens described in clauses (i), (iv), (xi), (xii) and (xiii) of
this definition; PROVIDED, HOWEVER, that (a) if any Lien securing
Indebtedness being refinanced is subordinated or junior to any Lien
granted for the benefit of the Holders, then the Lien securing the new
Indebtedness shall be subordinated or junior to any Lien granted for the
benefit of the Holders at least to the same extent as the Lien securing
the Indebtedness being refinanced and (b) such Liens do not extend to or
cover any Property of the Company or any of its Restricted Subsidiaries
not securing the Indebtedness so refinanced;
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(vi) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or a Restricted Subsidiary, as the
case may be, has set aside on its books such reserves, or has made such
other appropriate provision, if any, as is required by GAAP;
(vii) Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other similar Liens incurred in the
ordinary course of business for sums not delinquent or being contested in
good faith, and as to which the Company or a Restricted Subsidiary, as the
case may be, has set aside on its books such reserves, or has made such
other appropriate provision, if any, as is required by GAAP;
(viii)Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the payment or
performance of tenders, statutory or regulatory obligations, surety and
appeal bonds, bids, government contracts and leases, performance and
return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(ix) Liens securing any judgment not giving rise to a Default or
Event of Default and so long as any appropriate legal proceedings that may
have been duly initiated for the review of the judgment has not been
finally terminated or the period within which those proceedings may be
initiated has not expired;
(x) easements, rights-of-way, reservations, zoning and other
restrictions and other similar encumbrances not interfering in any
material respect with the ordinary conduct of business of the Company or
any Restricted Subsidiary;
(xi) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease; PROVIDED that (a) the Attributable
Indebtedness related thereto constitutes Indebtedness permitted to be
incurred under the terms of this Indenture and (b) with respect to any
Capitalized Lease Obligation, such Liens do not extend to any Property
that is not leased Property subject to such Capitalized Lease Obligation;
(xii) Liens securing Non-Recourse Purchase Money Indebtedness;
PROVIDED, HOWEVER, that (a) the Non-Recourse Purchase Money Indebtedness
shall not be secured by any Property of the Company or any Restricted
Subsidiary other than the Property so acquired and any proceeds therefrom
and (b) the Lien securing such Non-Recourse Purchase Money Indebtedness
shall be created within 90 days of such acquisition;
(xiii)Liens securing Acquired Indebtedness incurred in accordance
with Section 10.11(a); PROVIDED that (a) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (b)
such Liens
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do not extend to or cover any Property of the Company or of any Restricted
Subsidiary other than the Property that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary and are no more favorable to the
lienholder than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary;
(xiv) leases or subleases granted to others that do not interfere
with the ordinary conduct of business of the Company or any Restricted
Subsidiary;
(xv) rights of a common owner of any interest in Property held by
the Company or any Restricted Subsidiary and that common owner as tenants
in common or through other common ownership; and
(xvi) Liens or equitable encumbrances deemed to exist by reason of
(a) fraudulent conveyance or transfer laws or (b) negative pledge or other
agreements to refrain from giving Liens.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Security" has the meaning specified in Section 2.1.
"Predecessor Security" of any particular Security means every previous
Security, including any Security of a different series, evidencing all or a
portion of the same debt as that evidenced by such particular Security; and, for
the purposes of this definition, any Security authenticated and delivered under
Section 3.6 hereof in exchange for a mutilated security or in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Security.
"Preferred Equity Interests" means, with respect to any Person, any and
all Equity Interests of such Person that are not Common Equity Interests,
whether outstanding on or after the Issue Date.
"Principals" means (i) Miami Valley Leasing, Inc., Nipsco Energy Services,
Inc., PSRC Del., Inc. and TPC Corporation, (ii) the respective ultimate parent
companies, if any, that controls such Persons on the date of this Indenture,
(iii) wholly owned Subsidiaries of any such ultimate parent companies, or (iv)
any one or more of such Persons.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or assets, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Equity Interests in any other
Person.
"Public Equity Offering" means an offer and sale of (i) Common Equity
Interests of the Company for cash pursuant to a registration statement that has
been declared effective by the SEC
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pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company) or (ii) Common Equity Interests of the Parent for cash
pursuant to such a registration statement to the extent that such cash is
contributed by the Parent to the capital of the Company without any obligation
of the Company (other than that imposed by applicable law) to return such
contribution to the Parent.
"Qualified Equity Interests" of any Person means any and all Equity
Interests of that Person other than Disqualified Equity Interests of that
Person.
"Redemption Date" when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of March 4, 1998, by and among the Company, Finance Corp., the
Subsidiary Guarantors and SBC Warburg Dillon Read Inc., as such agreement may be
amended, modified or supplemented from time to time.
"Regular Record Date" means, with respect to the interest payable on any
Interest Payment Date, the February 15 or August 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Related Business" means (i) the businesses of the Company and the
Restricted Subsidiaries on the Issue Date and any business related, ancillary or
complementary to the business of the Company and the Restricted Subsidiaries on
that date and (ii) any other business related to the production, gathering,
marketing, treating, storage, selling and/or transporting of natural gas as long
as the principal businesses of the Company and its Restricted Subsidiaries
remain the businesses described in the preceding clause (i).
"Related Business Investment" means any Investment by the Company or any
Restricted Subsidiary in any Related Business.
"Responsible Officer", when used with respect to the Trustee, means any
officer in the Corporate Trust Department of the Trustee, and also means, with
respect to a particular corporate trust matter, any other officer of the Trustee
to whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Investment" means (with duplication) (i) the designation of a
Subsidiary as an Unrestricted Subsidiary in the manner described in the
definition of "Unrestricted Subsidiary" and (ii) any Investment other than a
Permitted Investment.
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"Restricted Payment" means, with respect to any Person:
(i) any declaration or payment of any dividend or distribution
(other than a dividend or distribution declared or paid by a Restricted
Subsidiary to the Company or a Wholly Owned Restricted Subsidiary), or any
other distribution with respect to any shares of Equity Interests of that
Person, including any payments to the general partner of such Person to
compensate such Person for any management or related services provided by
such general partner in its capacity as such or pursuant to the applicable
partnership agreement (but excluding dividends or distributions payable
solely in shares of Qualified Equity Interests of that Person or in
options, warrants or other rights to purchase Qualified Equity Interests
of that Person);
(ii) any purchase, redemption, retirement or other acquisition for
value of any Equity Interests of that Person or any other payment or
distribution made in respect thereof, either directly or indirectly;
(iii) any principal payment on or repurchase, redemption, defeasance
or other acquisition or retirement for value, prior to any scheduled
principal payment, scheduled sinking fund payment or maturity, of any
subordinated indebtedness (including, with respect to the Company, Finance
Corp. and any Subsidiary Guarantor, Subordinated Indebtedness) of that
Person; or
(iv) any Restricted Investment.
"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the Issue Date, unless that Subsidiary is designated as an
Unrestricted Subsidiary in the manner described below in this Section 1.1 in the
definition of "Unrestricted Subsidiary."
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Sale/Leaseback Transaction" means any direct or indirect arrangement
pursuant to which Properties are sold or transferred by the Company or a
Restricted Subsidiary and are thereafter leased back from the purchaser or
transferee thereof by the Company or a Restricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor act thereto.
"Security" and "Securities" have the respective meanings specified in the
first recital of this Indenture and more particularly mean any of the Securities
authenticated and delivered under this Indenture.
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"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.5 hereof.
"Senior Management" means, with respect to the Company, the Chairman of
the Board of Directors, the president, the chief operating officer, the chief
financial officer, the chief accounting officer, the treasurer, the controller
and any vice-president of the Company or, if the Company has no such officers,
the comparable officers or managers of the General Partner.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7 hereof.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument evidencing
or governing such Indebtedness as the fixed date on which the principal of that
Indebtedness or that installment of interest is due and payable.
"Subordinated Indebtedness" means any Indebtedness of the Company, Finance
Corp. or a Subsidiary Guarantor that is expressly subordinated in right of
payment to the Securities or Subsidiary Guarantees, respectively.
"Subsidiary" means, with respect to any specified Person, (i) a
corporation a majority of whose Voting Equity Interests is at the time, directly
or indirectly, owned by the specified Person, by one or more Subsidiaries of the
specified Person or by the specified Person and one or more Subsidiaries thereof
or (ii) any other Person (other than a corporation), including, without
limitation, a partnership, joint venture or limited liability company, in which
the specified Person, one or more Subsidiaries thereof or the specified Person
and one or more Subsidiaries thereof, directly or indirectly, at the date of
determination thereof, has or have at least a majority of the Voting Equity
Interests or other ownership interests of such Person.
"Subsidiary Guarantors" mean (i) Moss Bluff Hub Partners, L.P. and Egan
Hub Partners L.P., each a Delaware limited partnership, and their general
partners, Moss Bluff Hub Partners, L.L.C., and Egan Hub Partners, L.L.C.,
respectively, each a Delaware limited liability company, and (ii) any other
Subsidiary of the Company that executes a Subsidiary Guarantee in accordance
with the provisions of this Indenture, and their respective successors and
assigns.
"Subsidiary Guarantee" means the guarantee of the Subsidiary Guarantors as
provided herein.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and in force at the date as of which this Indenture was executed until
such time as this Indenture is qualified under the TIA, and thereafter as in
effect on the date on which this Indenture is qualified under the TIA, except as
provided in Section 9.5 hereof.
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"Trustee" means the Person named as the "Trustee" in the first paragraph
of this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
Board of Directors as provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary of the Company,
other than Finance Corp. and the Subsidiary Guarantors existing on the date of
this Indenture, as an Unrestricted Subsidiary so long as: (i) neither the
Company nor any Restricted Subsidiary is directly or indirectly liable for the
payment of any Indebtedness of that Subsidiary; (ii) no default with respect to
any Indebtedness of that Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of the Company or any Restricted
Subsidiary to declare a default on that other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity or require the
Company or any Restricted Subsidiary to repurchase or secure that other
Indebtedness; (iii) such designation as an Unrestricted Subsidiary would be
permitted under Section 10.10; (iv) that designation would not result in the
creation or imposition of any Lien on any of the properties or assets of the
Company or any Restricted Subsidiary (other than any Permitted Lien); and (v)
the Company could incur at least $1.00 of additional Indebtedness not
constituting Permitted Indebtedness in accordance with Section 10.11(a);
PROVIDED, HOWEVER, that with respect to clause (i) of this sentence, the Company
or a Restricted Subsidiary may be liable for the payment of Indebtedness of an
Unrestricted Subsidiary if (x) the liability constituted a Permitted Investment
or a Restricted Payment permitted under Section 10.10, in each case at the time
of incurrence, or (y) the liability would be a Permitted Investment at the time
of designation of that Subsidiary as an Unrestricted Subsidiary. Any such
designation by the Board of Directors must be evidenced to the Trustee by filing
a Board Resolution with the Trustee giving effect to that designation, together
with an Officers' Certificate stating that such designation complies with the
requirements of this Indenture. The Board of Directors may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving
effect to such designation on a pro forma basis, (i) no Default or Event of
Default has occurred and is continuing, (ii) the Company could incur at least
$1.00 of additional Indebtedness not constituting Permitted Indebtedness in
accordance with Section 10.11(a) and (iii) if any of the Properties of the
Company or any Restricted Subsidiary would on such designation become subject to
any Lien (other than a Permitted Lien), the creation or imposition of that Lien
shall comply with Section 10.13.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
"Voting Equity Interests" with respect to any specified Person, (i) means
any class or classes of Equity Interests of the specified Person pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors,
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partners, managers or trustees of the specified Person (irrespective of whether
or not, at the time, stock of any other class or classes have, or might have,
voting power by reason of the happening of any contingency) that control the
management and policies of such Person, and (ii) if such specified Person is a
limited partnership, includes the general partner and limited partner interests
of such Person.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary that
is a Wholly Owned Subsidiary.
"Wholly Owned Subsidiary" means (i) a corporate Restricted Subsidiary all
the outstanding capital stock of which (other than directors' qualifying shares)
are owned by the Company or one or more Wholly Owned Subsidiaries, (ii) a
partnership Restricted Subsidiary all of the interests of which, other than not
more than a two percent interest owned by the general partner of such
partnership Subsidiary, are owned by the Company or one or more Wholly Owned
Subsidiaries or (iii) a Restricted Subsidiary that is neither a corporation or a
partnership all of the Equity Interests of which are owned by the Company or one
or more Wholly Owned Subsidiaries.
"Working Capital Agreement" means, with respect to any specified Person,
(i) any agreement providing for the making of loans or advances on a revolving
basis, the issuance of letters of credit and/or the creation of bankers'
acceptances to fund the general working capital and other business requirements
of that Person and one or more of its Subsidiaries and (ii) any refinancings,
renewals, replacements, modification and extensions of any of the agreements
described in clause (i) of this sentence. Initially, "Working Capital Agreement"
means the revolving credit facility loan agreement proposed to be entered into
by the Issuers and Bank One, Texas, NA pursuant to a commitment letter, dated
February 5, 1998, from Bank One, Texas, NA addressed to Market Hub Partners.
SECTION 1.2 OTHER DEFINITIONS.
DEFINED
TERM IN SECTION
"Affiliate Transaction"............................... 10.17
"Affiliated Group" ................................... 8.1
"Change of Control Notice"............................ 10.14(c)
"Change of Control Offer"............................. 10.14(a)
"Change of Control Purchase Date"..................... 10.14(c)
"Change of Control Purchase Price".................... 10.14(a)
"Excess Proceeds"..................................... 10.15
"Net Proceeds Deficiency"............................. 10.16(a)
"Net Proceeds Payment Date"........................... 10.16(a)
"Net Proceeds Offer".................................. 10.16(a)
"Offered Price"....................................... 10.16(a)
"Payment Amount"...................................... 10.16(a)
"Pari Passu Indebtedness Amount"...................... 10.16(a)
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"Pari Passu Indebtedness Offer"....................... 10.16(a)
"Purchase Notice"..................................... 10.16(a)
"Surviving Corporation"............................... 8.2
"Surviving Entity".................................... 8.1
"Trigger Date"........................................ 10.16(a)
"U.S. Government Obligations"......................... 12.4(a)
Certain additional terms are defined in Appendix A.
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities,
"indenture security holder" means a Holder,
"indenture to be qualified" means this Indenture,
"indenture trustee" or "institutional trustee" means the Trustee,
and
"obligor" on the indenture securities means the Company or any other
obligor on the 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 Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.4 RULES OF CONSTRUCTION.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP and all accounting
calculations will be determined in accordance with GAAP;
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(c) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(d) the masculine gender includes the feminine and the neuter;
(e) a "day" means a calendar day; and
(f) references to agreements and other instruments include
subsequent amendments and waivers but only to the extent not prohibited by
this Indenture.
ARTICLE II
SECURITY FORMS
SECTION 2.1 FORMS GENERALLY.
Securities offered and sold in reliance on Rule 144A shall be
issued, and Securities offered and sold in offshore transactions in reliance on
Regulation S may be issued, initially in the form of one or more permanent
Global Securities in registered form, substantially in the form set forth in
Exhibit 1 to Appendix A (each being herein called a "Global Security"),
deposited with the Trustee, as custodian for the Depository, duly executed by
the Issuers and authenticated by the Trustee as hereinafter provided, and shall
bear the global securities and the restricted securities legend set forth in
Exhibit 1 to Appendix A. Subject to the limitation set forth in Section 3.1, the
principal amounts of any Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Securities offered and sold in reliance on any exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Securities offered and sold in reliance on Rule
144A may be issued, in the form of certificated Securities in registered form in
substantially the form set forth in Exhibit 1 to Appendix A (the "U.S. Physical
Securities"). Securities offered and sold in offshore transactions in reliance
on Regulation S may also be issued in the form of certificated Securities in
registered form set forth in Exhibit 1 to Appendix A (the "Offshore Physical
Securities"). The Offshore Physical Securities and the U.S. Physical Securities
are sometimes collectively herein referred to as the "Physical Securities".
SECTION 2.2 FORM OF SECURITIES.
The Initial Securities, the Subsidiary Guarantees endorsed thereon
and the Trustee's certificate of authentication thereon 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 Subsidiary
Guarantees endorsed thereon and the Trustee's certificate of authentication
thereon shall be substantially in the form of such Exhibit 1 except that the
Assignment Form
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contained in Exhibit 2 to Appendix A, which is hereby incorporated in and
expressly made a part of this Indenture, shall take the place of the Assignment
Form appearing in Exhibit 1. The Securities shall be printed, typewritten,
lithographed or engraved or produced by any combination of those methods, all as
determined by the officers of the Issuers executing the Securities, as evidenced
by their execution thereof. The Securities may have notations, legends or
endorsements (including notations relating to the Subsidiary Guarantees)
required by law, stock exchange rule, agreement to which the Company or Finance
Corp. is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Issuers). Each Security shall be
dated the date of its authentication. The terms of the Securities set forth in
Exhibits 1 and 2 of Appendix A are part of the terms of this Indenture.
ARTICLE III
THE SECURITIES
SECTION 3.1 TITLE AND TERMS.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture for original issue is limited to
$115,000,000. The aggregate principal amount of Securities Outstanding at any
one time may not exceed such amount except as provided in Section 3.6 hereof.
The Securities shall be known and designated as the "8 1/4% Senior Notes
due 2008" of the Issuers. The Securities shall be a joint and several obligation
of the Company and Finance Corp. Their Stated Maturity shall be March 1, 2008,
and they shall bear interest at the rate of 8 1/4% per annum from the Issue
Date, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, payable semiannually in cash in arrears on March 1
and September 1 in each year, commencing September 1, 1998, and at such Stated
Maturity, until the principal thereof is paid or duly provided for.
Principal of and premium, if any, interest and Liquidated Damages, if any,
on the Securities shall be payable (i) in same-day funds on or prior to the
payment dates with respect to those amounts in the case of Securities held of
record by the Depository and (ii) at the corporate trust office of the Trustee
in New York, New York, in the case of Securities held of record by Holders other
than the Depository. The Issuers may, at their option, pay interest and
Liquidated Damages, if any, on Securities held of record by Holders other than
the Depository by check mailed to the addresses of the Persons entitled thereto
as they appear in the Security Register on the Regular Record Date for that
interest or by wire transfer to an account maintained by the Holder located in
the United States, as specified in a written notice to the Trustee by any such
Holder requesting payment by wire transfer and specifying the account to which
transfer is requested.
The Securities shall be redeemable as provided in Article XI hereof.
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The Securities shall be subject to defeasance at the option of the Company
as provided in Article XII hereof.
SECTION 3.2 DENOMINATIONS.
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 3.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by the General
Partner of the Company and on behalf of Finance Corp. by the chairman of the
board, the president or a vice president of Finance Corp., and attested by its
secretary or an assistant secretary. The Securities shall be executed on behalf
of the General Partner, acting on behalf of the Company, by the chairman of the
board, the president or a vice president of the General Partner, and attested by
its secretary or assistant secretary, or by managers of the General Partner
holding comparable positions. The signature of any of these officers on the
Securities may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Securities.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company or Finance Corp. shall bind
the Company and Finance Corp., notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such Securities.
At any time after the execution and delivery of this Indenture, the
Issuers may deliver Securities executed by the Company and Finance Corp. to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities, and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as provided in this
Indenture. Such Company Order shall specify the principal amount of the
Securities to be authenticated, the date on which the original issue of
Securities is to be authenticated, and applicable delivery instructions.
Each Security shall be dated the date of its authentication.
No Security or Subsidiary Guarantee endorsed thereon shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein duly executed by the Trustee by
manual signature of an authorized signatory, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
and the Subsidiary Guarantees endorsed thereon have been duly authenticated and
delivered hereunder and that such Security is entitled to the benefits of this
Indenture.
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In case the Company or Finance Corp., pursuant to and in compliance with
Article VIII hereof, shall be consolidated or merged with or into any other
Person or shall sell, assign, convey, transfer, lease or otherwise dispose of
its Properties substantially as an entirety to any Person, and the successor
Person resulting from such consolidation, or surviving such merger, or into
which the Company shall have been merged, or the Person which shall have
received a sale, assignment, conveyance, transfer, lease or other disposition as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article VIII hereof, any of the Securities authenticated or
delivered prior to such sale, assignment, consolidation, merger, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person be exchanged for other Securities executed in the name of
the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 3.4 TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company and Finance
Corp. may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Issuers will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Issuers designated for such purpose pursuant to Section 10.2
hereof, without charge to the Holders. Upon surrender for cancellation of any
one or more temporary Securities, the Issuers and each Subsidiary Guarantor
shall execute and, upon Company Order, the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations and of like tenor and aggregate principal amount. Until
so exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 3.5 REGISTRATION OF TRANSFER AND EXCHANGE.
The Issuers shall cause to be kept a register (the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
and Finance Corp. shall provide for
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the registration of Securities and of transfers of Securities. The Security
Register shall be in written form or any other form capable of being converted
into written form within a reasonable time. At all reasonable times and during
normal business hours, the Security Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as security registrar (the
"Security Registrar") for the purpose of registering Securities and transfers of
Securities as herein provided.
Subject to the provisions of this Section and Appendix A, upon surrender
for registration of transfer of any Security at the office or agency of the
Issuers designated pursuant to Section 10.2 hereof, the Company, Finance Corp.
and each Subsidiary Guarantor shall execute, and upon Company Order, the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities with the Subsidiary Guarantees endorsed
thereon of like tenor and of any authorized denomination and of a like aggregate
principal amount.
Furthermore, any Holder of a Global Security shall, by acceptance of such
Global Security, be deemed to have agreed that transfers of beneficial interests
in such Global Security may be effected only through a book-entry system
maintained by the Depository (or its agent) and that ownership of a beneficial
interest in a Global Security shall be required to be reflected in a book-entry.
At the option of any Holder, Securities may be exchanged for other
Securities with the Subsidiary Guarantees endorsed thereon of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at the office or agency of the Issuers designated
pursuant to Section 10.2 hereof. Whenever any Securities are so surrendered for
exchange, the Company, Finance Corp. and each Subsidiary Guarantor shall execute
and, upon Company Order, the Trustee shall authenticate and deliver, the
Securities with the Subsidiary Guarantees endorsed thereon which the Holder
making the exchange is entitled to receive.
All Securities with the Subsidiary Guarantees endorsed thereon issued upon
any registration of transfer or exchange of Securities shall be the valid
obligations of the Company, Finance Corp. and each Subsidiary Guarantor,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Security Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer or
exchange, in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer, exchange
or redemption of Securities, but the Issuers or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge and any other
expenses, including the fees and expenses of the Trustee, payable in connection
therewith, other than exchanges pursuant to Section 3.4, 9.6 or 11.8 hereof not
involving any transfer.
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Neither the Trustee, the Security Registrar nor the Issuers shall be
required (i) to issue, register the transfer of or exchange any Physical
Security during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption of Securities selected for redemption and
ending at the close of business on the day of that mailing of the relevant
notice of redemption or (ii) to register the transfer of or exchange any
Physical Security so selected for redemption in whole or in part, except the
unredeemed portion of any such Security being redeemed in part.
SECTION 3.6 MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If (i) any mutilated Security is surrendered to the Trustee or (ii) the
Issuers and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Issuers and the Trustee such Security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company,
Finance Corp. or the Trustee that such Security has been acquired by a bona fide
purchaser, the Issuers and each Subsidiary Guarantor shall execute and upon
Company Order the Trustee shall authenticate and deliver, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security with the Subsidiary Guarantees endorsed thereon of like
tenor and of like principal amount bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Issuers in their discretion may,
instead of issuing a new Security, pay such Security.
Every new Security issued and authenticated pursuant to this Section in
lieu of any mutilated, destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Issuers and the Subsidiary
Guarantors whether or not the mutilated, destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Issuers maintained for such purpose pursuant to Section 10.2
hereof.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular
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Record Date by virtue of having been such Holder, and such defaulted interest
and (to the extent lawful) interest on such defaulted interest at the rate borne
by the Securities (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest") may be paid by the Company and Finance
Corp., at their election in each case, as provided in clause (a) or (b) below:
(a) The Issuers may elect to make payment of any Defaulted Interest
to the Holders in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment at least 60 days
prior to the date of the proposed payment, and at the same time the
Issuers shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, and such money when deposited
shall be held in trust for the benefit of the Holders entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee shall
fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date
of the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to the
Holders entitled to such Defaulted Interest in the manner provided for in
Section 14.5 hereof, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so given, such Defaulted Interest
shall be paid to the Holders in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following clause (b).
(b) The Issuers may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
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SECTION 3.8 PERSONS DEEMED OWNERS.
The Issuers , the Security Registrar, the Trustee and any agent of the
Issuers or the Trustee may treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of and premium, if any, and, subject to Section 3.7, interest and
Liquidated Damages, if any, on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Issuers,
the Subsidiary Guarantors, the Security Registrar, the Trustee or any agent of
the Issuers or the Trustee shall be affected by notice to the contrary.
SECTION 3.9 CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and, upon Company Order, shall be promptly canceled
by it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall, upon Company Order, be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of as directed by a
Company Order or, if no such Company Order has been provided, in accordance with
the Trustee's usual practice; PROVIDED, HOWEVER, that the Trustee shall not be
required to destroy canceled Securities.
SECTION 3.10 COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 3.11 CUSIP NUMBERS.
The Company and Finance Corp. 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.
SECTION 3.12 RESTRICTIONS ON TRANSFER; BOOK-ENTRY PROCEDURES.
Reference is made to Appendix A which contains certain provisions relating
to, among other things, book-entrys, transfers and legends. Such Appendix A is
hereby incorporated in and expressly made a part of this Indenture.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of
Securities, as expressly provided for in this Indenture) as to all Outstanding
Securities, and the Trustee, at the expense of the Issuers, shall, upon payment
of all amounts due the Trustee under Section 6.6 hereof, execute proper
instruments acknowledging satisfaction and discharge of this Indenture when
(a) either
(1) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been mutilated, destroyed, lost or stolen
and that have been replaced or paid as provided in Section 3.6 hereof and
(ii) Securities for whose payment money or United States governmental
obligations of the type described in clause (i) of the definition of Cash
Equivalents have been deposited in trust with the Trustee or any Paying
Agent or segregated and held in trust by the Company and thereafter repaid
to the Company or discharged from such trust, as provided in Section 10.3
hereof) have been delivered to the Trustee for cancellation, or
(2) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their final Stated
Maturity within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the serving of notice
of redemption by the Trustee in the name, and at the expense, of the
Company and Finance Corp.,
and the Issuers, in the case of clause (2)(i), (2)(ii) or (2)(iii) above,
have irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge the
entire Indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal of and premium, if any, interest
and Liquidated Damages, if any, on such Securities to the date of such
deposit (in the case of Securities that have become due and payable) or to
the final Stated Maturity or Redemption Date, as the case may be, together
with the
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Company Order irrevocably directing the Trustee to apply such funds to the
payment thereof at maturity or redemption, as the case may be;
(b) the Issuers have paid or caused to be paid all other sums then due and
payable hereunder by the Company and Finance Corp.; and
(c) the Company has delivered to the Trustee an Officers' Certificate
stating and an Opinion of Counsel opining that all conditions precedent herein
relating to the satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuers to the Trustee under Section 6.6 hereof and, if money
shall have been deposited with the Trustee pursuant to this Section, the
obligations of the Trustee under Section 4.2 hereof and the last paragraph of
Section 10.3 hereof and the Trustee's rights under Article VI hereof shall
survive.
SECTION 4.2 APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 10.3 hereof,
all money deposited with the Trustee pursuant to Section 4.1 hereof shall be
held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and
premium, if any, interest and Liquidated Damages, if any, for whose payment such
money has been deposited with the Trustee.
ARTICLE V
REMEDIES
SECTION 5.1 EVENTS OF DEFAULT.
"Event of Default" wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) any default in the payment of the principal of or premium, if
any, on any of the Securities when the same becomes due and payable,
whether such payment is due at Stated Maturity or on redemption,
repurchase pursuant to a Change of Control Offer or a Net Proceeds Offer,
acceleration or otherwise; or
(b) any default in the payment of any installment of interest or
Liquidated Damages, if any, on any Security, when it becomes due and
payable, and the continuance of that default for a period of 30 days; or
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(c) any default in the performance or breach by the Company or any
Restricted Subsidiary of the provisions of Article VIII hereof or any
failure of the Issuers to make or consummate either a Change of Control
Offer or a Net Proceeds Offer in accordance with the provisions of Section
10.14 or any failure of the Company to make or consummate a Net Proceeds
Offer in accordance with Section 10.16; or
(d) any failure of the Company, Finance Corp. or any Subsidiary
Guarantor to perform or observe any other term, covenant or agreement
applicable to it and contained in the Securities or this Indenture (other
than a default specified in subparagraph (a), (b) or (c) above) or the
Subsidiary Guarantees, as the case may be, for a period of 30 days after
written notice of that failure is given (x) to the Company, Finance Corp.
and the Subsidiary Guarantor by the Trustee or (y) to the Company, Finance
Corp., the Subsidiary Guarantor and the Trustee, by the Holders of at
least 25% in aggregate principal amount of the Securities then
Outstanding; or
(e) the occurrence and continuation beyond any applicable grace
period of any default in the payment of the principal of or premium, if
any, or interest on any Indebtedness of the Company (other than the
Securities or any Non-Recourse Purchase Money Indebtedness) or any
Restricted Subsidiary for money borrowed when due at final Stated
Maturity, or any other default resulting in acceleration of any
Indebtedness (other than Non-Recourse Purchase Money Indebtedness) of the
Company or any Restricted Subsidiary for money borrowed, PROVIDED that the
aggregate principal amount of such Indebtedness exceeds $5,000,000; or
(f) one or more final judgments or orders rendered against the
Company or any Restricted Subsidiary that are unsatisfied and require the
payment in money, either individually or in an aggregate amount, in excess
of $5,000,000 over the coverage of applicable insurance policies are not
paid, discharged or stayed for a period of 60 days; or
(g) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of the Company, Finance Corp. or
any Restricted Subsidiary in an involuntary case or proceeding under the
Federal Bankruptcy Code or any other applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (B)
adjudging the Company, Finance Corp. or any Restricted Subsidiary bankrupt
or insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition of the Company, Finance Corp. or any Restricted
Subsidiary under the Federal Bankruptcy Code or any applicable federal or
state law, or appointing under any such law a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company, Finance Corp. or any Restricted Subsidiary or of a
substantial part of its consolidated assets, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
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(h) the commencement by the Company, Finance Corp. or any Restricted
Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy
Code or any other applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or any other case or proceeding to be
adjudicated bankrupt or insolvent, or the consent by the Company, Finance
Corp. or any Restricted Subsidiary to the entry of a decree or order for
relief in respect thereof in an involuntary case or proceeding under the
Federal Bankruptcy Code or any other applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by the Company, Finance Corp. or any Restricted
Subsidiary of a petition or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it under any such
law to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Company, Finance Corp. or
any Restricted Subsidiary or of any substantial part of its consolidated
assets, or the making by it of an assignment for the benefit of creditors
under any such law, or the admission by it in writing of its inability to
pay its debts generally as they become due or taking of corporate action
by the Company or any Restricted Subsidiary in furtherance of any such
action; or
(i) except as permitted hereunder and the Securities, the cessation
of the effectiveness of any Subsidiary Guarantee or the repudiation by any
Subsidiary Guarantor (or by any Person acting on behalf of any Subsidiary
Guarantor) of its obligations under its Subsidiary Guarantee.
SECTION 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 5.1(g) or (h) hereof) occurs and is continuing, the Trustee, by written
notice to the Company, or the Holders of not less than 25% in aggregate
principal amount of the Securities then Outstanding, by written notice to the
Company and to the Trustee, may, and the Trustee on the request of the Holders
of not less than 25% in aggregate principal amount of the Outstanding Securities
shall, by a notice in writing to the Company, declare all unpaid principal of
and premium, if any, accrued and unpaid interest and Liquidated Damages, if any,
on all the Securities to be due and payable immediately, on which declaration
all amounts payable in respect of the Securities shall be immediately due and
payable. If an Event of Default of any type described in Section 5.1(g) or (h)
hereof occurs, then the amounts described above shall become and be immediately
due and payable, to the extent permitted by applicable law, without any
declaration, notice or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made, but before
the Trustee obtains a judgment or decree for payment of the money due as
hereinafter in this Article provided, the Holders of a majority in aggregate
principal amount of the Securities Outstanding, by written notice to the Company
and the Trustee, may rescind and annul each such declaration and its
consequences if
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(a) the Company and Finance Corp. have paid or deposited with the
Trustee a sum sufficient to pay,
(i) all overdue interest on all Outstanding Securities,
(ii) all unpaid principal of and premium, if any, or
Liquidated Damages, if any, on any Outstanding Securities which have
become due otherwise than by such declaration of acceleration,
including any Securities required to have been purchased on a Change
of Control Date or a Net Proceeds Payment Date pursuant to a Change
of Control Offer or a Net Proceeds Offer, as applicable, and
interest on such unpaid principal at the rate borne by the
Securities,
(iii) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate borne
by the Securities (without duplication of any amount paid or
deposited pursuant to clauses (i) and (ii) above), and
(iv) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel;
(b) the rescission would not conflict with any judgment or decree of
a court of competent jurisdiction as certified to the Trustee by the
Company in an Officer's Certificate and Opinion of Counsel; and
(c) all Events of Default, other than the non-payment of amounts of
principal of and premium, if any, interest or Liquidated Damages, if any,
on the Securities that have become due solely because of that declaration,
have been cured or waived as provided in Section 5.13 hereof.
No such rescission shall affect any subsequent default or Event of Default
or impair any right consequent thereon.
Notwithstanding the foregoing, if an Event of Default specified in Section
5.1(e) hereof shall have occurred and be continuing, such Event of Default and
any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or if
the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, then the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such repayment, or cure or waiver and rescission, as the case may be, shall
have been given to the Trustee by the Company and countersigned by the holders
of such Indebtedness or a trustee, fiduciary or agent for such holders, within
30 days after any such acceleration in respect of the Securities, and so long as
such rescission of any such acceleration of the Securities does not conflict
with any judgment or decree as certified to the Trustee by the Company by an
Officers' Certificate and Opinion of Counsel.
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SECTION 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company and Finance Corp. jointly and severally covenant that if
(a) default is made in the payment of any installment of interest or
Liquidated Damages, if any, on any Security when such interest or
Liquidated Damages becomes due and payable and such default continues for
a period of 30 days, or
(b) default is made in the payment of the principal of or premium,
if any, on any Security at the Maturity thereof or with respect to any
Security required to have been purchased by the Company on the Change of
Control Purchase Date or the Net Proceeds Payment Date pursuant to a
Change of Control Offer or Net Proceeds Offer, as applicable,
then the Company and Finance Corp., jointly and severally, will, upon the demand
of the Trustee, pay to the Trustee for the benefit of the Holders of such
Securities, the whole amount then due and payable on such Securities for
principal and premium, if any, interest or Liquidated Damages, if any, and
interest on any overdue principal, premium, if any, or Liquidated Damages, if
any, and, to the extent that payment of such interest shall be legally
enforceable, upon any overdue installment of interest, at the rate borne by the
Securities, and in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company and Finance Corp. fail to pay such amounts forthwith upon
such demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company and Finance Corp., or either of them, or
any other obligor upon the Securities and collect the money adjudged or decreed
to be payable in the manner provided by law out of the Property of the Company,
Finance Corp. or any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company, Finance Corp., a Subsidiary
Guarantor or any other obligor upon the Securities, their creditors or the
Property of the Company, Finance Corp., a Subsidiary Guarantor or of such other
obligor, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee
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shall have made any demand on the Company, Finance Corp., a Subsidiary Guarantor
or such other obligor for the payment of overdue principal, premium, if any,
Liquidated Damages, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim, to the extent permitted by law, for
the whole amount of principal and premium, if any, and interest or
Liquidated Damages, if any, owing and unpaid in respect of the Securities
and to file such other papers or documents and take any other actions
including participation as a full member of any creditor or other
committee as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceedings, and
(b) to collect and receive any money or other Property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee pursuant to Section 6.6 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims arising under this Indenture or Securities
or Subsidiary Guarantees endorsed thereon may be prosecuted and enforced by the
Trustee without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name and as trustee of an express
trust, and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities in respect of which such judgment has been recovered.
SECTION 5.6 APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in the case of the distribution of such money on account of principal or
premium, if any, interest or Liquidated Damages, if any, upon presentation of
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the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee pursuant to
Section 6.6 hereof;
SECOND: to the payment of the amounts then due and unpaid for
principal of and premium, if any, interest and Liquidated Damages, if any,
on the Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
principal and premium, if any, interest and Liquidated Damages, if any,
respectively; and
THIRD: the balance, if any, to the Company.
SECTION 5.7 LIMITATIONS ON SUITS.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) that Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(c) that Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority or more in aggregate principal amount of the Outstanding
Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders. These
limitations shall not apply, however, to a suit instituted by any Holder to
enforce the payment of the principal of and premium, if any, interest or
Liquidated Damages, if any, on that Holder's Security on or after the respective
due dates expressed in that Security or in the Registration Rights Agreement.
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SECTION 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM,
LIQUIDATED DAMAGES AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article XII hereof) and
in such Security of the principal of and premium, if any, and (subject to
Section 3.7 hereof) interest and Liquidated Damages, if any, on such Security on
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
SECTION 5.9 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, Finance Corp., the Subsidiary Guarantors, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereunder and all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
3.6 hereof, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 5.12 CONTROL BY HOLDERS.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for
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any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee, PROVIDED that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the Holders not joining
therein.
SECTION 5.13 WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any existing Default or Event of Default hereunder and its consequences,
except a Default or Event of Default
(a) in respect of the payment of the principal of or premium, if
any, interest or Liquidated Damages, if any, on any Security, or
(b) in respect of a covenant or provision hereof that under Article
IX hereof cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected thereby.
Upon any such waiver, such Default or Event of Default shall cease to
exist for every purpose under this Indenture, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 5.14 WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each of the Company and Finance Corp. and each Subsidiary Guarantor
covenants (to the extent that each may lawfully do so) that it will not at any
time insist upon, plead or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law wherever enacted,
now or at any time hereafter in force, which would prohibit or forgive the
Company, Finance Corp. or a Subsidiary Guarantor from paying all or any portion
of the principal of and premium, if any, interest or Liquidated Damages, if any,
on the Securities as contemplated herein, or which may affect the covenants or
the performance of this Indenture; and (to the extent that it may lawfully do
so) each of the Company and Finance Corp. and each Subsidiary Guarantor hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
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SECTION 5.15 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the Trustee
or to any suit instituted by any Holders of more than 10% in principal amount of
the Outstanding Securities.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, 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 his own affairs.
(b) Except during the continuance of an Event of Default:
(i) 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
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, and shall be fully protected in so relying, 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; PROVIDED, HOWEVER, in
the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) No provisions of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(i) this paragraph (c) shall not limit the effect of paragraph (b)
of this Section 6.1;
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(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) 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 5.12; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.2 CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 6.1 hereof:
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Issuers mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate from the Company
or, if a Person other than the Company is specified, from such other
Person;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
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indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may reasonably
see fit;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it in good faith to be
authorized or within the discretion or rights or powers conferred upon it
by this Indenture;
(i) the Trustee shall not be deemed to have notice or knowledge of
any event or matter the occurrence of which would require it to take
action or omit to take action hereunder unless a Responsible Officer of
the Trustee has actual knowledge of such event or matter or unless written
notice thereof delivered in accordance with this Indenture is received by
the Trustee at its Corporate Trust Office and such notice references the
Securities generally, the Company and this Indenture; and
(j) unless otherwise expressly provided herein, the Trustee shall
not have any responsibility with respect to reports, notices, certificates
or other documents filed with it hereunder except to make them available
for inspection, at reasonable times, by the Holders.
SECTION 6.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except for the
Trustee's certificate of authentication, shall be taken as the statements of the
Company and Finance Corp., and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or the Securities, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture and
authenticate the Securities. The Trustee shall not be accountable for the use or
application by the Issuers of any Securities or the proceeds thereof.
SECTION 6.4 MAY HOLD SECURITIES.
The Trustee, any Paying Agent, any Security Registrar or any other agent
of the Company, Finance Corp. or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to TIA
Sections 310(b) and 311 in the case of the Trustee, may
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otherwise deal with the Company and Finance Corp. with the same rights it would
have if it were not the Trustee, Paying Agent, Security Registrar or such other
agent.
SECTION 6.5 MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except as otherwise expressly provided in this Indenture or to the
extent required by law. The Trustee shall be under no liability for interest on
any money received by it hereunder except as otherwise agreed with the Company.
SECTION 6.6 COMPENSATION AND REIMBURSEMENT.
The Company and Finance Corp. jointly and severally agree:
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agent and counsel), except any such expense,
disbursement or advance as may be attributable to the Trustee's wilful
misconduct, negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without wilful misconduct,
negligence or bad faith on its part, (i) arising out of or in connection
with the acceptance or administration of this trust, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder or (ii) in connection with enforcing this indemnification
provision.
The obligations of the Company and Finance Corp. under this Section 6.6 to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture or any other termination under any Insolvency or
Liquidation Proceeding. As security for the performance of such obligations of
the Company and Finance Corp., the Trustee shall have a claim and lien prior to
the Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for payment of principal of and premium, if
any, interest or Liquidated Damages, if any, on particular Securities. Such lien
shall survive the satisfaction and discharge of this Indenture or any other
termination under any Insolvency or Liquidation Proceeding.
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When the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in paragraph (g) or (h) of Section 5.1 of this
Indenture, such expenses and the compensation for such services are intended to
constitute expenses of administration under any Insolvency or Liquidation
Proceeding.
SECTION 6.7 CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be eligible to
act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and
surplus of at least $50,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section 6.7, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 6.8 CONFLICTING INTERESTS.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act; PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.
SECTION 6.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10 hereof.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 6.10 hereof shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of not
less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
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(d) If at any time:
(i) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(ii) the Trustee shall cease to be eligible under Section 6.7 hereof
and shall fail to resign after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of
not less than a majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee appointed by
the Company. If no successor Trustee shall have been so appointed by the Company
or the Holders and accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee. The
evidence of such successorship may, but need not be, evidenced by a supplemental
indenture.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to the Holders of
Securities in the manner provided for in Section 14.5 hereof. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 6.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company, Finance Corp. and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such
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successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of all amounts due it under Section 6.6 hereof, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all money and other Property held by such
retiring Trustee hereunder, subject nevertheless to the lien provided for in
Section 6.6. Upon request of any such successor Trustee, the Issuers shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, PROVIDED such corporation shall be otherwise qualified and
eligible under this Article. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities of like tenor or in this Indenture provided;
PROVIDED, HOWEVER, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
SECTION 6.12 NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any Default hereunder, the Trustee
shall transmit in the manner and to the extent provided in TIA Section 313(c),
notice of such Default hereunder, of which a Responsible Officer of the Trustee
has actual knowledge, unless such Default shall have been cured or waived;
PROVIDED, HOWEVER, that, except in the case of a Default in the payment of the
principal of or premium, if any, interest or Liquidated Damages, if any, on any
Security, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interest of the Holders; and
PROVIDED, FURTHER, that in the case of any Default under Section 5.1(b) or
5.1(d) no such notice to Holders shall be given until at least 30 days after the
occurrence thereof.
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ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1 HOLDERS' LISTS; HOLDER COMMUNICATIONS; DISCLOSURES RESPECTING
HOLDERS.
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
the Holders. Neither the Company, Finance Corp. nor the Trustee shall be under
any responsibility with regard to the accuracy of such list. If the Trustee is
not the Security Registrar, the Issuers shall furnish to the Trustee
semi-annually before each Regular Record Date, and at such other times as the
Trustee may reasonably request in writing, a list, in such form as the Trustee
may reasonably request, as of such date of the names and addresses of the
Holders then known to the Company or Finance Corp. The Company, Finance Corp.
and the Trustee shall also satisfy any other requirements imposed upon each of
them by TIA Section 312(a).
Holders may communicate pursuant to Section 312(b) of the TIA with other
Holders with respect to their rights under this Indenture or the Securities.
Every Holder of Securities, by receiving and holding the same, agrees with the
Issuers, the Security Registrar and the Trustee that none of the Issuers, the
Security Registrar or the Trustee, or any agent of any of them, shall be held
accountable by reason of the disclosure of any information as to the names and
addresses of the Holders in accordance with TIA Section 312, regardless of the
source from which such information was derived, that each of such Persons shall
have the protection of TIA Section 312(c) and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
TIA Section 312(b).
SECTION 7.2 REPORTS BY THE TRUSTEE.
On or before March 1 of each year commencing with March 1, 1999, the
Trustee shall transmit by mail to all Holders, as their names and addresses
appear in the Security Register, a brief report in accordance with, and to the
extent required under TIA Section 313(a). The Trustee shall also comply with TIA
Sections 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the Securities
become listed on any stock exchange or automatic quotation system.
A copy of each Trustee's report, at the time of its mailing to Holders of
Securities, shall be mailed to the Company and filed with the Commission and
each stock exchange, if any, on which the Securities are listed.
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SECTION 7.3 REPORTS BY THE ISSUERS.
The Company, Finance Corp. and each Subsidiary Guarantor shall:
(a) file with the Trustee, within 15 days after the date on which
the Company, Finance Corp. or such Subsidiary Guarantor files or is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Company, Finance Corp.
or such Subsidiary Guarantor may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the
Company, Finance Corp. or such Subsidiary Guarantor is not required to
file information, documents or reports pursuant to either of said
Sections, then the Company shall file with the Trustee such information,
documents or reports as required pursuant to Section 10.9 hereof;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance
by the Company with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations; and
(c) transmit by mail to all Holders, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports (without exhibits except to the extent required by
TIA Section 313(c)) required to be filed by the Company, Finance Corp. and
each such Subsidiary Guarantor pursuant to paragraph (a) or (b) of this
Section as may be required by rules and regulations prescribed from time
to time by the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not, in any single transaction or series of related
transactions, consolidate or merge with any other Person, or sell, assign,
convey, transfer, lease or otherwise dispose of the Properties of the Company
and the Restricted Subsidiaries on a consolidated basis substantially as an
entirety to any Person or group of Persons that are Affiliates of each other (an
"Affiliated Group"), and the Company will not permit any of the Restricted
Subsidiaries to enter into any such transaction or series of transactions, if,
in any event, such transaction or series of transactions, in the aggregate,
would result in the sale, assignment, conveyance, transfer, lease or other
disposition of the Properties of the Company and the Restricted Subsidiaries on
a consolidated basis substantially as an entirety to any other Person or
Affiliated Group, unless:
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(i) either (a) if the transaction is a merger, the Company shall be
the surviving Person of that merger, or (b) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged
or the Person or Affiliated Group that acquires the Properties of the
Company and the Restricted Subsidiaries on a consolidated basis
substantially as an entirety (any such surviving Person or acquiring
Person or member of an acquiring Affiliated Group being referred to in
this Section 8.1 as the "Surviving Entity") shall be a corporation,
limited liability company or limited partnership organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia and expressly assumes by a supplemental indenture to
this Indenture executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of the Company or the Restricted
Subsidiary, as the case may be, with respect to the Securities and this
Indenture, including, with respect to each Restricted Subsidiary that is a
Subsidiary Guarantor, the obligations under the Subsidiary Guarantee of
that Restricted Subsidiary, and, in any case, this Indenture remains in
full force and effect;
(ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating
any Indebtedness not previously an obligation of the Company or any
Restricted Subsidiary that becomes an obligation of the Company or any
Restricted Subsidiary in connection with or as a result of such
transaction or transactions as having been incurred at the time of such
transaction or transactions), no Default or Event of Default has occurred
and is continuing;
(iii) except in the case of the consolidation or merger of (x) the
Company with or into a Restricted Subsidiary or any Restricted Subsidiary
with or into the Company or another Restricted Subsidiary or (y) the
Company with or into any Person that has no Indebtedness outstanding,
immediately before and immediately after giving effect to such transaction
or series of transactions on a pro forma basis (assuming that the
transaction or series of transactions occurred on the first day of the
most recent period of four consecutive fiscal quarters of the Company
prior to the consummation of such transaction or series of transactions
for which consolidated financial statements of the Company are available,
with the appropriate adjustments with respect to the transaction or
transactions being included in such pro forma calculation to the extent
permitted by Regulation S-X), the Company (or the Surviving Entity if the
Company is not the continuing obligor under this Indenture) could incur at
least $1.00 of additional Indebtedness not constituting Permitted
Indebtedness in accordance with Section 10.11(a);
(iv) if any of the Properties of the Company or any Restricted
Subsidiary would on such transaction or series of transactions become
subject to any Lien (other than a Permitted Lien), the creation and
imposition of that Lien complies with Section 10.13;
(v) each Subsidiary Guarantor, unless it is the other party to the
transaction or series of transactions, confirms by amendment to its
Subsidiary Guarantee that its guarantee of the Securities will apply to
the obligations of the Company (or the Surviving Entity if the
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Company is not the continuing obligor under this Indenture) under the
Securities and this Indenture; and
(vi) the Company (or the Surviving Entity if the Company is not the
continuing obligor under this Indenture) delivers to the Trustee, in form
and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such transaction
or series of transactions and any supplemental indenture in respect
thereof comply with the requirements of the Indenture and that all
conditions precedent in the Indenture relating to such transaction or
series of transactions have been satisfied.
When any consolidation or merger or any sale, assignment, lease,
conveyance, transfer or other disposition of the Properties of the Company and
its Restricted Subsidiaries on a consolidated basis substantially as an entirety
becomes effective in accordance with Section 8.1 in which the Company is not the
Surviving Entity, the Surviving Entity will succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture with
the same effect as if the Surviving Entity had been named as the Company in this
Indenture, and thereafter the Company (which term shall for this purpose mean
the Person named as the "Company" in the first paragraph of this Indenture or
any successor Person which shall theretofore become such in the manner described
in Section 8.1), except in the case of a lease, shall be discharged from all
obligations and covenants under this Indenture and the Securities and may be
liquidated and dissolved.
Upon the effectiveness of any such transaction, subject to the
satisfaction of the conditions of clause (ii) and the other clauses of the
second preceding paragraph, any Person that was a Restricted Subsidiary of the
Company immediately after such transaction shall be a Restricted Subsidiary and
each other Subsidiary of the Surviving Entity shall be an Unrestricted
Subsidiary unless designated a Restricted Subsidiary (subject, in each case, to
future redesignation).
For purposes of this Section 8.1, the lease of Properties pursuant to
storage contracts entered into in the ordinary course of business shall not be
considered a lease of substantially all the assets of the Company.
SECTION 8.2 FINANCE CORP. MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
Finance Corp. shall not, in any single transaction or series of related
transactions, consolidate or merge with any other Person, or sell, assign,
convey, transfer, lease or otherwise dispose of the Properties of Finance Corp.
substantially as an entirety to any Person or an Affiliated Group other than the
Company, unless:
(i) either (a) if the transaction is a merger, Finance Corp. shall
be the surviving Person of that merger, or (b) the Person (if other than
Finance Corp.) formed by such consolidation or into which Finance Corp. is
merged or the Person or Affiliated Group that acquires the Properties of
Finance Corp. substantially as an entirety (any such surviving Person or
acquiring Person or member of an acquiring Affiliated Group being referred
to in
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this Section 8.2 as the "Surviving Corporation") shall be a corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and expressly assumes by a
supplemental indenture to this Indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
Finance Corp. with respect to the Securities and this Indenture, and, in
any case, this Indenture remains in full force and effect;
(ii) the Surviving Corporation shall be a Wholly Owned Restricted
Subsidiary of the Company;
(iii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating
any Indebtedness not previously an obligation of Finance Corp. that
becomes an obligation of Finance Corp. in connection with or as a result
of such transaction or transactions as having been incurred at the time of
such transaction or transactions), no Default or Event of Default has
occurred and is continuing;
(iv) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (assuming that
the transaction or series of transactions occurred on the first day of the
most recent period of four consecutive fiscal quarters of the Company
prior to the consummation of such transaction or series of transaction,
with the appropriate adjustments with respect to the transaction or
transactions being included in such pro forma calculation), the Company
could incur at least $1.00 of additional Indebtedness not constituting
Permitted Indebtedness in accordance with Section 10.11(a);
(v) each Subsidiary Guarantor, unless it is the other party to the
transaction or series of transactions, confirms by amendment to its
Subsidiary Guarantee that its guarantee of the Securities will apply to
the obligations of Finance Corp. (or the Surviving Corporation if Finance
Corp. is not the continuing obligor under this Indenture) under the
Securities and this Indenture; and
(vi) Finance Corp.(or the Surviving Entity if Finance Corp. is not
the continuing obligor under this Indenture) delivers to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such transaction
or series of transactions and any supplemental indenture in respect
thereof comply with the requirements of the Indenture and that all
conditions precedent in the Indenture relating to such transaction or
series of transactions have been satisfied.
When any consolidation or merger or any sale, assignment, lease,
conveyance, transfer or other disposition of the Properties of Finance Corp.
substantially as an entirety becomes effective in accordance with Section 8.2 in
which Finance Corp. is not the Surviving Corporation, the Surviving Corporation
will succeed to, and be substituted for, and may exercise every right and power
of, Finance Corp. under this Indenture with the same effect as if the Surviving
Corporation
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had been named as Finance Corp. in this Indenture, and thereafter Finance Corp.
(which term shall for this purpose mean the Person named as the "Finance Corp."
in the first paragraph of this Indenture or any successor Person which shall
theretofore become such in the manner described in Section 8.2), except in the
case of a lease, shall be discharged from all obligations and covenants under
this Indenture and the Securities and may be liquidated and dissolved.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company, when authorized by a Board
Resolution, Finance Corp., the Subsidiary Guarantors and the Trustee upon
Company Request, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(a) to evidence the succession of another Person to the Company,
Finance Corp. or any Subsidiary Guarantor and the assumption by any such
successor of the covenants of the Company, Finance Corp. or any Subsidiary
Guarantor, as the case may be, contained herein and in the Securities or;
(b) to add to the covenants of the Company or Finance Corp. for the
benefit of the Holders or to surrender any right or power herein conferred
upon the Company or Finance Corp.; or
(c) to comply with any requirement of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(d) to secure the Securities pursuant to Section 10.13 or otherwise;
(e) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(f) to reflect the release of any Subsidiary Guarantor from its
Subsidiary Guarantee pursuant to Section 13.4 or to add as a Subsidiary
Guarantor any Subsidiary of the Company pursuant to Section 13.5 in the
manner provided by this Indenture; or
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Sections
6.9 and 6.10; or
(h) to cure any ambiguity or omission, to correct or supplement any
provision herein or in the Securities that may be defective or
inconsistent with any other provision herein or in the Securities, or to
make any other provisions with respect to matters or
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questions arising under this Indenture; PROVIDED, HOWEVER, that no
modification or amendment described in this clause (h) may adversely
affect the interests of the Holders in any material respect.
After an amendment under this Section becomes effective, the Company shall
mail to Holders of Securities a notice briefly describing such amendment. The
failure to give such notice to all Holders of Securities, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, by Act of such Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, Finance Corp., the Subsidiary Guarantors and the Trustee upon
Company Request may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; PROVIDED, HOWEVER, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security or alter the provisions with
respect to redemption of the Securities, or reduce the principal amount
thereof or the rate of interest, any premium, or any Liquidated Damages
thereon, or change the coin or currency in which principal of any Security
or premium, if any, interest or Liquidated Damages, if any, on any
Security is payable, or impair the right to institute suit for the
enforcement of any payment on or with respect to any Security; or
(b) reduce the percentage of aggregate principal amount of any of
the Outstanding Securities, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder or the consequences of a default
provided for in this Indenture; or
(c) modify any provisions of this Section or Section 5.13 or 10.21
hereof, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby or
the rights of any Holder to receive payments of principal of or premium,
if any, interest or Liquidated Damages, if any, on the Securities; or
(d) change the ranking of the Securities in a manner adverse to the
Holders or expressly subordinate in right of payment the Securities to any
other Indebtedness; or
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(e) amend, change or modify the obligation of the Company to make
and consummate a Change of Control Offer if a Change of Control occurs or
to make and consummate a Net Proceeds Offer with respect to any Asset Sale
or modify any of the provisions or definitions in this Indenture insofar
as they relate thereto; or
(f) release any security that may have been granted in respect of
the Securities.
It shall not be necessary for any Act of the Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
After an amendment under this Section becomes effective, the Company shall
mail to Holders of Securities a notice briefly describing such amendment. The
failure to give such notice to all Holders of Securities, or any defect therein,
shall not impair or affect the validity of an amendment under this Section.
SECTION 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive
(subject to Section 6.1), and shall be fully protected relying upon, an
Officers' Certificate stating and an Opinion of Counsel opining that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.4 EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5 CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect, if
this Indenture shall then be qualified under the TIA.
SECTION 9.6 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall
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so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors of the Company, to any such supplemental
indenture may be prepared and executed by the Company and, upon Company Order,
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of like tenor and in like principal amount.
SECTION 9.7 NOTICE OF SUPPLEMENTAL INDENTURES AND WAIVERS.
Promptly after (i) the execution by the Issuers and the Trustee of any
supplemental indenture pursuant to the provisions of Section 9.2 hereof or (ii)
a waiver under Section 5.13 or 10.20 hereof becomes effective, the Company shall
give notice thereof to the Holders of each Outstanding Security affected, in the
manner provided for in Section 14.5, setting forth in general terms the
substance of such supplemental indenture or waiver as the case may be.
ARTICLE X
COVENANTS
SECTION 10.1 PAYMENT OF PRINCIPAL, PREMIUM OR LIQUIDATED
DAMAGES, IF ANY, AND INTEREST.
Each of the Company and Finance Corp., jointly and severally, covenants
and agrees for the benefit of the Holders that it will duly and punctually pay
the principal of and premium, if any, interest or Liquidated Damages, if any, on
the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 10.2 MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Issuers in respect of the Securities and this Indenture may be served. The
Corporate Trust Office shall be such office or agency of the Issuers, unless the
Issuers shall designate and maintain some other office or agency for one or more
of such purposes. The Issuers shall give prompt written notice to the Trustee of
any change in the location of any such office or agency. If at any time the
Issuers shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the aforementioned office of the
Trustee, and the Company and Finance Corp. hereby appoint the Trustee as their
agent to receive all such presentations, surrenders, notices and demands.
The Issuers may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind any such designation. Further,
if at any time there shall be no such office or agency in The City of New York
where the Securities may be presented or surrendered for payment, the Issuers
shall forthwith designate and maintain such an office or agency in The City of
New York, in order
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that the Securities shall at all times be payable in The City of New York. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and any change in the location of any such other office or agency.
SECTION 10.3 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as the Paying Agent for the Issuers,
it shall, on or before 12:00 noon, New York City time, on each due date of the
principal of and premium, if any, interest or Liquidated Damages, if any, on any
of the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal and premium, if any,
interest or Liquidated Damages, if any, so becoming due until such sum shall be
paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Issuers shall have one or more Paying Agents for the
Securities, the Issuers will on or before 12:00 noon, New York City time, on
each due date of the principal of and premium, if any, interest or Liquidated
Damages, if any, on any Securities, deposit with a Paying Agent immediately
available funds sufficient to pay the principal and premium, if any, interest or
Liquidated Damages, if any, so becoming due, such funds to be held in trust for
the benefit of the Persons entitled to such principal, premium, Liquidated
Damages or interest, and (unless such Paying Agent is the Trustee) the Issuers
shall promptly notify the Trustee of such action or any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of and
premium, if any, interest or Liquidated Damages, if any, on Securities in trust
for the benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company and Finance
Corp. (or any other obligor upon the Securities) in the making of any payment of
principal and premium, if any, interest or Liquidated Damages, if any; and
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
sums.
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Subject to applicable escheat and abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of and premium, if any, interest or
Liquidated Damages, if any, on any Security and remaining unclaimed for two
years after such principal and premium, if any, interest or Liquidated Damages,
if any, has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company and Finance Corp. for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York (an "Authorized Newspaper"), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 10.4 EXISTENCE.
Except as expressly permitted by Article VIII hereof, Section 10.15 hereof
or other provisions of this Indenture, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect the
existence, rights (charter and statutory) and franchises of the Company and each
Restricted Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required
to preserve any such existence of its Restricted Subsidiaries, rights or
franchises, if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.5 PAYMENT OF TAXES; MAINTENANCE OF PROPERTIES; INSURANCE.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or Property of the Company or any
Restricted Subsidiary and (b) all lawful material claims for labor, materials
and supplies, which, if unpaid, might by law become a Lien upon the Property of
the Company or any Restricted Subsidiary; PROVIDED, HOWEVER, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
appropriate provision has been made in accordance with GAAP.
The Company shall or, as applicable, shall cause its Restricted
Subsidiaries to, cause all material Properties owned by the Company or any
Restricted Subsidiary and used or held for use in the conduct of its business or
the business of any Restricted Subsidiary to be maintained and kept
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in good condition, repair and working order (ordinary wear and tear excepted),
all as in the judgment of the Company or such Restricted Subsidiary may be
necessary so that its business may be properly and advantageously conducted at
all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent the
Company or any Restricted Subsidiary from discontinuing the maintenance of any
such Properties if such discontinuance is, in the judgment of the Company or
such Restricted Subsidiary, as the case may be, desirable in the conduct of the
business of the Company or such Restricted Subsidiary and not disadvantageous in
any material respect to the Holders. Notwithstanding the foregoing, nothing
contained in this Section 10.5 shall limit or impair in any way the right of the
Company and its Restricted Subsidiaries to sell, divest and otherwise to engage
in transactions that are otherwise permitted by this Indenture.
The Company shall at all times keep all of its, and cause its Restricted
Subsidiaries to keep their, Properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or damage
to the extent that property of similar character and in a similar location is
usually so insured by corporations similarly situated and owning like
Properties.
The Company or any Restricted Subsidiary may adopt such other plan or
method of protection, in lieu of or supplemental to insurance with insurers,
whether by the establishment of an insurance fund or reserve to be held and
applied to make good losses from casualties, or otherwise, conforming to the
systems of self-insurance maintained by similarly situated companies, as may be
determined by the Board of Directors of the Company or such Restricted
Subsidiary.
SECTION 10.6 LIMITATION ON SALE/LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into, assume, guarantee or otherwise become liable
with respect to any Sale/Leaseback Transaction unless (i) the Company would be
permitted to incur Indebtedness not constituting Permitted Indebtedness in
accordance with Section 10.11(a) in an amount equal to the Attributable
Indebtedness arising from the Sale/Leaseback Transaction, (ii) the Company or
the Restricted Subsidiary receives proceeds from the Sale/Leaseback Transaction
at least equal to the Fair Market Value of the Property subject thereto (as
determined in good faith by the Board of Directors, whose determination in good
faith and evidenced by a Board Resolution will be conclusive), (iii) the Company
applies an amount in cash equal to the Net Available Proceeds of the
Sale/Leaseback Transaction in accordance with the provisions of Section 10.15
hereof as if the Sale/Leaseback Transaction were an Asset Sale and (iv) the
Sale/Leaseback Transaction would not result in a violation of Section 10.13.
SECTION 10.7 LIMITATION ON CONDUCT OF BUSINESS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in the conduct of any business other than any Related Business.
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SECTION 10.8 STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Issuers and the Subsidiary Guarantor shall deliver to the Trustee,
within 120 days after the end of each fiscal year of the Company and within 45
days of the end of each of the first, second and third quarters of each fiscal
year of the Company, a written certificate or certificates signed by a principal
executive officer, principal financial officer or principal accounting officer
of each of the Issuers and Subsidiary Guarantors stating that a review of the
activities of the such Issuer or Subsidiary Guarantor during the preceding
fiscal quarter or fiscal year, as applicable, has been made under the
supervision of the signing Person with a view to determining whether such Issuer
or Subsidiary Guarantor has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Person
signing such certificate, that to the best of such Person's knowledge such
Issuer or Subsidiary Guarantor has kept, observed, performed and fulfilled each
and every covenant contained in this Indenture and no Default or Event of
Default has occurred and is continuing (or, if a Default or Event of Default
shall have occurred to either such Person's knowledge, describing all such
Defaults or Events of Default of which such Person may have knowledge and what
action such Issuer or Subsidiary Guarantor is taking or proposes to take with
respect thereto). Such written statement shall comply with TIA Section
314(a)(4). For purposes of this Section 10.8(a), such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) The Company shall, so long as any Security is Outstanding, deliver to
the Trustee, within 30 days after Senior Management becomes aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company proposes to take with respect thereto.
SECTION 10.9 PROVISION OF FINANCIAL INFORMATION.
The Company shall file on a timely basis with the SEC, to the extent the
SEC accepts such filings and whether or not the Company has a class of
securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that the Company would be required to file if it
were subject to Section 13 or 15(d) of the Exchange Act. The Company also shall
(i) file with the Trustee (with exhibits), and provide to each Holder (without
exhibits), without cost to that Holder, copies of such reports and documents
within 15 days after the date on which the Company files such reports and
documents with the SEC or the date on which the Company would be required to
file such reports and documents if the Company were subject to Section 13 or
15(d) of the Exchange Act and (ii) if filing such reports and documents with the
SEC is not accepted by the SEC or is prohibited under the Exchange Act, supply
at its cost copies of such reports and documents (including any exhibits
thereto) to any Holder of Securities promptly on its written request given in
accordance with Section 14.4 hereof. For so long as any Transfer Restricted
Securities (as defined in the Registration Rights Agreement) remain outstanding,
the Issuers and the Subsidiary Guarantors shall also furnish to the Holders and
beneficial holders of such Securities and to prospective purchasers of such
Securities designated by the Holders of such Securities and to broker-dealers,
on their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
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SECTION 10.10 LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, make any Restricted Payment unless, at the time of and
after giving effect to the proposed Restricted Payment: (i) no Default or Event
of Default has occurred and is continuing; (ii) the Company and its Restricted
Subsidiaries would be permitted to incur at least $1.00 of additional
Indebtedness not constituting Permitted Indebtedness in accordance with Section
10.11(a) hereof; and (iii) the amount of that Restricted Payment, when added to
the aggregate amount of all other Restricted Payments made after the Issue Date,
does not exceed the sum (without duplication) of the following:
(a) 50% of the Consolidated Net Income (or, if Consolidated Net
Income is a loss, minus 100% of such loss) accrued on a cumulative basis
during the period beginning on January 1, 1998 and ending on the last day
of the Company's last fiscal quarter for which quarterly or annual
consolidated financial statements are available next preceding the date of
payment of the proposed Restricted Payment;
(b) the aggregate Net Cash Proceeds received by the Company after
the Issue Date from the issuance or sale (other than to any Restricted
Subsidiary) of Qualified Equity Interests of the Company or from the
issuance, sale or exercise of any options, warrants or rights to purchase
Qualified Equity Interests of the Company;
(c) the aggregate net cash proceeds received after the Issue Date by
the Company from the issuance of sale (other than to any of its Restricted
Subsidiaries) of Indebtedness or shares of Disqualified Equity Interests
that have been converted into or exchanged for Qualified Equity Interests
of the Company to the extent such Indebtedness or Disqualified Equity
Interests were originally sold for cash, together with the aggregate cash
received by the Company at the time of such conversion or exchange; and
(d) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the cash return of capital (to the extent not otherwise included in
Consolidated Net Income) with respect to that Restricted Investment (less
the cost of disposition, if any).
The foregoing provisions (ii) and (iii) of this Section 10.10 will not
prohibit: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment would have
complied with the provisions of this Indenture; (ii) the redemption, repurchase,
retirement or other acquisition of any Qualified Equity Interests of the Company
in exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to any Restricted Subsidiary) of, other Qualified Equity Interests
of the Company; (iii) the defeasance, redemption, repurchase or other retirement
of Subordinated Indebtedness in exchange for, or out of the proceeds of, the
substantially concurrent issue and sale of (a) Subordinated Indebtedness so long
as the new Subordinated Indebtedness has (1) an Average Life equal to or longer
than the Average Life of the Subordinated Indebtedness being defeased, redeemed,
repurchased or otherwise retired and (2) terms
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of subordination no less favorable to the Holders of the Securities than those
applicable to the Subordinated Indebtedness being defeased, redeemed,
repurchased or otherwise retired or (b) Qualified Equity Interests of the
Company (other than to any Restricted Subsidiary); (iv) repurchases,
acquisitions or retirements of shares of Qualified Equity Interests of the
Company deemed to occur upon the exercise of stock options or similar rights
issued under employee benefit plans of the Company if such shares represent all
or a portion of the exercise price or are surrendered in connection with
satisfying any Federal income tax obligations; (v) the distribution by the
Company of a portion of the net proceeds of the sale of the Initial Securities
to its Parent for the purpose of repaying the outstanding principal amount of
$17,000,000 of promissory notes issued by such Parent to its limited partners
and the interest accrued therein; (vi) Permitted Distributions in an amount
which, when added to the aggregate amount of all Permitted Distributions made
after the Issue Date, does not exceed the Permitted Distribution Amount accrued
on a cumulative basis during the period beginning on January 1, 1998 and ending
on the last day of the Company's last fiscal quarter for which quarterly or
annual consolidated financial statements are available next preceding the date
of payment of such Permitted Distribution; and (vii) Restricted Payments which,
when added to the aggregate amount of Restricted Payments previously or
contemporaneously made pursuant to this clause (vii) after the Issue Date, do
not exceed $5.0 million.
The amounts referred to in clauses (i), (ii) and (iii)(b) of the
immediately preceding paragraph will be included as Restricted Payments in any
computation made pursuant to clause (iii) of the second preceding paragraph
PROVIDED, that any dividend paid pursuant to clause (i) of the immediately
preceding paragraph shall reduce the amount that would otherwise be available
under clause (iii) of the second preceding paragraph when declared, but not also
when subsequently paid pursuant to such clause (i), and the actions described in
clauses (iii)(a), (iv), (v), (vi) and (vii) of the immediately preceding
paragraph shall be Restricted Payments that shall be permitted to be made in
accordance with the immediately preceding paragraph and shall not reduce the
amount that would otherwise be available for Restricted Payments under clause
(iii) of the second preceding paragraph.
Any Investment made by the Company or any Restricted Subsidiary in a
Subsidiary that is redesignated from a Restricted Subsidiary to an Unrestricted
Subsidiary shall be subject to this Section 10.10 and shall be treated as a
Restricted Payment (to the extent not previously included as a Restricted
Payment) made on the day of redesignation in an amount equal to the greater of
(i) the Fair Market Value of the Equity Interests of such redesignated
Subsidiary held by the Company and its Restricted Subsidiaries on that date and
(ii) the amount of the Investments determined in accordance with GAAP made by
the Company and its Restricted Subsidiaries in that redesignated Subsidiary.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors, whose determination shall be conclusive)
on the date of the Restricted Payment of the asset(s) proposed to be transferred
by the Company or a Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. If the Company makes a Restricted Payment which, at the time
of the making of such Restricted Payment, would in the good faith determination
of the Company be permitted under the requirements of the Indenture, such
Restricted Payment shall be deemed to have been
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made in compliance with the Indenture notwithstanding any subsequent adjustments
made in good faith to the Company's financial statements affecting Consolidated
Net Income of the Company for any period.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted by and complies with this Indenture and setting
forth in reasonable detail the basis on which the required calculations were
computed, which calculations will be based upon the Company's latest available
financial statements. Additionally, if the Restricted Payment is made pursuant
to clause (vi) of the second paragraph of this Section 10.10, the Company shall
state in such certificate that (i) the Restricted Payment is designated as a
Permitted Distribution, (ii) the Permitted Distribution Amount accrued on a
cumulative basis during the period referred to in such clause and (iii) the
aggregate amount of all Permitted Distributions made prior to the date of such
certificate.
SECTION 10.11 LIMITATION ON INDEBTEDNESS AND DISQUALIFIED EQUITY INTERESTS.
(a) The Company shall not, and shall not permit any Restricted Subsidiary
to, (a) create, incur, assume, guarantee or in any manner become directly or
indirectly liable for the payment of (collectively, "incur") any Indebtedness
(including any Acquired Indebtedness, but excluding any Permitted Indebtedness),
or (b) issue any Disqualified Equity Interests, unless, on a pro forma basis
after giving effect to that incurrence or issuance and the application of the
net proceeds therefrom, the Company's Consolidated Fixed Charge Coverage Ratio
for the four most recent consecutive fiscal quarters of the Company prior to the
date of the proposed incurrence or issuance (and for which consolidated
financial statements are available) would be at least 2.0 to 1.0.
(b) The Company shall not, and shall not permit Finance Corp. or any
Subsidiary Guarantor to, incur any Indebtedness that is expressly subordinated
to any other Indebtedness of the Company, Finance Corp. or such Subsidiary
Guarantor unless such Indebtedness, by its terms or the terms of any agreement
or instrument pursuant to which such Indebtedness is issued or outstanding, is
also expressly made subordinate to the Securities, in the case of the Company or
Finance Corp., or to the Subsidiary Guarantees, in the case of a Subsidiary
Guarantor, at least to the extent such Indebtedness is subordinated to such
other Indebtedness.
(c) For purposes of this Section 10.11, Indebtedness of any Person that
becomes a Restricted Subsidiary by merger, consolidation or other acquisition
shall be deemed to have been incurred by the Company and the Restricted
Subsidiary at the time such Person becomes a Restricted Subsidiary.
SECTION 10.12 LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS OF
RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any Restricted Subsidiary to
(i) issue or sell or otherwise dispose of any Equity Interests of any Restricted
Subsidiary to any Person other than to the Company or another Restricted
Subsidiary or (ii) permit any Person other than the Company or
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a Restricted Subsidiary to own any Equity Interests of any Restricted
Subsidiary, PROVIDED, HOWEVER, that this covenant shall not restrict (A)
disposition of all of the Equity Interests of any Restricted Subsidiary, but any
such disposition shall be subject to the covenant set forth in Section 10.15 or
(B) the ownership by any Person of Equity Interests of a Restricted Subsidiary
that were owned by a Person at the time such Restricted Subsidiary became a
Restricted Subsidiary (including any Equity Interests issued as a result of a
stock split, a dividend of Equity Interests to holders of such Equity Interests,
a recapitalization affecting such Equity Interests or similar event).
SECTION 10.13 LIMITATION ON LIENS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume, affirm or suffer to exist or
become effective any Lien upon any of its Properties, whether owned or acquired
after the Issue Date, or upon any income, profits or proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom,
except Permitted Liens, unless prior to, or contemporaneously therewith, the
Securities (and, in the case of Liens upon the Property of a Restricted
Subsidiary, the Subsidiary Guarantee of such Restricted Subsidiary) are equally
and ratably secured with (or prior to) the obligation or liability secured by
that Lien; PROVIDED, HOWEVER, that if a Lien is granted to secure Indebtedness
and that Indebtedness is expressly subordinated to the Securities or a
Subsidiary Guarantee, the Lien securing that Indebtedness shall be expressly
subordinated and junior to the Lien securing the Securities or such Subsidiary
Guarantee, as the case may be, with the same relative priority as such
Indebtedness has with respect to the Securities or the applicable Subsidiary
Guarantee.
SECTION 10.14 OFFER TO PURCHASE SECURITIES UPON CHANGE OF CONTROL.
(a) If a Change of Control occurs, the Issuers shall make an offer to
purchase (a "Change of Control Offer") all the then Outstanding Securities, in
whole or in part, from the Holders of such Securities in integral multiples of
$1,000, at a purchase price (the "Change of Control Purchase Price") equal to
101% of the principal amount of such Securities, together with accrued and
unpaid interest thereon, if any, and Liquidated Damages, if any, to the Change
of Control Purchase Date (as defined below), in accordance with the procedures
set forth in paragraphs (b), (c) and (d) of this Section. The Issuers shall,
subject to the provisions described below, purchase all Securities validly
tendered pursuant to the Change of Control Offer and not withdrawn. The Issuers
will not be required to make a Change of Control Offer following the occurrence
of a Change of Control if another Person (i) makes the Change of Control Offer
(A) at the same purchase price, (B) at the same time and (C) otherwise in
substantial compliance with the requirements applicable to a Change of Control
Offer to be made by the Company and (ii) purchases all Securities validly
tendered and not withdrawn under that Person's Change of Control Offer.
(b) The Issuers shall keep the Change of Control Offer open for at least
20 Business Days (or such longer period as is required by law) and until the
close of business on the fifth Business Day prior to the Change of Control
Purchase Date (as defined below).
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(c) Not later than the 30th day after a Change of Control occurs, the
Issuers shall give to the Trustee in the manner provided in Section 14.4 and
each Holder of the Securities in the manner provided in Section 14.5, a notice
(the "Change of Control Notice") governing the terms of the Change of Control
Offer and stating:
(i) that a Change in Control has occurred and that such Holder has
the right to require the Company to repurchase such Holder's Securities,
or portion thereof, at the Change of Control Purchase Price;
(ii) any information regarding such Change of Control required to be
furnished pursuant to Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder;
(iii) a purchase date (the "Change of Control Purchase Date") which
shall be on a Business Day not more than 60 nor less than 30 days
following the date such notice is mailed;
(iv) that any Security, or portion thereof, not validly tendered or
accepted for payment will continue to accrue interest;
(v) that unless the Issuers default in depositing money with the
Paying Agent in accordance with the last paragraph of clause (d) of this
Section 10.14, or payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Purchase Date;
and
(vi) the instructions a Holder must follow in order to have his
Securities repurchased in accordance with paragraph (d) of this Section.
(d) Holders electing to have Securities purchased must surrender such
Securities to the Paying Agent at the address specified in the Change of Control
Notice at least five Business Days prior to the Change of Control Purchase Date.
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than three Business Days prior to the Change of Control
Purchase Date, a telegram, facsimile transmission or letter setting forth the
name of the Holder, the certificate number(s) (in the case of Physical
Securities) and principal amount of the Securities delivered for purchase by the
Holder as to which his election is to be withdrawn and a statement that such
Holder is withdrawing his election to have such Securities purchased. Holders
whose Securities are purchased only in part will be issued new Securities of
like tenor and equal in principal amount to the unpurchased portion for the
Securities surrendered.
On or prior to the Change of Control Purchase Date, the Issuers shall (i)
accept for payment Securities or portions thereof validly tendered pursuant to
the Change of Control Offer, (ii) irrevocably deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so tendered, and (iii) deliver or cause to be delivered to the Trustee the
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Securities so accepted. The Paying Agent shall promptly mail or deliver to
Holders of the Securities so tendered payment in an amount equal to the Change
of Control Purchase Price for the Securities, and the Company and Finance Corp.
shall execute and, upon Company Order, the Trustee shall authenticate and mail
or make available for delivery to such Holders a new Security of like tenor and
equal in principal amount to any unpurchased portion of the Security which any
such Holder did not surrender for purchase. The Company shall announce the
results of a Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date. For purposes of this Section 10.14, the Trustee
shall act as the Paying Agent.
(e) The Issuers shall comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, if a Change of Control occurs and the Issuers are
required to purchase Securities as described in this Section 10.14.
SECTION 10.15 LIMITATION ON ASSET SALES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
consummate any Asset Sale unless (i) the Company or the Restricted Subsidiary,
as the case may be, receives consideration at the time of the Asset Sale at
least equal to the fair market value of the assets and properties sold or
otherwise disposed of pursuant to the Asset Sale (as determined by the Board of
Directors, whose determination in good faith shall be conclusive and evidenced
by a Board Resolution), (ii) at least 80% of the consideration received by the
Company or the Restricted Subsidiary, as the case may be, in respect of the
Asset Sale consists of cash or Cash Equivalents and (iii) the Company delivers
to the Trustee an Officers' Certificate certifying that the Asset Sale complies
with clauses (i) and (ii) of this sentence. The amount (without duplication) of
any Indebtedness (other than Subordinated Indebtedness) of the Company or any
Restricted Subsidiary that is expressly assumed by the transferee in an Asset
Sale and with respect to which the Company or the Restricted Subsidiary, as the
case may be, is unconditionally released by the holder of that Indebtedness
shall be deemed (i) to be cash or Cash Equivalents for purposes of clause (ii)
of the preceding sentence and (ii) to constitute a repayment of, and a permanent
reduction in, the amount of that Indebtedness for purposes of the following
paragraph. If at any time any non-cash consideration received by the Company or
any Restricted Subsidiary, as the case may be, in connection with any Asset Sale
is converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration) or Cash Equivalents,
then such conversion or disposition shall constitute an Asset Sale and the Net
Available Proceeds therefrom shall be applied in accordance with this covenant.
A transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to a Wholly Owned Restricted
Subsidiary will not constitute an Asset Sale, and a transfer of assets that
constitutes a Restricted Investment and that is permitted under Section 10.10
will not constitute an Asset Sale.
If the Company or any Restricted Subsidiary consummates an Asset Sale, the
Company or that Restricted Subsidiary, as the case may be, may either, no later
than 365 days after that Asset Sale, (i) apply all or any of the Net Available
Proceeds therefrom to repay Indebtedness (other than Subordinated Indebtedness)
of the Company or any Restricted Subsidiary, PROVIDED, in each case,
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that the related loan commitment (if any) is thereby permanently reduced by the
amount of the Indebtedness so repaid or (ii) invest all or any part of the Net
Available Proceeds therefrom in Properties that replace the Properties that were
the subject of the Asset Sale or in other Properties that are being, or will be,
used in the business of the Company and the Restricted Subsidiaries. The amount
of the Net Available Proceeds not applied or invested as provided in this
paragraph shall constitute "Excess Proceeds." Pending application of such Net
Available Proceeds pursuant to this paragraph, the Company or such Restricted
Subsidiary may invest such Net Available Proceeds in Cash Equivalents or may
apply such Net Available Proceeds to temporarily reduce amounts outstanding
under the Working Capital Agreement.
If substantially all (but not all) the property and assets of the Company
and its Restricted Subsidiaries are transferred as an entirety to a Person in a
transaction permitted under Article VIII and the Company or a Restricted
Subsidiary receives cash or Cash Equivalents in such transaction, then the
successor entity will be deemed to have sold the properties and assets of the
Company and its Subsidiaries not so transferred for purposes of this covenant
and cash at least equal to the Fair Market Value of the assets deemed to be sold
must be applied in accordance with the preceding paragraph.
SECTION 10.16 NET PROCEEDS OFFER.
(a) On the date when the aggregate amount of Excess Proceeds from one or
more Asset Sales equals or exceeds $5,000,000 (the "Trigger Date"), the Company
shall be required to make an offer to purchase, from all Holders of the then
Outstanding Securities and the holders of any then outstanding Pari Passu
Indebtedness required to be repurchased or repaid on a permanent basis in
connection with an Asset Sale, an aggregate principal amount of Securities and
any then outstanding Pari Passu Indebtedness equal to such Excess Proceeds as
follows:
(i) (A) Not later than the 30th date following the Trigger Date, the
Company shall give to the Trustee in the manner provided in Section 14.4
hereof and each Holder of the Securities in the manner provided in Section
14.5 hereof, a notice (a "Purchase Notice") offering to purchase (a "Net
Proceeds Offer") from all Holders of the Securities the maximum aggregate
principal amount (expressed as a multiple of $1,000) of Securities that
may be purchased out of the amount (the "Payment Amount") of such Excess
Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Securities and the denominator of
which is the sum of the outstanding principal amount of the Securities and
such Pari Passu Indebtedness, if any (subject to proration in the event
such amount is less than the aggregate Offered Price (as defined below) of
all Securities tendered), and (B) to the extent required by such Pari
Passu Indebtedness and provided there is a permanent reduction in the
principal amount of such Pari Passu Indebtedness, the Company shall make
an offer to purchase Pari Passu Indebtedness (a "Pari Passu Indebtedness
Offer") in an amount (the "Pari Passu Indebtedness Amount") equal to the
excess of the Excess Proceeds over the Payment Amount;
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(ii) The offer price for the Securities shall be payable in cash in
an amount equal to 100% of the principal amount of the Securities tendered
pursuant to a Net Proceeds Offer, together with accrued and unpaid
interest thereon, if any, and Liquidated Damages, if any, to the date that
Net Proceeds Offer is consummated (the "Offered Price"), in accordance
with the procedures set forth in paragraph (b) of this Section. To the
extent that the aggregate Offered Price of the Securities tendered
pursuant to a Net Proceeds Offer is less than the Payment Amount relating
thereto or the aggregate amount of the Pari Passu Indebtedness that is
purchased or repaid pursuant to the Pari Passu Indebtedness Offer is less
than the Pari Passu Indebtedness Amount (such shortfall constituting a
"Net Proceeds Deficiency"), subject to the limitations of Section 10.10
hereof the Company may use any or all of such Net Proceeds Deficiency for
general business purposes;
(iii) If the aggregate Offered Price of Securities validly tendered
and not withdrawn by Holders thereof exceeds the Payment Amount, the
Trustee will select the Securities to be purchased on a PRO RATA basis in
accordance with the relative aggregate principal amounts of Securities so
tendered and not withdrawn. When a Net Proceeds Offer and the Pari Passu
Indebtedness Offer are completed, the amount of Excess Proceeds shall be
zero.
(iv) The Purchase Notice shall set forth a purchase date (the "Net
Proceeds Payment Date"), which shall be on a Business Day no earlier than
30 days nor later than 60 days from the Trigger Date. The Purchase Notice
shall also state (i) that a Trigger Date with respect to one or more Asset
Sales has occurred and that such Holder has the right to require the
Company to repurchase such Holder's Securities at the Offered Price,
subject to the limitations described in the foregoing paragraph (iii),
(ii) any information regarding such Net Proceeds Offer required to be
furnished under the Exchange Act and any other securities laws and
regulations thereunder, (iii) that any Security, or portion thereof, not
tendered or accepted for payment will continue to accrue interest, (iv)
that, unless the Company defaults in depositing money with the Paying
Agent in accordance with the last paragraph of clause (b) of this Section
10.15, or payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrue interest after the Net Proceeds Payment Date, and (v) the
instructions a Holder must follow in order to have his Securities
repurchased in accordance with paragraph (b) of this Section.
(b) Holders electing to have Securities purchased will be required to
surrender such Securities to the Paying Agent at the address specified in the
Purchase Notice at least five Business Days prior to the Net Proceeds Payment
Date. Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than three Business Days prior to the Net Proceeds Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the certificate number(s) (in the case of Physical Securities)
and principal amount of the Securities delivered for purchase by the Holder as
to which his election is to be withdrawn and a statement that such Holder is
withdrawing his election to have such Securities purchased. Holders whose
Securities are purchased only in part will be issued new Securities of like
tenor and equal in principal amount to the unpurchased portion of the Securities
surrendered.
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On or prior to the Net Proceeds Payment Date, the Company shall (i) accept
for payment Securities or portions thereof validly tendered pursuant to a Net
Proceeds Offer in an aggregate principal amount equal to the Payment Amount or
such lesser amount of Securities as has been tendered, (ii) irrevocably deposit
with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so tendered in an aggregate principal amount
equal to the Payment Amount or such lesser amount and (iii) deliver or cause to
be delivered to the Trustee the Securities so accepted. The Paying Agent shall
promptly mail or deliver to Holders of the Securities so accepted payment in an
amount equal to the purchase price, and the Company shall execute and the
Trustee shall authenticate and mail or make available for delivery to such
Holders a new Security of like tenor and equal in principal amount to any
unpurchased portion of the Security which any such Holder did not surrender for
purchase. Any Securities not so accepted will be promptly mailed or delivered to
the Holder thereof. The Company shall announce the results of a Net Proceeds
Offer on or as soon as practicable after the Net Proceeds Payment Date. For
purposes of this Section 10.16, the Trustee shall act as the Paying Agent.
(c) The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into or suffer to exist any agreement that would place any restriction
of any kind (other than pursuant to law or regulation and other than the terms
of any agreement relating to Pari Passu Indebtedness requiring the making of a
Pari Passu Indebtedness Offer consistent with the foregoing) on the ability of
the Company to make a Net Proceeds Offer following any Asset Sale. The Company
shall comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder, if applicable, if an Asset Sale occurs and the
Company is required to purchase Securities as described in this Section 10.16.
SECTION 10.17 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
enter into, renew or extend any contract, agreement, transaction or arrangement
with or for the benefit of an Affiliate of the Company (including, without
limitation, the sale, purchase or lease of assets, property or services from or
to any Affiliate of the Company) (each of the foregoing, an "Affiliate
Transaction") (i) on terms less favorable to the Company or the Restricted
Subsidiary, as the case may be, than would be available in a comparable
transaction with a Person not an Affiliate of the Company or (ii) on terms that
are not fair from a financial point of view to the Company or the Restricted
Subsidiary, as the case may be, in the event no comparable transaction with a
Person not an Affiliate of the Company is available; PROVIDED, that the Company
shall not, and shall not permit any Restricted Subsidiary to, enter into, renew
or extend any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate payments, value, remuneration or other consideration in
excess of $1.0 million after the Issue Date unless the prior approval thereof by
the Board of Directors (including a majority of the Disinterested Directors, if
any) has been obtained and the Company delivers to the Trustee an Officers'
Certificate (i) certifying that the Affiliate Transaction or series of related
Affiliate Transactions complies with the foregoing restriction and (ii) in the
case of transactions other than storage contracts, hub services contracts or
similar contracts entered into in the ordinary course of business, if the
Affiliate Transaction or series of related Affiliate Transactions involves
aggregate payments, value, remuneration or other consideration in excess of $5.0
million
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after the Issue Date, to which is attached a copy of a written opinion of an
Independent Financial Advisor specializing or having a speciality in the type
and subject matter of the transaction or series of related transactions at
issue, to the effect that such transaction or series of related transactions is
fair from a financial point of view to the Company or the Restricted Subsidiary,
as the case may be; PROVIDED, HOWEVER, that the foregoing restriction will not
apply to: (i) transactions between or among (a) the Company and one or more
Wholly Owned Restricted Subsidiaries or (b) Wholly Owned Restricted
Subsidiaries; (ii) transactions between the Company or any Restricted Subsidiary
and any qualified employee stock or equity ownership plan established for the
benefit of the Company's employees, or the establishment or maintenance of any
such plan; (iii) reasonable compensation and other benefit arrangements for the
benefit of Persons in their capacity as officers and employees of the Company
(but not Persons in their capacity as officers and employees of an Affiliate)
and directors, officers and employees of the General Partner of the Company, in
each case approved by the Board of Directors; (iv) transactions permitted by
Section 10.10; (v) Permitted Investments of the character described in clause
(vi) of the definition of Permitted Investments; (vi) making any indemnification
or similar payment to any director or officer (a) in accordance with the
charter, partnership agreement, bylaws, or other constituent document of the
Company or any Restricted Subsidiary, (b) under any indemnification agreement or
(c) under applicable law; or (vii) transactions contemplated by the Existing
Storage Contracts.
SECTION 10.18 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or allow to become effective any Payment Restriction with respect to any
Restricted Subsidiary, except for any such Payment Restriction existing under or
by reason of (i) applicable law, (ii) customary non-assignment provisions in
leases or other contracts entered into in the ordinary course of business, (iii)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions on the property so acquired, (iv) customary
restrictions imposed on the transfer of copyrighted or patented materials, (v)
the entering into of a contract for the sale or other disposition of assets,
directly or indirectly, so long as such restrictions do not extend to assets
that are not subject to such sale or other disposition, (vi) the terms of any
agreement evidencing any Indebtedness of Restricted Subsidiaries that was
permitted by this Indenture to be incurred that only restrict the transfer of
the assets purchased with the proceeds of such Indebtedness, (vii) the terms of
any merger agreement, stock purchase agreement, asset sale agreement or similar
agreement that limit the transfer of properties and assets pending consummation
of the subject transaction, (viii) Permitted Liens which are customary
limitations on the transfer of collateral and (ix) the terms of any agreement
evidencing any Acquired Indebtedness that was permitted by this Indenture to be
incurred, PROVIDED that such Payment Restriction only applies to assets that
were subject to such restrictions prior to the acquisition of such assets by the
Company or any Restricted Subsidiary.
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SECTION 10.19 LIMITATION ON PREFERRED EQUITY INTERESTS OF SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary to issue any
Preferred Equity Interests (other than to the Company or to a Wholly Owned
Restricted Subsidiary) or permit any Person (other than the Company or a Wholly
Owned Restricted Subsidiary) to own any Preferred Equity Interests of any
Restricted Subsidiary.
SECTION 10.20 CERTAIN RESTRICTIONS ON FINANCE CORP.
Finance Corp. shall not, and the Company shall not permit Finance Corp.
to, incur any Indebtedness unless (i) the Company is a co-obligor or guarantor
of such Indebtedness or (ii) the net proceeds of such Indebtedness are lent to
the Company, used to acquire debt securities of the Company or used directly or
indirectly to refinance or discharge Indebtedness permitted under the foregoing
limitations. Finance Corp. shall not, and the Company shall not permit Finance
Corp. to, engage in any business not related directly or indirectly to obtaining
money or arranging financing for the Company.
SECTION 10.21 WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Sections 10.5, 10.6, 10.7, 10.9 through
10.13, Section 10.15 and Sections 10.17 through 10.20 hereof if, before or after
the time for such compliance, the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities, by Act of such Holders, waive
such compliance in such instance with such term, provision or condition, but no
such waiver shall extend to or affect such term, provision or condition except
to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 RIGHT OF REDEMPTION.
The Issuers may, at the Company's option, redeem the Securities in whole
or from time to time in part, on or after March 1, 2003, on not less than 30 nor
more than 60 days' notice to each Holder of Securities to be redeemed, subject
to the conditions and at the redemption prices (expressed as percentages of
principal amount) set forth below, if redeemed during the twelve-month period
beginning on March 1 of the year indicated below:
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REDEMPTION
YEAR PRICE
---- ----------
2003...................................... 104.125%
2004........................................... 102.750%
2005........................................... 101.375%
2006 and thereafter............................ 100.000%
together in the case of any such redemption with accrued and unpaid interest
thereon and Liquidated Damages, if any, to the applicable Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date), all as provided herein.
Notwithstanding the foregoing, at any time on or prior to March 1, 2001,
the Issuers may redeem up to 35% of the aggregate principal amount of Securities
originally issued on not less than 30 nor more than 60 days' notice to each
Holder of Securities to be redeemed, from the Net Cash Proceeds of one or more
Public Equity Offerings, at a redemption price equal to 108.250% of the
principal amount thereof, together with accrued and unpaid interest thereon and
Liquidated Damages, if any, to the Redemption Date, PROVIDED that (i) at least
$74,750,000 aggregate principal amount of Securities originally issued remains
Outstanding immediately after that redemption and (ii) the Issuers effect that
redemption within 60 days after the Public Equity Offering closes.
SECTION 11.2 APPLICABILITY OF ARTICLE.
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 11.3 ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Issuers to redeem any Securities pursuant to Section
11.1 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Issuers, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 11.4. Any election to redeem
Securities shall be revocable until the Company gives a notice of redemption
pursuant to Section 11.5 to the Holders of Securities to be redeemed.
SECTION 11.4 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the Trustee shall, not
less than 30 days nor more than 60 days prior to the Redemption Date, select the
particular Securities to be redeemed from the Outstanding Securities not
previously called for redemption, pro rata, by lot or by any other method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for
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redemption of portions of the principal of Securities; PROVIDED, HOWEVER, that
any such partial redemption shall be in integral multiples of $1,000.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs of this Section 11.4 shall
not apply with respect to any redemption affecting only a Global Security,
whether such Global Security is to be redeemed in whole or in part. In the case
of any such redemption in part, the unredeemed portion of the principal amount
of the Global Security shall be in an authorized denomination.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
SECTION 11.5 NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided for in Section
15.5 hereof not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) in the case of a partial redemption of Physical Securities, the
identification of the particular Securities to be redeemed, and, if any
Global Security or Physical Security is to be redeemed in part, the
portion of the principal amount thereof to be redeemed;
(d) that on the Redemption Date the Redemption Price (together with
accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date payable as provided in Section 11.7 hereof) will become
due and payable upon each such Security, or the portion thereof, to be
redeemed, and that, unless the Issuers shall default in the payment of the
Redemption Price and any applicable accrued and unpaid interest or
Liquidated Damages, if any, interest thereon will cease to accrue on and
after said date;
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, which shall be the office or agency
of the Issuers maintained for such purpose pursuant to Section 10.2
hereof; and
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(f) the CUSIP number of the Securities.
Notice of redemption of Securities to be redeemed at the election of the
Issuers shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Issuers. Failure to give such
notice by mailing to any Holder of Securities or any defect therein shall not
affect the validity of any proceedings for the redemption of other Securities.
SECTION 11.6 DEPOSIT OF REDEMPTION PRICE.
On or before 12:00 noon, New York City time, on any Redemption Date, the
Issuers shall 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 as
provided in Section 10.3 hereof) immediately available funds in an amount
sufficient to pay the Redemption Price of, and accrued and unpaid interest and
Liquidated Damages, if any, on, all the Securities which are to be redeemed on
such Redemption Date.
SECTION 11.7 SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued and unpaid interest
and Liquidated Damages, if any, to the Redemption Date), and from and after such
date (unless the Issuers shall default in the payment of the Redemption Price
and accrued and unpaid interest and Liquidated Damages, if any) such Securities
shall cease to bear interest. Upon surrender of any such Security for redemption
in accordance with said notice, such Security shall be paid by the Issuers at
the Redemption Price, together with accrued and unpaid interest and Liquidated
Damages, if any, to the Redemption Date; PROVIDED, HOWEVER, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 3.7 hereof.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium, if any, and Liquidated
Damages, if any, shall, until paid, bear interest from the Redemption Date at
the rate borne by the Securities.
SECTION 11.8 SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered at
the office or agency of the Issuers maintained for such purpose pursuant to
Section 10.2 hereof (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company and Finance Corp. shall
execute, and, upon Company Order, the Trustee shall authenticate and deliver to
the Holder of such Security without
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service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, of like tenor and in aggregate principal amount equal
to and in exchange for the unredeemed portion of the principal amount of the
Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1 ISSUERS' OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the Company's option by Board Resolution at any time,
with respect to the Securities, elect to have either Section 12.2 or Section
12.3 hereof be applied to all Outstanding Securities upon compliance with the
conditions set forth below in this Article XII.
SECTION 12.2 DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 12.1 hereof of the option
applicable to this Section 12.2, the Issuers and the Subsidiary Guarantors shall
be deemed to have been discharged from their obligations with respect to all
Outstanding Securities on and after the date the conditions set forth in Section
12.4 hereof are satisfied (hereinafter, "legal defeasance"). For this purpose,
such legal defeasance means that the Issuers shall be deemed (i) to have paid
and discharged their obligations under the Outstanding Securities, PROVIDED,
HOWEVER, that the Securities shall continue to be deemed to be "Outstanding" for
purposes of Section 12.5 hereof and the other Sections of this Indenture
referred to in clauses (A) and (B) below, and (ii) to have satisfied all its
other obligations with respect to such Securities and this Indenture (and the
Trustee, at the expense and direction of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities to receive, solely from the trust fund
described in Section 12.4 hereof and as more fully set forth in such Section,
payments in respect of the principal of and premium, if any, interest and
Liquidated Damages, if any, on their Outstanding Securities when those payments
are due (or at such time as the Securities would be subject to redemption at the
option of the Issuers in accordance with this Indenture), (B) the Company's and
Finance Corp.'s obligations under Section 3.3, 3.4, 3.5, 3.6, 5.8, 6.6, 6.9,
6.10, 10.2 and 10.3, (C) the rights, powers, trusts, duties and immunities of
the Trustee hereunder, and (D) the Company's and Finance Corp.'s obligations
under this Article XII. Subject to compliance with this Article XII, the Company
may exercise its option under this Section 12.2 notwithstanding the prior
exercise of its option under Section 12.3 hereof with respect to the Securities.
SECTION 12.3 COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 12.1 hereof of the option
applicable to this Section 12.3, (i) the Issuers shall be released from their
obligations under clauses (iii), (iv) and (v) under Section 8.1, any covenant in
Sections 10.5 through 10.20 and any covenant in Article XIII, (ii) the
Subsidiary Guarantors shall be released from the Subsidiary Guarantees and (iii)
the occurrence of
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any event specified in Sections 5.1(c), 5.1(d) (with respect to clauses (iii),
(iv) and (v) under Section 8.1, Sections 10.5 through 10.20), 5.1(e), 5.1(f),
5.1(g) (with respect to any Restricted Subsidiary) and 5.1(h) (with respect to
any Restricted Subsidiary) shall be deemed not to be or result in an Event of
Default, in each case with respect to the Outstanding Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities shall thereafter be deemed not to be
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Outstanding Securities, the Issuers may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Article or Section (to the extent so specified in the case of Sections
5.1(d), 5.1(g) and 5.1(h) hereof), whether directly or indirectly, by reason of
any reference elsewhere herein to any such Article or Section or by reason of
any reference in any such Article or Section to any other provision herein or in
any other document, but, EXCEPT as specified above, the remainder of this
Indenture and such Securities shall not be affected thereby.
SECTION 12.4 CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
12.2 or Section 12.3 hereof to the Outstanding Securities:
(a) The Issuers shall irrevocably deposit or cause to be deposited
with the Trustee (or another trustee satisfying the requirements of
Section 6.7 hereof who shall agree to comply with the provisions of this
Article XII applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
cash in United States dollars in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of and premium, if any, interest and
Liquidated Damages, if any, on the Outstanding Securities on the Stated
Maturity thereof (or Redemption Date, if applicable), PROVIDED that the
Trustee shall have been irrevocably instructed by a Company Order to apply
such money or the proceeds of such U.S. Government Obligations to said
payments with respect to the Securities. Before such a deposit, the
Company may give to the Trustee, in accordance with Section 11.3 hereof, a
notice of its election to redeem all of the Outstanding Securities at a
future date in accordance with Article XI hereof, which notice shall be
irrevocable. Such irrevocable redemption notice, if given, shall be given
effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full faith
and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or
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instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, PROVIDED that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or
the specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(b) The Company must deliver to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a result
of such legal defeasance or 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 legal defeasance or covenant
defeasance had not occurred (in the case of legal defeasance, this Opinion
of Counsel must refer to and be based on a published ruling of the
Internal Revenue Service or a change in applicable federal income tax
laws).
(c) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or,
insofar as Sections 5.1(g) and 5.1(h) are concerned, at any time during
the period ending on the 91st day after the date of such deposit.
(d) Such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest under this Indenture or the Trust
Indenture Act with respect to any securities of the Issuers.
(e) Such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any other
material agreement or instrument to which the Company or any Restricted
Subsidiary is a party or by which the Company or any Restricted Subsidiary
is bound, as evidenced to the Trustee in an Officers' Certificate
delivered to the Trustee concurrently with such deposit.
(f) The Company shall have delivered to the Trustee an Opinion of
Counsel experienced in bankruptcy matters to the effect that the use of
the trust funds to pay the principal of and premium, if any, interest and
Liquidated Damages, if any, on the Outstanding Securities would not be
avoidable as a preferential payment under Section 547 of the Federal
Bankruptcy Code (or any similar provision then in force) or recoverable
under Section 550 of the Federal Bankruptcy Code (or any similar provision
then in force) in the
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event the Company or Finance Corp. became a debtor in a proceeding
commenced thereunder.
(g) The Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Outstanding Securities over other
creditors of the Company or Finance Corp. with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or Finance
Corp. or others.
(h) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, satisfactory to the Trustee, each
stating that all conditions precedent under this Indenture to either the
legal defeasance under Section 12.2 hereof or the covenant defeasance
under Section 12.3, as the case may be, have been complied with.
SECTION 12.5 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 10.3 hereof,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee -- collectively for
purposes of this Section 12.5, the "Trustee") pursuant to Section 12.4 hereof in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (other
than the Company acting as its own Paying Agent) as the Trustee may determine,
to the Holders of such Securities of all sums due and to become due thereon in
respect of principal and premium, if any, interest and Liquidated Damages, if
any, but such money need not be segregated from other funds EXCEPT to the extent
required by law.
The Company and Finance Corp., jointly and severally, shall pay and
indemnify the Trustee against all taxes, fees or other charges imposed on or
assessed against the U.S. Governmental Obligations deposited pursuant to Section
12.4 hereof or the principal and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the Outstanding Securities.
Anything in this Article XII to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 12.4
hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, are in EXCESS of the amount thereof which would then be required to be
deposited to effect an equivalent legal defeasance or covenant defeasance, as
applicable, in accordance with this Article.
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SECTION 12.6 REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 12.5 hereof by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's and Finance Corp.'s obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 12.2 or 12.3 hereof, as the case may
be, until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 12.5 hereof; PROVIDED, HOWEVER, that if
the Company or Finance Corp. makes any payment of principal of or premium, if
any, interest or Liquidated Damages, if any, on any Security following the
reinstatement of its obligations, the Company or Finance Corp., as the case may
be, shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE XIII
SUBSIDIARY GUARANTEES
SECTION 13.1 UNCONDITIONAL GUARANTEE.
Each Subsidiary Guarantor hereby jointly and severally unconditionally
Guarantees to each Holder of a Security authenticated and delivered by the
Trustee, and to the Trustee on behalf of such Holder, the full and punctual
payment of the principal of and premium, if any, interest and Liquidated
Damages, if any, on such Security when and as the same shall become due and
payable, whether at the Stated Maturity, by acceleration, call for redemption,
purchase or otherwise, in accordance with the terms of such Security and of this
Indenture. In case of the failure of the Issuers punctually to make any such
payment, each Subsidiary Guarantor hereby jointly and severally agrees to pay or
cause such payment to be made punctually when and as the same shall become due
and payable, whether at the Stated Maturity, by acceleration, call for
redemption, purchase or otherwise, and as if such payment were made by the
Issuers.
Each Subsidiary Guarantor hereby jointly and severally agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of such Security or this Indenture, the absence of
any action to enforce the same, any exchange, release or non-perfection of any
Lien on any collateral for, or any release or amendment or waiver of any term of
any other Guarantee of all or any of the Securities, or any consent to departure
from any requirement of any other Guarantee of all or any of the Securities, the
election by the Trustee or any of the Holders in any proceeding under Chapter 11
of the Federal Bankruptcy Code, or the application of Section 1111(b)(2) of the
Federal Bankruptcy Code, any borrowing or grant of a security interest by the
Company or Finance Corp., as debtor-in-possession, under Section 364 of the
Federal Bankruptcy Code, the disallowance, under Section 502 of the Federal
Bankruptcy Code, of all or any portion of the claims of the Trustee or any of
the Holders for payment of any of the Securities (including, without limitation,
any interest, Liquidated Damages or premium thereon), any waiver or consent by
the Holder of such Security or by the Trustee with respect to any provisions
thereof
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or of this Indenture or with respect to the provisions of this Article XIII as
they apply to any other Subsidiary Guarantor, the obtaining of any judgment
against the Company or Finance Corp. or any action to enforce the same or any
other circumstances which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives the
benefits of diligence, presentment, demand of payment, any requirement that the
Trustee or any of the Holders protect, secure, perfect or insure any security
interest in or other Lien on any property subject thereto or exhaust any right
or take any action against the Company or Finance Corp. or any other Person,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company or Finance Corp., any right to require a proceeding first against the
Company or Finance Corp., protest or notice with respect to such Security or the
Indebtedness evidenced thereby and all demands whatsoever, and covenants that
its Subsidiary Guarantee will not be discharged in respect of such Security
except by complete performance of the obligations contained in such Security and
in such Subsidiary Guarantee. Each Subsidiary Guarantor hereby agrees that, in
the event of a default in payment of principal of or premium, if any, interest
or Liquidated Damages, if any, on such Security, whether at their Stated
Maturity, by acceleration, call for redemption, purchase or otherwise, legal
proceedings may be instituted by the Trustee on behalf of, or by, the Holder of
such Security, subject to the terms and conditions set forth in this Indenture,
directly against all or any of the Subsidiary Guarantors to enforce their
respective Subsidiary Guarantees without first proceeding against the Company or
Finance Corp. Each Subsidiary Guarantor agrees that if, after the occurrence and
during the continuance of an Event of Default, the Trustee or any of the Holders
are prevented by applicable law from exercising their respective rights to
accelerate the maturity of the Securities, to collect interest on the
Securities, or to enforce or exercise any other right or remedy with respect to
the Securities, such Subsidiary Guarantor agrees to pay to the Trustee for the
account of the Holders, upon demand therefor, the amount that would otherwise
have been due and payable had such rights and remedies been permitted to be
exercised by the Trustee or any of the Holders.
Each Subsidiary Guarantor shall be subrogated to all rights of the Holders
of the Securities against the Issuers in respect of any amounts paid by that
Subsidiary Guarantor on account of such Securities pursuant to the provisions of
its Subsidiary Guarantee of this Indenture; PROVIDED, HOWEVER, that no
Subsidiary Guarantor shall be entitled to enforce or to receive any payments
arising out of, or based upon, such right of subrogation until the principal of
and premium, if any, interest and Liquidated Damages, if any, on all Securities
issued hereunder shall have been paid in full.
Each Subsidiary Guarantee shall remain in full force and effect and
continue to be effective if any petition is filed by or against the Company or
Finance Corp. for liquidation or reorganization, if the Company or Finance Corp.
becomes insolvent or makes an assignment for the benefit of creditors or if a
receiver or trustee is appointed for all or any significant part of the
Company's or Finance Corp.'s assets, and shall, to the fullest extent permitted
by law, continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Securities is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by an
obligee on the Securities whether as a "voidable preference," "fraudulent
transfer," or otherwise, all as though such payment or performance has not been
made. If any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Securities shall, to the fullest extent
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permitted by law, be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
The Subsidiary Guarantors shall have the right to seek contribution from
any non-paying Subsidiary Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Subsidiary Guarantees or under
this Article XIII in accordance with Section 13.7.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to its Subsidiary Guarantee and this Indenture constitute
senior unsecured obligations of that Subsidiary Guarantor.
SECTION 13.2 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
The Subsidiary Guarantee to be endorsed on the Securities is set forth in
Appendix A. Each Subsidiary Guarantor hereby agrees to execute its Subsidiary
Guarantee, in a form established pursuant to Appendix A, to be endorsed on each
Security authenticated and delivered by the Trustee.
The Subsidiary Guarantee shall be executed on behalf of each respective
Subsidiary Guarantor by any one of such Subsidiary Guarantor's Officers,
attested by its secretary or assistant secretary. The signature of any or all of
these Officers on the Subsidiary Guarantee may be manual or facsimile.
A Subsidiary Guarantee bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of a Subsidiary Guarantor
shall bind such Subsidiary Guarantor, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of the Security on which such Subsidiary Guarantee is endorsed or did
not hold such offices at the date of such Subsidiary Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee
endorsed thereon on behalf of the Subsidiary Guarantors. Each Subsidiary
Guarantor hereby jointly and severally agrees that its Subsidiary Guarantee set
forth in Section 13.1 shall remain in full force and effect notwithstanding any
failure to endorse a Subsidiary Guarantee on any Security.
SECTION 13.3 LIMITATION ON MERGER OR CONSOLIDATION.
No Subsidiary Guarantor (in this Section 13.3, the "Subject Subsidiary
Guarantor") may consolidate with or merge with or into (whether or not the
Subject Subsidiary Guarantor is the surviving Person), or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all the Properties
of the Subject Subsidiary Guarantor to another Person (other than the Company or
another Subsidiary Guarantor), whether or not affiliated with the Subject
Subsidiary Guarantor, unless:(i) the Person formed by or surviving any such
consolidation or merger (if other than the Subject Subsidiary Guarantor) assumes
all the obligations of the Subject Subsidiary Guarantor under the Securities and
the Indenture pursuant to a supplemental indenture, in form and substance
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satisfactory to the Trustee; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) immediately after
giving effect to such transaction as if the same had occurred at the beginning
of the most recently ended period of four consecutive fiscal quarters of the
Company, the Company and the Restricted Subsidiaries could incur at least $1.00
of additional Indebtedness not constituting Permitted Indebtedness in accordance
with Section 10.11(a).
Except as set forth in Articles VIII and X hereof, nothing contained in
this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Subsidiary Guarantor with or into the Company or another Subsidiary
Guarantor or shall prevent any sale or conveyance of the Property of a
Subsidiary Guarantor as an entirety or substantially as an entirety to the
Company or another Subsidiary Guarantor. For purposes of this Section 13.3, the
lease of Properties pursuant to storage contracts entered into in the ordinary
course of business shall not be considered a lease of substantially all the
Properties of a Subsidiary Guarantor.
SECTION 13.4 RELEASE OF SUBSIDIARY GUARANTORS.
(a) In the event of a sale or other disposition of all the properties and
assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all the Equity Interests of any
Subsidiary Guarantor, in each case subject to and as permitted by the terms of
this Indenture, including, without limitation, Sections 8.1, 10.15 and 13.3, and
upon delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such consolidation, merger, sale or other
disposition was made in accordance with Section 13.3 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
that Subsidiary Guarantor (in the event of a sale of or other disposition, by
way of such a merger, consolidation or otherwise, of all the Equity Interests of
that Subsidiary Guarantor) from its obligations under its Subsidiary Guarantees
endorsed on the Securities and under this Article XIII PROVIDED that, the case
of a sale of the Equity Interests of a Subsidiary Guarantor not constituting a
sale subject to Article VIII, the Net Available Proceeds of such sale or other
disposition are applied in accordance with the provisions of this Indenture
including Sections 10.15 and 10.16. Any Subsidiary Guarantor not released from
its obligations under its Subsidiary Guarantees endorsed on the Securities and
under this Article XIII shall remain liable for the full amount of principal of
and premium, if any, interest and Liquidated Damages, if any, on the Securities
and for the other obligations of a Subsidiary Guarantor under its Subsidiary
Guarantees endorsed on the Securities and under this Article XIII.
(b) Concurrently with the legal defeasance of the Securities under Section
12.2 hereof or the covenant defeasance of the Securities under Section 12.3
hereof, the Subsidiary Guarantors shall be released from all of their
obligations under their Subsidiary Guarantees endorsed on the Securities and
under this Article XIII.
(c) Upon the redesignation by the Company of a Subsidiary Guarantor from a
Restricted Subsidiary to an Unrestricted Subsidiary in compliance with the
provisions of this Indenture, such Subsidiary may, at its option, cease to be a
Subsidiary Guarantor and shall be released from all of the obligations of a
Subsidiary Guarantor under its Subsidiary Guarantees endorsed on the Securities
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and under this Article XIII, which release shall be evidenced by a supplemental
indenture executed by the Company, Finance Corp., the Subsidiary Guarantors and
the Trustee.
SECTION 13.5 ADDITIONAL SUBSIDIARY GUARANTORS.
The Company or any Restricted Subsidiary may cause any of their respective
Subsidiaries to become a Subsidiary Guarantor with respect to the Securities. If
the Company or any Restricted Subsidiary or any of their respective Subsidiaries
shall, in compliance with the covenants in Article X, after the date of this
Indenture, (i) transfer or cause to be transferred, any Property to any
Subsidiary that is not a Subsidiary Guarantor (other than an Unrestricted
Subsidiary) or (ii) make any Investment in any Subsidiary that is not a
Subsidiary Guarantor (other than an Unrestricted Subsidiary), then the Company
or that Restricted Subsidiary shall cause that Subsidiary to execute a
Subsidiary Guarantee and deliver an Opinion of Counsel, in accordance with the
terms of this Indenture unless the Board of Directors has duly designated that
Subsidiary as an Unrestricted Subsidiary. Any such Subsidiary shall become a
Subsidiary Guarantor by executing and delivering to the Trustee (a) a
supplemental indenture, in form and substance satisfactory to, and executed by,
the Trustee and executed by the Company, which subjects such Subsidiary to the
provisions of this Indenture as a Subsidiary Guarantor and (b) an Opinion of
Counsel to the effect that such supplemental indenture has been duly authorized
and executed by such Subsidiary and constitutes the legal, valid, binding and
enforceable obligation of such Subsidiary (subject to such customary exceptions
concerning creditors' rights and equitable principles).
SECTION 13.6 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY.
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the Guarantee
by that Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Federal Bankruptcy Code,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar Federal or state law. To effectuate the foregoing intention, the
Holders and such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee shall be
limited to the maximum amount that, after giving effect to all other contingent
and fixed liabilities of such Subsidiary Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to Section 13.7, result in the obligations
of that Subsidiary Guarantor under its Subsidiary Guarantee not constituting
such a fraudulent transfer or conveyance under federal or state law.
SECTION 13.7 CONTRIBUTION.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, INTER SE, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Subsidiary Guarantor") under its Subsidiary Guarantee, and so long as
the exercise of such right does not impair the rights of the Holders under the
Subsidiary Guarantees or under this Article XIII, such Funding Subsidiary
Guarantor shall be entitled to a
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contribution from all other Subsidiary Guarantors in a PRO RATA amount, based on
the net assets of each Subsidiary Guarantor (including the Funding Subsidiary
Guarantor), determined in accordance with GAAP, subject to Section 13.6, for all
payments, damages and expenses incurred by that Funding Subsidiary Guarantor in
discharging the Company's and Finance Corp.'s obligations with respect to the
Securities or any other Subsidiary Guarantor's obligations with respect to its
Subsidiary Guarantee.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as may be required under the Trust
Indenture Act or this Indenture. Each such certificate and each such opinion
shall be in the form of an Officers' Certificate or an Opinion of Counsel, as
applicable, and shall comply with the requirements of this Indenture.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(a) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope for the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such Person, such
Person 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
(d) a statement as to whether, in the opinion of each such Person,
such condition or covenant has been complied with.
The certificates and opinions provided pursuant to this Section 14.1 and
the statements required by this Section 14.1 shall comply in all respects with
TIA Sections 314(c) and (e).
SECTION 14.2 FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the
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opinion of, only one such Person, or that they be so certified or covered by
only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an Officer may be based, insofar as it
relates to legal matters, upon an opinion of counsel, UNLESS such Officer knows,
or in the exercise of reasonable care should know, that the opinion with respect
to the matters upon which his certificate or opinion is based is erroneous. Any
such Opinion of Counsel may be based, insofar as it relates to factual matters,
upon an Officers' Certificate, unless such counsel knows that the certificate
with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 14.3 ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly appointed in writing;
and, EXCEPT as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.1) conclusive in favor of the Trustee, the Company and
Finance Corp., if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. In each
situation in which such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership, principal amount and serial numbers of Securities held
by any Person, and the date of holding the same, shall be provided by the
Security Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or
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pursuant to a Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act, but the Company shall have no
obligation to do so. Notwithstanding TIA Section 316(c), such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the date 30 days prior to the first
solicitation of Holders generally in connection therewith and not later than the
date such solicitation is completed. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record at
the close of business on such record date shall be deemed to be Holders for the
purpose of determining whether Holders of the requisite proportion of
Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of such record
date, PROVIDED that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective UNLESS it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, omitted or suffered to be done by the Trustee, the Company or
Finance Corp. in reliance thereon, whether or not notation of such action is
made upon such Security.
SECTION 14.4 NOTICES, ETC. TO TRUSTEE AND THE COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver or
other Act of Holders or other document provided or permitted by this Indenture
to be made upon, given or furnished to or filed with,
(i) the Trustee by any Holder, Finance Corp., the Company, or any
Subsidiary Guarantor shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing (in the English language) and
delivered in person or mailed by certified or registered mail (return
receipt requested) to the Trustee at its Corporate Trust Office; or
(ii) the Company, Finance Corp. or any Subsidiary Guarantor by the
Trustee or by any Holder shall be sufficient for every purpose hereunder
(UNLESS otherwise herein expressly provided) if in writing (in the English
language) and delivered in person or mailed by certified or registered
mail (return receipt requested) to the Company, addressed to it at the
Company's offices located at 16420 Park Ten Place, Suite 420, Houston,
Texas 77084, Attention: Chief Financial Officer, or at any other address
otherwise furnished in writing to the Trustee by the Company.
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SECTION 14.5 NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to Holders by the
Company or Finance Corp., the Trustee or any Paying Agent, such notice shall be
sufficiently given (UNLESS otherwise herein expressly provided) if in writing
(in the English language) and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of publication of any Authorized
Newspaper, or by reason of any other cause, it shall be impossible to make
publication of any notice in an Authorized Newspaper or Authorized Newspapers as
required by this Indenture, then such method of publication or notification as
shall be made with the approval of the Trustee shall constitute a sufficient
publication of such notice.
SECTION 14.6 EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 14.7 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 14.8 SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
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SECTION 14.9 BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person (other than the parties thereto, any Paying Agent, any
Securities Registrar and their successors hereunder and the Holders) any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 14.10 GOVERNING LAW; TRUST INDENTURE ACT CONTROLS;
CONSENT TO JURISDICTION AND SERVICE.
(a) THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY, FINANCE CORP. AND EACH SUBSIDIARY
GUARANTOR IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, THE
CITY OF NEW YORK, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS INDENTURE, OR THE SECURITIES, OR ANY SUBSIDIARY GUARANTEE AND FOR
ACTIONS BROUGHT UNDER FEDERAL OR STATE SECURITIES LAWS WITH RESPECT TO THE
SECURITIES, AND THE COMPANY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED BY ANY SUCH COURT.
(b) This Indenture is subject to the provisions of the Trust Indenture Act
that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with the duties
imposed by operation of Section 318(c) of the Trust Indenture Act, or conflicts
with any provision (an "incorporated provision") required by or deemed to be
included in this Indenture by operation of such Trust Indenture Act section,
such imposed duties or incorporated provisions shall control.
(c) Each of the Company, Finance Corp. and the Subsidiary Guarantors shall
appoint CT Corporation as their agent upon which process may be served in any
action or proceeding with respect to this Indenture, the Securities or the
Subsidiary Guarantees.
SECTION 14.11 LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal, interest, premium, if any, and Liquidated Damages, if any,
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the Interest Payment Date,
Redemption Date or at the Stated Maturity or Maturity; PROVIDED, HOWEVER, that,
if such payment is made or duly provided for on such Business Day, no interest
shall accrue for the period from and after such Interest
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Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be,
to such Business Day.
SECTION 14.12 NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder, limited partner, member,
incorporator or Affiliate, as such, past, present or future, of the Company,
Finance Corp. or a Subsidiary Guarantor shall not have any personal liability
under the Securities or this Indenture by reason of his or its status as a
director, officer employee, stockholder, limited partner, member, incorporator
or Affiliate or any liability for any obligations of the Company, Finance Corp.
or a Subsidiary Guarantor under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder, by accepting any of the Securities, waives and releases
all such lability to the extent permitted by applicable law.
SECTION 14.13 DUPLICATE ORIGINALS.
The parties may sign any number of copies or counterparts of this
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
SECTION 14.14 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or Finance Corp. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 14.15 NATURE OF OBLIGATIONS OF ISSUERS.
The obligations of the Company and Finance Corp. under the Securities are
joint and several and, in any proceedings against any of such Persons arising
out of the Securities or this Indenture, it shall not be necessary to join any
other such Person. Finance Corp. hereby appoints the Company as its agent to
give and receive all notices and to exercise all rights that Finance Corp. shall
be entitled to give, receive or exercise pursuant to this Indenture. Such
appointment is irrevocable and coupled with an interest.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
CO-ISSUERS:
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.,
a Delaware limited liability company
Its General Partner
By:/s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
MARKET HUB PARTNERS FINANCE, INC.
By:/s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
SUBSIDIARY GUARANTORS:
MOSS BLUFF HUB PARTNERS, L.P.
By: Moss Bluff Hub Partners, L.L.C.
Its General Partner
By:/s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
<PAGE>
EGAN HUB PARTNERS, L.P.
By: Egan Hub Partners, L.L.C.
Its General Partner
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
MOSS BLUFF HUB PARTNERS, L.L.C.
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
EGAN HUB PARTNERS, L.L.C.
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
TRUSTEE:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/ STEPHEN J. GIURLANDO
Name: Stephen J. Giurlando
Title: Assistant Vice President
<PAGE>
Reconciliation and Tie between Trust Indenture Act of 1939, as
amended, and Indenture, dated as of March 1, 1998
Trust Indenture Indenture
Act Section Section
----------- -------
ss.310 (a)(1)................................................... 6.7
(a)(2)................................................... 6.7
(b)...................................................... 6.7, 6.8, 6.9
ss.311 (a)...................................................... 6.12
(b)...................................................... 6.12
ss.312 ......................................................... 7.1
ss.313 ......................................................... 7.2
ss.314 (a)...................................................... 7.3
(a)(4).................................................. 10.8(a)
(c)(1).................................................. 14.1
(c)(2).................................................. 14.1
(e)..................................................... 14.1
ss.315 (a)...................................................... 6.1
(b)...................................................... 6.13
(c)...................................................... 6.1
(d)...................................................... 6.1
ss.316 (a) (last sentence)...................................... 1.1
("Outstanding")
(a)(1)(A)................................................ 5.2, 5.12
(a)(1)(B)................................................ 5.13
(b)...................................................... 5.8
ss.317 (a)(1)................................................... 5.3
(a)(2)................................................... 5.4
(b)......................................................10.3
ss.318 (a)......................................................14.10(b)
Note: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A AND TO CERTAIN PERSONS IN
OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL 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:
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Exchange Offer" means the offer by the Issuers, 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.
"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchaser" means SBC Warburg Dillon Read Inc.
"Physical Security" means a certificated Initial Security bearing the
restricted securities legend set forth in Section 2.3(d) of this APPENDIX A.
"Purchase Agreement" means the Purchase Agreement, dated February 27,
1998, by and among the Issuers, the Subsidiary Guarantors and the Initial
Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of March 4, 1998, by and among the Issuers, the Subsidiary Guarantors
and the Initial Purchaser, as such agreement may be amended, modified or
supplemented from time to time.
"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.
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"Shelf Registration Statement" means the registration statement issued by
the Issuers, in connection with the offer and sale of Initial Securities,
pursuant to the Registration Rights Agreement.
"Transfer Restricted Securities" means Physical Securities and Global
Securities that bear or are required to bear the legend set forth in Section
2.3(d) of this APPENDIX A.
1.2. Other Definitions.
DEFINED IN
APPENDIX
TERM A SECTION
"Agent Members".................................. 2.1 (b)
"Global Security"................................ 2.1 (a)
Terms used herein without definition have the meanings ascribed to them in
the Indenture.
2. THE SECURITIES.
2.1. Form and Dating.
The Initial Securities are being offered and sold by the Issuers pursuant
to the Purchase Agreement.
(a) GLOBAL SECURITIES. Securities offered and sold to a QIB in reliance on
Rule 144A 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 "144A Global
Security"), which shall be deposited on behalf of the Initial Purchaser 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
Finance Corp. and duly endorsed by each Subsidiary Guarantor and authenticated
by the Trustee as provided in the Indenture. Securities offered in offshore
transactions in reliance on Regulation S may be issued initially in the form of
one or more global securities in such form without interest coupons with such
global securities legend and restricted securities legend (each, a "Regulation S
Global Security and, together with the 144 Global Securities, the "Global
Securities"). The Regulation S Global Securities will also be deposited with the
Trustee and registered in the manner set forth above for the 144A Global
Securities. 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.
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The Company and Finance Corp. shall execute, each of the Subsidiary
Guarantors shall endorse and the Trustee shall, in accordance with this Section
2.1(b) and pursuant to a Company Order, 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.
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 the custodian of the Depository or by the
Trustee under such Global Security, and the Depository may be treated by the
Issuers, the Trustee and any agent of the Company, Finance Corp. or the Trustee
as the absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers 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) PHYSICAL SECURITIES. Securities offered and sold in reliance on
Regulation S may also be issued in the form of Physical Securities. Owners of
beneficial interests in Global Securities will be entitled to receive physical
delivery of certificated Securities in accordance with Section 2.3 or 2.4.
2.2. AUTHENTICATION. The Trustee shall authenticate and deliver: (a)
Initial Securities for original issue in an aggregate principal amount of
$115,000,000 and (b) Exchange Securities for issue only in an Exchange Offer,
respectively, pursuant to the Registration Rights Agreement, for a like
principal amount, in each case, upon a Company Order, accompanied, in the case
of clause (b), by an Officers' Certificate from each of the Issuers and an
Opinion of Counsel to the effect that all conditions precedent to the issuance
of the Exchange Securities have been satisfied. Such Company Order shall specify
the principal amount of the Securities to be authenticated, the date on which
the original issue of Securities is to be authenticated, whether the Securities
are to be Initial Securities or Exchange Securities and whether such Securities
are to be issued as Global Securities or Physical Securities or, if both, the
principal amount of each thereof. The aggregate principal amount of Securities
outstanding at any time may not exceed $115,000,000, except as provided in
Section 3.6 of the Indenture.
2.3. TRANSFER AND EXCHANGE. (a) Transfer and Exchange of Physical
Securities. When Physical Securities are presented to the Security Registrar
with a request:
(x) to register the transfer of such Physical Securities; or
(y) to exchange such Physical Securities for an equal principal
amount of Physical Securities of other authorized denominations,
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<PAGE>
the Security Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met; PROVIDED,
HOWEVER, that the Physical 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 Security
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 or pursuant to clause (A),
(B) or (C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Physical Securities are being delivered to the
Security Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect; or
(B) if such Physical Securities are being transferred to the
Company, a certification to that effect;
(C) if such Physical Securities are being transferred to a QIB
in accordance with Rule 144A, a certification to that effect (in the
form set forth on the reverse of the Security); or
(D) if such Physical Securities are being transferred to an
IAI that is not a QIB or are being transferred pursuant to Rule 144,
Rule 904 or another exemption from registration, (i) a certification
to that effect (in the form set forth on the reverse of the
Security), and (ii) if the Company or Security 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) of this APPENDIX
A which, in the case of a transfer to an IAI that is not a QIB or
pursuant to Rule 904, may consist of a certificate in the form of
Exhibit 3 or Exhibit 4, respectively, to this Appendix A.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth in clause (i) and (ii) of Section 2.3(a). Additionally,
in the case of a transfer to an IAI that is not an QIB, the Company may decline
to exchange a Physical Security for a beneficial interest in a Global Security.
Subject to the foregoing, upon receipt by the Trustee of a Physical
Security duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with 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 Depository account to be credited with such
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<PAGE>
increase, then the Trustee shall cancel such Physical 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
Physical 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 Physical Security so
canceled. If no Global Securities are then Outstanding, the Company and Finance
Corp. shall issue and the Trustee shall authenticate, upon the Company Order, a
new Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities.
(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 Security Registrar a written order given in accordance with the
Depository's procedure containing information regarding the participant
account of the Depository to be credited with a beneficial interest in the
Global Security. The Security Registrar shall, in accordance with such
instructions, subject, however, to the procedures of the Depository and
custom and practice therefor, instruct the Depository 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.
The Security Registrar shall have no liability on account of any failure
of any transferor of a beneficial interest in a Global Security to provide
such written order.
(ii) Notwithstanding any other provisions of this APPENDIX A (other
than the provisions set forth in Section 2.4 of this APPENDIX A), 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 of this
APPENDIX A prior to the consummation of an 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 the respective exemption from registration afforded under the
Act) and such other procedures as may from time to time be adopted by the
Company.
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<PAGE>
(d) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities and the
Physical Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLERS
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT."
"THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO 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, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE ISSUERS SO REQUEST), (2) TO THE ISSUERS OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
Each Physical Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY
REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH SECURITY
REGISTRAR MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS."
<PAGE>
(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
Physical Security, the Security Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Physical
Security that does not bear the legend set forth above and rescind
any restriction on the sale or transfer of such Transfer Restricted
Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Security Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Global Security that does not bear the legend set
forth above and rescind any restriction on the sale or transfer of
such Transfer Restricted Security;
in either case, if the Holder certifies in writing to the Security 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 Initial
Security).
(iii) After a transfer of any Initial Securities during the period
of the effectiveness of a Shelf Registration Statement with respect to
such Initial Securities and an Initial Securities in certificated or
global form without legends will be available to the transferee of the
Holder of such Initial Securities upon exchange of such transferring
Holder's certificated Initial Securities. Upon the occurrence of any of
the circumstances described in this paragraph, the Company will deliver a
Company Order instructing the Trustee to issue Securities without legends.
(iv) Upon the consummation of an 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 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
Exchange Offer. Upon the occurrence of any of the circumstances described
in this paragraph, the Company will deliver a Company Order instructing
the Trustee to issue Exchange Securities without legends.
(e) Cancellation or Adjustment of Global Security. At such time as all
beneficial interests in a Global Security have either been exchanged for
certificated or Physical Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancellation or retained
and canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated or
Physical Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall
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<PAGE>
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
and Finance Corp. shall execute and, upon Company Order, the Trustee shall
authenticate certificated Securities, Physical Securities and Global
Securities.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company or the Trustee may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge and any other expenses, including the fees and
expenses of the Trustee, payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.5 and 10.14).
(iii) The Security Registrar or co-registrar shall not be required
to register the transfer or exchange of (a) any Physical Security selected
for redemption in whole or in part pursuant to Article 3 of the Indenture,
except the unredeemed portion of any Physical Security being redeemed in
part, or (b) any Physical Security for a period beginning 15 Business Days
before the mailing of a notice of an offer to repurchase or redeem
Securities.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Issuers, the Trustee, the Paying Agent, the Security
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, premium, if
any, and Liquidated Damages, if any, on such Security and for all other
purposes whatsoever, whether or not such Security is overdue, and none of
the Company, Finance Corp., the Trustee, the Paying Agent, the Security
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, Company or Finance Corp.
(i) Neither the Trustee, the Company, Finance Corp., nor any agent
of any thereof, shall have any responsibility or obligation to any
beneficial owner of a Global Security, an Agent Member, 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 an Agent
Member, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depository) of any notice (including any
notice of redemption) or the payment of any
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<PAGE>
amount, under or with respect to such Securities. All notices and
communications to be given to the Holder 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, the Company, Finance Corp. and any such agent 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) Neither the Trustee nor the Security Registrar shall have any
obligation or duty to monitor, determine or inquire as to compliance with
any restrictions on transfer imposed under the 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 the 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 of this APPENDIX A 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 of this APPENDIX A 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 depository
is not appointed by the Company within 90 days of such notice, (ii) the Holder
requests a certificated security and complies with the provisions of Section 2.4
or (iii) the Company, in its sole discretion, notifies the 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 2.4 shall be surrendered by the Depository to
the Trustee to be so transferred, in whole or from time to time in part, without
charge, and, upon Company Order, 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 cases 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) of
this APPENDIX A, bear the restricted securities legend set forth in EXHIBIT 1
hereto.
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<PAGE>
(c) Subject to the provisions of Section 2.4(b) of this APPENDIX A, 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 the
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i) of this APPENDIX A, (ii) or (iii), the Issuers will promptly
make available to the Trustee a reasonable supply of certificated Securities in
definitive, fully registered form without interest coupons.
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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]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLERS
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE
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<PAGE>
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO
REQUEST), (2) TO THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE SECURITY
REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH SECURITY REGISTRAR MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.] (1)
- ----------
(1) Include if a Physical Security.
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<PAGE>
GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, INTEREST
AND LIQUIDATED DAMAGES, IF ANY, BY CERTAIN SUBSIDIARIES OF
MARKET HUB PARTNERS STORAGE, L.P.
CUSIP No._________________ $____________
No. _______________________
MARKET HUB PARTNERS STORAGE, L.P.
MARKET HUB PARTNERS FINANCE, INC.
8 1/4% Senior Note due 2008
Market Hub Partners Storage, L.P., a Delaware limited partnership (herein
called the "Company," which term includes any successor Person under the
Indenture hereinafter referred to), and Market Hub Partners Finance, Inc., a
Delaware corporation (herein called "Finance Corp.", which term includes any
successor Person under such Indenture, and, together with the Company, the
"Issuers"), for value received, hereby promise to pay to ____________ or
registered assigns the principal sum of _________ Dollars on March 1, 2008, at
the office or agency of the Company referred to below, and to pay interest
thereon, commencing on September 1, 1998 and continuing semiannually thereafter,
on March 1 and September 1 in each year, accruing from March 4, 1998, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, at the rate of 8 1/4% per annum, until the principal hereof is
paid or duly provided for, and (to the extent lawful) to pay on demand interest
on any overdue interest at the rate borne by the Securities from the date on
which such overdue interest becomes payable to the date payment of such interest
has been made or duly provided for. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered on the Security Register at the close of
business on the Regular Record Date for such interest, which shall be the
February 15 or August 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date, and such Defaulted Interest, and (to the extent
lawful) interest on such Defaulted Interest at the rate borne by the Securities,
may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered on the Security Register at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Principal of and premium, if any, interest and Liquidated Damages, if any,
on the Securities shall be payable (i) in same-day funds on or prior to the
payment dates with respect to those amounts
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<PAGE>
in the case of Securities held of record by the Depository and (ii) at the
office of the Trustee in New York, New York, in the case of Securities held of
record by Holders other than the Depository. The Issuers may, at their option,
pay interest and Liquidated Damages, if any, on Securities held of record by
Holders other than the Depository by check mailed to the addresses of the
Persons entitled thereto as they appear in the Security Register on the Regular
Record Date therefor or by a wire transfer of immediately available funds to an
account located in the United States designated by the Holder.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
This Security is a joint and several obligation of the Company and Finance
Corp.
IN WITNESS WHEREOF, the Company and Finance Corp. have caused this
instrument to be duly executed under its corporate seal.
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.,
a Delaware limited liability company,
Its General Partner
By:_____________________________
Name: __________________________
Title: _______________________
ATTEST:
By:
Name:
Title:
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<PAGE>
MARKET HUB PARTNERS FINANCE, INC.
By:__________________________________
Name: __________________________
Title: _______________________
ATTEST:
By:
Name:
Title:
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:_________________
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: _________________________________
Authorized Signatory
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<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
This Security is one of a duly authorized issue of securities of the
Company and Finance Corp. designated as their 8 1/4% Senior Notes due 2008
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $115,000,000 which
may be issued under an indenture (herein called the "Indenture"; capitalized
terms used herein and not defined herein shall have the respective meanings set
forth in the Indenture) dated as of March 1, 1998 among the Company, Finance
Corp., the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as
Trustee (herein called the "Trustee," which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties, obligations and immunities thereunder of the Company, Finance
Corp., the Subsidiary Guarantors, the Trustee and the Holders of the Securities,
and of the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Issuers may, at their option, redeem the Securities in whole or from
time to time in part, on or after March 1, 2003, on not less than 30 nor more
than 60 days' notice at the following Redemption Prices (expressed as
percentages of principal amount) set forth below, if redeemed during the
twelve-month period beginning on March 1 of the year indicated below:
Redemption
YEAR PRICE
------ ----------
2003........................................... 104.125%
2004........................................... 102.750%
2005........................................... 101.375%
2006 and thereafter............................ 100.000%
together in the case of any such redemption with accrued and unpaid interest
thereon and Liquidated Damages, if any, to the applicable Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to such
Redemption Date), all as provided herein.
Notwithstanding the foregoing, at any time on or prior to March 1, 2001,
the Issuers may redeem up to 35% of the aggregate principal amount of Securities
originally issued on not less than 30 nor more than 60 days' notice to each
Holder of Securities to be redeemed, from the Net Cash Proceeds of one or more
Public Equity Offerings, at a Redemption Price equal to 108.250% of the
principal amount thereof, together with accrued and unpaid interest thereon and
Liquidated Damages, if any, to the Redemption Date, PROVIDED that (i) at least
$74,750,000 of the aggregate principal amount of Securities originally issued
remains Outstanding immediately after that redemption and (ii) the Issuers
effect that redemption within 60 days after the Public Equity Offering closes.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to Holders
of such Securities, or one or more
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<PAGE>
Predecessor Securities, of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the Redemption Date. In the event of
redemption or purchase of this Security in part only, a new Security or
Securities for the unredeemed or unpurchased portion hereof shall be issued in
the name of the Holder hereof upon the cancellation hereof.
The Securities do not have the benefit of any mandatory redemption or
sinking fund obligations.
If a Change of Control of the Company occurs, and subject to certain
conditions and limitations provided in the Indenture, the Issuers will be
obligated to make an offer to purchase, on a Business Day not more than 60 or
less than 30 days following the occurrence of a Change of Control of the
Company, all the then Outstanding Securities at a purchase price equal to 101%
of the principal amount thereof, together with accrued and unpaid interest
thereon, if any, and Liquidated Damages, if any, to the Change of Control
Purchase Date, all as provided in the Indenture.
In the event of Asset Sales, under certain circumstances, the Company will
be obligated to make a Net Proceeds Offer to purchase all or a specified portion
of each Holder's Securities at a purchase price equal to 100% of the principal
amount of the Securities, together with accrued and unpaid interest thereon, if
any, and Liquidated Damages, if any, to the Net Proceeds Payment Date, all as
provided in the Indenture.
As set forth in the Indenture, an Event of Default is generally (i) any
default in the payment of principal of or premium, if any, on any of the
Securities, whether at maturity, redemption or otherwise (including pursuant to
a Change of Control Offer or a Net Proceeds Offer); (ii) any default for 30 days
in payment of interest or Liquidated Damages, if any, on any of the Securities;
(iii) any default in the performance or breach of agreements relating to
mergers, consolidations and sales of assets substantially as an entirety or the
failure to make or consummate either a Change of Control Offer or a Net Proceeds
Offer; (iv) any failure of the Company, Finance Corp. or any Subsidiary
Guarantor for 30 days after written notice to comply with any other covenants in
the Indenture or the Securities or its Subsidiary Guarantee, as the case may be;
(v) certain payment defaults under, and the acceleration prior to the maturity
of, certain Indebtedness of the Company, Finance Corp. or any Restricted
Subsidiary in an aggregate principal amount in excess of $5,000,000; (vi)
certain final judgments or orders against the Company, Finance Corp. or any
Restricted Subsidiary in an aggregate amount of more than $5,000,000 in excess
of insurance coverage not paid, discharged or stayed for a period of 60 days;
(vii) certain events of bankruptcy, insolvency or reorganization of the Company,
Finance Corp. or any Restricted Subsidiary; and (viii) except as permitted by
the Indenture and hereby, cessation of the effectiveness of any Subsidiary
Guarantee or any repudiation thereof. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities may declare the principal amount of all the
Securities to be due and payable immediately, except that in the case of an
Event of Default arising from certain events of bankruptcy, insolvency or
reorganization of the Company, Finance Corp. or any Restricted Subsidiary, the
principal amount of the Securities will become due and
-8-
<PAGE>
payable immediately without further action or notice. No Holder may pursue any
remedy under the Indenture unless the Trustee shall have failed to act after
notice from such Holder of an Event of Default and written request by Holders of
at least 25% in aggregate principal amount of the Outstanding Securities, and
the offer to the Trustee of indemnity reasonably satisfactory to it; however,
such provision does not affect the right to sue for enforcement of any overdue
payment on a Security by the Holder thereof. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Outstanding
Securities may direct the Trustee in its exercise of any trust or power under
the Indenture. The Trustee may withhold from Holders notice of any continuing
default (except default in payment of principal, premium, interest or Liquidated
Damages) if it determines in good faith that withholding the notice is in the
interest of the Holders. The Company is required to file annual and quarterly
reports with the Trustee as to the absence or existence of defaults.
The Indenture contains provisions for (i) defeasance at any time of the
entire indebtedness of the Issuers on this Security and (ii) discharge from
certain covenants and Defaults and Events of Default, upon compliance by the
Issuers with certain conditions set forth therein, which provisions apply to
this Security.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Issuers and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Issuers with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by or on behalf of the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Security. Without the consent of any Holder, the Issuers and the Trustee
may amend or supplement the Indenture or the Securities to effect or maintain
the qualification of the Indenture under the Trust Indenture Act to make certain
specified changes, to cure any ambiguity or omission, correct or supplement any
provision that may be defective or inconsistent with any other provision and to
make certain other changes that do not adversely affect the interests of the
Holders in any material respect.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Issuers, which is
absolute and unconditional, to pay the principal of and premium, if any,
interest and Liquidated Damages, if any, on this Security at the times, place,
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registerable on the Security
Register of the Issuers, upon surrender of this Security for registration of
transfer at the office or agency of the Issuers maintained for such purpose duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in
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<PAGE>
writing, and thereupon one or more new Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Issuers or the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge and any other
expenses, including the fees and expenses of the Trustee, payable in connection
therewith.
A director, officer, employee, incorporator, stockholder, limited partner,
manager or Affiliate of the Issuers or a Subsidiary Guarantor, as such, past,
present or future shall not have any personal liability under this Security or
any other Security or the Indenture by reason of his or its status as such
director, officer, employee, incorporator, stockholder,. limited partner,
manager or Affiliate, or any liability for any obligations of the Issuers or a
Subsidiary Guarantor under the Securities or the Indenture or for any claim
based on, in respect of, or by reason of such obligations or their creation
PROVIDED, that the foregoing shall not limit any liability the General Partner
may have for the obligations of the Company under applicable law. Each Holder,
by accepting this Security, waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of this Security.
Prior to the time of due presentment of this Security for registration of
transfer, the Issuers, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security is overdue, and neither
the Issuers, the Trustee nor any agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. The Company will furnish to
any Holder upon written request and without charge a copy of the Indenture.
Requests may be made to the Company at 16420 Park Ten Place, Suite 420, Houston,
Texas 77084, Attention: Secretary (or such other address as the Company may have
furnished in writing to the Trustee).
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
indemnification of the Issuers to the extent provided therein.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders thereof. No
representation is made as to the accuracy of such numbers as printed on the
Securities, and reliance may be placed only on the other identifying information
printed hereon.
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<PAGE>
Interest on this Security shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
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<PAGE>
[FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE]
The Subsidiary Guarantors, referred to in this Security upon which this
notation is endorsed and each hereinafter referred to as a "Subsidiary
Guarantor," which term includes any successor person under the Indenture, have
unconditionally guaranteed, jointly and severally, on a senior basis (such
guarantee by each Subsidiary Guarantor being referred to herein as the
"Subsidiary Guarantee") (i) the due and punctual payment of the principal of and
premium, if any, and interest on the Securities, whether at Stated Maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of and premium, if any, and interest, if any, on the
Securities, the payment of Liquidated Damages on the Securities, and the due and
punctual performance of all other obligations of the Company and Finance Corp.
to the Holders or the Trustee all in accordance with the terms set forth in
Article XIII of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Securities or any of such other obligations, the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
The obligations of each Subsidiary Guarantor to the Holders of Securities
and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly set forth, and are senior obligations of each such Subsidiary
Guarantor to the extent and in the manner provided, in Article XIII of the
Indenture, and may be released or limited under certain circumstances. Reference
is hereby made to such Indenture for the precise terms of the Subsidiary
Guarantee therein made.
The Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication of the Securities upon which this
Subsidiary Guarantee is endorsed shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized signatories.
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<PAGE>
SUBSIDIARY GUARANTORS:
MOSS BLUFF HUB PARTNERS, L.P.
By: Moss Bluff Hub Partners, L.L.C.,
Its General Partner
By:_________________________________
Name:___________________________
Title:___________________________
EGAN HUB PARTNERS, L.P.
By: Egan Hub Partners, L.L.C.,
Its General Partner
By:__________________________________
Name:___________________________
Title:__________________________
MOSS BLUFF HUB PARTNERS, L.L.C.
By:__________________________________
Name:___________________________
Title:__________________________
EGAN HUB PARTNERS, L.L.C.
By:__________________________________
Name:___________________________
Title:__________________________
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<PAGE>
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 Issuers. 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.
Signature Guarantee:
Date:___________________________________ ____________________________________
Signature must be guaranteed by a Signature of Signature
participant in a recognized Guarantor
signature guaranty medallion program
or other signature guarantor acceptable
to the Trustee
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 Finance Corp. or any Affiliate of the Company, the
undersigned confirms that such Securities are being transferred in accordance
with its terms:
CHECK ONE BOX BELOW
(1) o to the Company or Finance Corp.; or
(2) o pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
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<PAGE>
(3) o inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933, as amended)
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, as
amended; or
(4) o to an institutional "accredited investor" (within the meanings of
subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933, as amended);
(5) o 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, as amended;
(6) o pursuant to Rule 144 under the Securities Act of 1933, as amended;
or
(7) o pursuant to another available exemption from registration provided
under the Securities Act of 1933, as amended.
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), (5), (6)
or (7) 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, as
amended.
------------------------------------
Signature
Signature Guarantee:
Date:___________________________________ ____________________________________
Signature must be guaranteed by a Signature of Signature
participant in a recognized Guarantor
signature guaranty medallion program
or other signature guarantor acceptable
to the Trustee
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF BOX (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
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<PAGE>
any such account is a "qualified institutional buyer" within the meaning of Rule
144A under the Securities Act of 1933, as amended, and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Issuers 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 for ongoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:_____________________ ______________________________________
NOTE: To be executed by an executive officer
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuers
pursuant to Section 10.14 or 10.16 of the Indenture, check the box:
o
If you want to elect to have only part of this Security purchased by the
Issuers pursuant to Section 10.14 or 10.16 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:
Date:___________________________________ ____________________________________
Signature must be guaranteed by a Signature of Signature
participant in a recognized Guarantor
signature guaranty medallion program
or other signature guarantor acceptable
to the Trustee
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<PAGE>
EXHIBIT 2
to
Appendix A
[FORM OF ASSIGNMENT FOR EXCHANGE SECURITIES]
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 Issuers. 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.
Signature Guarantee:
Date:___________________________________ ____________________________________
Signature must be guaranteed by a Signature of Signature
participant in a recognized Guarantor
signature guaranty medallion program
or other signature guarantor acceptable
to the Trustee
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<PAGE>
EXHIBIT 3
to
Appendix A
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
-----------, ----
[Name and Address of Trustee]
Re: Market Hub Partners Storage, L.P.
Market Hub Partners Finance, Inc.
8 1/4% Senior Notes due 2008
Ladies and Gentlemen:
We are delivering this letter in connection with a proposed purchase of 8
1/4% Senior Notes due 2008 (the "Senior Notes") of Market Hub Partners Storage,
L.P. (the "Company") and Market Hub Partners Finance, Inc.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities
Act"), or an entity in which all of the equity owners are accredited investors
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
(an "Institutional Accredited Investor");
(ii) any purchase of Notes by us will be for our own account or for the
account of one or more other Institutional Accredited Investors;
(iii) in the event that we purchase any Senior Notes, we will acquire
Notes having a minimum purchase price of at least $100,000 for our own account
and for each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Senior Notes;
(v) we are not acquiring Senior Notes with a view to any distribution
thereof in a transaction that would violate the Securities Act or the securities
laws of any State of the United States or any other applicable jurisdiction;
provided that the disposition of our property and the property of any accounts
for which we are acting as fiduciary shall remain at all times within our
control; and
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<PAGE>
(vi) we acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Issuers and receive answers thereto, as we deem necessary
in connection with our decision to purchase Senior Notes.
We understand that the Senior Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Senior Notes have not been registered under the Securities Act, and we
agree, on our own behalf and on behalf of each account for which we acquire any
Senior Notes, that such Senior Notes may be offered, resold, pledged or
otherwise transferred only (i) to a person whom we reasonably believe to be a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act), in a transaction meeting the requirements of Rule 144A, in a transaction
meeting the requirements of Rule 144, outside the United states in a transaction
meeting the requirements of Rule 904 under the Securities Act, or in accordance
with another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel if the Issuers so requests), (ii) to the
Issuers or (iii) pursuant to an effective registration statement, and, in each
case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction. We understand that the
registrar will not be required to accept for registration of transfer any Senior
Notes, except upon presentation of evidence satisfactory to the Issuers that the
foregoing restrictions on transfer have been complied with. We further
understand that the Senior Notes purchased by us will be in the form of
definitive physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph.
We acknowledge that you and others will rely upon our confirmation,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases to
be accurate and complete.
(Name of Purchaser)
By:_________________________________
Name:______________________________
Title:______________________________
Address:____________________________
===================================
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EXHIBIT 4
to
Appendix A
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
--------------, ----
[Name and Address of Trustee]
Re: Market Hub Partners Storage, L.P.
Market Hub Partners Finance, Inc.
8 1/4% Senior Notes due 2008 (the "Senior Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate principal
amount of the Senior Notes, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Senior Notes was not made to a person in the United
States;
2. either (a) at the time the buy offer was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States, or (b) the
transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
3. no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
5. we have advised the transferee of the transfer restrictions applicable
to the Senior Notes.
You and the issuers of the Senior Notes are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative
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<PAGE>
or legal proceedings or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[Name of Transferor]
By:________________________________________
Authorized Signature
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EXHIBIT 4.2
CONFORMED
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of March 4, 1998
by and among
MARKET HUB PARTNERS STORAGE, L.P.
MARKET HUB PARTNERS FINANCE, INC.
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
SBC WARBURG DILLON READ INC.
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<PAGE>
This Registration Rights Agreement (the "AGREEMENT") is made and entered
into as of March 4, 1998 by and among MARKET HUB PARTNERS STORAGE, L.P., a
Delaware limited Partnership (the "COMPANY"), MARKET HUB PARTNERS, INC., a
Pennsylvania corporation ("FINANCE CORP." and together with the Company, the
"ISSUERS"), the SUBSIDIARY GUARANTORS (as defined herein) and SBC WARBURG DILLON
READ INC. (the "INITIAL PURCHASER"). The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchaser to purchase
$115,000,000 of the 8 1/4% Senior Notes due 2008 of the Company and Finance
Corp. under the Purchase Agreement, dated as of February 27, 1998 (the "PURCHASE
AGREEMENT"), by and among the Issuer, the Subsidiary Guarantors and the Initial
Purchaser.
The Company, Finance Corp., the Subsidiary Guarantors and the Initial
Purchaser hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended, and the rules and regulations
promulgated by the Commission pursuant thereto.
ACTION: As defined in Section 8(c) of this Agreement.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: As that term is defined in the Indenture.
CLOSING DATE: The date that the Notes are purchased by the Initial
Purchaser pursuant to the Purchase Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Notes to be issued in the Exchange Offer, (ii) the maintenance
of such Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the minimum period required
pursuant to Section 3(b) of this Agreement and (iii) the delivery by the Company
and Finance Corp. to the Registrar under the Indenture of New Notes in the same
aggregate principal amount as the aggregate principal amount of Old Notes that
were so tendered.
DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment
Date.
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EFFECTIVENESS TARGET DATE: As defined in Section 5 of this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission pursuant thereto.
EXCHANGE OFFER: The registration under the Act by the Issuers and the
Subsidiary Guarantors of the New Notes pursuant to a Registration Statement
pursuant to which the Issuers and the Subsidiary Guarantors offer the Holders of
all outstanding Transfer Restricted Securities the opportunity to exchange all
such outstanding Old Notes that are Transfer Restricted Securities held by such
Holders for New Notes in an aggregate principal amount equal to the aggregate
principal amount of the Old Notes that are Transfer Restricted Securities
tendered in such exchange offer by such Holders.
EXCHANGE OFFER EFFECTIVE DATE: The dated on which the Exchange Offer
Registration Statement is declared effective by the Commission.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchaser proposes
to sell the Notes to (i) certain "qualified institutional buyers," as such term
is defined in Rule 144A under the Act, and (ii) other eligible purchasers
pursuant to Regulation S under the Act.
HOLDERS: As defined in Section 2(b) of this Agreement.
INDENTURE: The Indenture, dated as of March 1, 1998, by and among the
Issuers, the Subsidiary Guarantors and IBJ Schroder Bank & Trust Company, as
trustee (the "TRUSTEE"), pursuant to which the Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with its
terms.
INITIAL PURCHASER: SBC Warburg Dillon Read Inc.
INTEREST PAYMENT DATE: As defined in the Notes.
ISSUE DATE: The date the Old Notes are originally issued (March 4, 1998).
NASD: National Association of Securities Dealers, Inc.
NEW NOTES: The 8 1/4% Senior Notes due 2008 of the Issuers to be issued
pursuant to the Indenture in connection with the Exchange Offer and evidencing
the same debt as the Old Notes, including the guarantees by the Subsidiary
Guarantors.
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<PAGE>
NOTES: Old Notes and New Notes.
OLD NOTES: The 8 1/4% Senior Notes due 2008 of the Issuers to be issued
pursuant to the Indenture on the Closing Date, including the guarantees by the
Subsidiary Guarantors.
PARTICIPATING BROKER DEALER: As defined in Section 6(a)(iii) of this
Agreement.
PERSON: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
and supplements thereto, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such Prospectus.
REGISTRATION DEFAULT: As defined in Section 5 of this Agreement.
REGISTRATION STATEMENT: Any registration statement of the Issuers and the
Subsidiary Guarantors relating to (a) an offering of New Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement that is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including pre- and
post-effective amendments) and all exhibits and material incorporated by
reference or deemed to be incorporated by reference, if any, therein.
SHELF FILING DEADLINE: As defined in Section 4(a) of this Agreement.
SHELF REGISTRATION STATEMENT: As defined in Section 4(a) of this
Agreement.
SUBSIDIARY: With respect to any Person, any other Person of which a
majority of the equity ownership or the voting securities is at the time owned,
directly or indirectly, by such Person or by one or more other subsidiaries of
such Person or a combination thereof.
SUBSIDIARY GUARANTORS: Each Subsidiary of the Company that, pursuant to
the Indenture, is, or is required to become, a guarantor of the obligations of
the Company under the Notes and the Indenture.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
77aaa-77bbbb), as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Note until the earliest to occur of
(i) the date on which each such Old Note has been exchanged by a person other
than a Broker-Dealer for a New Note in
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<PAGE>
the Exchange Offer, (ii) following the exchange by a Broker-Dealer in the
Exchange Offer of an Old Note for a New Note, the date on which such New 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 Note has been effectively
registered under the Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public pursuant to an effective Registration Statement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person
beneficially owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless, due to a change in law or Commission policy after the date
hereof, the Exchange Offer shall not be permissible under applicable federal law
or Commission policy, the Issuers and the Subsidiary Guarantors shall (i) cause
to be filed with the Commission as soon as practicable on or prior to 60 days
after the Issue Date (or, if such 60th day is not a Business Day, then the first
Business Day thereafter), a Registration Statement under the Act relating to the
New Notes and the Exchange Offer and (ii) use their best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable on or prior to 120 days after the Closing Date (or, if such 120th
day is not a Business Day, then the first Business Day thereafter). In
connection with the foregoing, the Issuers and the Subsidiary Guarantors shall
(A) file all pre-effective amendments to such Registration Statement as may be
necessary to cause such Registration Statement to become effective, (B) if
applicable, file a post-effective amendment to such Registration Statement
pursuant to Rule 430A under the Act, (C) cause all necessary filings in
connection with the registration and qualification of the New Notes to be made
under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer (PROVIDED, HOWEVER, that the Issuers and the
Subsidiary Guarantors shall not be obligated to qualify as foreign corporations
in any jurisdiction in which they are not so qualified or to take any action
that would subject them to general service of process or taxation in any
jurisdiction where they are not so subject, except service of process with
respect to the offering and sale of the Notes and Exchange Notes) and (D) upon
the effectiveness of such Registration Statement, promptly commence the Exchange
Offer and use their best efforts to issue on or prior to 45 days after the
Exchange Offer
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<PAGE>
Effective Date, New Notes in exchange for all Old Notes tendered in the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the New Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of New Notes held by Broker-Dealers
as contemplated by Section 3(c) below. If, after such Exchange Offer
Registration Statement initially is declared effective by the Commission, the
Exchange Offer or the issuance of New Notes under the Exchange Offer or the
resale of New Notes received by Broker-Dealers in the Exchange Offer as
contemplated by Section 3(c) below is interfered with by any stop order,
injunction or other order or requirement of the Commission or any other
governmental agency or court, such Registration Statement shall be deemed not to
have become effective for purposes of this Agreement during the period that such
stop order, injunction or other similar order or requirement shall remain in
effect.
(b) The Issuers and the Subsidiary Guarantors shall cause the Exchange
Offer Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20
business days. The Issuers and the Subsidiary Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
The Issuers and the Subsidiary Guarantors shall only offer to exchange New Notes
for Old Notes in the Exchange Offer, and only the New Notes shall be registered
under the Exchange Offer Registration Statement.
(c) The Issuers shall indicate in a "Plan of Distribution" section
contained in the Prospectus included in the Exchange Offer Registration
Statement that any Broker-Dealer that holds Old Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such Old
Notes pursuant to the Exchange Offer; PROVIDED, HOWEVER, that such Broker-Dealer
may be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the New Notes received by such Broker-Dealer in
the Exchange Offer. Such "Plan of Distribution" section shall allow the use of
the Prospectus by all Persons subject to the prospectus delivery requirements of
the Act, including Participating Broker-Dealers, and shall also contain all
other information with respect to such resales by Broker-Dealers that the
Commission may require to permit such resales pursuant thereto, but such "Plan
of Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Issuers and the Subsidiary Guarantors shall use their best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the
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<PAGE>
Act and the policies, rules and regulations of the Commission as announced from
time to time. The Issuers shall provide sufficient copies of the latest version
of such Prospectus to Broker-Dealers promptly upon request at any time during
such period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Issuers and the Subsidiary Guarantors
are not required to file an Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities shall notify the Company within 20 business days of the commencement
of the Exchange Offer that such Holder (A) is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) may not
resell the New Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder or (C) is a Broker-Dealer and holds Old Notes (including the Initial
Purchaser who holds Old Notes as part of an unsold allotment from the original
offering of the Notes) acquired directly from the Company or one of its
affiliates or (iii) the Issuers and the Subsidiary Guarantors do not consummate
the Exchange Offer within 45 days following the effectiveness date of the
Exchange Offer Registration Statement, then the Company and the Subsidiary
Guarantors shall (x) cause to be filed a shelf registration statement pursuant
to Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "SHELF REGISTRATION STATEMENT"), on
or prior to the earliest to occur of (1) the 45th day after the date on which
the Company determines that it is not required to file the Exchange Offer
Registration Statement or (2) the 45th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as contemplated
by clause (ii) above (such earliest date being the "SHELF FILING DEADLINE"),
which Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) of this Agreement, and (y) use its best
efforts to cause such Shelf Registration Statement to be declared effective by
the Commission on or before the 90th day after the Shelf Filing Deadline. The
Issuers and the Subsidiary Guarantors shall use their best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) of this Agreement to the
extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a) and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a continuous period of two years following the
date on which such Shelf Registration Statement becomes effective under the Act
or such shorter period that will terminate when all the Notes covered by the
Shelf Registration Statement have been sold pursuant to such Shelf Registration
Statement.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer
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Restricted Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Company in writing,
within 15 business days after receipt of a request therefor, such information
regarding such Holder as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included in such Shelf Registration Statement. Each Holder as to
which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement (or, if such date is not a Business Day, the next succeeding
Business Day), (ii) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the
Exchange Offer has not been Consummated within 165 days after the Issue Date
(or, if such date is not a Business Day, the next succeeding Business Day) or
(iv) any Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or usable in connection
with resales of Transfer Restricted Securities in accordance with and during the
periods required by this Agreement (each such event referred to in clauses (i)
through (iv), a "REGISTRATION DEFAULT"), the Issuers and the Subsidiary
Guarantors hereby agree, jointly and severally, to pay liquidated damages to
each Holder of Transfer Restricted Securities with respect to the first 90-day
period immediately following the occurrence of such Registration Default, in an
amount equal to $.05 per week per $1,000 principal amount of Notes constituting
Transfer Restricted Securities held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the liquidated
damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Notes constituting Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.30 per week per $1,000 in principal
amount of Notes constituting Transfer Restricted Securities. Notwithstanding the
foregoing, the Issuers and the Subsidiary Guarantors shall not be required to
pay liquidated damages to each Holder of Transfer Restricted Securities if the
Registration Default arises from the failure of the Issuers and the Subsidiary
Guarantors to file, or cause to become effective, a Shelf Registration Statement
within the time period required by Section 4 of this Agreement and such
Registration Default is by reason of the failure of the Holders to provide the
information regarding the Holder reasonably requested by the Company, the NASD
or any other regulatory agency having jurisdiction over any of the Holders at
least 10 business days prior to such Registration Default. All accrued
liquidated damages shall be paid by the Issuers and the Subsidiary Guarantors on
each Damages Payment Date to the Holders by wire transfer of immediately
available funds or by federal funds check and to the Holders of certificated
securities by mailing a check to such Holders' registered addresses. Following
the cure of all Registration Defaults relating to any particular
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Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease.
All obligations of the Issuers and the Subsidiary Guarantors set forth in
the preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Transfer Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange
Offer, the Issuers and the Subsidiary Guarantors shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, due to a change in law or Commission policy after the date
hereof, in the reasonable opinion of special counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
federal law or Commission policy, the Company hereby agrees to seek a
no-action letter or other favorable decision from the Commission allowing
the Issuers and the Subsidiary Guarantors to Consummate an Exchange Offer
for such Old Notes. The Company hereby agrees to pursue the issuance of
such a no-action letter or favorable decision to the Commission staff
level but shall not be required to take commercially unreasonable action
to effect a change of Commission policy. The Company hereby agrees,
however, to (A) participate in telephonic conferences with the Commission,
(B) deliver to the Commission an analysis prepared by special counsel to
the Company setting forth the legal bases, if any, upon which such counsel
has concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission of such submission. The Initial Purchaser shall be given prior
notice of any action taken by the Company under this clause (i).
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written representation
to the Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an affiliate of the Issuers or any of the Subsidiary
Guarantors, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate in,
a distribution of the New Notes to be issued in the Exchange Offer and (C)
it is acquiring the New Notes in its ordinary course of business. In
addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange Offer.
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<PAGE>
(iii) The Issuers, the Subsidiary Guarantors and the Initial
Purchaser acknowledge that the staff of the Commission has taken the
position that any broker-dealer that owns New Notes that were received by
such broker-dealer for its own account in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER") may be deemed to be an "underwriter" within
the meaning of the Act and must deliver a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes
(other than a resale of an unsold allotment resulting from the original
offering of the Notes).
The Issuers, the Subsidiary Guarantors and the Initial Purchaser also
acknowledge that it is the Commission staff's position that if the Prospectus
contained in the Exchange Offer Registration Statement includes a plan of
distribution containing a statement to the above effect and the means by which
Participating Broker-Dealers may resell the New Notes, without naming the
Participating Broker-Dealers or specifying the amount of New Notes owned by
them, such Prospectus may be delivered by Participating Broker-Dealers to
satisfy their prospectus delivery obligations under the Act in connection with
resales of New Notes for their own accounts, so long as the Prospectus otherwise
meets the requirements of the Act.
(b) SHELF REGISTRATION STATEMENT. In the event that a Shelf Registration
Statement is required by this Agreement, the Issuers and the Subsidiary
Guarantors shall comply with all the provisions of Section 6(c) of this
Agreement and shall use their best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution of such Transfer Restricted
Securities and, in connection therewith, the Issuers and the Subsidiary
Guarantors will as expeditiously as possible prepare and file with the
Commission a Shelf Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution of such Transfer Restricted Securities.
(c) GENERAL PROVISIONS. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus, to the extent that the same are required
to be available to permit resales of Notes by Broker-Dealers), the Issuers and
the Subsidiary Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective for the applicable time period required hereunder
and provide all requisite financial statements (including, if required by
the Act or any regulation thereunder, financial statements of the
Subsidiary Guarantors) for the period specified in Section 3 or 4 of this
Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company shall
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<PAGE>
promptly notify the Holders to suspend use of the Prospectus, and the
Holders shall suspend use of the Prospectus, and such Holders shall not
communicate non-public information to any third party, in violation of the
securities laws, until the Issuers and the Subsidiary Guarantors have made
an appropriate amendment to such Registration Statement, in the case of
clause (A), correcting any such misstatement or omission, and, in the case
of either clause (A) or (B), the Issuers and the Subsidiary Guarantors
shall use their best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 of this Agreement, as applicable, or
such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold; cause
the Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act
during the applicable time period required hereunder and to comply fully
with the applicable provisions of Rules 424 and 430A under the Act in a
timely manner; and comply with the provisions of the Act and the Exchange
Act with respect to the disposition of all Transfer Restricted Securities
covered by such Registration Statement during such period in accordance
with the intended method or methods of distribution by the sellers of such
securities set forth in such Registration Statement as so amended or in
such Prospectus as so supplemented;
(iii) advise the underwriter(s), if any, the Initial Purchaser, and,
in the case of a Shelf Registration Statement, each of the selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any prospectus supplement or
post-effective amendment has been filed and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating to such Registration
Statement or Prospectus, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement under the
Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or sale
in any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening of
any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement to
such Registration Statement or Prospectus, as the case may be, or any
document incorporated by reference in such Registration Statement or
Prospectus untrue in any material respect, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements in such Registration Statement
or Prospectus not misleading and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state
any material fact
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<PAGE>
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Issuers and the Subsidiary Guarantors shall use their best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) furnish to each of the underwriter(s), if any, the Initial
Purchaser and, in the case of a Shelf Registration Statement, each of the
selling Holders before filing with the Commission, copies of any
Registration Statement or any Prospectus included in such Registration
Statement or Prospectus or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement),
which documents will be subject to the reasonable review of such
underwriter(s), if any, the Initial Purchaser, and such Holders for a
period of at least five business days, and the Issuers and the Subsidiary
Guarantors will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus, as the case may be, (including all such documents incorporated
by reference) to which any underwriter, Initial Purchaser or selling
Holder shall reasonably object within five business days after the receipt
of such Registration Statement or Prospectus. A selling Holder or
underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, Prospectus, amendment or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, (a)
provide copies of such document to the selling Holders and to the
underwriter(s), if any, (b) make the Issuer's and the Subsidiary
Guarantors' representatives available for discussion of such document and
other customary due diligence matters; PROVIDED that such discussion and
due diligence shall be coordinated on behalf of the selling Holders by one
counsel designated by and on behalf of such selling Holders and (c)
include such information in such document prior to the filing of such
document as such selling Holders or underwriter(s), if any, may reasonably
request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), if any, at the offices
where normally kept, during reasonable business hours, all relevant
financial and other records, pertinent corporate documents and properties
of the Issuers and the Subsidiary Guarantors and cause the Issuer's and
the Subsidiary Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement
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<PAGE>
subsequent to the filing thereof and prior to its effectiveness; PROVIDED,
HOWEVER, that such persons shall first agree in writing with the Company
that any information that is reasonably and in good faith designated by
the Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless and to the
extent that (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws
in connection with the filing of the Shelf Registration Statement or the
use of any Prospectus), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to
safeguard such information by such person or (iv) such information becomes
available to such person from a source other than the Issuers and its
Subsidiaries and such source is not bound by a confidentiality agreement;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid for Transfer Restricted
Securities and any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
PROVIDED, HOWEVER, that the Company shall not be required to take any
action pursuant to this Section 6(c)(vii) that would, in the opinion of
counsel for the Company, violate applicable law;
(viii)furnish to each underwriter, if any, the Initial Purchaser and
upon request to the Company to a selling Holder without charge, at least
one conformed copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including, upon the request of
such Person, all documents incorporated by reference therein and all
exhibits to the extent requested (including exhibits incorporated therein
by reference);
(ix) deliver to each selling Holder, each of the underwriter(s), if
any, and the Initial Purchaser, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Issuers and
the Subsidiary Guarantors hereby consent to the use of the Prospectus and
any amendment or supplement to the Prospectus by each of the selling
Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities in accordance
with the terms thereof and with U.S.
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<PAGE>
Federal securities laws and Blue Sky laws covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings of
securities of this type) and take all such other reasonable actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, all as may be reasonably requested by any
Holder of Transfer Restricted Securities or the underwriter(s), if any, in
connection with any sale or resale of Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Registration, the Issuers and the
Subsidiary Guarantors shall (i) make such representations and warranties
to the Holders of such Transfer Restricted Securities and the
underwriters, if any, with respect to the business of the Company and its
Subsidiaries (including with respect to businesses or assets acquired or
to be acquired by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when customarily requested; (ii)
obtain opinions of counsel to the Issuers and the Subsidiary Guarantors
and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the underwriters, if any,
and special counsel to the Holders of the Transfer Restricted Securities
being sold), addressed to each selling Holder of Transfer Restricted
Securities and each of the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such underwriters, if
any, and special counsel to Holders of Transfer Restricted Securities;
(iii) use their best efforts to obtain customary "cold comfort" letters
and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired
by the Company or any such subsidiary for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed (where reasonably possible) to each selling Holder
of Transfer Restricted Securities and each of the underwriters, if any,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings; (iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no less
favorable to the selling Holders and the underwriters, if any, than those
set forth in Section 8 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate principal amount of
Transfer Restricted Securities covered by such Shelf Registration
Statement and the underwriters, if any); and (v) deliver such documents
and certificates as may be reasonably requested by the Holders of a
majority in aggregate principal amount of the Transfer Restricted
Securities being sold and the underwriters, if any, to evidence the
continued validity of the representations and
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<PAGE>
warranties made pursuant to clause (i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company.
If at any time the representations and warranties of the Issuers and the
Subsidiary Guarantors contemplated in clause (A)(1) above cease to be true and
correct, the Company shall so advise the Initial Purchaser and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
any of them, shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with and cause the Subsidiary Guarantors to cooperate with the
selling Holders, the underwriter(s), if any, and their respective counsel
in connection with the registration and qualification (or exemption from
such registration or qualification) of the Transfer Restricted Securities
for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the selling Holders and underwriter(s), if any, may
reasonably request in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Registration Statement;
PROVIDED, HOWEVER, that neither the Company nor the Subsidiary Guarantors
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xii) if a Shelf Registration is filed pursuant to Section 2(b),
cooperate with the selling Holders of Registrable Securities and the
managing Underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be
sold, which certificates shall not bear any restrictive legends and shall
be in a form eligible for deposit with The Depository Trust Company; and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing Underwriters, if any, or Holders
may reasonably request;
(xiii)in connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with and cause the Subsidiary Guarantors
to cooperate with the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xiv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental
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<PAGE>
agencies or authorities as may be necessary to enable the seller or
sellers of such Transfer Restricted Securities or the underwriter(s), if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xi) above;
(xv) if any fact or event contemplated by Section 6(c)(iii)(D) of
this Agreement shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated in such Registration Statement or
Prospectus by reference or file any other required document so that, as
thereafter delivered to the purchasers of Transfer Restricted Securities,
the Registration Statement will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading and the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and
provide the Trustee under the Indenture with printed certificates for the
Transfer Restricted Securities that are in a form eligible for deposit
with The Depository Trust Company;
(xvii)cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of
the NASD);
(xviii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission in regards to any Registration
Statement, and make generally available to its securityholders, as soon as
practicable, a consolidated earning statement of the Company meeting the
requirements of Rule 158 (which need not be audited) for the twelve-month
period (A) commencing at the end of any fiscal quarter in which Transfer
Restricted Securities are sold to underwriters in a firm commitment or
reasonable best efforts Underwritten Offering or (B) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement; and
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture, if any, as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its best efforts to cause the
Trustee to execute, all customary documents that may be required to effect
such changes and all other forms and documents
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<PAGE>
required to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(c)(iii)(D) of this Agreement, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xv) of
this Agreement, or until it is advised in writing (the "ADVICE") by the Company
that the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of such notice. In
the event that the Company shall give any such notice, the time period regarding
the effectiveness of such Registration Statement set forth in Section 3 or 4 of
this Agreement, as applicable, shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) of this Agreement to and including the date when each
selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv) of this Agreement or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All fees and expenses incident to the Issuers and the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Company regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made with the NASD (and, if applicable, the fees and expenses
of any "qualified independent underwriter" and its counsel that may be required
by the rules and regulations of the NASD)); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the New Notes to
be issued in the Exchange Offer and printing of Prospectuses); (iv) all fees and
disbursements of counsel for the Issuers, the Subsidiary Guarantors and, subject
to Section 7(b) below, the Holders of Transfer Restricted Securities; and (v)
all fees and disbursements of independent certified public accountants of the
Company and the Subsidiary Guarantors (including the expenses of any special
audit and comfort letters required by or incident to such performance).
The Issuers and the Subsidiary Guarantors will, in any event, bear their
internal expenses (including, without limitation, all salaries and expenses of
their officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person, including
special experts, retained by them.
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<PAGE>
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each Holder of Transfer Restricted Notes shall pay all underwriting
discounts and commissions of any underwriters with respect to any Notes sold by
or on behalf of it.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Vinson & Elkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) Each of the Company, Finance Corp. and the Subsidiary Guarantors, on a
joint and several basis, agrees to indemnify and hold harmless (i) the Initial
Purchaser, each Holder of Transfer Restricted Securities and each Participating
Broker Dealer, (ii) each person, if any, who controls any of the foregoing
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(any of the persons referred to in this clause (ii) being hereinafter referred
to as a "CONTROLLING PERSON") and (iii) its agents, employees, officers and
directors and the agents, employees, officers and directors of any such
controlling person (collectively, the "INDEMNIFIED PERSONS") from and against
any and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all reasonable amounts paid in settlement of any claim or litigation) to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus, or in any amendment thereof 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, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the Issuers and the Subsidiary
Guarantors will not be liable in any such case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Indemnified Person
relating to such Indemnified Person expressly for use therein. This indemnity
agreement will be in addition to any liability that the Issuers and the
Subsidiary Guarantors may otherwise have, including, but not limited to,
liability under this Agreement.
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<PAGE>
If any action is brought against any Indemnified Persons or any such
person in respect of which indemnity may be sought against the Issuers and the
Subsidiary Guarantors pursuant to the foregoing paragraph, such Indemnified
Persons or such person shall promptly notify the indemnifying party in writing
of the institution of such action and the indemnifying party shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses,
PROVIDED, HOWEVER, except to the extent that the indemnifying party shall be
materially prejudiced thereby (through the forfeiture of substantive rights or
defenses), that the omission to so notify the indemnifying party shall not
relieve the indemnifying party from any liability which they may have to the
Indemnified Persons or any such person or otherwise. Such Indemnified Persons
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Persons
unless the employment of such counsel shall have been authorized in writing by
the indemnifying party in connection with the defense of such action or the
indemnifying party shall not have employed counsel to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the indemnifying party (in which case
the indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying party and paid as
incurred (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (together with
appropriate local counsel) in any one action or series of related actions in the
same jurisdiction representing the indemnified parties who are parties to such
action). The indemnifying party shall not be liable for any settlement of any
such claim or action effected without its written consent but if settled with
the written consent of the indemnifying party, the indemnifying party agrees to
indemnify and hold harmless any Indemnified Persons and any such person from and
against any loss or liability by reason of such settlement. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior notice of its intention to settle. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding 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 claims
that are the subject matter of such proceeding.
(b) In connection with any Registration Statement pursuant to which a
Holder of Transfer Restricted Securities offers or sells Transfer Restricted
Securities, such Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, Finance Corp. and the Subsidiary
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Guarantors, their respective directors and officers and any person controlling
the Company or a Subsidiary Guarantor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and each of their agents,
employees, officers and directors and the agents, employees, officers and
directors of such controlling person from and against any losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to reasonable
attorneys' fees and any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all reasonable amounts paid in
settlement of any claim or litigation) to which they or either of them may
become subject under the Act, the Exchange Act or otherwise insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, or in any amendment
thereof 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, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information relating to such Holder furnished to the Company by
such Holder expressly for use in such Registration Statement.
If any action is brought against the Company, Finance Corp. or the
Subsidiary Guarantors or any such person in respect of which indemnity may be
sought against any Holder of Transfer Restricted Securities pursuant to
foregoing paragraph, the Company, Finance Corp., the Subsidiary Guarantors or
such person shall promptly notify such Holder in writing of the institution of
such action and such Holder shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses, PROVIDED, HOWEVER, except to the extent that
the indemnifying party shall be materially prejudiced thereby (through the
forfeiture of substantive rights or defenses), that the omission to so notify
such Holder shall not relieve such Holder from any liability which they may have
to the Issuers the Subsidiary Guarantors or any such person or otherwise. The
Issuers, the Subsidiary Guarantors or such person shall have the right to employ
its own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of the Company or such person unless the employment of
such counsel shall have been authorized in writing by such Holder of Transfer
Restricted Securities in connection with the defense of such action or such
Holder shall not have employed counsel to have charge of the defense of such
action or such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to such Holder (in which case such Holder shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties, but such Holder may employ counsel and participate
in the defense thereof but the fees and expenses of such counsel shall be at the
expense of such Holder), in any of which events such fees and expenses shall be
borne by such Holder and paid as incurred (it being understood, however, that
such Holder shall not be liable for the expenses of more tan one separate
counsel in any one action or series of related actions in the same jurisdiction
representing the indemnified parties who are parties
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<PAGE>
to such action). Anything in this paragraph to the contrary notwithstanding, any
Holder of Transfer Restricted Securities shall not be liable for any settlement
of any such claim or action effected without the written consent of such Holder
but if settled with the written consent of such Holder, such Holder agrees to
indemnify and hold harmless the Issuers, the Subsidiary Guarantors and any such
person from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second sentence of this
paragraph, then the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
not have reimbursed the indemnifying party in accordance with such request prior
to the date of such settlement and (iii) such indemnified party shall have given
the indemnifying party at least 30 days' prior notice of its intention to
settle. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
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 claims that are the subject matter of such proceeding.
(c) In order to provide for contribution in circumstances in which the
indemnification provided for in paragraphs (a) and (b) of this Section 8 is for
any reason held to be unavailable from the indemnifying party, or is
insufficient to hold harmless a party indemnified under this Section 8, the
Issuers, the Subsidiary Guarantors and the Indemnified Parties shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action or any claims asserted) to which the Issuers and/or
the Subsidiary Guarantors and the Indemnified Parties may be subject, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuers and the Subsidiary Guarantors, on the one hand, and the Indemnified
Parties, on the other hand, from the offering of the Old Notes or, (ii) if such
allocation 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 Issuers and the Subsidiary Guarantors,
on the one hand, and the Indemnified Parties, on the other hand, in connection
with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuers and the Subsidiary Guarantors, on
the one hand, and the Indemnified Parties, on the other hand, shall be deemed to
be in the same proportion as the total proceeds from the offering of Old Notes
(net of discounts but before deducting expenses) received by the Company as set
forth in the table on the cover page of the Offering Memorandum bear to the
total proceeds received by such Holder with respect to its sale of Transfer
Restricted Securities or New Notes. The relative fault of the Issuers and the
Subsidiary Guarantors, on the one hand, and the Indemnified Parties, on the
other hand, 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
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<PAGE>
material fact relates to information supplied by the Issuers, the Subsidiary
Guarantors or the Indemnified Parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Issuers, the Subsidiary Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this
paragraph (c) of this Section 8 were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of paragraph
(c) of this Section 8, (i) in no case shall an Indemnified Party be required to
contribute any amount in excess of the amount by which the total received by
such Indemnified Party with respect to its sale of its Transfer Restricted
Securities or New Notes, as the case may be, exceeds the amount of any damages
that such Indemnified Party has otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph (c)
of this Section 8, each person, if any, who controls an Indemnified Party within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall
have the same rights to contribution as such Indemnified Party, and each person,
if any, who controls the Issuers or the Subsidiary Guarantors within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Issuers or the Subsidiary Guarantors, subject in
each case to clauses (i) and (ii) of this paragraph. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
Action against such party in respect of which a claim for contribution may be
made against another party or parties under this paragraph 8(c), notify such
party or parties from whom contribution may be sought, but, except to the extent
that the indemnifying party shall be materially prejudiced thereby (through the
forfeiture of substantive rights and defenses), the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this paragraph (c)
or otherwise. No party shall be liable for contribution with respect to any
action or claim settled without its written consent; PROVIDED, HOWEVER, that
such written consent was not unreasonably withheld.
SECTION 9. RULE
The Issuers and the Subsidiary Guarantors shall use their best efforts,
for so long as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale of such securities and any prospective purchaser of
such Transfer Restricted Securities from such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
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<PAGE>
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration under this
Agreement unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled under this Agreement to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorneys, indemnities, underwriting agreements, lock-up letters and
other documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to exercise all
rights provided in this Agreement, in the Indenture, the Purchase Agreement or
granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Issuers
and the Subsidiary Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any Action for
specific performance that a remedy at law would be adequate. The obligations of
the Company, Finance Corp. and the Subsidiary Guarantors under this Agreement
are joint and several and, in any proceedings against any of such Persons
arising out of this Agreement, it shall not be necessary to join any other such
Person.
(b) NO INCONSISTENT AGREEMENTS. Each of the Company, Finance Corp. and the
Subsidiary Guarantors will not on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions of this Agreement. The Issuers and the Subsidiary Guarantors have not
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders under
this Agreement do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the securities of the Issuers under any
agreement in effect on the date of this Agreement.
(c) ADJUSTMENTS AFFECTING THE NOTES. Without the written consent of the
Holders of a majority in aggregate principal amount of outstanding Transfer
Restricted Notes, the Issuers and the
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<PAGE>
Subsidiary Guarantors will not take any action, or permit any change to occur,
with respect to the Notes that would materially and adversely affect the ability
of the Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions of this Agreement may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions of this
Agreement that relates exclusively to the rights of Holders whose securities are
being sold or tendered pursuant to a Registration Statement and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being sold or tendered pursuant to such Registration Statement may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities being so sold or tendered.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivering, first-class
mail (registered or certified, return receipt requested), telex, telecopier or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company, Finance Corp. or the Subsidiary Guarantors,
at:
Market Hub Partners Storage, L.P.
16420 Park Ten Place
Suite 420
Houston, Texas 77084
Attention: Chief Financial Officer
with a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
Facsimile: (713) 229-1522
Attention: Stephen A. Massad, Esq.
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) when answered back, if telexed; (iv) when receipt
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<PAGE>
acknowledged, if telecopied; and (v) on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties to this Agreement 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.
(h) CAPTIONS. The captions included in this Agreement are included solely
for convenience of reference and are not to be considered a part of this
Agreement.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SUBMISSION TO JURISDICTION. The Company, Finance Corp. and the
Subsidiary Guarantors irrevocably submit to the nonexclusive jurisdiction of any
State or Federal court sitting in New York over any suit, action or proceeding
arising out of or relating to this agreement. The Company, Finance Corp. and the
Subsidiary Guarantors irrevocably waive, to the fullest extent permitted by law,
any objection it may now or thereafter have to the laying of venue of any such
court and any claim that any such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum. The Company, Finance Corp. and
the Subsidiary Guarantors agree that a final judgment in any such suit, action
or proceeding brought in any such court shall be conclusive and binding upon the
Company, Finance Corp. and the Subsidiary Guarantors and may be enforced in any
other courts to the jurisdiction of which the Company, Finance Corp. and the
Subsidiary Guarantors are or may be subject, by suit upon such judgment. The
Company, Finance Corp. and the Subsidiary Guarantors hereby appoint, without
power of revocation, CT Corporation System as its agent to accept and
acknowledge on its behalf service of any and all process which may be served in
any suit, action or proceeding arising out of or relating to this letter.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement, or the application of any such provision 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 in this Agreement shall not be affected or
impaired thereby.
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<PAGE>
(l) ENTIRE AGREEMENT. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties to this Agreement in
respect of the subject matter contained in this Agreement. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to in this Agreement with respect to the registration rights granted
by the Company with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
[Remainder of page left blank intentionally]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.
Its General Partner
By:/s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
MARKET HUB PARTNERS FINANCE, INC.
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
MOSS BLUFF HUB PARTNERS, L.P.
By: Moss Bluff Hub Partners, L.L.C.,
Its General Partner
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
EGAN HUB PARTNERS, L.P.
By: Egan Hub Partners, L.L.C.,
Its General Partner
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
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<PAGE>
MOSS BLUFF HUB PARTNERS, L.L.C.
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
EGAN HUB PARTNERS, L.L.C.
By: /s/ ANTHONY J. CLARK
Name: Anthony J. Clark
Title: Vice President, Chief Financial
Officer and Secretary
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<PAGE>
Confirmed and Accepted and agreed
as of the date first above written:
SBC WARBURG DILLON READ INC.
By: /s/ VINCENT LU
Name: Vincent Lu
Title: Director
By: JAMES STONE
Name: James Stone
Title: Associate Director
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EXHIBIT 4.3
================================================================================
MARKET HUB PARTNERS, L.P.
10.09% SENIOR NOTES DUE DECEMBER 31, 2001
PPN: 57057# AA 6
- --------------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
Dated as of April 11, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PARAGRAPH PAGE
- ------------------------------------- ----
1. AUTHORIZATION; RANKING; GUARANTY............................ 1
1.1 Authorization of Issue of the Notes................... 1
1.2 Ranking............................................... 1
1.3 Guaranty.............................................. 1
2. PURCHASE AND SALE OF THE NOTES.............................. 1
3. CLOSING..................................................... 1
4. CONDITIONS OF CLOSING....................................... 1
4.1 Representation and Warranties......................... 1
4.2 Performance; No Default............................... 2
4.3 Compliance Certificates............................... 2
4.4 Opinion of Company Counsel............................ 2
4.5 Opinion of Purchasers' Special Counsel................ 2
4.6 Purchase Permitted by Applicable Laws................. 2
4.7 Sale of all Notes..................................... 2
4.8 Payment of Special Counsel Fees....................... 2
4.9 Private Placement Number.............................. 2
4.10 Changes in Organizational Structure.................. 2
4.11 Documents and Proceedings............................ 3
4.12 Guaranty............................................. 3
4.13 Issuance of Subordinated Notes....................... 3
4.14 Appointment of Agent for Service of Process.......... 3
5. REPRESENTATIONS AND WARRANTIES.............................. 3
5.1 Organization, Power and Authority..................... 3
5.2 Authorization, Etc. .................................. 3
5.3 Disclosure............................................ 3
5.4 Organization and Ownership of Subsidiaries;
Affiliates............................................ 4
5.5 Financial Statements; Projections..................... 4
5.6 Conflicting Agreements and Other Matters.............. 4
5.7 Governmental Authorizations, Etc. .................... 4
5.8 Litigation; Observance of Agreements, Statutes and
Orders................................................ 5
5.9 Tax Returns and Payments.............................. 5
5.10 Title to Properties................................... 5
5.11 ERISA................................................. 5
5.12 Offering of Notes..................................... 6
5.13 Regulation G, Etc. ................................... 6
5.14 Existing Indebtedness; Future Liens................... 6
5.15 Status Under Certain Federal Statutes; Foreign
Asset Control......................................... 7
5.16 Compliance with Laws, Etc............................. 7
5.17 Environmental Matters................................. 7
5.18 Financial Condition................................... 7
6. REPRESENTATIONS OF THE PURCHASERS........................... 8
7. INFORMATION AS TO THE COMPANY............................... 9
7.1 Financial and Other Reporting by the Company.......... 9
7.2 Information Required by Rule 144A..................... 10
7.3 Inspection of Property................................ 10
8. PREPAYMENT, REPAYMENT AND REDEMPTION........................ 11
8.1 Scheduled Repayment of Notes.......................... 11
8.2 Optional Prepayment of Notes with Make-Whole Amount... 11
8.3 Payments Pro Rata; Application of Payments............ 11
<PAGE>
PARAGRAPH PAGE
- --------- ----
8.4 Maturity; Surrender, Etc.............................. 11
8.5 Purchase, Redemption and Retirement of Notes.......... 11
8.6 Make-Whole Amount..................................... 12
9. AFFIRMATIVE COVENANTS....................................... 13
9.1 Compliance with Laws, Etc............................. 13
9.2 Insurance............................................. 13
9.3 Maintenance of Properties and Leases.................. 13
9.4 Corporate Existence, Etc.............................. 14
9.5 Payment of Taxes and Claims........................... 14
9.6 Scope of Business..................................... 14
9.7 Use of Proceeds....................................... 14
9.8 Environmental Compliance.............................. 14
9.9 Maintenance of Books and Records...................... 14
10. NEGATIVE COVENANTS.......................................... 15
10.1 Financial Covenants................................... 15
10.2 Restricted Payments and Restricted Investments........ 15
10.3 Liens................................................. 16
10.4 Sale of Stock, Equity Interest........................ 17
10.5 Merger and Sale of Assets............................. 17
10.6 Company Guaranties.................................... 18
10.7 Transactions with Affiliates.......................... 18
10.8 Compliance with ERISA................................. 18
11. EVENTS OF DEFAULT........................................... 19
12. REMEDIES ON DEFAULT, ETC.................................... 21
12.1 Acceleration.......................................... 21
12.2 Other Remedies........................................ 21
12.3 Rescission of Acceleration............................ 21
12.4 Notice of Acceleration or Rescission.................. 21
12.5 No Waivers or Election of Remedies.................... 21
13. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES... 22
14. PAYMENTS ON NOTES........................................... 22
14.1 Place of Payment...................................... 22
14.2 Home Office Payment................................... 23
15. EXPENSES.................................................... 23
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT................................................... 23
17. AMENDMENT AND WAIVER........................................ 24
17.1 Requirements.......................................... 24
17.2 Solicitation of Holders of Notes...................... 24
17.3 Binding Effect, Etc................................... 24
18. NOTICES..................................................... 24
19. REPRODUCTION OF DOCUMENTS................................... 25
20. CONFIDENTIAL INFORMATION.................................... 25
21. SUBSTITUTION OF PURCHASER................................... 26
22. MISCELLANEOUS............................................... 26
22.1 Successors and Assigns................................ 26
22.2 Payments Due on Non-Business Days..................... 26
22.3 Severability ......................................... 26
22.4 Construction ......................................... 26
22.5 Counterparts.......................................... 26
ii
<PAGE>
PARAGRAPH PAGE
- --------- ----
22.6 Descriptive Headings.................................. 26
22.7 Governing Law......................................... 26
22.8 Consent to Jurisdiction and Service and Waiver
of Trial by Jury...................................... 27
22.9 Termination........................................... 27
22.10 Compliance by Subsidiaries........................... 27
SIGNATURE PAGE.................................................. 28
SCHEDULES AND EXHIBITS
EXHIBIT A - Form of Note
EXHIBIT B - Coverage of Opinions of Counsel to the Company
EXHIBIT C - Form of Guaranty
EXHIBIT D - Form of Subordinated Note
SCHEDULE A - Purchasers
SCHEDULE B - Definitions
SCHEDULE 3 - Wiring Instructions
SCHEDULE 5.3 - Disclosure Matters
SCHEDULE 5.4 - Subsidiaries, Affiliates etc.
SCHEDULE 5.5 - Financial Statements
SCHEDULE 5.8 - Litigation, Etc.
SCHEDULE 5.10 - Title to Properties, Etc.
SCHEDULE 5.14 - Existing Debt
SCHEDULE 5.17 - Environmental Matters
SCHEDULE 9.2 - Insurance
SCHEDULE 9.7 - Use of Proceeds
SCHEDULE 10.2 - Existing Investments
SCHEDULE 10.3 - Existing Liens
SCHEDULE 10.7 - Transactions with Affiliates
iii
<PAGE>
MARKET HUB PARTNERS, L.P.
2 RIVERBEND AT LANSDOWNE
44084 RIVERSIDE PARKWAY, SUITE 340
LEESBURG, VA 22075
April 11, 1997
To: The Purchasers Listed
on Schedule A
Gentlemen:
The undersigned, Market Hub Partners, L.P., a Delaware limited partnership,
(together with any surviving or acquiring entity in any merger or consolidation
with the Company permitted by PARAGRAPH 10.5, the "Company") agrees with you as
follows:
1. AUTHORIZATION; RANKING; GUARANTY.
1.1 AUTHORIZATION OF ISSUE OF THE NOTES. The Company will authorize the
issue and sale of $35,000,000 in aggregate principal amount of its 10.09% Senior
Notes due December 31, 2001, to be in the form of EXHIBIT A (together with all
notes issued in substitution, replacement or exchange therefor in accordance
with the terms of this Agreement, the "NOTES"). Certain capitalized terms used
in this Agreement are defined in SCHEDULE B and PARAGRAPH 8.6; references to a
"SCHEDULE" or an "EXHIBIT" are, unless otherwise specified, to a SCHEDULE or an
Exhibit attached to this Agreement.
1.2 RANKING. The Notes shall rank PARI PASSU with each, will constitute the
direct senior obligations of the Company and will rank not less than PARI PASSU
in priority of payment with all other outstanding Debt of the Company, present
or future.
1.3 GUARANTY. The Notes will be guaranteed by Market Hub Partners, Inc., a
Delaware corporation (the "GUARANTOR"), as provided in PARAGRAPH 4.12.
2. PURCHASE AND SALE OF THE NOTES.
Subject to the terms and conditions of this Agreement, the Company shall
sell to each of you (individually a "Purchaser" and collectively, the
"PURCHASERS"), AND EACH PURCHASER SHALL PURCHASE FROM THE COMPANY, NOTES OF
PRINCIPAL AMOUNT SPECIFIED BELOW SUCH PURCHASER'S NAME SCHEDULE A, at a price
equal to 100% of such principal amount, registered in such Purchaser's name or
that of the Purchasers' nominee or nominees as specified in SCHEDULE A.
Notwithstanding the foregoing, each Purchaser's obligations under this Agreement
are several and not joint obligations and no Purchaser shall have any obligation
or liability for the performance or non-performance by any other Purchaser of
such other Purchaser's obligations under this Agreement.
3. CLOSING.
The purchase and sale of the Notes shall take place at the offices of
Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts 02109,
at a closing (the "CLOSING") to be held on April 11, 1997 or on such other
Business Day as the Purchasers and the Company may agree (the "CLOSING DATE").
At the Closing, the Company will deliver to each Purchaser, the Notes to be
purchased by it, against payment of the purchase price therefor by transfer of
immediately available funds to the Company in accordance with the wiring
instructions set for on SCHEDULE 3. If at the Closing, the Company fails to
tender any Notes to any Purchaser as provided in this PARAGRAPH 3, or if any of
the conditions specified in PARAGRAPH 4 shall not have been fulfilled to a
Purchaser's satisfaction or waived by such Purchaser, such Purchaser may, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights such Purchaser may have by reason of such failure or
non-fullment.
4. CONDITIONS OF CLOSING.
Each Purchaser's obligation to purchase and pay for its Notes is subject to
the fulfillment to its satisfaction or its written waiver, at or before the
Closing, of the following conditions:
4.1 REPRESENTATION AND WARRANTIES. The representations and warranties of
the Company in this Agreement, the other Transaction Documents and any
certificates delivered at Closing to the Purchasers in connection therewith
shall be correct when made and at the time of the Closing.
<PAGE>
4.2 PERFORMANCE; NO DEFAULT. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing and after giving
effect to the issue and sale of the Notes (and the application of the proceeds
thereof as contemplated by SCHEDULE 9.7) no Default or Event of Default shall
have occurred and be continuing. Neither the Company nor any Subsidiary shall
have entered any transaction since the date of the most recent of the Financial
Statements that would have been prohibited by PARAGRAPHS 10.1, 10.2 OR 10.7
hereof had this Agreement been in effect since such date.
4.3 COMPLIANCE CERTIFICATES.
(a) The Company shall have delivered to you an Officer's Certificate, dated
the date of the Closing, certifying that the conditions specified in PARAGRAPHS
4.1, 4.2, 4.10 and 4.13 have been fulfilled.
(b) Each of the Company and the Guarantor shall have delivered to the
Purchasers a certificate from its Secretary certifying as to its organizational
documentation and the resolutions and other proceedings relating to the
authorization, execution and delivery of the Transaction Documents to which each
is a party.
4.4 OPINION OF COMPANY COUNSEL. The Purchasers shall have received an
opinion, in form and substance satisfactory to them, dated the Closing Date and
addressed to them, from (i) Baker & Botts, L.L.P., counsel to the Company,
covering the matters set forth in EXHIBIT B (i) and such other matters as any
Purchaser or Special Counsel may reasonably request, and (ii) M. Scott Jones,
counsel to the Company covering the matters set forth in EXHIBIT B (ii) and such
other matters as any Purchaser or Special Counsel may reasonably request. To the
extent that any opinion referred to in this PARAGRAPH 4.4 is rendered in
reliance upon the opinion of any other counsel, the Purchasers shall have
received a copy of the opinion of such other counsel, dated the Closing Date and
addressed to them, or a letter from such other counsel, dated the Closing Date
and addressed to them, authorizing them to rely on such other counsel's opinion.
4.5 OPINION OF PURCHASERS' SPECIAL COUNSEL. The Purchasers shall have
received from Special Counsel an opinion satisfactory to them as to such matters
incident to the transactions contemplated by this Agreement as they may
reasonably request.
4.6 PURCHASE PERMITTED BY APPLICABLE LAWS. On the date of the Closing, each
Purchaser's purchase of Notes shall be (i) permitted by the laws and regulations
of each jurisdiction to which it is subject, without recourse to provisions
(such as Section 1405(a)(8) of the New York Insurance Law) permitting limited
investments by insurance companies without restriction as to the character of
the particular investment, (ii) not violate any applicable law or regulation
(including, without limitation, Section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and (iii) not
subject any Purchaser to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof. If requested by a Purchaser, such Purchaser shall have received an
Officer's Certificate certifying as to such matters of fact as a Purchaser may
reasonably specify to enable it to determine whether such purchase is so
permitted.
4.7 SALE OF ALL NOTES. At the Closing, the Company shall have sold to each
Purchaser, and each purchaser shall have purchased, the Notes to be purchased by
it as set forth in SCHEDULE A.
4.8 PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of
PARAGRAPH 15, the Company shall have paid, at or before the Closing, the fees,
charges and disbursements of Special Counsel (which may include a reasonable
reserve for anticipated fees and expenses for closing the transactions
contemplated hereby) to the extent reflected in a statement of Special Counsel
rendered to the Company at least one Business Day prior to the Closing.
4.9 PRIVATE PLACEMENT NUMBER. A Private Placement Number shall have been
assigned to the Notes by Standard & Poor's CUSIP Service Bureau.
4.10 CHANGES IN ORGANIZATIONAL STRUCTURE. The Company shall not have
changed its jurisdiction of organization or been a party to any merger or
consolidation or succeeded to all or any substantial part of the liabilities of
any other Person at any time after the date of the most recent Financial
Statements.
2
<PAGE>
4.11 DOCUMENTS AND PROCEEDINGS. All proceedings taken or to be taken in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident thereto shall be satisfactory to the
Purchasers and Special Counsel, and the Purchasers shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
4.12 GUARANTY. The Guarantor shall have executed and delivered to each
Purchaser a Guaranty in the form of Exhibit C (the "Guaranty") and such Guaranty
shall be in full force and effect and the Purchasers shall have received such
confirmation thereof (which may include an opinion of counsel) as they may
reasonably request.
4.13 ISSUANCE OF SUBORDINATED NOTES. The Company shall have repaid
$12,000,000 in principal and interest owed to TPC Corporation and shall have
issued to one or more of its limited partners $12,000,000 in aggregate principal
amount of its Subordinated Notes in the form of Exhibit D (the "Subordinated
Notes").
4.14 APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. The Purchasers shall have
received written evidence satisfactory to them that CT Corporation has been
appointed, and has accepted such appointment, by the Company as its agent for
service of process in the State of New York and that CT Corporation has agreed
to provide the Purchasers with not less than 30 days prior notice of any
termination of such appointment.
5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants that:
5.1 ORGANIZATION, POWER AND AUTHORITY. Each Member is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and is qualified and in good standing in each jurisdiction in which
it is required to be qualified to do business (other than those jurisdictions in
which the failure to be so qualified or in good standing, individually or in
aggregate, could not reasonably be expected to have a Material Adverse Effect).
Each Member has all requisite corporate or partnership, as applicable, power and
authority to own, operate and lease the property it purports to own, operate or
lease and to carry on its business as now being conducted. The Company has all
requisite partnership power and authority to execute, deliver and perform each
Transaction Document to which it is a party and to issue and sell the Notes.
5.2 AUTHORIZATION, ETC. Each Transaction Document to which the Company is a
party has been duly authorized by all necessary partnership action on the part
of the Company and has been (or will have been as of the Closing Date) duly
executed and delivered by an authorized officer of the Company or its general
partner and constitutes (or will constitute upon execution thereof by the
Company) the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law).
5.3 DISCLOSURE. Except as disclosed in SCHEDULE 5.3, the Transaction
Documents, the Memorandum, the Financial Statements and the other documents,
certificates and statements furnished to the Purchasers by or on behalf of the
Company, the Guarantor or any Subsidiary in connection herewith taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which they are made, not
misleading. Except as disclosed in the Memorandum or as expressly described in
SCHEDULE 5.3, or in one of the documents, certificates or other writings
identified therein, or in the Financial Statements, since December 31, 1996,
there has been no change in the financial condition, operations, business,
properties or prospects of any Member or the Consolidated Group taken as a whole
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. The Memorandum fairly describes in
all material respects the general nature of the business and principal
properties of the Consolidated Group as of the date thereof.
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5.4 ORGANIZATION AND OWNERSHIP OF SUBSIDIARIES; AFFILIATES.
(a) SCHEDULE 5.4 contains (except as noted therein) complete and correct
lists of (i) the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by the Company and each other Subsidiary, (ii) the Company's
Affiliates, other than Subsidiaries, and (iii) the Company's directors and
senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in SCHEDULE 5.4 as being owned by the Company
or another Subsidiary have validly issued, are fully paid and nonassessable and
are owned by the Company or such Subsidiary free and clear of any Lien (except
as otherwise disclosed in SCHEDULE 5.4). Except as set forth in SCHEDULE 5.4, no
Subsidiary has any outstanding rights, options, warrants or other agreements
which would require it to issue any additional shares of its capital stock or
similar equity interest after the Closing.
(c) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on SCHEDULE 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any other
Subsidiary that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
5.5 FINANCIAL STATEMENTS; PROJECTIONS.
(a) The Company has delivered to the Purchasers the financial statements of
the Consolidated Group listed on SCHEDULE 5.5, which collectively, with their
related schedules and notes, are referred to in this Agreement as the "FINANCIAL
STATEMENTS". The Financial Statements fairly present in all material respects
the financial condition of the Consolidated Group as of the respective dates
thereof and the results of its operations and cash flows for the respective
periods specified thereby. The Financial Statements have been prepared in
accordance with GAAP, consistently applied throughout the periods involved
except as set forth in the notes thereto.
(b) The assumptions and limitations listed in the preparation of projected
financial information contained in the Memorandum, as updated in writing to the
Purchasers prior to the date hereof (the "PROJECTIONS"), were reasonable when
made and continue to be reasonable. The Projections have a reasonable basis,
were prepared by executive and financial officers of the Company in good faith
and represent the good faith opinion of the Company as to the projected results
of the operations of the Consolidated Group, subject to the assumptions and
limitations set forth therein. No events or facts have occurred or have been
discovered by the Company since the preparation of the Projections that would
cause the Projections, taken as a whole, not to be reasonably atttainable. The
Consolidated Group does not have, and will not have on the Closing Date, any
material obligations (whether accrued, matured, contingent or otherwise) that
are not reflected in the Projections or arise from the Transaction Documents.
5.6 CONFLICTING AGREEMENTS AND OTHER MATTERS. The execution, delivery and
performance of the Transaction Documents by the Company and the offering,
issuance and sale of the Notes do not and will not (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien
in respect of any property of any Member under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter or by-laws
or similar organizational documentation, or any other agreement or instrument to
which any Member is a party or by which any Member or any of their respective
properties are bound or affected, (iii) conflict with or result in a breech of
any of the terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to any
Member or (iii) violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to any Member.
5.7 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization
of, or registration, filing or declaration with, any Governmental Authority is
required in connection with the execution, delivery or performance by the
Company of this Agreement or the Company's offer, issuance and sale of the
Notes.
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5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in SCHEDULE 5.8, there are no actions, suits or
proceedings pending and publicly filed or, to the knowledge of the Company,
otherwise pending or threatened against, or affecting any Member or any property
of any Member in any court or before any arbitrator of any kind or before or by
any Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) No Member is in default under any term of any agreement or instrument
to which it is a party or by which it is bound, or any order, judgment, decree
or ruling of any court, arbitrator or Governmental Authority or is in violation
of any applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
5.9 TAX RETURNS AND PAYMENTS. Each Member has filed all federal, state,
local and foreign income tax returns, franchise tax returns, real and personal
property tax returns and other tax returns required by law to be filed by or on
its behalf, or with respect to its properties or assets, and all Taxes,
assessments, and other governmental charges imposed upon any Member or any
Member's properties, assets, income or franchises which are due and payable have
been paid, other than those (i) the amount of which is not, individually or in
the aggregate, Material or (ii) presently being contested in good faith by
appropriate proceedings diligently conducted and for which such reserves or
other appropriate provisions, if any, as may be required by GAAP have been made.
The charges, accruals and reserves on the books of the Consolidated Group in
respect of Taxes for all fiscal periods are adequate and the Company knows of no
unpaid assessment on any Member for additional Taxes for any period or any basis
for any such assessment that individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect.
5.10 TITLE TO PROPERTIES.
(a) Each Member has good and sufficient title to all of its properties and
assets reflected in the most recent audited balance sheet for the Consolidated
Group included in the Financial Statements or purported to have been acquired by
such Member after such date (other than properties and assets disposed of since
such date in the ordinary course of business), in each case free of any Lien not
permitted by PARAGRAPH 10.3.
(b) Each Member enjoys peaceful and undisturbed possession under all leases
which are Material and ail such leases are valid and subsisting and are in full
force and effect in all material respects.
(c) Except as set forth on SCHEDULE 5.10, each Member owns or has the right
to use (under agreements or licenses which are in full force and effect) all
Intellectual Property necessary for it to conduct its business as currently
conducted, without any known conflict with the rights of others. No Member is
infringing upon any Intellectual Property owned by any other Person and there is
no violation by any Person of any right of any Member with respect to any
Intellectual Property owned or used by any Member which is Material.
5.11 ERISA.
(a) Each Member and each ERISA Affiliate has operated and administered each
Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. No Member and no 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), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by any Member or any ERISA Affiliate, or in the imposition of any Lien
on any of the rights, properties or assets of any Member 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 be, individually or in the aggregate Material.
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(b) The present value of the aggregate benefit liabilities under any of the
Plans that is subject to Title IV of ERISA (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan year on the
basis of the actuarial assumptions specified for funding purposes in such Plan's
most recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities. The term
"BENEFIT LIABILITIES" has the meaning specified in section 4001 of ERISA and the
terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in Section
3 of ERISA.
(c) No Member and no ERISA Affiliate has incurred withdrawal liabilities
(and no Member and no ERISA Affiliate is subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected postretirement 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 by section 490B of
the Code) of the Consolidated Group is not Material.
(e) The execution and delivery of the Transaction Documents, the issuance
and sale of the Notes and the consummation of the transactions contemplated by
the Agreement will not involve a transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a Tax could be
imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation in
the preceding sentence is made in reliance upon and subject to the accuracy of
the Purchasers' representations in PARAGRAPH 6(B) as to the source of the funds
to be used to pay the purchase price of the Notes.
5.12 OFFERING OF NOTES. Neither the Company nor anyone acting on its behalf
has, directly or indirectly, offered the Notes or similar securities for sale
to, or solicited any offers to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any Person other than the Purchasers and
two other Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither the Company nor anyone acting on its behalf
has taken or will take any action which would subject the issuance or sale of
the Notes to the provisions of Section 5 of the Securities Act or to the
registration provisions of any securities or Blue Sky law of any applicable
jurisdiction. As of the Closing Date, the Notes will not be of the same class as
securities of the Company listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system, within the meaning of Rule 144A.
5.13 REGULATION G, ETC. None of the proceeds of the sale of the Notes will
be used, directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12 CFR
Part 207) or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of such Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of such Board (12 CFR 220). Margin stock does not constitute
more than 25% of the value of the assets of the Consolidated Group or of the
Company and the Company has no present intention that margin stock will
constitute more than 25% of the value of its or the Consolidated Group's assets.
As used in this PARAGRAPH 5.13, the terms "MARGIN STOCK" and "PURPOSE OF BUYING
OR CARRYING" shall have the meanings assigned to them in said Regulation G.
5.14 EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Schedule 5.14 sets forth a complete and correct list of all outstanding
Debt of the Consolidated Group as of the Closing Date after the application of
the proceeds of the Notes as set forth in PARAGRAPH 9.7 and a list of each
instrument or agreement evidencing or otherwise governing the terms and
conditions of such Debt. The Company has previously delivered to Special Counsel
true, correct and complete copies of each instrument or agreement listed on
SCHEDULE 5.14. No Member is in default and no waiver of default is currently in
effect, in the payment of any principal or interest on any such Debt and no
event or condition exists with respect to any such Debt that would permit (or
that with notice or the lapse of time, or both,
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would permit) one or more Persons to cause such Debt to become due and payable
before its stated maturity or before its regularly scheduled dates of payment.
(b) No Member has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
PARAGRAPH 10.3.
(c) As of the Closing Date, after the application of the proceeds of the
Notes as set forth in PARAGRAPH 9.7, the ratio of Consolidated Total Debt to
Consolidated Total Capitalization will not exceed the ratio set forth therefor
in PARAGRAPH 10.1.3 and Partners' Capital will be at least $45,000,000.
5.15 STATUS UNDER CERTAIN FEDERAL STATUTES; FOREIGN ASSET CONTROL. No
Member is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Neither the sale of the Notes hereunder nor the use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.
5.16 COMPLIANCE WITH LAWS, ETC. Each Member is in compliance with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority (including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA and any Environmental Laws), and has
in effect all licenses, certificates, permits, franchises, filing and other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its businesses, in each case to the extent failure does not, and
could not reasonably be expected, individually and in the aggregate, to have a
Material Adverse Effect.
5.17 ENVIRONMENTAL MATTERS. Except as disclosed on SCHEDULE 5.17, there are
no claims and no Member has received any notice of any claim, and no proceeding
has been instituted raising any claim, against any Member or any of their
respective real properties now or formerly owned, leased or operated by any
Member or other assets, alleging any damage to the environment or violation of
any Environment Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
in SCHEDULE 5.17:
(i) the Company has no knowledge of any facts which would give rise to
any claim, public or private, of violation of Environmental Laws or damage
to the environment emanating from, occurring on or in any way related to
real properties now or formerly owned, leased or operated by any Member or
relating to any Member's other assets or their use, except, in each case,
such as could not reasonably be expected to result in a Material Adverse
Effect;
(ii) no Member has stored any Hazardous Materials on real properties
now or formerly owned, leased or operated by any Member and has not
disposed of any Hazardous Materials in violation of any Environmental Laws,
in each case in any manner that could reasonably be expected to result in a
Material Adverse Effect; and
(iii) all buildings on all real properties now owned, leased or
operated by any Member are in compliance with applicable Environmental
Laws, except where failure to comply could not reasonably be expected to
result in a Material Adverse Effect.
5.18 FINANCIAL CONDITION. After giving effect to the transactions
contemplated hereby, (i) the aggregate present fair saleable value of the assets
of the Company will be greater than the amount that will be required to pay the
probable liabilities of the Company on its debts, including contingent
liabilities, as they become absolute and mature; (ii) the Company has (and has
no reason to believe that it will not have) sufficient capital for the conduct
of its business as presently conducted; and (iii) the Company does not intend to
incur, or believe it has incurred, debts beyond its ability to pay as they
mature.
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6. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents that:
(a) It is purchasing its Notes for its own account or for one or more
separate accounts maintained by it or for the account of one or more
pension or trust funds, in each case for investment and not with a view to
the distribution thereof, PROVIDED that the disposition of such Purchaser's
property shall at all times be within its control. The Company acknowledges
that a Purchaser's sale of all or a portion of its Notes to one or more
Qualified Institutional Buyers in compliance with Rule 144A would not be a
breach of this representation.
(b) With respect to each source of funds to be used by it to pay the
purchase price of its Notes (respectively, the "SOURCE"), at least one of
the following statements is accurate as of the Closing Date:
(i) the Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE")
95-60 (issued July 12, 1995) and there is no "employee benefit plan"
(within the meaning of Section 3(3) of ERISA or Section 4975(e)(1) of
the Code and treating as a single plan all plans maintained by the same
employer or employee organization) with respect to which the amount of
the general account reserves and liabilities for all contracts held by
or on behalf of such plan exceed ten percent (10%) of the total reserves
and liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NAIC Annual Statement
filed with the state of domicile of the Purchaser.
(ii) The Source is either (i) an insurance company pooled separate
account and the purchase is exempt in accordance with PTE 90-1 (issued
January 29, 1990), or (ii) a bank collective investment fund, within the
meaning of PTE 91-38 (issued July 21, 1991) and, except as such
Purchaser has disclosed to the Company in writing pursuant to this
CLAUSE (II), no employee benefit plan or group of plans maintained by
the same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or
collective investment fund; or
(iii) The Source constitutes assets of an "investment fund" (within
the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of
the QPAM Exemption), no employee benefit plan's assets that are included
in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by
the QPAM (applying the definition of "control" in Section V(e) of the
QPAM Exemption) owns a 5% or more interest in the Company and (i) the
identity of such QPAM and (ii) the names of all employee benefit plans
whose assets are included in such investment fund have been disclosed to
the Company in writing pursuant to this CLAUSE (III); or
(iv) The Source is a "governmental plan" as defined in Title I,
Section 3(32) of ERISA; or
(v) The Source is one or more plans or a separate account or trust
fund comprised of one or more plans each of which has been identified to
the Company in writing pursuant to this CLAUSE (V); or
(vi) The Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
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As used in this PARAGRAPH 6, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO THE COMPANY.
So long as any of the Notes are outstanding:
7.1 FINANCIAL AND OTHER REPORTING BY THE COMPANY. The Company will
deliver to each Holder:
(i) as soon as practicable, and in any event not more than 90 days
after the end of each fiscal quarter (other than the fourth quarter), the
unaudited combined, consolidated and combining, consolidating balance sheet
of the Consolidated Group as at the end of such quarter and the related
unaudited combined, consolidated and combining, consolidating statements of
operations, cash flows and partners' capital of the Consolidated Group for
such period and for the fiscal year to date, setting forth, in each case in
comparative form, figures for the corresponding period(s) in the preceding
fiscal year, all in reasonable detail and in accordance with GAAP, and
certified by the chief accounting officer or chief financial officer of the
Company as fairly presenting the financial condition of the Consolidated
Group as at the dates indicated and the results of its operations and cash
flows, in each case for the periods indicated, in conformity with GAAP
subject to changes resulting from normal year-end adjustments;
(ii) as soon as practicable, and in any event not more than 105 days,
after the end of each fiscal year of the Company, the combined,
consolidated and combining, consolidating balance sheet of the Consolidated
Group as of the end of such year and the related combined, consolidated and
combining, consolidating statements of operations, cash flows and partners'
capital of the Consolidated Group for such year, and setting forth in each
case in comparative form, corresponding figures for the preceding fiscal
year, all in reasonable detail and in accordance with GAAP and accompanied
(A) by an opinion thereon of the Approved Auditor, which opinion shall be
without limitation as to the scope of the audit and shall state that such
financial statements present fairly in all material respects the
consolidated financial condition of the Consolidated Group as at the dates
indicated and the results of their consolidated operations and cash flows
for the periods indicated in conformity with GAAP and that the examination
by such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards and provides
a reasonable basis for such opinion and (B) a certificate of the Approved
Auditor stating that they have reviewed this Agreement and stating further
whether, in making their audit, they have become of any condition or event
that then constitutes a Default or an Event of Default, and, if they are
aware that any such condition or event then exists, specifying the nature
and period of the existence thereof (it being understood that the Approved
Auditor shall not be liable, directly or indirectly, for any failure to
obtain knowledge of any Default or Event of Default unless the Approved
Auditor should have obtained knowledge thereof in making an audit in
accordance with generally accepted auditing standards or did not make such
an audit);
(iii) together with each delivery of financial statements of the
Consolidated Group pursuant to CLAUSES (I) and (ii) of this PARAGRAPH 7.1,
a certificate of the chief financial officer of the Company (A) stating
that the signer has reviewed the terms of the Transaction Documents and has
made, or caused to be made under the signer's supervision, a review in
reasonable detail of the transactions and condition of the Consolidated
Group during the fiscal period coveted by such financial statements and
that such review has not disclosed the existence during or at the end of
such fiscal period, and that after reasonable investigation the signer has
no knowledge of the existence as at the date of such certificate, of any
condition or event which constitutes a Default or Event of Default or, if
any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Company has taken or is
taking or proposes to take with respect thereto and (B) demonstrating (if
applicable, with computations in reasonable detail) compliance by the
Company with the provisions of PARAGRAPHS 10.1, 10.2 and 10.5;
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(iv) promptly and in any event within 5 days after (A) any Senior
Officer becomes aware of the existence of any Default or Event of Default
or (B) any Holder gives notice to the Company or takes any other action
with respect to a claimed Default or Event of Default under this agreement,
or (C) any Person gives any notice to any Member or takes any other action
with respect to a claimed default or event or condition of the type
referred to in CLAUSE (iii) of PARAGRAPH 11, an Officer's Certificate
specifying the nature and period of existence of any such condition or
event, or specifying the notice given or action taken by such Holder of
Person and the nature of such claimed Default, Event of Default, event or
condition, and what action the Company has taken, is taking or proposes to
take with respect thereto;
(v) promptly, and in any event within 5 days after any Senior Officer
becomes aware of any of the following, a written notice setting forth the
nature thereof and the action, if any, that the Company or any ERISA
Affiliate proposes to take with respect thereto:
(A) with respect to any Plan, any reportable event, as defined in
section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(B) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by any Member or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan; or
(C) any event, transaction or condition that could result in the
incurrence of any liability by any Member or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of any
Member or any ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions if, such liability or Lien, taken
together with any other such liabilities or Liens then existing, is
reasonably expected to have a Material Adverse Effect;
(vi) (A) promptly upon their becoming available, copies of (i) all
financial statements, proxy statements, notices and reports as any Member
shall send or make available to its security holders generally and (ii) all
registration statements (with exhibits), prospectuses and all regular or
periodic reports which it files with the SEC or any stock exchange and of
all press releases and other statements made available generally by any
Member to the public concerning material developments and (B) promptly
after receipt thereof, copies of any reports, statements and notices any
Member may receive in accordance with Section 13(d) or 14(d) of the
Exchange Act or the rules and regulations of any capital stock exchange;
and
(vii) with reasonable promptness, such other information and data
relating to the business, operations, affairs, financial condition, assets
or properties of the Consolidated Group or any Member or relating to the
ability of the Company or the Guarantor to perform their obligations under
the Transaction Documents or relating to the ability of any Member to
comply with the terms of the Transaction.
7.2 INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of any Holder, provide to such Holder, and any Qualified Institutional Buyer
designated by such Holder, such financial and other information as such Holder
may reasonably determine to be necessary in order to permit compliance with the
information requirements of Rule 144A in connection with a resale or proposed
resale of any Note.
7.3 INSPECTION OF PROPERTY. The Company shall permit the representatives
of any Holder that is an Institutional Investor:
(i) if no Default or Event of Default then exists, at the expense of
such Holder and upon reasonable prior notice to the Company, to visit the
principal executive office of the Company, to discuss the affairs, finances
and accounts of the Consolidated Group with the officers of the general
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partner of the Company and, with the consent of the Company, which consent
will not be unreasonably withheld or delayed, the independent public
accountants of the Company and, with the consent of the Company, which
consent will not be unreasonably withheld or delayed, to visit the offices
of each Member, all at such reasonable times and as often as may be
reasonably requested in writing; and
(ii) if a Default or Event of Default then exists, at the expense of
the Company, to visit and inspect any of the offices or properties of any
Member, to examine all their respective books of account, records, reports
and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the
Company authorizes said accountants to discuss the affairs, finances and
accounts of each Member), all at such times and as often as may be
requested.
8. PREPAYMENT, REPAYMENT AND REDEMPTION.
The Notes may be prepaid only under the circumstances set forth in
PARAGRAPH 8.2 and shall be repaid in accordance with PARAGRAPH 8.1 and upon any
acceleration of final maturity as provided in PARAGRAPH 12.1.
8.1 SCHEDULED REPAYMENT OF NOTES. The Company shall on December 31, 2001
repay in full all unpaid principal of the Notes at 100% of the principal amount
so repaid.
8.2 OPTIONAL PREPAYMENT OF NOTES WITH MAKE-WHOLE AMOUNT. The Company may
prepay the Notes in full at any time or in part from time to time (provided that
any partial prepayment shall be of at least $1,000,000 in aggregate principal
amount or a larger principal amount which is an integral multiple of $500,000),
at 100% of the principal amount so prepaid, plus interest accrued thereon to the
Settlement Date and the Make-Whole Amount. The Company shall give each Holder
irrevocable written notice of any prepayment to be made pursuant to this
PARAGRAPH 8.2 at least 30 days, and not more than 60 days, prior to the
Settlement Date, (i) specifying the Settlement Date and the Called Principal of
the Notes held by each such Holder (determined in accordance with PARAGRAPH
8.3), (ii) stating that such prepayment is to be made pursuant to this PARAGRAPH
8.2, (iii) stating the amount of interest to be paid on the Settlement Date with
respect to such Called Principal and (iv) providing an estimate of the
Make-Whole Amount payable on the Called Principal of such Holder's Notes
(calculated as if the date of such notice were the date of prepayment) and
setting forth the details of such computation. Not later than the close of
business on the second Business Day prior to the Settlement Date, the Company
shall deliver to the Holder of each Note, an Officer's Certificate setting forth
in detail the calculations used in determining whether a Make-Whole Amount is
payable on such prepayment and the amount of such Make-Whole Amount.
8.3 PAYMENTS PRO RATA; APPLICATION OF PAYMENTS. Upon any partial prepayment
of the Notes pursuant to PARAGRAPH 8.2 the principal amount so prepaid shall be
allocated among the Holders in proportion to the respective outstanding
principal amounts of the Notes held by them.
8.4 MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes
pursuant PARAGRAPH 8.2, the principal amount of each Note to be prepaid shall
mature and become due and payable on the Settlement Date, together with interest
on such principal amount accrued to such date and the applicable Make-Whole
Amount. From and after such date, unless the Company shall fail to pay such
principal amount so due and payable, together with the interest and Make-Whole
Amount as aforesaid, interest on such principal amount shall cease to accrue.
Any Note paid or prepaid in full shall be surrendered to the Company and
cancelled and shall not be reissued, and no Note shall be issued in lieu of any
prepaid or repaid principal amount of any Note.
8.5 PURCHASE, REDEMPTION AND RETIREMENT OF NOTES. The Company shall not,
and shall not permit any of its Affiliates to, prepay or otherwise retire any
Note in whole or in part, prior to its stated maturity (other than by prepayment
pursuant to PARAGRAPH 8.2 or upon acceleration of final maturity pursuant to
PARAGRAPH 12.1), or purchase or otherwise acquire, directly or indirectly, any
Note unless the Company or such Affiliate shall have offered to prepay or
otherwise retire, purchase, redeem or otherwise acquire, as the case may be, the
same proportion of the aggregate outstanding principal amount of Notes held by
each other Holder at the time outstanding upon the same terms and conditions.
Any such offer shall
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provide each Holder with sufficient information to enable it to make an informed
decision with respect to such offer, and shall remain open for at least 5
Business Days. If the Required Holders accept such offer, the Company shall
promptly notify the remaining Holders of such fact and the expiration date for
the acceptance by Holders of such offer shall be extended by the number of days
necessary to give each such Holder at least 5 Business Days from its receipt of
such notice to accept such offer. No Notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Affiliates shall
thereafter be reissued or deemed to be outstanding for any purpose under this
Agreement.
8.6 MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to
any Note, an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Note
over the amount of such Called Principal, PROVIDED that the Make-Whole Amount
may in no event be less than zero. For the purposes of this PARAGRAPH 8 and
determining the Make-Whole Amount, the following terms have the following
meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to PARAGRAPH 8.2 or has become or
is declared to be immediately due and payable pursuant to PARAGRAPH 12.1,
as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basic as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, one hundred basis points over the yield to maturity implied by
(i) the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page USD" on the Bloomberg
Financial Markets (or such other display as may replace Page USD on
Bloomberg Financial Markets) for actively traded U.S. Treasury securities
having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, of (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H. 15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury
securities having a constant maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively traded
U.S. Treasury security with the duration closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the duration closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, PROVIDED that if such Settlement Date is in
connection with a prepayment pursuant to PARAGRAPH 8.2 and is not a date on
which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the
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amount of interest accrued to such Settlement Date and required to be paid
on such Settlement Date pursuant to PARAGRAPH 8.2.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
PARAGRAPH 8.2 or has become or is declared to be immediately due and
payable pursuant to paragraph 12.1, as the context requires.
The Company acknowledges that the Make-Whole Amount due at any optional or
required prepayment of Notes (including any prepayment required pursuant to any
provision of PARAGRAPH 12.1) has been negotiated with the Purchasers to provide
a bargained for rate of return on the Purchasers' investment in the Notes and is
not a penalty.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any Note is outstanding;
9.1 COMPLIANCE WITH LAWS, ETC. Each Member will comply with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority (including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, ERISA and all Environmental Laws), and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of its
properties or to the conduct of its businesses, in each case to the extent
necessary to ensure that any non-compliance with such laws, ordinances or
governmental rules or regulations or any failure to obtain or maintain in effect
such licenses, permits, franchises and other governmental authorizations does
not, and could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
9.2 INSURANCE. Each Member will maintain, with financially sound and
reputable insurers, rated at least A or A+ by A.M. Best, insurance with respect
to its properties and business of such types and in such forms and amounts
(including deductibles, co-insurance and self-insurance if adequate reserves are
maintained with respect thereto) and against such risks as are reasonable and
prudent in the circumstances and as are customarily insured against by Persons
of established reputation engaged in the same or similar business and similarly
situated. Insurance of the type, with the carriers and in substantially (but not
less than) the amounts set forth in Schedule 9.2 shall be deemed to be in
compliance with this paragraph 9.2.
9.3 MAINTENANCE OF PROPERTIES AND LEASES. Each Member will (i) maintain all
its properties in good repair and working order and condition (other than
ordinary wear and tear) so that the business carried on in connection therewith
may be properly conducted at all times and from time to time make or cause to be
made all appropriate repairs, renewals, replacements, additions and improvements
thereof as needed, PROVIDED that this PARAGRAPH 9.3 shall not prevent any Member
from discontinuing the operation or maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and (ii) comply in all
material respects with the provisions of all leases or licenses under which it
leases or licenses any such properties to the extent necessary to ensure that
any such non-compliance with such leases or licenses could not reasonably be
expected to have a Material Adverse Effect.
9.4 CORPORATE EXISTENCE, ETC. Except as otherwise specifically permitted by
this Agreement, each Member will at all times preserve and keep in full force
and effect its separate legal existence and all its Material rights and
franchises, and qualify and maintain its qualification to do business and good
standing in any jurisdiction, except in each case where the failure to do so,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
9.5 PAYMENT OF TAXES AND CLAIMS.
(a) Each Member will file all tax returns required to be filed in any
jurisdiction and pay all Taxes shown to be due and payable on such returns and
all other Taxes imposed upon it or any of its properties or assets or in respect
of any of its franchises, business, income, sales and services, or profits when
the same become due and payable, but in any event before any penalty or interest
accrues thereon, and all claims
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(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which have or might
become a Lien upon any of its properties or assets, PROVIDED, that no such Tax
or claim need be paid if (a) it is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted and if such reserves or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor, and (b) the failure to pay such Tax or claim could not
reasonably be expected, if such contest were adversely determined, individually
or in the aggregate, to have a Material Adverse Effect.
(b) No Member will consent to or permit the filing of or be a party to any
consolidated income tax return on its behalf with any Person (other than a
consolidated return that includes solely the Consolidated Group).
9.6 SCOPE OF BUSINESS. No Member will engage to a substantial extent in any
business other than the business described in the Memorandum and businesses
reasonably related thereto or in furtherance thereof.
9.7 USE OF PROCEEDS. The Company will use the proceeds of the sale of the
Notes only as designated on SCHEDULE 9.7 and not for any purpose which would
violate any applicable law or governmental regulation or which is otherwise
prohibited under PARAGRAPH 5.13.
9.8 ENVIRONMENTAL COMPLIANCE. Each Member will (i) obtain and maintain all
permits, licenses, and other authorizations that are required of it under all
Environmental Laws other than those which the failure to obtain or maintain,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, and (ii) comply with all terms and conditions of all
such permits, licenses, and authorizations and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables contained in all Environmental Laws or in any
regulation, ordinance or code applicable to such Member and any, plan, order,
decree, judgment, injunction, notice, or demand letter issued, entered,
promulgated, or approved thereunder directly applicable to such Member, except
to the extent of any noncompliance which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, and (iii)
operate all property owned or leased by it such that no claim or obligation,
including a clean-up obligation, which, individually or in the aggregate, with
all such other obligations could reasonably be expected to have a Material
Adverse Effect, shall arise under any Environmental Law, and if any claim is
made against it or any such obligation shall arise under any Environmental Law,
it shall at its own cost and expense, timely satisfy such claim or obligation,
provided no such claim or obligation need be satisfied for so long as (A) it is
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and (B) such reserves or other appropriate provision, if
any, as shall be required by GAAP shall have been made therefor.
9.9 MAINTENANCE OF BOOKS AND RECORDS. Each Member will: (i) keep proper
records and books of account with respect to its business activities in which
proper entries are made in the ordinary course of all dealings or transactions
of or in relation to its business and affairs; (ii) set up on its books adequate
reserves with respect to all Taxes, assessments, charges, levies and claims; and
(iii) set up on its books reserves against doubtful accounts receivable,
advances and all other proper reserves (including reserves for depreciation,
obsolescence or amortization of its property). All determinations pursuant to
this PARAGRAPH 9.9 shall be made in accordance with, or as required by, GAAP in
order to fairly reflect all of the Consolidated Group's financial transactions.
Notwithstanding the foregoing, a Member may make adjustments and changes in the
manner in which its books and records are kept, PROVIDED, that:
(A) all such adjustments and changes shall be required or permitted by
GAAP, but need not conform with the prior accounting practice of such
Member or its predecessor;
(B) each Holder shall be given written notice of all such changes or
adjustments together with the financial statements required by CLAUSE (I)
of PARAGRAPH 7.1 for the quarter in which such change occurred, and
together with the financial statements required by CLAUSE (II) of PARAGRAPH
7.1, a year-end listing and description of all such changes and adjustments
and the effect thereof certified by the chief accounting or chief financial
officer of the Company; and
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(C) the financial covenants and ratios set forth in PARAGRAPH 10.1
shall continue to be calculated without regard to such adjustments or
changes unless and until the Required Holders have consented thereto, which
consent shall not be unreasonably withheld or delayed and which shall be
deemed granted if not objected to in writing by the Required Holders within
30 days notice is given by the Company with respect to such change pursuant
to CLAUSE (B) above.
10. NEGATIVE COVENANTS.
The Company covenants that for so long as any Note is outstanding:
10.1 FINANCIAL COVENANTS.
10.1.1 PARTNERS' CAPITAL. Partners' Capital shall not, at any time, be less
than $45,000,000 plus an amount equal to the sum of 25% of Consolidated Net
Income for each fiscal year ended on or after the Closing Date (other than any
fiscal year in which Consolidated Net Income for such year was a loss).
10.1.2 INTEREST EXPENSE COVERAGE. As of the last day of any fiscal quarter
ending on or after the Closing Date, the ratio of (a) Consolidated EBITDA to (b)
Consolidated Interest Expense, for the four most recently ended fiscal quarters
taken as a single accounting period, shall not be less than 1.50 to 1.00 for
fiscal quarters ending on or before December 31, 1998, and shall not be less
than 1.75 to 1.00 for fiscal quarters ending thereafter.
10.1.3 LIMITATION ON CONSOLIDATED TOTAL DEBT. No Member shall incur,
create, issue, assume guarantee or otherwise become liable in respect of any
Debt after the Closing Date unless (i) no Default or Event of Default exists
immediately before or immediately after the incurrence of such Debt or could
reasonably be expected to result therefrom; and (ii) immediately after the
incurrence of such Debt, Consolidated Total Debt does not exceed 70% of
Consolidated Total Capitalization.
For the purposes of this PARAGRAPH 10.1.3: (i) the outstanding Debt of any
Person which becomes a subsidiary after the Closing Date shall be deemed to have
been incurred at the time it becomes a Subsidiary; (ii) if any outstanding Debt
of a Member owned by another Member is sold or otherwise transferred to a Person
who is not a Member, such Debt shall be deemed to have been incurred on the date
of such sale or transfer; and (iii) any Debt which is extended, renewed or
refunded after the Closing Date shall be deemed incurred on the date of such
extension, renewal or refunding.
10.2 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
10.2.1 RESTRICTED PAYMENTS. No Member shall make, declare or incur any
liability to make any Restricted Payment after the Closing Date unless
immediately after giving effect thereto, the aggregate amount of all Restricted
Payments made or declared by the Consolidated Group since December 31, 1996
would not exceed the sum of (a) $5,000,000 plus (b) 50% of Consolidated Net
Income for each full fiscal year ended after December 31, 1996 (or if
Consolidated Net Income for any such year is a loss, then 100% of Consolidated
Net Income for such year, expressed as a negative number), (ii) no Event of
Default or Default exists immediately before or immediately after making,
declaring or incurring liability to make such Restricted Payment or could
reasonably be expected to result therefrom and (iii) immediately after giving
effect thereto the Company could incur an additional $1.00 of Debt and not
violate the financial covenants set forth in PARAGRAPH 10.1.3.
10.2.2 RESTRICTED INVESTMENTS. No Member shall make, declare or incur any
liability to make any Restricted Investment after the Closing Date unless (i)
immediately after giving effect thereto, the aggregate amount of all Restricted
Investments then outstanding would not exceed 15% of Partners' Capital as of the
most recent fiscal quarter end, (ii) no Event of Default or Default exists
immediately before or immediately after making, declaring or incurring liability
to make such Restricted Investment or could reasonably be expected to result
therefrom and (iii) immediately after giving effect thereto the Company could
incur an additional $1.00 of Debt and not violate the financial covenants set
forth in PARAGRAPH 10.1.3. For the purpose of this PARAGRAPH 10.2.2, the value
of a Restricted Investment which constitutes a liability (contingent or
otherwise) shall be the maximum amount of such liability.
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10.3 LIENS. No Member shall create, assume or suffer to exist any Lien on
its properties or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom or proceeds of dispositions thereof, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its general creditors without equally and ratably
securing the Notes, except for:
(i) Liens, and other charges incidental to the conduct of its
business, or the ownership of its property (including charges for Taxes or
otherwise arising by operation of law, mechanics', carriers', workers',
repairmen's, warehousers' or other similar Liens), which are not incurred
in connection with the borrowing of money or the securing of Debt, PROVIDED
that, in each case, the obligation secured is not overdue or is being
contested in good faith by appropriate actions or procedures promptly
instituted and diligently conducted and such reserves as shall be required
by GAAP shall have been made therefor, but only so long as no foreclosure,
distraint, sale or similar proceedings have been commenced with respect
thereto (unless the same shall have been fully bonded or otherwise
effectively stayed);
(ii) Liens arising as a result of any judicial proceedings with
respect to which it shall then, in good faith and by appropriate actions
and procedures promptly instituted and diligently conducted, be prosecuting
appeal or other proceedings for review and Liens arising from judgments or
decrees not constituting a Default or Event of Default unless, in either
case, such Lien remains undischarged, unstayed pending appeal, unbonded or
undismissed for a period of 60 consecutive days and PROVIDED, in either
case, such reserves as shall be required by GAAP shall have been made
therefor and such Liens in the aggregate do not have a Material Adverse
Effect;
(iii) deposits or pledges to secure worker's compensation,
unemployment insurance, old age benefits or other social security
obligations or retirement benefits;
(iv) Liens arising out of deposits in connection with, or given to
secure the performance of leases, bids, tenders, trade contracts not for
the payment of money, or to secure statutory obligations or surety or
appeal bonds, performance bonds or other pledges or deposits for purposes
of like nature in the ordinary course of business but only so long as no
foreclosure, distraint, sale or similar proceedings have been commenced
with respect thereto (unless the same shall have been fully bonded or
otherwise effectively stayed);
(v) minor survey exceptions or encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of its activities or which
customarily exist on properties of Persons engaged in similar activities
and similarly situated and which do not in the aggregate have a Material
Adverse Effect or materially impair the use of such real properties in the
operation of its business;
(vi) Liens on any properties or assets of a Subsidiary in favor of the
Company or a Wholly-Owned Subsidiary and Liens, if any, securing the Notes;
(vii) Liens existing as of the Closing and described on Schedule 10.3;
(viii) Liens on property of a Subsidiary of the Company, PROVIDED that
(A) the Debt secured by such Lien is solely the Debt of such Subsidiary,
(B) no Event of Default or Default exists immediately before or immediately
after the creation of such Lien or could reasonably be expected to result
therefrom and (C) after giving effect to the Debt secured thereby, the
financial tests set forth in PARAGRAPH 10.1, calculated on the basis of the
most recently available financial information, would be satisfied;
(ix) Liens on the assets of any Person (other than the Company or an
existing Subsidiary) existing at the time such assets are acquired by it
whether by merger, consolidation, purchase of assets or otherwise so long
as such (A) Liens are not created, incurred or assumed in contemplation of
such assets being acquired by it; (B) no Default or Event of Default exists
immediately before or immediately after the incurrence of such Liens or
could reasonably be anticipated to result therefrom;
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(C) after giving effect to such acquisition and the Debt secured by such
Lien, the financial tests set forth in PARAGRAPH 10.1, calculated on the
basis of the most recently available financial information, would be
satisfied, and (D) such Liens do not extend to any other assets of the
Consolidated Group;
(x) Liens securing the Moss Bluff/Egan Notes as of the date hereof and
any extension of such Liens to secure other Debt of Moss Bluff and/or Egan
so long as (A) such other Debt and such extension of such Liens is
otherwise permitted by the Moss Bluff Egan Note Agreement, (B) no Default
or Event of Default exists immediately before or immediately after the
extension of such Lien, (C) after giving effect to the incurrence of the
other Debt to be secured thereby, the financial tests set forth in
PARAGRAPH 10.1 calculated on the basis of the most recently available
financial information, would be satisfied; and (D) such Liens do not extend
to any other assets of the Consolidated Group; and
(xi) any Lien resulting from renewing, extending or refinancing any
Liens permitted by CLAUSES (VII), (VIII), (IX) or (X) above, provided that
(a) such Lien does not extend to any property of any Member other than a
Subsidiary which is an existing obligor on the Debt secured by the Lien
being renewed, refinanced or extended and (b) immediately after such
extension, renewal or refunding, no Default or Event of Default would exist
or could reasonably be expected to result therefrom.
10.4 SALE OF STOCK, EQUITY INTEREST. No Subsidiary of the Company shall
issue, sell or otherwise dispose of, or part with control of, any of its own
Equity Interest (other than directors' qualifying shares) either directly or
indirectly by the issuance of rights, options for securities convertible into or
exchangeable for its Equity Interest unless (i) the proceeds of such issuance,
transfer or sale are used to make a Qualifying Reinvestment within the meaning
of CLAUSE (V) of PARAGRAPH 10.5 and (ii) after such sale, transfer or other
disposition, such Subsidiary remains a Subsidiary.
10.5 MERGER AND SALE OF ASSETS. No Member shall merge or consolidate with
any other Person or sell, lease or transfer or otherwise dispose of its
respective assets to any Person or Persons, except that:
(i) any Subsidiary may merge or consolidate with or sell, lease,
transfer or otherwise dispose of all or any of its assets to the Company or
a Wholly-Owned Subsidiary (PROVIDED, that the Company or such Wholly-Owned
Subsidiary shall be the continuing or surviving corporation in the case of
a merger or consolidation and, in any case, the acquiring or surviving
entity is a corporation organized under the laws of, and having its
principal place of business in, a state of the United States of America or
the District of Columbia) and upon any such sale, transfer or other
disposition, such Subsidiary may liquidate and dissolve;
(ii) the Company may merge or consolidate with any other Person;
PROVIDED, that (A) the Company shall be the continuing or surviving Person,
or (B) the successor or acquiring Person (1) shall be a solvent Person
organized under the laws of any state of the United States of America or
the District of Columbia; (2) shall expressly assume in writing all of the
obligations and covenants of the Company under the Transaction Documents;
and (3) shall provide the Holders the written opinion of counsel
satisfactory in form and substance to the Holders confirming that the
assumption of such obligations by such Person is duly authorized and
constitutes the legal, valid and binding obligation of such Person,
enforceable (subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity regardless of whether enforcement is sought in
a proceeding in equity or at law) against such Person in accordance with
its terms, PROVIDED, that in either case, immediately after and giving
effect thereto, on a pro forma basis, based on the most recently available
financial information, the financial tests set forth in PARAGRAPH 10.1
would be satisfied;
(iii) any Member may sell or lease, as lessor, inventory in the
ordinary course of its business;
(iv) any Member may dispose of equipment or other assets which have
become obsolete or otherwise no longer useful or required for the conduct
of its business, provided such dispositions do not, individually or in the
aggregate, constitute a liquidation of all or substantially all of any
Member's assets; and
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(v) the Company and any Subsidiary may sell, transfer or otherwise
dispose of some or all of its respective properties or assets (including
any Equity Interests of a Subsidiary owned by the Company or another
Subsidiary) in a transaction not otherwise permitted pursuant to this
PARAGRAPH 10.5 for fair and adequate consideration (a "DISPOSITION") and if
such Disposition is a Disposition of all or substantially all of the assets
of a Subsidiary, such Subsidiary may thereafter liquidate and dissolve);
PROVIDED, that immediately after and giving effect to any such Disposition,
the greater of (A) aggregate book value of each property and asset so sold
(each an "ASSET SOLD" and collectively, the "ASSETS SOLD"), as reflected on
the most recent combined, consolidated balance sheet of the Consolidated
Group furnished to the Holders pursuant to PARAGRAPH 7.1 prior to the date
of Disposition of such Asset Sold, or (B) the aggregate net proceeds (with
any non-cash proceeds being valued at its fair market value) of the Assets
Sold (1) during the immediately preceding twelve months, less the aggregate
amount of Qualifying Reinvestments, did not exceed more than 15% of
Consolidated Total Assets as reflected on the most recent combined,
consolidated balance sheet of the Consolidated Group delivered to the
Holders pursuant to PARAGRAPH 7.1 and (2) since the Closing Date, less the
aggregate amount of Qualifying Reinvestments, did not exceed more than 30%
of Consolidated Total Assets as reflected on the most recent combined,
consolidated balance sheet of the Consolidated Group delivered to the
Holders pursuant to PARAGRAPH 7.1;
PROVIDED, that, in each case other than the sale or lease of inventory pursuant
to CLAUSE (III) above or disposition of assets pursuant to CLAUSE (IV) above, no
Default or Event of Default exists immediately before or immediately after
giving effect to such sale, transfer or disposition of properties or assets or
such merger or consolidation nor would any Default or Event of Default
reasonably be expected to result therefrom.
For purposes of CLAUSE (V) of this PARAGRAPH 10.5, a "QUALIFYING
REINVESTMENT" is the use of the proceeds, or of funds expended in anticipation
of the proceeds, of Assets Sold not more than 30 days before or twelve months
after the date of a Disposition, (a) to purchase (x) assets usable in any
business permitted to be conducted by PARAGRAPH 9.6, or (y) either (1) all of
the outstanding Equity Interests of a Person which, immediately after such
purchase, is a Wholly-Owned Subsidiary and is engaged in a business permitted to
be conducted by PARAGRAPH 9.6, or (2) all or substantially all of the assets and
business of a Person which is engaged in any business permitted to be conducted
by PARAGRAPH 9.6; or (b) to make an optional prepayment of the Notes pursuant to
PARAGRAPH 8.2 or (c) in the case of a Disposition of an Equity Interest of a
Subsidiary or in the case of a Disposition by a Subsidiary of its own assets or
properties, to prepay or repay Debt of such Subsidiary or of a Person which
after the date of such Disposition is a Subsidiary.
10.6 COMPANY GUARANTIES. The Company will not make or enter into any
Guaranties of Construction Debt other than Permitted Construction Debt
Guaranties.
10.7 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 10.7, no
Member shall directly or indirectly, engage in any transaction or group of
transactions (including, without limitation, the purchase, sale or exchange of
assets or the payment of salary, bonuses and other compensation for services
rendered) with any Affiliate, except in the ordinary course of business pursuant
to the reasonable requirements of its business and upon commercially reasonable
terms which are no less favorable to it than those which might be obtained at
arms' length with a Person not an Affiliate.
10.8 COMPLIANCE WITH ERISA. No Member and no ERISA Affiliate shall:
(i) engage in any transaction in connection with which such Member or
any ERISA Affiliate could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code, terminate or withdraw from any Plan (other than a Multiemployer Plan)
in a manner, or take any other action with respect to any such Plan
(including, without limitation, a substantial cessation of business
operations or an amendment of a Plan within the meaning of Section 4041(e)
of ERISA, which could result in any liability to the PBGC, to a Plan, to a
Plan participant, to the Department of Labor or to a trustee appointed
under Section 4042(b) or (c) of ERISA), incur any liability to the PBGC or
a Plan on account of a withdrawal from or a termination of a Plan under
Section 4063 or 4064 of ERISA, fail to make full payment when due of all
amounts
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which, under the provisions of any Plan or applicable law, it is required
to pay as contributions thereto, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any Plan (other than a
Multiemployer Plan) other than such penalties, taxes, liabilities, failures
or deficiencies which individually and in the aggregate do not, and are not
reasonably expected to have in the future, a material Adverse Effect;
(ii) at any time permit the termination of any defined benefit pension
plan intended to be qualified under Section 401(a) and Section 501(a) of
the Code unless such plan is funded so that the value of all benefit
liabilities upon the termination date does not exceed the then current
value of all assets in such plan by an amount the payment of which would
have a Material Adverse Effect; or
(iii) at any time permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to Multiemployer Plans
incurred by any Member and its ERISA Affiliates, or the aggregate liability
under Title IV of ERISA incurred by any Member and its ERISA Affiliate, to
exceed an amount the payment of which would have a Material Adverse Effect.
For the purposes of CLAUSE (III) of this PARAGRAPH 10.8, the amount of the
withdrawal liability of a Member and its ERISA Affiliates at any date shall be
the aggregate present value of the amounts claimed to have been incurred less
any portion thereof as to which the Company reasonably believes, after
appropriate consideration of possible adjustments arising under subtitle E of
Title IV of ERISA, that no Member nor any ERISA Affiliate will have any
liability, PROVIDED, that the Company shall promptly obtain written advice from
independent actuarial consultants supporting such determination. The Company
will (x) once in each calendar year, beginning in 1997, request and obtain a
current statement of withdrawal liability from each Multiemployer Plan to which
any Member or any ERISA Affiliate is or has been obligated to contribute and (y)
to the extent such liabilities, individually or in the aggregate, are Material,
transmit a copy of such statement to each Holder, within 15 days after the
Company receives the same. As used in this PARAGRAPH 10.8, the term "ACCUMULATED
FUNDING DEFICIENCY" has the meaning specified in Section 302 of ERISA and
Section 412 of the Code, the terms "PRESENT VALUE" and "CURRENT VALUE" have the
meanings specified in section 3 of ERISA, the term "BENEFIT LIABILITIES" has the
meaning specified in Section 4001(a)(16) of ERISA and the term "AMOUNT OF
UNFUNDED LIABILITIES" has the meaning specified in section 4001(18) of ERISA.
11. EVENTS OF DEFAULT.
If any of the following events shall occur or conditions shall exist for
any reason whatsoever, and whether such occurrence or condition shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise, such occurrence or conditions shall constitute an "EVENT OF DEFAULT":
(i) the Company defaults in the payment of any principal of any Note
or Interest thereon or Make-Whole Amount when the same shall become due and
payable whether by the terms thereof or otherwise as provided by the terms
of this Agreement; or
(ii) any representation or warranty made in writing by the Company or
the Guarantor in any Transaction Document or in any writing furnished at
Closing in connection with any Transaction Document proves to have been
false or incorrect in any Material respect on the date as of which made; or
(iii) with respect to any Debt, other than the Debt represented by the
Notes, any Member (A) defaults (whether as primary obligor or guarantor or
surety) in any payment of principal of, premium, if any, make-whole amount
or interest on any such Debt, the outstanding principal amount of which
exceeds $500,000 in the aggregate, beyond any period of grace provided with
respect thereto, or (B) fails to perform or observe any other agreement,
term or condition contained in any agreement under which such Debt is
created (or if any other event thereunder or under any such agreement shall
occur and be continuing) and the effect of such default or other event is
to cause, or to permit the holder or holders of such Debt (or a trustee on
behalf of such holder or holders) to declare such Debt to become due or to
be required to be redeemed or repurchased prior to any stated maturity or
regularly scheduled dates of payment, or (C) as a consequence of the
occurrence or continuation of any event or
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condition (other than the passage of time or the right of the holder of
Debt to convert such Debt into Equity Interests), (x) any Member has become
obligated to purchase or repay or redeem an aggregate outstanding principal
amount of $500,000 or more of Debt before its regular maturity or before
its regularly scheduled dates of payment or redemption, or (y) one or more
Persons have the right to require any Member so to purchase or repay such
Debt (other than the right to demand repayment of any Debt payable by its
terms on demand);
(iv) any Member fails to perform or observe any covenant contained in
PARAGRAPH 7.1(IV), 9.4, 9.7, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, OR 10.7.
(v) any Member fails to perform or observe any other agreement, term
or condition of any of the Transaction Documents applicable to it and such
failure shall not be remedied within 30 days; or
(vi) the Company or the Guarantor voluntarily or involuntarily
suspends or discontinues operation or liquidates all or substantially all
of its assets; or
(vii) any Member (A) is generally not paying, or admits in writing
that it is not able to pay, its debts as such debts become due; or (B)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction; or (C) makes an assignment for the
benefit of its creditors; or (D) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property; (E)
is adjudicated insolvent or to be liquidated or (F) takes corporate action
for the purpose of any of the foregoing; or
(viii) a Governmental Authority enters an order appointing, without
the consent of such Member, a custodian, receiver, trustee or other officer
with similar powers with respect to such Member or with respect to any
substantial part of the property of such Member, or constituting an order
for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of any Member without the consent of
such Member and such order remains unstayed and in effect for 60 days; or
(ix) a final judgment or judgments for the payment of money
aggregating in excess of $500,000 is rendered against any Member and within
60 days thereof such judgment or judgments are not bonded or discharged or
execution thereof stayed pending appeal, or within 60 days after the
expiration of any such stay, such judgment or judgments are not discharged;
or
(x) if (A) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any 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, (B) a notice of intent to terminate (other
than a notice of a "standard termination" as defined in Section 4041(b) of
ERISA) 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 any Member or any ERISA Affiliate that a Plan may
become a subject of any such proceedings, (C) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of Section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $500,000, (D) any Member or any ERISA Affiliate shall have
incurred or is reasonable 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, (E) any Member or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (F) any Member establishes or
amends any employee welfare benefit plan that provides post-employment
welfare benefits in a manner that would increase the liability of any
Member thereunder; and any such event or events described in CLAUSES (A)
through (F) above, either individually or together with any other such
event or events, could reasonably be expected to result in Material Adverse
Effect. As used in this CLAUSE (X), the terms "EMPLOYEE BENEFIT
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PLAN" and "EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective
meanings assigned to such terms in Section 3 of ERISA; or
(xi) the Guaranty shall, at any time or for any reason, not be valid,
binding and enforceable in any material respect on the Guarantor or the
Guarantor shall contest or deny the validity or enforceability of the
Guaranty or shall disaffirm or repudiate any of its obligations thereunder.
12. REMEDIES ON DEFAULT, ETC.
12.1 ACCELERATION.
(a) If an Event of Default with respect to the Company described in CLAUSES
(vii) or (viii) of PARAGRAPH 11 has occurred, all Notes then outstanding shall
automatically become immediately due and payable at 100% of the principal amount
thereof together with all interest accrued thereon and the Make-Whole Amount,
without presentment, demand, protest or notice of any kind, all of which are
expressly waived by the Company.
(b) If any other Event of Default has occurred, the Required Holders may at
their option declare each Note to be, and each Note shall thereupon be
immediately due and payable at 100% of the principal amount thereof together
with all interest accrued thereon and the Make-Whole Amount, without
presentment, demand, protest or notice of any kind, all of which are expressly
waived by the Company.
(c) If an Event of Default specified in CLAUSE (I) of PARAGRAPH 11 has
occurred, any Holder, whether or not the Required Holders have declared each
Note to be due and payable pursuant to the immediately preceding SUBPARAGRAPH
(B), may declare each Note held by such Holder to be immediately due and payable
at 100% of the principal amount thereof together with interest accrued thereon
and Make-Whole Amount, without presentment, demand, protest or notice of any
kind, all of which are expressly waived by the Company.
12.2 OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under PARAGRAPH 12.1, any Holder may proceed to protect and
enforce the rights of such Holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
12.3 RESCISSION OF ACCELERATION. At any time after any Note shall have been
declared immediately due and payable pursuant to SUBPARAGRAPH (B) or (C) of
PARAGRAPH 12.1, the Required Holders may, by written notice to the Company,
rescind and annul any such declaration with respect to the Notes if (i) the
Company shall have paid all interest, principal and Make-Whole Amount payable
with respect to any Note which have become due otherwise than by reason of such
declaration, including any interest on any such overdue interest, principal and
the Make-Whole Amount, at the Default Rate, (ii) the Company shall not have paid
any amounts which have become due solely by reason of such declaration, (iii)
all Events of Default and Defaults, other than non-payment of amounts which have
become due solely by reason of such declaration, shall have been cured or waived
pursuant to PARAGRAPH 17, and (iv) no judgment or decree shall have been entered
for the payment of any amounts due pursuant to the Transaction Documents solely
by reason of such declaration. No such rescission or annulment shall extend to
or affect any subsequent Default or Event of Default or impair any right arising
therefrom.
12.4 NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to SUBPARAGRAPH (B) or (C) of
PARAGRAPH 12.1, or any such declaration under PARAGRAPH 12.1 shall be rescinded
and annulled pursuant to PARAGRAPH 12.3, the Company shall forthwith give
written notice thereof to each other Holder at the time outstanding, PROVIDED,
the failure to give such notice shall not affect the validity of any such
declaration, rescission or annulment.
12.5 NO WAIVERS OR ELECTION OF REMEDIES. No course of dealing or failure or
delay by any Holder in exercising any right, power or remedy under a Transaction
Document or any other document executed in
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connection therewith shall operate as a waiver thereof or otherwise prejudice
such Holder's rights, powers or remedies, nor shall any single or partial
exercise of any such right or remedy preclude any other right or remedy
hereunder or thereunder. No right, power or remedy conferred by this Agreement
or by any Note or upon any Holder shall be exclusive of any other right, power
or remedy referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. Without limiting the obligations of the Company
under PARAGRAPH 15, the Company will pay to the holder of each Note on demand
such further amount as shall be sufficient to cover all costs and expenses of
such holder incurred in any enforcement or collection under this PARAGRAPH 12,
including, without limitation, reasonable attorneys' fees, expenses and
disbursements.
13. REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.
13.1 REGISTRATION. The Notes are to be issued and are transferable in whole
or in part as registered Notes without coupons in denominations of at least
$1,000,000, except as may be necessary to reflect any remaining principal amount
less than $1,000,000 and may be exchanged for one or more Notes of any
authorized denomination and like class and like aggregate outstanding principal
amount. The Company shall keep at the principal executive office of the Company
a register in which the Company shall record the registrations of the Notes and
the names and addresses of the Holders from time to time and all transfers
thereof. The Company shall provide any Holder, promptly upon request, a complete
and correct copy of the names and addresses of the then Holders. Prior to due
presentment for registration of transfer, the Person in whose name any Note
shall be registered shall be deemed and treated as the owner and Holder thereof
for all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary.
13.2 TRANSFER AND EXCHANGE. Upon surrender of any Note at the principal
executive office of the Company for registration of transfer or exchange (and in
the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
Holder of such Note or his attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, within 5 Business Days, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
Holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit A. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been paid thereon.
The Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $1,000,000, PROVIDED that
if necessary to enable the registration or transfer by a Holder of its entire
holding of Notes, one Note may be in a denomination of less than $1,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representations set forth in
PARAGRAPH 6.
13.3 REPLACEMENT. Upon receipt of written notice from a Holder of the loss,
theft, destruction or mutilation of a Note and, in the case of any such loss,
theft or destruction, upon receipt of an indemnification agreement of such
Holder (and, in the case of a Holder which is not a Institutional Investor, with
such security as may be reasonably requested by the Company) satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver, within 5 Business Days, a new
Note, at its expense, of like class and tenor, in lieu of the lost, stolen,
destroyed or mutilated Note, and each new Note will bear interest from the date
to which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or if no interest has been paid thereon, the date of such lost,
stolen, destroyed or mutilated Note.
14. PAYMENTS ON NOTES
14.1 PLACE OF PAYMENT. Subject to PARAGRAPH 14.2 payment of principal,
Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in Boston, Massachusetts at the principal office of the State
Street Bank and Trust Company in such jurisdiction. The Company may at any time,
by notice to each holder of a Note, change the place of payment of the Notes so
long as such place of
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payment shall be either the principal office of the Company in such jurisdiction
or the principal office of a bank or trust company in such jurisdiction.
14.2 HOME OFFICE PAYMENT. The Company agrees that, so long as a Purchaser
shall hold any Notes, all payments in respect of such Notes, required by the
terms thereof or otherwise by this Agreement, will be made in compliance with
the applicable terms thereof or otherwise by this Agreement, will be made in
compliance with the applicable terms thereof or hereof and by wire transfer to
such Purchaser of immediately available funds for credit to the account or
accounts as specified in SCHEDULE A for such Purchaser, or such other account or
accounts in the United States as a Purchaser may designate in writing,
notwithstanding any contrary provision in this Agreement or the Notes, with
respect to the Place of Payment. Each Purchaser agrees that, before disposing of
any Note, it will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made and of the date to which interest has
been paid. The Company agrees to afford the benefits of this PARAGRAPH 14.2 to
any Holder which shall have made the same agreement in writing as the Purchasers
have made in this PARAGRAPH 14.2.
14.3 NO DEDUCTION OR SET-OFF. The obligation of the Company to pay
principal, interest, Make-Whole Amounts and any other amounts under the
Transaction Documents owed by the Company shall be absolute and unconditional
and shall not be affected by any circumstances including without limitation any
set-off, counterclaim, recoupment, defense or other right which the Company may
have against a Purchaser or any Holder for any reason whatsoever.
15 EXPENSES.
Whether or not the transactions provided for hereby shall be consummated,
the Company will pay on demand and save each Purchaser and each Holder harmless
against liability for the payment of, all out-of-pocket expenses arising in
connection with such transactions and in connection with any subsequent
modification of, or waiver or consent under or in respect of, the Transaction
Documents, whether or not such transactions are consummated or modification
shall be effected or consent or waiver granted ("EXPENSES"), including (i) the
reasonable fees and expenses of Special Counsel and its agents and of any other
special or local counsel or other special advisers engaged and reasonably
required by the Purchasers in connection with the transactions contemplated by
this Agreement; provided the Company shall not be liable for the fees and
expenses of more than one Special Counsel in any single matter, the costs of
obtaining the private placement number from Standard & Poor's Ratings Group for
the Notes, (iii) the costs and expenses, including reasonable attorneys' fees
and the fees of any other special or financial advisers, incurred in enforcing
and defending and, during the continuance of a Default or after the occurrence
of an Event of Default, monitoring or evaluating any rights under the
Transaction Documents (including, without limitation, any costs, expenses or
fees incurred in connection with perfecting or maintaining perfection of any
Lien hereafter existing in favor of the Purchasers or any Holder as security for
the obligations of the Company or the Guarantor under the Transaction Documents
or maintaining or protecting the collateral which is the subject of such Lien)
or in responding to any subpoena or other legal process or informal
investigation issued in connection with the Transaction Documents or the
transactions provided for hereby or thereby or by reason of a Purchaser or any
Holder having acquired any of its Notes, and (iv) costs and expenses, including
financial advisors fees, incurred in connection with any bankruptcy or
insolvency of any Member or connection with any workout or restructuring of any
of the transactions contemplated by the Transaction Documents. The Company will
pay and will save each Purchaser and each Holder from all claims in respect of
any fees, costs or expenses, if any, of any brokers and finders not retained by
such Purchaser or Holder. The obligations of the Company under this PARAGRAPH 15
shall survive the transfer of any of its Notes or any interest therein by a
Purchaser or any Hoider and the payment of any Notes.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained in any Transaction Document or
made in any other writing by or on behalf of the Company in connection herewith
shall survive the execution and delivery of such Transaction Document or other
writing, the transfer by a Purchaser of any Notes or portion thereof or interest
therein and the payment of any Notes and may be relied upon by any Holder as
having been true when made, regardless of any investigation made at any time by
or on behalf of the Purchasers or any
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Holder. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company, any Subsidiary or the Guarantor
pursuant to any Transaction Document shall be deemed representations and
warranties of the Company under this Agreement. Subject to the preceding
sentence, the Transaction Documents embody the entire agreement and
understanding between the Purchasers and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof and thereof.
17. AMENDMENT AND WAIVER.
17.1 REQUIREMENTS. This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (i) no amendment or waiver of any
of the provisions of PARAGRAPHS 1, 2, 3, 4, 5, 6 OR 21 hereof, or any defined
term (as it is used therein), will be effective as to any Holder unless
consented to by such Holder in writing and (ii) no such amendment or waiver may,
without the written consent of each Holder affected thereby, (A) subject to the
provisions of PARAGRAPH 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-whole Amount on, the Notes, (B) change the percentage of the principal
amount of the Notes the Holders of which are required to consent to any such
amendment or waiver or (C) amend any of PARAGRAPHS 8, 11(I), 12, 17 OR 20.
17.2 SOLICITATION OF HOLDERS OF NOTES.
17.2.1 SOLICITATION. The Company will provide each Holder (irrespective of
the amount of Notes then owned by it) with sufficient information, sufficiently
far in advance of the date a decision is required, to enable such Holder to make
an informed and considered decision with respect to any proposed amendment,
waiver or consent in respect of any of the provisions hereof or of the Notes.
The Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this PARAGRAPH 17 to
each Holder promptly following the date on which it is executed and delivered
by, or receives the consent or approval of, the Required Holders.
17.2.2 PAYMENT. The Company will not directly or indirectly pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as consideration
for or as an inducement to the entering into by any Holder of any waiver or
amendment of any of the terms and provisions hereof unless such remuneration is
concurrently aid, or security is concurrently granted, on the same terms,
ratably to each Holder even if such Holder did not consent to such waiver or
amendment.
17.3 BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this PARAGRAPH 17
applies equally to all Holders and is binding upon them and upon each future
Holder and upon the Company without regard to whether such Note has been marked
to indicate such amendment or waiver. No such amendment or waiver will extend to
or affect any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent thereon. No course of
dealing between the Company and any Holder nor any delay in exercising any
rights hereunder or under any Note shall operate as a waiver of any rights of
any such Holder.
18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
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prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to a Purchaser or its nominees, to it at the address specified
for it for such communications in SCHEDULE A, or at such other address as
such Purchaser shall have specified to the Company in writing.
(ii) if to any other Holder, to such Holder at such address or fax
number as is specified for such Holder in the Note register referenced in
PARAGRAPH 13, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of Donald B. Russell, President, or
at such other address as the Company shall have specified to each Holder in
writing.
Notices given in accordance with this paragraph 18 will be deemed given upon the
earlier of actual receipt or the second Business Day after dispatch.
19. REPRODUCTION OF DOCUMENTS.
Any Transaction Document and any documents relating thereto, including,
without limitation, (i) consents, waivers and modifications that may hereafter
be executed, (ii) documents received by the Purchasers at the Closing (except
the Notes), and (iii) financial statements, certificates and other information
previously or hereafter furnished to the Purchasers, may be reproduced by any
Purchaser by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and the Purchasers may destroy any
original document so reproduced. The Company agrees and stipulates that, to the
extent permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This PARAGRAPH 19 shall not prohibit the
Company or any Holder from contesting any such reproduction to the same extent
that it could contest the original, or from introducing evidence to demonstrate
the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this PARAGRAPH 20, "Confidential Information" means
information delivered to a Purchaser by or on behalf of a Member in connection
with the transactions contemplated by or otherwise pursuant to this Agreement,
that is proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified when received by the Purchaser as being
confidential information of a Member, PROVIDED that such term does not include
information that (i) was publicly known or otherwise known to the Purchaser
prior to the time of such disclosure, (ii) subsequently becomes publicly known
through no act or omission by the Purchaser, (iii) otherwise becomes known to
the Purchaser other than through disclosure by any Member or (iv) constitutes
financial statements delivered to the Purchaser under PARAGRAPH 7.1 that are
otherwise publicly available. Each Purchaser will maintain the confidentiality
of such Confidential Information in accordance with the procedures adopted by it
in good faith to protect confidential information of third parties delivered to
it. Notwithstanding the foregoing, a Purchaser may deliver copies of any
Confidential Information to such Purchaser's and its Subsidiaries' directors,
officers, employees, and to its agents and professional consultants who in the
ordinary course of performance of their duties to or for the benefit of such
Purchaser have a need to have access to such information, any other Purchaser,
any Person to whom such Purchaser offers to sell any of its Notes or any part
thereof or to whom such Purchaser sells or offers to sell a participation in all
or any part of its Notes (provided such Person has entered into a
confidentiality agreement with respect to such information substantially on the
terms of the first two sentences of this PARAGRAPH 20), any federal or state
regulatory authority having jurisdiction over such Purchaser, any Person from
which a Purchaser to purchase any security of a Member (provided such Person has
entered into a confidentiality agreement with respect to such information
substantially on the terms of the first two sentences of this PARAGRAPH 20), the
NAIC or any regulatory agency which generally requires access to information
about a Purchaser's investment portfolio or any similar organization, Standard &
Poor's Ratings Group (but only to the extent required to obtain private
placement numbers for the Notes) or any other Person to which such delivery or
disclosure may be necessary or appropriate (a) in compliance
25
<PAGE>
with any law, rule, regulation or order applicable to such Purchaser, (b) in
response to any subpoena or other legal process, (c) in connection with any
litigation to which such Purchaser is a party relating to the transactions
contemplated by this Agreement, or (d) if an Event of Default has occurred and
is continuing, to the extent that such Purchaser determines disclosure is
necessary or appropriate in the enforcement of or for the protection of its
rights and remedies under the Transaction Documents. Each Holder, by its
acceptance thereof, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this PARAGRAPH 20 as though it were a party to this
Agreement.
21. SUBSTITUTION OF PURCHASER.
Each Purchaser has the right to substitute any one of its Affiliates as the
purchaser of the Notes that it has agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by such Purchaser and its
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in PARAGRAPH 6. In the event
that such Affiliate is so substituted as a Purchaser hereunder and such
Affiliate thereafter transfers to the original Purchaser all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
such Purchaser shall have all the rights of a Purchaser.
22. MISCELLANEOUS.
22.1 SUCCESSORS AND ASSIGNS. All covenants and other agreements contained
in this Agreement by or on behalf of any of the parties hereto bind and inure to
the benefit of their respective successors and assigns (including, without
limitation, any subsequent Holder) whether so expressed or not; PROVIDED, that
except as expressly permitted by this Agreement, the Company may not delegate
the performance of any of its obligations hereunder.
22.2 PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or Make-Whole
Amount or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.
22.3 SEVERABILITY. Any provision of this agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 CONSTRUCTION. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other convenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
22.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
22.6 DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
22.7 GOVERNING LAW. THIS AGREEMENT IS TO BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO
CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK).
26
<PAGE>
22.8 CONSENT TO JURISDICTION AND SERVICE AND WAIVER OF TRIAL BY JURY. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND
IRREVOCABLY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN SAID JURISDICTION IN
CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST IT BY ANY HOLDER
ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS AND HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY WAIVES AND
AGREES NOT TO ASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT
TO IT OR ITS PROPERTY, (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, OR (D) SUCH TRANSACTION DOCUMENT MAY NOT BE ENFORCED IN OR
BY ANY SUCH COURT. IN ANY SUCH ACTION OR PROCEEDING, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY
WAIVES TRIAL BY JURY AND PERSONAL IN HAND SERVICE OF ANY SUMMONS, COMPLAINT,
DECLARATION OR OTHER PROCESS AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREES THAT
THE SERVICE MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO IT AT ITS ADDRESS SET FORTH IN OR FURNISHED PURSUANT TO
THE PROVISIONS OF THIS AGREEMENT, OR BY ANY OTHER MANNER PROVIDED BY LAW.
ANYTHING HEREINBEFORE TO THE CONTRARY NOTWITHSTANDING, ANY HOLDER MAY SUE THE
COMPANY IN ANY OTHER APPROPRIATE JURISDICTION AND ANY PARTY MAY SUE ANY OTHER
PARTY ON A JUDGMENT RENDERED BY ANY COURT PURSUANT TO THE PROVISIONS OF THE
FIRST SENTENCE OF THIS PARAGRAPH 22.8 IN THE COURTS OF ANY COUNTRY, STATE OF THE
UNITED STATES OR PLACE WHERE SUCH OTHER PARTY OR ANY OF ITS PROPERTY OR ASSETS
MAY BE FOUND OR IN ANY OTHER APPROPRIATE JURISDICTION.
22.9 TERMINATION. This Agreement and the rights of the Holders and the
obligations of the Company hereunder shall not terminate until each of the
Notes, including all principal, interest, including interest on overdue interest
and Make-Whole Amount has been indefeasibly paid in full and all Expenses and
all other amounts owed to any Purchaser or any Holder pursuant to the terms of
any Transaction Document have been indefeasibly paid in full.
22.10 COMPLIANCE BY SUBSIDIARIES. The Company, as the holder of the Equity
Interests of its Subsidiaries, shall cause such meetings to be held, votes to be
cast, resolutions to be passed, by-laws to be made and confirmed, documents to
be executed and all other things and acts to be done to ensure that, at all
times, the provisions of this Agreement relating to its Subsidiaries are
complied with.
[SIGNATURES FOLLOW ON PAGE 28]
27
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same of the
Company, whereupon this letter shall become a binding agreement, executed under
seal between you and the Company.
Very truly yours,
MARKET HUB PARTNERS, L.P.
By: Market Hub Partners, Inc., its
general partner
By: /s/ ROBERT D. KINCAID
Name: Robert D. Kincaid
Title: Treasurer
The foregoing Agreement is hereby accepted as of the date first above written.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ EILEEN M. FORDE
Name:
Title: Investment Officer
SIGNATURE IA (CAYMAN), LTD.
By: John Hancock Mutual Life
Insurance Company,
Portfolio Advisor
By: /s/ EILEEN M. FORDE
Name:
Title: Investment Officer
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc.
By: /s/ DEBRA J. HEIGHT
Name:
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
on behalf of one or more separate accounts
By: CIGNA Investments, Inc.
By: /s/ DEBRA J. HEIGHT
Name:
Title: Managing Director
28
<PAGE>
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: /s/ DEBRA J. HEIGHT
Name:
Title: Managing Director
THE TRAVELERS INSURANCE COMPANY
By: /s/ JOHN GILSENAN
Name:
Title: Second Vice President
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ ANDREW C. DICKEY
Name:
Title:
CM LIFE INSURANCE COMPANY
By: /s/ ANDREW C. DICKEY
Name:
Title:
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: Massachusetts Mutual Life Insurance Company, as Investment Advisor
By: /s/ ANDREW C. DICKEY
Name:
Title:
29
<PAGE>
EXHIBIT A
THIS NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, OR (B) IF SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS IN EFFECT THEREUNDER AND ANY APPLICABLE STATE SECURITIES
LAWS.
MARKET HUB PARTNERS, L.P.
10.09% Senior NOTE
due December 31, 2001
PPN: 57057# AA 6
No. April 11, 1997
$
FOR VALUE RECEIVED, the undersigned, Market Hub Partners, L.P., a Delaware
limited partnership (the "COMPANY") hereby promises to pay to , or its
registered assigns (the "HOLDER"), the principal sum of
DOLLARS ($ ), with interest (computed on the
basis of a 360-day year of twelve 30-day months) on the principal amount from
time to time unpaid and not yet due at the rate of 10.09% per annum from the
date hereof. Such interest shall be due and payable semi-annually in arrears on
each June 30 and December 31 of each calendar year, beginning June 30, 1997. All
unpaid principal shall be due and payable on December 31, 2001. Any overdue
principal (including any overdue prepayment of principal), overdue Make Whole
Amount and, to the extent permitted by applicable law, overdue interest, shall
bear interest, payable on demand, at the rate of 12.09% per annum, whether
overdue by acceleration or otherwise.
This note (this "NOTE") is one of the 10.09% Senior Notes issued by the
Company (the "NOTES") pursuant to, and is subject to, a Note Purchase Agreement
dated as of April 11, 1997 between the Company and John Hancock Mutual Life
Insurance Company, Signature 1A (Cayman), Ltd., Connecticut General Life
Insurance Company, Life Insurance Company of North America, The Travelers
Insurance Company, Massachusetts Mutual Life Insurance Company, CM Life
Insurance Company and MassMutual Corporate Value Partners Limited, as amended
from time to time (the "NOTE AGREEMENT"). Capitalized terms used in this Note
and not defined herein have the meanings given therefor in the Note Agreement.
The Holder is entitled, equally and ratably, with the other holders of the Notes
issued by the Company pursuant to the Note Agreement, to the benefits of the
Note Agreement. Each Holder will be deemed, by its acceptance hereof, (i) to
have agreed to the confidentiality provisions set forth in paragraph 20 of the
Note Agreement and (iii) to have made the representations set forth in paragraph
6 of the Note Agreement.
All dollar amounts in this Note refer to United States dollars. Payments of
principal, Make Whole Amount and interest are to be made at the place and in the
manner specified by the Purchaser of this Note in Schedule A to the Note
Agreement or at such other place or manner as the Holder shall designate to the
Company in writing in accordance with the Note Agreement, in lawful money of the
United States of America. If any payment of principal, Make Whole Amount or
interest on or in respect of this Note becomes due and payable on any day which
is not a Business Day, the payment shall be due and payable on the next
succeeding Business Day.
<PAGE>
This Note is a registered note and, as provided in the Note Agreement, upon
surrender of this Note for registration of transfer in accordance with the Note
Agreement, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice to
the contrary.
This Note may be declared or may otherwise become due and payable prior to
its expressed maturity in the events, on the terms, with the Make Whole Amount
and in the manner and amounts as provided in the Note Agreement.
This Note is not subject to prepayment or redemption at the option of the
Company prior to its expressed maturity except on the terms, with the Make Whole
Amount and in the manner and amounts as provided in the Note Agreement.
The Company and every maker, endorser and guarantor hereof or of the debt
evidenced by this Note waive presentment, demand, notice protest, and all other
demands, notices of intention to accelerate the maturity of this Note and notice
of acceleration and all other notices (other than notices expressly required by
the Note Agreement) and suretyship defenses generally, in connection with the
delivery, acceptance, performance, default or enforcement of or under this Note.
THIS NOTE IS TO BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO CONFLICTS OF LAWS THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK).
WITNESS: COMPANY:
MARKET HUB PARTNERS, L.P.
By: MARKET HUB PARTNERS, INC.,
its General Partner
- ------------------- By:
Name: Robert D. Kincaid
Title: Treasurer
2
<PAGE>
FOR THE FORM OF EXHIBIT B,
SEE THE OPINIONS OF COMPANY COUNSEL AT TAB NOS. 3 AND 4.
<PAGE>
FOR THE FORM OF EXHIBIT C,
SEE THE GUARANTY AT TAB NO. 6.
<PAGE>
FOR THE FORM OF EXHIBIT D,
SEE THE SUBORDINATED NOTES AT TAB NO. 11.
<PAGE>
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the paragraph of the Agreement following such terms:
"AFFILIATE" means, at any time and as to any Person, any other Person
(including in the case of a Subsidiary, another Subsidiary) directly or
indirectly (i) controlling, controlled by, or under common control with, such
Person or (ii) beneficially owning or holding, directly or indirectly, 10% or
more of the Equity Interest or Voting Stock of such Person, or (iii) of which
such Person beneficially owns or holds, directly or indirectly, 10% or more of
the Equity Interest or Voting Stock of such other Person, as well as, in the
case of an individual, such individual's spouse, issue, parents, siblings and
issue of siblings (in each case by blood, adoption or marriage). A Person shall
be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Note Purchase Agreement as it may from time to time
be amended in accordance with PARAGRAPH 17.
"APPROVED AUDITOR" means Deloitte & Touch, Arthur Andersen LLP, Coopers &
Lybrand, Ernst & Young, KPMG, Peat Marwick or Price Waterhouse.
"ASSET SOLD" or "ASSETS SOLD" has the meaning specified in PARAGRAPH
10.5.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which commercial banks in New York, New York are required or authorized to be
closed.
"CAPITALIZED LEASE" means any lease of property (whether real, personal or
mixed), as to which the lessee is required, in accordance with GAAP, to
recognize, concurrently, the acquisition of an asset and the incurrence of a
liability.
"CAPITALIZED LEASE OBLIGATION" means any rental obligation under a
Capitalized Lease, taken at the amount thereof that is accounted for as
indebtedness (net of interest expense) in accordance with GAAP.
"CLOSING" and "CLOSING DATE" have the meanings specified in PARAGRAPH
3.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time and the rules and regulations promulgated thereunder as from time to time
in effect.
"COMPANY" has the meaning specified in the first PARAGRAPH of this
Agreement.
"CONFIDENTIAL INFORMATION" has the meaning specified in PARAGRAPH 20.
"CONSOLIDATED EBITDA" means for any period the amount of which is to be
determined, Consolidated Net Income for such period plus (but only to the extent
such amounts were deducted in the computation of Consolidated Net Income) (i)
Consolidated Interest Expense, (ii) income tax expense (including deferred
income tax expense), (iii) amortization expense and (iv) depreciation expense of
the Consolidated Group for such period, determined on a combined consolidated
basis in accordance with GAAP.
"CONSTRUCTION DEBT" means Debt of a Subsidiary incurred for the purpose of
developing or constructing underground gas storage facilities and related
infrastructure at a specific location (the "PROJECT").
"CONSOLIDATED GROUP" means the Guarantor and each of its Subsidiaries and,
but without duplication, the Company and each of its Subsidiaries.
"CONSOLIDATED INTEREST EXPENSE" means for any period the amount of which is
to be determined, the aggregate interest charges of the Consolidated Group
(including without limitation that portion of any obligation under Capitalized
Leases allocable to interest expense and any debt discount or expense) on any
Debt for such period (without regard to any limitation on the payment thereof)
as determined on a combined, consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means for any period the amount of which is to
be determined, the Net Income of the Consolidated Group determined on a
combined, consolidated basis in accordance with GAAP.
<PAGE>
"CONSOLIDATED TOTAL ASSETS" means, as of any date the amount of which is to
be determined, the total assets of the Consolidated Group on a combined,
consolidated basis determined in accordance with GAAP after elimination of all
amounts properly attributable to minority interests.
"CONSOLIDATED TOTAL CAPITALIZATION" means, as of any date the amount of
which is to be determined, Partners' Capital plus (but only to the extent such
amount was deducted in the computation of Partners' Capital) Consolidated Total
Debt for such period.
"CONSOLIDATED TOTAL DEBT" means, as of any date the amount of which is to
be determined, all Debt of the Consolidated Group determined on a combined,
consolidated basis in accordance with GAAP.
"DEBT" means, as applied to any Person without duplication, (i) obligations
of such Person borrowed money, (ii) obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligations of such
Person to pay the deferred purchase price of property or services (other than
current Trade Payables to be paid in accordance with customary practices), (iv)
Capitalized Lease Obligations of such Person, (v) obligations of such Person to
purchase securities or other property that arise out of or in connection with
the sale of the same or substantially similar securities or property, (vi)
obligations of such Person to reimburse any other Person in respect of amounts
paid under a letter of credit or similar instrument, (vii) obligations with
respect to Interest Rate Agreements and similar obligations requiring such
Person to make payments, whether periodically or upon the happening of a
contingency, (viii) any obligations secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) a
Lien on any 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
fair market value of such asset or the amount of the obligation so secured, (ix)
any recourse obligations of such Person in connection with a sale of
receivables, (x) Guaranties by such Person of Debt of others, (xi) any
outstanding Preferred Stock of a Subsidiary of such Person (other than Preferred
Stock owned beneficially and of record by such Person or a Wholly-Owned
Subsidiary of such Person) and any outstanding Redeemable Preferred Stock of
such Person, and (xii) any other items (excluding Trade Payables, items of
contingency reserves or reserves for deferred income Taxes or other reserves, to
the extent that such reserves do not represent an obligation) which in
accordance with GAAP would be shown on the liabilities side of the balance sheet
of such Person.
"DEFAULT" means any occurrence or condition which with the giving of notice
or the passage of time, or both, and remaining uncured after the expiration of
any applicable grace period would be an Event of Default.
"DEFAULT RATE" means the annual rate of interest of 12.09%.
"DISPOSITION" has the meaning specified in PARAGRAPH 10.5.
"EGAN" means Egan Hub Partners, L.P., a Delaware limited partnership.
"ENVIRONMENTAL LAWS" means any and all Federal, state and local statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"EQUITY INTEREST" means as to any Person, the capital stock or other equity
or beneficial interest in such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder,
as from time to time, in effect.
"ERISA AFFILIATE" means, with respect to any Person, any trade or business,
whether or not incorporated, which, is treated as a single employer together
with such Person under Section 414 of the Code.
"EVENT OF DEFAULT" has the meaning specified in PARAGRAPH 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time and the rules and regulations promulgated thereunder, as from time
to time in effect.
2
<PAGE>
"EXPENSES" has the meaning specified in PARAGRAPH 15.
"FINANCIAL STATEMENTS" has the meaning specified in PARAGRAPH 5.5.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"GOVERNMENTAL AUTHORITY" means (a) the governments of (i) the United States
of America and its states and political subdivisions, and (ii) any other
jurisdiction in which any Member conducts all or any part of its business, or
which asserts jurisdiction over any properties of any Member, and (b) any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government or jurisdiction.
"GUARANTY", as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of such Person with respect to any
indebtedness, dividend or obligation of another, including, without limitation,
any such obligation directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of business) or discounted or
sold with recourse by such Person, or in respect of which such Person is
otherwise directly or indirectly liable, including, without limitation, any such
obligation in effect guaranteed by such Person through any agreement (contingent
or otherwise) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to advance to or provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the working
capital, equity capital, net worth, solvency or any balance sheet or other
financial condition of the obligor of such obligation, or to make payment for
any securities, products, materials or supplies or for any transportation or
services without regard to the non-delivery or nonfurnishing thereof, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected against loss in respect thereof. The amount of
any Guaranty shall be deemed to be equal to the lower of (a) the amount of the
obligation guaranteed and (b) the maximum amount for which such Person may be
contingently liable pursuant to the terms of the instrument evidencing such
Guaranty, unless such guaranteed obligation and the amount for which such Person
may be liable are not stated or determinable, in which case the amount of such
Guaranty shall be the maximum reasonably anticipated liability for which such
Person is contingently liable in respect thereof as determined by such Person in
good faith (but in any event not less than the amount which is, or would
otherwise be required, in accordance with GAAP, to be reflected in such Person's
balance sheet or the notes thereto) as the amount of such obligation.
"GUARANTOR" has the meaning specified in PARAGRAPH 1.3.
"HAZARDOUS MATERIALS" means any and all substances: the presence of which
requires notification, investigation, monitoring or remediation under any
Environmental Law; which at such time is defined as a "hazardous waste",
"hazardous material", "hazardous substance", "toxic substance", "pollutant" or
"contaminant" under any Environmental Law, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 ET SEQ.) and any applicable local statutes and the regulations
promulgated thereunder; or without limitation, which contains gasoline, diesel
fuel or other petroleum products, asbestos or polychlorinated biphenyls.
"HOLDER" means any Person at the time shown as the holder of a Note on the
register referred to in PARAGRAPH 13.1.
"INSTITUTIONAL INVESTOR" means any bank, savings institution, trust
company, insurance company, investment company, pension or profit sharing trust
or other financial institution or institutional buyer, regardless of legal form.
"INTANGIBLES means all Intellectual Property, goodwill and all other assets
or property classified as intangibles in accordance with GAAP.
"INTELLECTUAL PROPERTY means all patents, copyrights, trademarks, trade
names, service marks or other intellectual or industrial property rights.
"INTEREST RATE AGREEMENT means, with respect to any Person, any one or
more of the following agreements entered into by such Person with one or more
financial institutions: interest rate protection
3
<PAGE>
agreements, interest rate swaps and/or other types of interest rate hedging
agreements obligating such Person to make payments, whether periodically or upon
the happening of a contingency. The amount of the obligation under any Interest
Rate Agreement shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Interest Rate Agreement had terminated at the end of such
fiscal quarter, and in making such determination, if any agreement relating to
such Interest Rate Agreement provides for the netting of amounts payable by and
to such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the amount of
such obligation shall be the net amount so determined.
"INVESTMENT means as to any Person (the Investor), (i) any loan or advance
or extension of credit by the Investor to or for the benefit of another Person;
(ii) the incurrence, assumption or guarantee by the Investor of, or grant of
credit support by the Investor for, any financial obligation of another Person
(including, without limitation, any Guaranties whether or not also constituting
Debt of the Investor); or (iii) the ownership, purchase or acquisition or other
investment by the Investor in any stock, obligations or securities of, or any
other Equity Interest in (including without limitation any Equity Interest in
any partnership, association, joint venture or other organization, whether or
not a legal entity any other Person, or (iv) any capital contribution by the
Investor to any other Person.
"INVESTOR" has the meaning specified in the definition of "Investment".
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of any Senior Officer
of the Company.
"LIEN" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute, court decision or contract, and including,
without limitation, any mortgage, pledge, security interest, lease, encumbrance,
lien, purchase option, call or right, or charge of any kind (including any
agreement to give or permit any of the foregoing), any conditional sale or other
title retention agreement, any Capitalized Lease, and the filing of, or
agreement to give or permit the filing on its behalf, of any financing statement
under the Uniform Commercial Code or personal property security legislation of
any jurisdiction.
"MAKE WHOLE AMOUNT" has the meaning specified in PARAGRAPH 8.6.
"MATERIAL" means material in relation to the business, operations, affairs,
financial condition, assets, properties, or prospects of the Company and its
Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means, (i) any material adverse effect on the
Company's business, assets, liabilities, financial condition or results of
operations, (ii) any material adverse effect on the Consolidated Group's
business, assets, liabilities, financial condition or results of operations
taken as a whole, and (iii) any adverse effect, WHETHER OR NOT MATERIAL, on the
binding nature, validity or enforceability of any Transaction Document as the
obligation of any party thereto and (iv) any material adverse effect on the
ability of the Company to perform its obligations under any Transaction Document
applicable to it or on the ability of the Guarantor to perform its obligations
under the Guaranty.
"MEMBER" means any Person included in the Consolidated Group.
"MEMORANDUM" means the Confidential Private Placement Memorandum dated
February, 1997 (including the Exhibits thereto) prepared by Dillion, Read & Co.
Inc. on the basis of information provided by the Company.
"MOSS BLUFF" means Moss Bluff Hub Partners, L.P., a Delaware limited
partnership.
"MOSS BLUFF/EGAN NOTES" means the $60,000,000 in aggregate principal amount
of Senior Secured Notes due 2006 issued by Moss Bluff and Egan.
"MOSS BLUFF/EGAN NOTE AGREEMENT" means the Note Purchase Agreements dated
July 3, 1996 pursuant to which the Moss Bluff/Egan Notes were issued.
"MULTIEMPLOYER PLAN" means any plan which is a "multiemployer plan" as such
term is defined in Section 4001(a)(3) of ERISA.
"NAIC" means the National Association of Insurance Commissioners.
4
<PAGE>
"NET INCOME" means as to any Person, for any period for which the amount
thereof is to be determined, gross revenues of such Person less all operating
and non-operating expenses of such Person including all changes of a proper
character (including current and deferred Taxes on income, provision for Taxes
on unremitted foreign earnings which are included in gross revenues,
amortization, depreciation and current additions to reserves), but not including
in gross revenues any gains (net of expenses and Taxes applicable thereto) in
excess of losses resulting from the sale, conversion or other disposition of
assets (other than inventory in the ordinary course of such Person's business),
any earnings or losses attributable to any Person, any gains arising from
transactions of a non-recurring and material nature, any gains arising from the
sale or discontinuation of operations, any gains resulting from the write-up of
assets, any equity of such Person in the unremitted earnings of any other
corporation or any earnings of any other Person acquired by such Person through
purchase, merger or consolidation or otherwise, earned prior to acquisition, all
determined in accordance with GAAP.
"NOTES" has the meaning specified in PARAGRAPH 1.1.
"OFFICER'S CERTIFICATE" means a certificate signed in the name of the
Company by any Senior Officer.
"PARTNERS' CAPITAL" means, as of any date the amount of which is to be
determined, the sum of (i) Consolidated Total Assets minus (ii) consolidated
total liabilities of the Consolidated Group minus (iii) the net book value of
any intangibles included in Consolidated Total Assets plus (iv) the amount of
any write-offs by the Company after the Closing Date (but not exceeding
$30,000,000 in the aggregate) of any Investment in its Subsidiaries other than
Moss Bluff or Egan, as determined on a combined, consolidated basis in
accordance with GAAP.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERMITTED CONSTRUCTION DEBT GUARANTY" means any Guaranty by the Company of
Construction Debt of a Subsidiary if such Guaranty is terminated or released
without further liability to the Company not later than six months after the
Project Completion Date for the portion of the Project financed by or securing
such Construction Debt. If any such Guaranty is not so terminated and released,
it shall cease to be Permitted Construction Debt Guaranty and shall be deemed
incurred for the purposes of paragraph 10.2.2 on such date.
"PERSON" means and includes an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust and any other form of
business organization (whether or not a legal entity), or any Governmental
Authorities.
"PLAN" means an "employee pension benefit plan. (as defined in Section 3 of
ERISA) which is or within the preceding five years has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate, or for which the Company or any ERISA Affiliate may have
any liability.
"PREFERRED STOCK" means as to any Person, any Redeemable Preferred Stock
and any other class or series of Equity Interest of such Person that has a
priority as to the payment of any dividends or distributions over the holders of
the most junior class of Equity Interest of such Person.
"PROJECT" has the meaning specified in the definition of Construction
Debt.
"PROJECT COMPLETION DATE" means with respect to any Project the date any
capacity is made available for placement in service to third parties.
"PROJECTIONS" has the meaning specified in PARAGRAPH 5.5.
"PURCHASER" and "PURCHASERS" have the meaning specified in PARAGRAPH
2.1.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"QUALIFIED INSTITUTIONAL BUYER" means a qualified institutional buyer, as
defined in Rule 144A.
"REDEEMABLE PREFERRED STOCK" means any class or series of Equity Interest
which has fixed payment or redemption obligations due and payable prior to the
final schedule due date for the repayment of
5
<PAGE>
principal of the Notes or is redeemable at the option of the holder, unless such
fixed payment obligations or repurchase obligations on exercise of such
redemption option can be satisfied, at the election of the issuer, through the
issuance of shares of its most junior class of Equity Interest.
"REQUIRED HOLDERS" means the Holder or Holders of more than 66 2/3% of the
aggregate principal amount of the Notes at the time outstanding, provided for
purposes of PARAGRAPH 12.1(B), Required Holders means the Holder or Holders of
more than 50% of the aggregate principal amount of the Notes at the time
outstanding.
"RESTRICTED INVESTMENTS" means any investment other than:
(i) prime commercial paper maturing not more than 270 days from the
date of issuance, having as at the date of acquisition a rating or at least
A-1 (or the existing equivalent) from Standard & Poor's Ratings Group or at
least P-1 (or then existing equivalent) from Moody's Investors Service,
Inc. and issued by a corporation organized in any state of the United
States of America or the District of Columbia;
(ii) securities issued or directly and fully and unconditionally
guaranteed or insured by the United States of America or any agency thereof
backed by the full faith and credit of the United States of America other
than derivative securities such as mortgage-backed "IOS" or "POS" and
mortgage pass-through certificates and similar investments;
(iii) time deposits, or certificates of deposit denominated in United
States dollars maturing within one year from the date of acquisition issued
by commercial banks (A) which are members of the Federal Reserve Systems
and chartered under the laws of the United States of America or any state
or the District of Columbia, (B) whose long-term certificates of deposit
and long-term unsecured debt is rated at least A (or then existing
equivalent) by Standard & Poor's Ratings Group and at least A-2 (or then
existing equivalent) by Moody's Investors Service, Inc. and (C) having
capital and surplus in excess of $500,000,000;
(iv) Investments in money market programs of investment companies
registered as such with the SEC which, at the time of acquisition, are
rated, or if such money market programs are not rated, the substantial
majority of the underlying investments of such investment company are rated
A-1 or better by Standard & Poor's Ratings Group or P-1 or better by
Moody's Investors Service, Inc., or provided that such money market
programs invest only in investments of the types described in CLAUSES (i)
through (iii) above;
(v) Investments in repurchase agreements (A) covering investments of
the type described in CLAUSE (ii) above (B) having terms of not more than
365 days, (C) with a bank, trust company or other financial institution
whose long-term unsecured debt, at the time of acquisition of such
investment, is rated A or better by Standard & Poor's Ratings Group, Duff &
Phelps Credit Rating Co. or Fitch Investor Service, Inc., or A2 or better
by Moody's Investors Service, Inc., (D) in respect to which the Investor
has the right, whether by contract or pursuant to applicable law, or
liquidate such agreement upon the occurrence of any default thereunder, and
(E) in connection with which all action required by the applicable law or
regulations to perfect a Lien in the Investments covered by such repurchase
agreements has been taken.
(vi) Investments in (A) Interest Rate Agreements designed to protect
the Company or any Subsidiary against fluctuations in interest rates in
respect of Debt incurred or to be incurred by the Company or any
Subsidiary, which obligations do not exceed the aggregate principal amount
of such Debt, or (B) Interest Rate Agreements to protect the Company or any
Subsidiary against fluctuations in the value of Investments in fixed-income
securities which were acquired in the ordinary course of business provided
in either case (1 ) the long-term senior unsecured Debt of the counterparty
thereto is rated A- or better by Standard & Poor's Ratings Group or A3 or
better by Moody's Investors Service, Inc. at the time the Investment is
made and (2) the underlying Debt or Investment being so protected is
otherwise not prohibited by this Agreement;
(vii) Investments in existence on the Closing Date and set forth on
SCHEDULE 10.2;
6
<PAGE>
(viii) endorsement of negotiable instruments for collection and
ownership of accounts receivable acquired in the ordinary course of
business;
(ix) demand deposits in banks in the ordinary course of business (not
for investment purposes);
(x) Investments in the Company and Investments (other than Guaranties)
in a Subsidiary if at the time more than fifty percent of the Equity
Interest of such Subsidiary is owned, directly or indirectly, by the
Company;
(xi) Investments in any Person that concurrently with such Investment
becomes a Subsidiary of which more than fifty percent of the Equity
interest is owned, directly or indirectly, by the Company and provided no
Default or Event of Default exists immediately before or immediately after
such Investment or could reasonably be expected to result therefrom;
(xii) Investments by the Guarantor in a Subsidiary of the Guarantor
which is, and conducts no other business than being, the general partner of
a Subsidiary of the Company;
(xiii) Investments (other than Guaranties) by the Company in the
Guarantor provided the amount of such Investment is concurrently
contributed, either by the Guarantor or by a Subsidiary of the Guarantor,
to the capital of a Subsidiary of the Company; and
(xiv) Permitted Construction Debt Guaranties.
"RESTRICTED PAYMENTS" means the declaration, payment or making, directly or
indirectly, of any dividend, payment or other distribution on or in respect of
any Equity Interest of a Member (other than the payment of a dividend, payment
or other distribution to the Company or a Subsidiary of which more than fifty
percent of the Equity Interest is owned directly or indirectly by the Company)
or the setting apart of any funds or property therefor, or the making of any
payment on account of the purchase, redemption, retirement or other acquisition,
direct or indirect, of any Equity Interest of a Member (other than any such
Equity Interest owned by the Company or a Subsidiary of which more than fifty
percent of the Equity Interest is owned directly or indirectly by the Company)
including without limitation, the forgiveness or foreclosure by the issuer of
any Debt secured by a pledge of such capital stock or any payment, repayment,
redemption, retirement, repurchase or other acquisition, direct or indirect, by
a Member of, on account of, or in respect of, the principal of any of the
Subordinated Notes or any other Debt subordinated in right of payment to the
Notes (or any installment thereof) prior to the regularly scheduled maturity
date thereof (as in effect on the date such Debt was originally incurred) or any
payment (whether in respect of principal or interest) on the Subordinated Notes
or any other Debt that is subordinated in right of payment to the Notes during
the continuance of any Default or after the occurrence of an Event of Default.
"RULE 144A" means Rule 144A promulgated under the Securities Act and
including any successor rule thereto, as such rule may be amended from time to
time.
"SEC" means the United States Securities and Exchange Commission, or any
Governmental Authority succeeding to the functions of such Commission in the
administration of the Securities Act and/or the Exchange Act.
"SECURITIES ACT' means the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder, as from time to time
in effect.
"SENIOR OFFICER" means the Chairman of the Board, the President, Chief
Executive Officer, any Senior Vice President, Chief Financial Officer, Treasurer
or principal accounting officer of the Company or any other individual, whether
or not an officer, who performs similar functions, on behalf of the Company.
"SPECIAL COUNSEL" means the law firm of Sullivan and Worcester or such
other firm of legal counsel as the Purchasers may from time to time designate as
their Special Counsel for the purposes of this Agreement or any matters related
hereto:
"SUBSIDIARY" means, as to any Person, any corporation, association or other
business entity in which such Person and/or one or more of its Subsidiaries
collectively owns sufficient equity or voting interests to enable it or them (as
a group) ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a
7
<PAGE>
50% interest in the profits or capital thereof is collectively owned by such
Person and/or one or more of its Subsidiaries (unless such partnership can and
does ordinarily take major business actions without the prior approval of such
Person and/or one or more of its Subsidiaries). Unless the context otherwise
clearly requires any reference to a "Subsidiary" is a reference to a Subsidiary
of the Company.
"SUBORDINATED NOTES" has the meaning specified in PARAGRAPH 4.13.
"TAXES" means any and all present or future taxes, assessments, stamps,
duties, fees, levies, imposts, deductions, withholdings or other governmental
charges of any nature whatsoever and any liabilities with respect thereto,
including any surcharge, penalties, additions to tax, fines or interest thereon,
now or hereafter imposed, levied, collected, withheld or assessed by any
government or taxing authority of any country or political subdivision of any
country, or any international taxing authority.
TRADE PAYABLES" means amounts payable to suppliers of goods and services in
the ordinary course of a Person's business.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes and the Guaranty.
"VOTING STOCK" means any securities of any class of a Person whose holders
are entitled under ordinary circumstances to vote for the election of directors
of such Person (or Persons performing similar functions) (irrespective of
whether at the time securities of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary of the Company all of the
voting power of all classes of the Voting Stock and all of the beneficial
ownership of which is owned directly or indirectly through one or more other
Wholly-Owned Subsidiaries.
8
<PAGE>
SCHEDULE 5.5 FINANCIAL STATEMENTS
<PAGE>
FINANCIAL STATEMENTS OF MARKET HUB PARTNERS
INDEX
PAGE
-----
Report of Independent Public Accountants.......................... F-2
Combined Balance Sheets as of December 31, 1996 and 1995.......... F-3
Combined Statements of Operations for the two years ended
December 31, 1996 and for the period from inception
(December 21, 1994) to December 31, 1994........................ F-4
Combined Statements of Capital for the two years ended
December 31, 1996 and for the period from inception
(December 21, 1994) to December 31, 1994........................ F-5
Combined Statements of Cash Flows for the two years ended
December 31, 1996 and for the period from inception
(December 21, 1994) to December 31, 1994........................ F-6
Notes to Combined Financial Statements............................ F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Partners of
Market Hub Partners:
We have audited the accompanying combined balance sheets of Market Hub
Partners (see Note 1) as of December 31, 1996 and 1995, and the related combined
statements of operations, capital and cash flows for the two years ended
December 31, 1996 and for the period from inception (December 21, 1994) to
December 31, 1994. These financial statements are the responsibility of the
management of Market Hub Partners. 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 Market Hub
Partners as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the two years ended December 31, 1996 and for the period from
inception (December 21, 1994) to December 31, 1994, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 6, 1997
F-2
<PAGE>
MARKET HUB PARTNERS
COMBINED BALANCE SHEETS
DECEMBER 31,
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents....... $ 638 $ 872
Restricted cash................. 721 1,172
Accounts receivable............. 3,121 1,549
Inventory....................... 2,031 1,774
Prepaid expenses................ 270 188
---------- ----------
Total Current
Assets................ 6,781 5,555
---------- ----------
Property and Equipment:
Natural gas storage
facilities...................... 124,968 83,107
Construction in progress........ 26,493 16,087
Less accumulated depreciation... (5,525) (1,634)
---------- ----------
145,936 97,560
---------- ----------
Other Assets......................... 4,018 2,970
---------- ----------
$ 156,735 $ 106,085
========== ==========
LIABILITIES AND CAPITAL
Current Liabilities:
Current portion of long-term
debt............................ $ 4,200 $ 1,350
Accounts payable:
Trade and other............ 15 2,371
Partners and affiliates
(including accrued
interest on note payable
to TPC)................. 1,818 8,989
Note payable to TPC............. 8,800 25,021
Deferred revenue................ -- 94
Accrued liabilities............. 2,239 2,681
---------- ----------
Total Current
Liabilities........... 17,072 40,506
Note payable to TPC.................. 12,000 --
Long-Term Debt, net of current
portion............................ 53,492 8,464
Capital.............................. 74,171 57,115
---------- ----------
$ 156,735 $ 106,085
========== ==========
The accompanying Notes to Combined Financial Statements are an
integral part of these statements.
F-3
<PAGE>
MARKET HUB PARTNERS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD FROM INCEPTION
-------------------- (DECEMBER 21, 1994)
1996 1995 TO DECEMBER 31, 1994
--------- --------- ---------------------
<S> <C> <C> <C>
Revenues:
Salt cavern storage................ 15,670 7,528 -$-
Pipeline storage and
transportation................... 1,804 2,700 115
Other revenue...................... 3,043 436 --
--------- --------- -------
Total revenue...................... 20,517 10,664 115
--------- --------- -------
Operating Expense:
Operations and maintenance......... 3,970 3,586 49
Plant administrative expense....... 2,082 1,802 --
Depreciation and amortization...... 4,138 1,875 21
--------- --------- -------
Total costs and expenses........... 10,190 7,263 70
--------- --------- -------
Operating Income........................ 10,327 3,401 45
Other Income (Expense):
General and administrative
expense.......................... (2,094) (1,717) (703)
Interest expense (including an
extraordinary loss of $452,000 on
early extinguishment of debt in
1996)............................ (3,589) (1,267) (18)
Interest income.................... 172 512 14
--------- --------- -------
Net Income (Loss)....................... $ 4,816 $ 929 $ (662)
========= ========= =======
</TABLE>
The accompanying Notes to Combined Financial Statements are an
integral part of these statements.
F-4
<PAGE>
MARKET HUB PARTNERS
COMBINED STATEMENTS OF CAPITAL
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, PERIOD FROM INCEPTION
-------------------- (DECEMBER 21, 1994)
1996 1995 TO DECEMBER 31, 1994
--------- --------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Contributions of assets by TPC....... $ -- $ (139) $ 24,227
Cash contributions by other
partners........................... 12,240 19,760 13,000
Net Income (Loss).................... 4,816 929 (662)
--------- --------- ----------------------
Net Increase in Capital.............. 17,056 20,550 36,565
Balance, Beginning of Period......... 57,115 36,565 --
--------- --------- ----------------------
Balance, End of Period............... $ 74,171 $ 57,115 $ 36,565
========= ========= ======================
</TABLE>
The accompanying Notes to Combined Financial Statements are an
integral part of these statements.
F-5
<PAGE>
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, PERIOD FROM INCEPTION
---------------------- (DECEMBER 21, 1994)
1996 1995 TO DECEMBER 31, 1994
---------- ---------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss).................. $ 4,816 $ 929 $ (662)
Depreciation and amortization... 4,138 1,875 21
Adjustments to reconcile net income
to net cash flows from operating
activities:
Decrease (increase) in
Restricted Cash................. 451 (146) --
Decrease (increase) in Accounts
Receivable...................... (1,572) (981) --
(Increase) decrease in Inventory
and Prepaid Expenses.......... (339) (1,799) --
Increase (decrease) in Trade
Payables and Other
Liabilities................... (2,798) (2,425) --
Increase (decrease) in payable
to partners and affiliates.... (7,171) 8,326 655
Other........................... 40 (135) --
---------- ---------- ----------------------
Net Cash Provided by (Used
in) Operating
Activities.............. (2,435) 5,644 14
---------- ---------- ----------------------
Cash Flows from Investing Activities:
Capital and Other Asset
additions....................... (43,770) (39,186) --
---------- ---------- ----------------------
Cash Flows from Financing Activities:
Capital contributions.............. 12,240 19,760 13,000
Net increase (decrease) in Note
Payable to TPC.................. (4,221) 2,799 227
Issuance of long-term debt (net of
expenses of $1,593,000)......... 58,407 -- --
Repayments of long-term debt....... (20,455) (1,386) --
---------- ---------- ----------------------
Net Cash Provided by
Financing Activities.... 45,971 21,173 13,227
---------- ---------- ----------------------
Net Increase (Decrease) in Cash and
Cash Equivalents................ (234) (12,369) 13,241
Cash and Cash Equivalents at
Beginning of Period............. 872 13,241 --
---------- ---------- ----------------------
Cash and Cash Equivalents at End of
Period.......................... $ 638 $ 872 $ 13,241
========== ========== ======================
Supplemental Disclosure:
Cash paid during the period for
interest, net of amounts
capitalized..................... $ 4,549 $ 1,068 -$-
</TABLE>
The accompanying Notes to Combined Financial Statements are an
integral part of these statements.
F-6
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND CONTROL
The accompanying financial statements of Market Hub Partners ("MHP") is a
combined presentation of the balance sheets and statements of operations and
cash flows of Market Hub Partners, Inc. ("MHI"), a Delaware corporation, and
Market Hub Partners, L.P. ("MHL"), a Delaware limited partnership, each formed
on December 21, 1994. MHP was formed to own, construct and operate underground
caverns capable of storing natural gas and related facilities capable of
injecting and withdrawing stored gas at high rates of delivery. TPC Corporation
("TPC"), a Delaware corporation, formed MHP with subsidiaries of NIPSCO
Industries, Inc. New Jersey Resources Corporation, DPL Inc., and Public Service
Enterprise Group, Incorporated. Subsidiaries of TPC and these four companies, on
a pro rata basis, own the stock of MHI, the 1% general partner of MHL, and are
the limited partners of MHL.
TPC contributed its interest in five market center projects (in varying
stages of operation or development) to MHP through a series of mergers between
the TPC subsidiaries, through which it previously conducted its gas storage
business, and subsidiaries of MHP. The interests contributed by TPC include its
market center facilities, market center locations, development plans, permits,
leases and signed storage service contracts, as well as associated long-term
debt and other liabilities, relating to its five market center projects as of
March 31, 1994 (herein referred to as the "Effective Date"). See Note 5 --
LONG-TERM DEBT AND NOTE PAYABLE TO TPC for a description of advances made by TPC
after the Effective Date. TPC's four partners committed to contribute
$45,000,000 to MHP over a period extending from 1994 to 1996, all of which was
contributed by July 1996. TPC's interest in net income is approximately 61% at
commencement of MHP operations and will increase to approximately 70% at such
time as two of the initial partners with reversionary interests receive
distributions from MHP equal to 150% of their cumulative capital contributions.
MHP owns and operates natural gas market centers located in Texas and
Louisiana and it is anticipated that MHP will construct, own and operate up to
three such additional natural gas market centers. The services that MHP markets
or anticipates marketing include "unbundled" high deliverability storage
services, cash market trading, real time title tracking and other hub services.
The customers for these "unbundled" services include natural gas producers,
marketers, pipelines, local distribution companies and end users. MPH's revenue,
profitability and future rate of growth are substantially dependent upon the
supply and demand for natural gas, the pace of natural gas industry deregulation
at both the federal and state levels, and the current and future positions
regarding expiration of customer contractual commitments for both firm
transportation and storage services. Such factors are largely beyond MHP's
control.
MHP has a small administrative staff located in Leesburg, Virginia, near
Washington, D.C., which is responsible for managing the business affairs of MHP.
Through June 30, 1996, many of the day-to-day operating activities at each of
the market centers and storage locations were performed under contract by
employees of TPC and its affiliates and were governed by various service
agreements covering project development management services, field operating
services, storage sales services, gas title information and administration
services, financing support services, business services and technology access
services. Effective July 1, 1996, MHP established another office in Houston,
Texas, and the TPC employees who were previously involved in providing project
development services, construction management services, storage sales services
and gas title information and administrative services to MHP became employees of
MHP. Accordingly, the contracts between TPC and MHP relating to those services
were canceled. The remaining service contracts between TPC and MHP for
accounting, financial, field operating and technology access services were not
affected.
Under the terms of the Agreement of Limited Partnership, certain decisions
require the approval of TPC and at least two other partners. Such matters
principally focus on decisions involving financing, acquisitions or divestitures
and approval of operating budgets.
F-7
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION AND PRINCIPLES OF COMBINATION -- The accompanying financial
statements include the combined accounts of MHI and MHL and their respective
subsidiaries. MHPs interests in various gas storage joint ventures have been
proportionately consolidated. Material intercompany balances and transactions
have been eliminated.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents consist of demand
deposits and highly liquid investments purchased with an original maturity of
three months or less.
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject MHP to concentration of credit risk consist primarily of temporary cash
investments and trade receivables derived principally from uncollateralized
sales to customers in the pipeline and natural gas utility industries. The
concentration of credit risk in these industries affects MHP's overall exposure
to credit risk because customers may be similarly affected by changes in
economic and other conditions.
INVENTORIES -- Inventories of natural gas are carried at the lower of
weighted average cost or market value.
PROPERTY AND EQUIPMENT -- Property and equipment contributed to MHP was
contributed at the historical cost basis net of related accumulated depreciation
at the date of contribution. Depreciation of storage facilities and equipment
(whether contributed or subsequently acquired) is provided using the
straight-line method over estimated useful lives of the assets ranging from
fifteen to thirty years. Other property is depreciated on the straight-line
method over applicable estimated useful lives. Additions, renewals, and
betterments that materially add to productive capacity or extend the life of an
asset are capitalized Expenditures for routine maintenance, repairs, and renewal
costs are expensed as incurred. Interest is capitalized during the construction
period of major facilities and amounted to $1,868,100 and $1,966,300 in the
years ended December 31, 1996 and 1995, respectively. In 1996, MHP adopted the
provisions of Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." Since adoption, SFAS No. 121 has had no impact on MHP's
financial statements.
INCOME TAXES -- MHI has various wholly-owned incorporated subsidiaries and
interests in related limited partnerships. Because no stockholder owns more than
80% of MHI, the corporation files a separate federal income tax return and as
such is responsible for its own income tax liabilities. The tax liabilities of
MHI are immaterial. MHL is a limited partnership, and the applicable tax
liability or benefit is the responsibility of the individual general or limited
partners.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts 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.
Significant estimates with regard to these financial statements relate primarily
to the depreciable lives of property and equipment.
(3) DESCRIPTION OF MARKET CENTER PROJECTS
MOSS BLUFF FACILITY. This facility, which is located near Houston, Texas,
began operations in 1990, prior to TPC's formation of MHP. Through July 3, 1996,
Moss Bluff Gas Storage Systems ("MBGSS"), was the partnership that owned the
facility, with MHP having a 50%. partnership interest in MBGSS. On July 3, 1996,
MHP acquired the 50% partnership interest in MBGSS owned by CMS Energy
Corporation ("CMS") for a net cash payment of approximately $26.6 million and
the transfer by MHP to CMS of MHP's 50% interest in a market hub project in
Michigan (see MIDWEST AREA below). Financing for this transaction was provided
through the issuance of $60 million of senior secured notes by MHP in a private
F-8
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
placement (see Note 5). MBGSS was effectively dissolved upon MHP's acquisition
of CMS's partnership interest.
The Moss Bluff Facility has three storage caverns that provide
approximately 7.8 Bcf of working storage capacity and a maximum 200 million
cubic feet per day ("MMcf/d") and 900 MMcf/d of injection and withdrawal
capacities, respectively." During 1994, an estimated 0.6 Bcf of storage capacity
was added to the second cavern at the Moss Bluff Facility by using technology
developed by TPC for leaching natural gas storage caverns while in operation.
The third cavern with a working storage capacity of 2.25 Bcf was placed in
service on September 18, 1995. Total construction expenditures related to this
cavern were approximately $13.4 million.
EGAN FACILITY. The Eagan Facility is located in Acadia Parish, Louisiana.
Construction began in 1994, following the signing of long term service contracts
with two major local distribution companies in the Midwest as well as TPC.
Initial service of 3.6 Bcf of working storage capacity (current capacity is 4.7
Bcf) with 185 MMcf/d of injection capacity and 750 MMcf/d of withdrawal capacity
began September 1, 1995, while construction continued on a new pipeline
interconnection. Total construction expenditures for the initial cavern, the
pipeline interconnection and the facility infrastructure were $60.7 million. In
1996, MHP began construction of a second cavern at Egan with an initial planned
working storage capacity of 2.0 Bcf. Cumulative construction expenditures of
$3.9 million were incurred on this cavern through December 31, 1996.
COPIAH COUNTY PROJECT. This project includes the planned development of
salt caverns at a storage site located in Copiah County, Mississippi. The
project was originally owned 75% by MHP and 25% by a third party, however, in
the first quarter of 1996, TPC purchased the third party's interest in the
project at the partner's cost. It is expected that the general partnership
owning the project site will ultimately be dissolved and that MHP and TPC will
each receive a proportionate share of the project site acreage in order to
enable them to pursue separate (but possibly related) projects in the respective
areas of natural gas storage and compressed air energy storage. A total of $2.7
million (net to MHP) had been incurred in development related expenditures
through December 31, 1996.
TIOGA PROJECT. The Tioga project is a market area project located in Tioga
County, Pennsylvania, near the New York border. MHP has received bids from
potential customers for natural gas storage, services at the facility which is
expected to initially have 2.5 Bcf of storage capacity. The first phase of the
facility is targeted to begin operations in 1999. A total of $19.7 million has
been incurred in development expenditures through December 31, 1996.
MIDWEST AREA. In the Midwest area, TPC and CMS originally proposed to
develop the Grands Lacs Project in southeastern Michigan, with each company
owing a 50% interest in the project. Service in a third party facility began
under an interim contract in the second quarter of 1995. On July 3, 1996, MHP
conveyed the interest in the Grands Lacs Project to CMS in conjunction with the
acquisition by MHP of the 50% interest in the Moss Bluff Facility held by CMS.
MHP is presently exploring other potential sites for a midwestern area market
hub.
(4) OTHER ASSETS
Other assets consist primarily of formation cost of MHP and deferred
financing fees related to a private placement financing transaction completed in
July 1996 (see Note 5). The formation costs include legal, accounting and other
services and are being amoritized over a period of five years. The deferred
financing fees related to the private placement transaction include legal,
placement agency and other services and are being amortized over the life of the
underlying loan.
F-9
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(5) LONG-TERM DEBT AND NOTE PAYABLE TO TPC
MOSS BLUFF FINANCING. MHP, through its half interest in MBGSS, was party to
a project financing agreement with a bank for an original amount of $25,000,000
of debt through July 3, 1996 (see NOTE PAYABLE TO TPC below). Borrowings under
the agreement provided for construction financing of the first two salt caverns
and related surface facilities. The outstanding loan balance at the time of
payoff on July 3, 1996, including assumption for the 50% attributable to CMS'
former interest, was $16,695,000 (a $452,000 loss was incurred on the early
extinguishment of the debt). The loan bore interest, at the option of MHP and
its partner, at the prime rate plus 1% or a Eurodollar index rate plus 1.65%
("Interest Index Margin"). Prior to June 30, 1996, terms of the loan required
MBGSS to deposit to accounts controlled by the lender certain amounts from
operating cash flow to equal certain future principal and interest payments.
NOTE PAYABLE TO TPC. Under the terms of the Agreement of Limited
Partnership, MHP has assumed an obligation to TPC for advances made by TPC to
the gas storage projects after the effective date of the formation in order to
fund construction activities. Additional advances were made to MHP by TPC to
fund construction and development activities during 1995 and the first quarter
of 1996 such that cumulative advances at that date totaled $31,020,000 Interest
on the outstanding balance was accrued through December 1996 at the prime rate
stated by Wells Fargo Bank, which was a weighted average of 8.25% and 8.83% for
the years ended December 31, 1996 and 1995; a total of $2,037,700 and $2,261,300
of interest was accrued on the advances during the years ended December 31, 1996
and 1995, and the unpaid portions of such amounts are included as a current
payable to TPC in the accompanying combined balance sheet.
SENIOR SECURED NOTES On July 3, 1996, two of MHP's subsidiaries completed
the issuance of $60 million of senior secured notes in a private placement
transaction. The senior secured notes bear interest at a rate of 8.10% per annum
and are due in varying amounts through December 31, 2006. Proceeds of the
private placement were used by MHP to acquire the remaining 50% interest in the
Moss Bluff Facility owned by a third party, to retire an outstanding bank loan
on the Moss Bluff Facility, to repay a portion of the promissory note owed by
MHP to TPC, and to pay the costs of the financing transaction. The portion of
the promissory note repaid by MHP to TPC with proceeds of the private placement
amounted to approximately $14,100,000. The remaining $16,900,000 balance of the
promissory note payable by MHP to TPC, which was originally due in December
1996, was extended through March 31, 1997 at annual interest rate of 12%; an
additional $3,900,000 was also loaned by TPC to MHP on the same terms in
December 1996. Repayment of approximately $8,800,000 of the promissory note is
expected to be made from the proceeds of a new MHP private placement debt
financing that is anticipated to close on or around March 31, 1997 (commitments
from the lenders have been obtained for this financing). Accordingly, such
portion of the promissory note has been classified as a current payable and the
balance, which is expected to be refinanced on a long-term basis, has been
classified as a non-current payable at December 31, 1996.
F-10
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The MHP subsidiaries which issued the senior secured notes are required to
maintain a specified balance in a cash reserve account at a trustee bank and to
meet certain debt service coverage ratios on a combined basis. At December 31,
1996, the subsidiaries were in compliance with such coverage ratios. Maturities
of the senior secured notes for the five fiscal years following December 31,
1996 are as follows:
AMOUNT
--------------
(IN THOUSANDS)
1997................................. $ 4,200
1998................................. 4,449
1999................................. 4,667
2000................................. 3,437
2001................................. 3,331
Thereafter........................... 37,608
--------------
Total minimum payments
required........................ $ 57,692
==============
(6) FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET RISK
The following table presents the carrying amount and estimated fair value
of MHP's financial instruments at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents....... $ 638 $ 638 $ 872 $ 872
Interest rate cap agreements.... -- -- 111 36
Liabilities:
Long-term debt.................. 57,692 57,692 9,814 9,814
Note payable to TPC............. 20,800 20,800 25,021 25,021
</TABLE>
The following methods and assumptions were used to estimate the fair value
of the financial instruments summarized in the above table. The carrying value
of restricted cash, trade receivables and trade payables included in the
accompanying balance sheet approximated fair value at December 31, 1996 and
1995.
CASH AND CASH EQUIVALENTS -- The carrying amounts of cash and cash
equivalents approximated fair value due to their short-term nature.
INTEREST RATE CAP AGREEMENT -- The fair value of interest rate caps at
December 31, 1995 represented the amount at which they could be settled, based
on quotes from dealers. The risk of nonperformance by the counterparties to the
interest rate cap agreements was not considered significant. In conjunction with
the private placement financing transaction and repayment of the MBGSS project
finance loan (see Note 5), MHP sold the interest rate caps to TPC at fair value
in September 1996. A loss of $112,000 was recorded on this transaction and was
included in the $452,000 loss on the early extinguishment of the MGBSS project
finance loan.
DEBT AND NOTE PAYABLE TO TPC -- The fair value of long-term debt is
estimated using discounted cash flow analysis, based on the borrowing rate
currently available to MHP for loans with similar terms and maturities.
F-11
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) RELATED PARTY TRANSACTIONS
For the period from the Effective Date of the formation of MHP (March 31,
1994) to December 21, 1994, TPC incurred certain internal costs related to the
development and construction of the individual market center projects. these
costs totaled $641,000 and were charged to MHP as a general and administrative
expenses in the accompanying combined statements of operations.
Subsequent to the formation of MHP, TPC has received natural gas storage
services from MHP, and in turn, provides certain administrative, financial and
other services to MHP. Storage fees paid by TPC to MHP are at contractual rates
which are comparable to those rates reflected in MHP's third party storage
contracts and amounted to $3,177,000 and $1,888,000 in the years ended December
31, 1996 and 1995, respectively. Charges for services provided by TPC to MHP are
based substantially upon contracts approved by TPC and MHP and are meant to
approximate the market rate for such services. Contracts covering a substantial
portion of such services were canceled by mutual agreement between TPC and MHP
effective July 1, 1996 and the TPC employees who were previously involved in
providing these services to MHP became employees of MHP at that date. The
aggregate charges for contractual services provided by TPC to MHP in the years
ended December 31, 1996 and 1995 were as follows:
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
--------- ---------
(IN THOUSANDS)
Services provided by lPC which were
continued subsequent to
July 1, 1996....................... S1,641 $ 4,292
Services provided by TPC which were
discontinued on July 1, 1996....... 774 1.158
--------- ---------
$ 2.415 $ 5.450
========= =========
(8) COMMITMENTS
MHP leases its main office space m Leesburg, Virginia from a third party.
In addition, since July 1, 1996, MHP has occupied office space in Houston,
Texas, leased by a TPC subsidiary from a third party; MHP has reimbursed the TPC
subsidiary for this space at the subsidiary's cost, however, the subsidiary
remains primarily liable on the lease with the third party. MHPs total office
lease expense for the years ended December 31, 1996 and 1995 were S62,000 and
$38,000, respectively. Future minimum rental payments required to be made by MHP
under the Leesburg, Virginia, office lease are as follows:
AMOUNT
---------------
(IN THOUSANDS)
1997................................. $ 40
1998................................. 42
1999................................. 44
2000................................. 4
2001................................. -0-
Thereafter........................... -0-
---------------
Total minimum payments required...... $ 130
===============
SCHEDULE 5.8 -- LITIGATION: OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS
NE Hub Partners, L.P. is currently in proceedings before the Federal Energy
Regulatory Commission to secure the appropriate order to begin construction of
the Tioga facility in Pennsylvania. Although the Company believes it will
ultimately receive such order, should the FERC not grant such order, the
ultimate operation of the project as a natural gas storage facility would be
indefinitely delayed and possibly
F-12
<PAGE>
MARKET HUB PARTNERS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
foregone. Consequently, the recoverability of current costs expended to date at
NE Hub Partners, L.P. for Tioga could be at risk.
SCHEDULE 5.10 -- TITLE TO PROPERTIES
c) The use by the Company and its Members of certain technology and other
information owned, licensed or contracted for use from third parties by TPC
Corporation relating to the design, construction and operation of
underground gas storage in salt structures is currently being provided
pursuant to a Technology Access Agreement between TPC Corporation ("TPC")
and Market Hub Partners, L.P. ("MHP").
Such agreement provides, a month other things, that for specific cash
consideration, TPC will license technology to MHP for use by MHP at a specific
Member's storage facility on a cavern by cavern basis. Subsidiaries of the
Company are provided access to such technology at the direction of the Company.
SCHEDULE 5.14 -- EXISTING INDEBTEDNESS: FUTURE LIENS.
a) $35,000,000 Senior Notes due December 31, 2001 issued pursuant to that Note
Purchase Agreement between MHP and the purchasers listed therein.
b) all remaining outstanding debt under those $60,000,000 Senior Secured Notes
due December 31, 2006 issued pursuant to the Note Purchase Agreements dated
as of July 3, 1996 among Moss Bluff Hub Partners, L.P., Egan Hub Partners,
L.P. the note purchasers named therein and Texas Commerce Bank National
Association, as Collateral Agent.
c) $12,000,000 Subordinated Notes due March 31, 2002 issued contemporaneously
with the debt listed in (a) above to the limited partners of MHP.
SCHEDULE 5.17 -- ENVIRONMENTAL MATTERS
None
SCHEDULE 9.2 -- INSURANCE
F-13
<PAGE>
SCHEDULE A -- PURCHASERS
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
$2,000,000 SENIOR NOTE NO. 1
$2,750,000 SENIOR NOTE NO. 2
1. All payments on account of the Notes described above or other obligations in
accordance with the provisions thereof shall be made by bank wire transfer
of immediately available funds for credit, not later than 12 noon, Boston
time, to:
The First National Bank of Boston
ABA No. 011000390
100 Federal Street
Boston, Massachusetts 02110
Account of: John Hancock Mutual Life Insurance Company
Private Placement Collection Account
Account Number: 541-55417
On order of: Market Hub Partners, L.P.
PPN. 57057 # AA 6
2. Contemporaneous with the above wire transfer, advice setting forth (1) the
full name, interest rate and the maturity date of the Note or other
obligations; (2) allocation of payment between principal and interest and
any special payment; and (3) name and address of bank (or trustee) from
which wire transfer was sent, shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
3. All notices with respect to prepayments, both scheduled and unscheduled,
whether partial or in full, and notice of maturity shall be delivered of
mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
4. All other communications which shall include, but not be limited to,
financial statements and certificates of compliance with financial
covenants, shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond & Corporate Finance Department, T-57
Fax No.: (617) 572-5068
5. The Notes above shall be registered in the name of John Hancock Mutual Life
Insurance Company.
6. Tax I.D. No. 04-1414660.
<PAGE>
SCHEDULE A -- PURCHASERS
SIGNATURE 1A (CAYMAN) LTD
$4,000,000 SENIOR NOTE NO. 3
1. All payments on account of the Note described above or other obligations in
accordance with the provisions thereof shall be made by bank wire transfer
of immediately available funds for credit, not later than 12 noon, Boston
time, to:
Bankers Trust Company
ABA #021-001-033
Acct. #99-911-145
For further credit to: Bankers Trust Company, as Indenture Trustee for
Signature 1A (Cayman), Ltd., Account #98016
The following required text shall be on all wires:
Market Hub Partners, L.P.
Private Placements No. 57057 # AA 6
Account #98016-Signature 1A (Cayman), Ltd.
Principal:
-----------------------------------------
Interest:
-----------------------------------------
Pay Date:
-----------------------------------------
2. All other communications shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company, Portfolio Advisor
200 Clarendon Street
Boston, MA 02117
Attention: George H. Braun, Bond and Corporate Finance Dept., T-57
3. The Note above shall be registered in the name of BARNETT & CO.
4. Tax I.D. No. (04-1414660).
<PAGE>
SCHEDULE A -- PURCHASERS
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
$1,331,750 SENIOR NOTE NO. 4
$110,250 SENIOR NOTE NO.5
$1,950,375 SENIOR NOTE NO. 6
$572,250 SENIOR NOTE NO. 7
$1,331,750 SENIOR NOTE NO. 8
1. All payments on account of the Notes described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer for credit, not later than 12 noon, Boston time, to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA # 021000021
OBI=Market Hub Partners, L.P. 10.09% Senior Note due 2001, PPN: 57057#AA6 and
identify application (as among principal, premium and interest of the payment
being made), contact name and phone
2. All notices related to payments shall be mailed or delivered to:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing - S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities -- S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
3. All other communications shall be delivered or mailed to:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division -- S-307
James G. Schelling/Debra J. Height
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax No.: 860-726-7203
4. The Notes shall be registered in the name of CIG & Co.
5. Tax I.D. No. 13-3574027
<PAGE>
SCHEDULE A -- PURCHASERS
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
(on behalf of one or more separate accounts)
$650,125 SENIOR NOTE NO. 9
$2,156,875 SENIOR NOTE NO. 10
1. All payments on account of the Notes described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer for credit, not later than 12 noon, Boston time, to:
Chase NYC/CTR/
BNF = CIGNA Private Placements/AC = 9009001802
ABA #021000021
OBI = Market Hub Partners, L.P. 10.09% Senior Notes due 2001, PPN: 57057 #
AA 6 and identify application (as among principal, premium and interest of the
payment being made), contact name and phone
2. All notices related to payments shall be mailed or delivered to:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing -- S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities -- S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
3. All other communications shall be delivered or mailed to:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division -- S-307
James G. Schelling/Debra J. Height
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax No.: 860-726-7203
4. The Notes above shall be registered in the name of CIG & Co.
5. Tax I.D. No. 13-3574027.
<PAGE>
SCHEDULE A -- PURCHASERS
LIFE INSURANCE COMPANY OF NORTH AMERICA
$646,625 SENIOR NOTE NO. 11
1. All payments on account of the Note described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer for credit, not later than 12 noon, Boston time, to:
Chase NYC/CTR/
BNF = CIGNA Pirvate Placements/AC = 9009001802
ABA #021000021
OBI = Market Hub Partners, L.P. 10.09% Senior Notes due 2001, PPN: 57057 #
AA 6 and identify application (as among principal, premium and interest of the
payment being made), contact name and phone
2. All notices related to payments shall be mailed or delivered to:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing -- S-309
900 Cottage Grove Road
Hartford, CT 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities -- S-307
Operations Group
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, NY 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
3. All other communications shall be delivered or mailed to:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division -- S-307
James G. Schelling/Debra J. Height
900 Cottage Grove Road
Hartford, CT 06152-2307
Fax No.: 860-726-7203
4. The Notes above shall be registered in the name of CIG & Co.
5. Tax I.D. No. 13-3574027.
<PAGE>
SCHEDULE A -- PURCHASERS
THE TRAVELERS INSURANCE COMPANY
$8,750,000 SENIOR NOTE NO. 12
1. All payments on account of the Note described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer, with sufficient information to identify the source and
application of funds, for credit, not later than 12 noon, Boston time, to:
The Travelers Insurance Company -- Consolidated Private Placement Account
No. 910-2-587434
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
ABA No. 021000021
2. All communications regarding payments should be directed to:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department -- Cashier
Facsimile: 860-277-2299
3. All other communications should be directed to:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department -- Private Placements
Facsimile: 860-954-5243
4. The Note above shall be registered in the name of TRAL & Co.
5. Tax I.D. No. 06-0566090
<PAGE>
SCHEDULE A -- PURCHASERS
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
$3,000,000 SENIOR NOTE NO. 13
1. All payments on account of the Note described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer (identifying each payment as Market Hub Partners, L.P. 10.09%
Senior Notes due 2001 and identifying interest and principal), not later
than 12 noon, Boston time, to:
Citibank, N.A.
111 Wall Street
New York, New York 10043
ABA N. 021000089
For MassMutual Long Term Pool
Account No.: 4067-3488
Re: Market Hub Partners, L.P. 10.09% Senior Notes due 2001, principal and
interest split
2. Contemporaneous with the above wire transfer, telephone advice of such
payment shall be made to:
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at 413-744-3878
3. All communications with respect to payments shall be delivered or mailed to:
Massachusetts Mutal Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Custody and Collection Department F-381
4. All other communications shall be delivered or mailed to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
5. The Note above shall be registered in the name of Massachusetts Mutual Life
Insurance Company
6. Tax I.D. No. 04-1590850.
<PAGE>
SCHEDULE A -- PURCHASERS
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
$1,500,000 SENIOR NOTE NO. 14
1. All payments on account of the Note described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer (identifying each payment as Market Hub Partners, L.P. 10.09%
Senior Notes due 2001 and identifying interest and principal), not later
than 12 noon, Boston time, to:
Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual Pension Management
Account No. 910-2594018
Re: Market Hub Partners, L.P. 10.09% Senior Notes due 2001, principal and
interest split
2. Contemporaneous with the above wire transfer, telephone advice of such
payments shall be made to:
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at 413-744-3878
3. All communications with respect to payments shall be delivered or mailed to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Custody and Collection Department F 381
4. All other communications shall be delivered or mailed to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
5. The Note above shall be registered in the name of Massachusetts Mutual Life
Insurance Company.
6. Tax I.D. No. 04-1590850.
<PAGE>
SCHEDULE A -- PURCHASERS
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
$1,000,000 SENIOR NOTE NO. 15
1. All payments on account of the Note described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer (identifying each payment as Market Hub Partners, L.P. 10.09%
Senior Notes due 2001 and identifying interest and principal), not later
than 12 noon, Boston time, to:
Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
New York, NY 10081
ABA No. 021000021
For MassMutual IFM Non-Traditional
Account No. 910-2509073
Re: Market Hub Partners, L.P. 10.09% Senior Notes due 2001, principal and
interest split
2. Contemporaneous with the above wire transfer, telephone advice of such
payments shall be made to:
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at 413-744-3878
3. All communications with respect to payments shall be delivered or mailed to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Custody and Collection Department F 381
4. All other communications shall be delivered or mailed to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
5. The Note above shall be registered in the name of Massachusetts Mutual Life
Insurance Company.
6. Tax I.D. No. 04-1590850.
<PAGE>
SCHEDULE A -- PURCHASERS
CM LIFE INSURANCE COMPANY
$750,000 SENIOR NOTE NO. 16
1. All payments on account of the Notes described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer (identifying each payment as Market Hub Partners, L.P. 10.09%
Senior Notes due 2001 and identifying interest and principal), not later
than 12 noon, Boston time, to:
Citibank, N.A.
111 Wall Street
New York, New York 10043
ABA No. 021000089
For Segment 43 -- Universal Life
Account No.: 4068-6561
Re: Market Hub Partners, L.P. 10.09% Senior Notes due 2001, principal and
interest split
2. Contemporaneous with the above wire transfer, telephone advice of such
payment shall be made to:
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at 413-744-3878
3. All communications with respect to payments shall be delivered or mailed to:
CM Life Insurance Company
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Custody and Collection Department F 381
4. All other communications shall be delivered or mailed to:
CM Life Insurance Company
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
5. The Note above shall be registered in the name of CM Life Insurance Company
6. Tax I.D. No. 06-1041383.
<PAGE>
SCHEDULE A -- PURCHASERS
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
$2,500,000 SENIOR NOTE NO. 17
1. All payments on account of the Notes described above or other obligations in
accordance with the provisions thereof shall be made by federal funds bank
wire transfer (identifying each payment as Market Hub Partners, L.P. 10.09%
Senior Notes due 2001 and identifying interest and principal), not later
than 12 noon, Boston time, to:
Gerlach & Co.
c/o Citibank, N.A.
ABA No. 021000089
Concentration Account 36112805
Account No.: 4067-3488
Re: Market Hub Partners, L.P. 10.09% Senior Notes due 2001, PPN: 57057 # AA
6.
2. Contemporaneous with the above wire transfer, telephone advice of such
payment shall be made to:
Securities Custody and Collection
Department of Massachusetts Mutual Life
Insurance Company at 413-744-3878
3. All communications shall be delivered or mailed to:
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
c/o BANK OF AMERICA TRUST AND BANKING
CORPORATION (CAYMAN) LIMITED
P.O. Box 1092
George Town
Grand Cayman
Cayman Islands, B.W.I.
Attention: Michael Carney
4. The Note purchased by the above shall be registered in the name of Gerlach &
Co.
5. Tax I.D. No. _________________ .
<PAGE>
SCHEDULE 3
MHP's wiring instructions for closing are:
Market Hub Partners, L.P.
Account No. 4159767474
Wells Fargo Bank (Texas), National Association
ABA No. 121000248
<PAGE>
SCHEDULE 5.3 -- DISCLOSURE
1. Updated financial projections have been provided to reflect the following
changes to the projections supplied in the Memorandum:
a) the increase in the size of the offering from $25,000,000 to
$35,000,000;
b) the setting of the interest rate on the notes at 10.09% per annum;
c) the elimination of all operating lease payments as Moss Bluff and Egan;
d) the increase in the amount of Subordinated Partner Notes to $12,000,000;
and
all other changes specified in the list of assumptions provided to the
Purchasers, as compared to the assumptions set forth in the Memorandum.
<PAGE>
SCHEDULE 5.4 -- ORGANIZATION AND OWNERSHIP OF SUBSIDIARIES: AFFILIATES
(A) NAME OF SUBSIDIARY OF COMPANY ORGANIZED IN % OWNERSHIP
- ------------------------------------- -------------- -----------
Moss Bluff Hub Partners, L.P. Delaware 99%
NE Hub Partners, L.P. Delaware 99%
Egan Hub Partners, L.P. Delaware 99%
Grands Lacs Hub Partners, L.P. Delaware 99%
Mistex Hub Partners, L.P. Delaware 99%
Copiah County Storage Company Texas 75%
MS-1 Distribution and Storage
Company Mississippi 100%
(ii) List of Company Affiliates
NAME VOTING % OWNERSHIP OF COMPANY
- ------------------------------------- -----------------------------
TPC Gas Storage Services, L.P. 66%
Miami Valley Market Hub, Inc. 11.66%
NIPSCO Energy Services, Inc. 11.66%
Egan Hub Partners, Inc. Common Control with Company
Grands Lacs Hub Partners, Inc. Common Control with Company
Market Hub Partners, Inc. Common Control with Company
Mistex Hub Partners, Inc. Common Control with Company
Moss Bluff Hub Partners, Inc. Common Control with Company
NE Hub Partners, Inc. Common Control with Company
(iii) Directors and Executive Officers of Market Hub Partners, Inc.
Directors: NAME AFFILIATION
------------------ -------------------------------
Larry W. Bickle TPC Corporation
John A. Strom TPC Corporation
J. Chris Jones TPC Corporation
Thomas M. Jenkins DPL, Inc.
Jeffrey W. Yundt NIPSCO Industries, Inc.
Jay Corn New Jersey Resources Corp.
Eileen A. Moran Public Service Resources Corp.
Officers: NAME TITLE
------------------ -------------------------------
Donald B. Russell President
David W. Hooker Vice President, Operations
Jack Gatewood Vice President
J. Chris Jones Vice President
Robert D. Kincaid Treasurer
M. Scott Jones Secretary
b) None
c) that certain note Purchase Agreement dated July 3, 1996 between Moss Bluff
Hub Partners, L.P./Egan Hub Partners, L.P. and the purchasers named therein.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
MARKET HUB PARTNERS, L.P., et *For Information Purpose Only, VICTORIA WEBB
al ALL coverage is subject to
INSURANCE SUMMARY actual policy terms, conditions April 9, 1997
and limitations.
COVERAGE DESCRIPTION LIMITS DEDUCTIBLE
BOILER & MACHINERY $50,000,000 per Accident $50,000 Damage to Covered
Property
The Traveler's Indemnity Co. - $100,000 expediting expenses 240 Hrs. - Business income
Rated BEST's - A/XV
Term: 11/1/96 - 11/1/97 $ Included Business Income Combined w/BI - Extra Expense
$ Included Extra Expense Combined w/PD - Spoilage
$10,000 Spoilage 24 Hrs-Off Premise Service
Interruption
$1,000,000 Off Premises Service Combined w/PD-Ammonia
Interruption Contamination
$100,000 Ammonia Contamination
$100,000 Water Damage &
Hazardous Substances
$1,000,000 Ordinance or Law
$5,000,000 Error in Description
$10,000 "Media", Brands and
Labels
$10,000,000 Newly Acquired
Locations
BUSINESS AUTOMOBILE $1,000,000 Ea. Accident None
Liability
Illinois National Insurance Co. $2,500 PIP
- Rated BEST's A++/XV
Term: 9/23/96 - /11/1/97 $1,000,000 Ea. Accident-
Uninsured/Under-insured Motor.
NO Physical Damage Coverage
COMMERCIAL GENERAL LIABILITY "Bodily Injury"/"Property $10,000
Damage" Combined
Lexington Insurance Co. - Rated $1,000,000 Each Occurrence
BEST's - A++/XV
Term: 11/1/96 - 11/1/97 $1,000,000 Prod./Comp. Ops.
Aggregate
$2,000,000 All Other Aggregate
COMMERCIAL CRIME $3,000,000 Per Occurrence $25,000 per occurrence
National Union Fire Ins. Co. Pa
- Rated BEST's - A++/XV
Term: 07/28/96 - 07/28/97
DIRECTORS AND OFFICERS $10,000,000 Each $-0- Each Director/Officer
Claim/Aggregate
Continental Casualty Co./CNA -
Rated BEST's - A/XV
Term: 07/28/96 - 07/28/97 (Corp. entity coverage for $250,000 Corporate
security claims) Reimbursement
ELECTRONIC EQUIPMENT PROTECTION $1,703,028 Hardware $5,000 per occurrence, Theft
American Mfg. Mutual Ins. Co. - $443,437 Software/Media $1,000 per occur.,
Rated BEST's A/XIV Fire/Lightning/Vandalism
Term: 11/1/96 - 11/1/97 $25,000 Limit for equipment in
transit or temp. location
$26,400 Miscellaneous Equipment
$950,000 Business
Interrp./Extra Expense
<PAGE>
MARKET HUB PARTNERS, L.P., et *For Information Purpose Only, VICTORIA WEBB
al ALL coverage is subject to
INSURANCE SUMMARY actual policy terms, conditions April 9, 1997
and limitations.
COVERAGE DESCRIPTION LIMITS DEDUCTIBLE
ENERGY PACKAGE Offshore Property:
100% London Markets - Not $8,456,000 Platforms/Flow Com- $100,000 Platform - any one
BEST's rated puters/Scada Equipment occurrence
Term: 11/1/96 - 11/1/98 $166,344,000 P/L(s), incl. $50,000 Pipelines - any one
onshore link (1st loss limit of occurrence
$7)
Onshore Property: $100,000 any one occurrence
$100,393,100 Oil Lease Equip.,
Gas Plant, etc.
$1,950,000 Buildings & Contents
$28,000,000 Caverns
$1,000,000 Onshore Pipeline
(1st loss limit)
$3,200,000 Egan compressor
12/96 (prorated 11 mo's.)
Control of Well: $25,000 OEE, AOO-ea. sub-sect.
separately.
28,000 1/4 Existing wells $50,000 all, more than 1
sub-sect. involved.
21,500 1/4 Wells to be drilled
Excess Liabilities: 000,000 ea accident in the
aggregate as applies.
$15,000,000 excess of s XS of sched. underlying
$35,000,000 (AEGIS) insur. or $50,000 SIR
Gas and/or Liquids In Storage $100,000 AOO, except 5% of
and/or In Line: value as respects
$6,478,726 Pad Gas Mysterious Disappearance.
$24,506,680 Working Gas
Loss of Earnings/Extra Exp. 0,000 Excess per occurrence or
(Business Interrupt): 10 days waiting
$10,745,000 Offshore d onshore, 20 days offshore,
whichever greater.
$12,425,000 Onshore
$3,500,000 Extra Expense
Construction/Builders Risk: TBA
Tioga Storage Facility (NE Hub
Partners, L.P.)
$7,000,000 Egan Cavern II
$58,000 Egan Leaching
Plant/Equipment
EXCESS LIABILITY $35,000,000 Per Occurrence (Deductible not applicable)
Associated Electric/Gas Svcs. - $35,000,000 Aggregate
Not BEST's rated (Pool)
Term: 11/1/96 - 11/1/97
FIDUCIARY LIABILITY $5,000,000 Single/Aggregate $25,000
National Union Fire Ins. Co. Pa
- Rated BEST's - A++/XV
Term: 7/28/96 - 7/28/97
NON-OWNED AIRCRAFT $5,000,000 each occurrence, BI 0
and PD
United States Aircraft Ins. $3,000 each person, medical
Group - Rated BEST's - A/XI coverage
Term: 11/1/96 - 11/1/97
WORKERS' COMP. EMPL. LIABILITY $1,000,000 BI by Accident, each N/A
accident
American Home Assurance - Rated $1,000,000 BI by Disease,
BEST's A++/XV policy limit
Term: 11/1/96 - 11/1/97 $1,000,000 BI by Disease, each
employee
</TABLE>
<PAGE>
SCHEDULE 9.7 - USE OF PROCEEDS
Repayment of Note Payable to TPC Corporation:
Principal $ 21,900,000.00
Accrued interest through April 11,
1997 1,334,899.43
Less: New borrowings from Partners (12,000,000.00)
Net repayment to TPC Corporation 11,234,899.43
Estimated equity contributions to
Moss Bluff Hub Partners, L.P.: $ 3,600,000
Estimated equity contributions to
Egan Hub Partners, L.P.: $ 14,222,000
Estimated equity contributions to NE
Hub Partners, L.P.: 2,293,100
Estimated equity contributions to
Grands Lacs Hub Partners, L.P. 800,000
Estimated Closing Fees -- Dillon,
Read & Co. Inc., Baker & Botts LLP,
Sullivan & Worcester LLP 850,000
Working Capital 2,000,000.57
<PAGE>
SCHEDULE 10.2 - RESTRICTED INVESTMENTS
None
SCHEDULE 10.3 - LIENS
None
SCHEDULE 10.7 - TRANSACTIONS WITH AFFILIATES
None
EXHIBIT 4.4
WAIVER AND AMENDMENT
THIS WAIVER AND AMENDMENT AGREEMENT is entered into February 11, 1998
("Waiver") among Market Hub Partners, L.P. (the "Company") and the
registered holders of the Company's 10.09% Senior Notes due December 31, 2001
signatory hereto (the "Holders"). The Senior Notes were issued pursuant to a
Note Purchase Agreement dated as of April 11, 1997 (the "Agreement") among the
Company and John Hancock Mutual Life Insurance Company, Signature IA (Cayman),
Ltd., Connecticut General Life Insurance Company (on its own behalf and on
behalf of one or more separate accounts), Life Insurance Company of North
America, The Travelers Insurance Company, Massachusetts Mutual Life Insurance
Company, CM Life Insurance Company, and MassMutual Corporate Value Partners
Limited.
Capitalized terms not defined in this Waiver shall have the meanings given
therefor in the Agreement.
The Company has advised the Holders that it desires to prepay the
Subordinated Notes and that it desires to amend the covenant in the Agreement
limiting incurrence of Debt. The Holders are willing to permit such prepayment
and for such purpose to waive compliance with the covenant limiting Restricted
Payments and to amend the covenant in the Agreement limiting incurrence of Debt
on the terms and conditions of this Waiver.
NOW THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties agree:
1. RESTRICTED PAYMENT WAIVER. At the date of this Waiver, the Company
represents and warrants that, in compliance with the provisions of paragraph
10.2.1 of the Agreement, it could make a Restricted Payment of $7,000,000 (a
"Complying Payment"). The Holders waive compliance by the Company with its
covenant in paragraph 10.2.1 of the Note Agreement to the extent required for
the Company to prepay the Subordinated Notes, in an amount which when aggregated
with the Complying Payment, does not exceed $17,800,000, and thereafter,
paragraph 10.2.1 of the Agreement is amended to read as follows: "No Member
shall make, declare or incur any liability to make any Restricted Payment."
2. LIMITATION ON CONSOLIDATED TOTAL DEBT. Clause (ii) of paragraph 10.1.3
of the Agreement is amended to read as follows: "Immediately after the
incurrence of such Debt, Consolidated Total Debt does not exceed 80% of
Consolidated Total Capitalization."
3. COMPANY GUARANTEES. Paragraph 10.6 of the Agreement is amended to read
as follows: "The Company will not make or enter into any Guarantees of
Construction Debt", and Schedule B to the Agreement is amended by the deletion
of the term "Permitted Construction Debt Guaranty".
4. INTEREST RATE ON NOTES. From and after the date of this Waiver as
written above, the principal amount from time to time unpaid and not yet due
under each of the Notes shall accrue interest (computed on the basis of a
360-day year of twelve 30-day months) at the rate of 10.34% per annum, due and
payable semi-annually in arrears on each June 30 and December 31 of each
calendar year and any principal of any Note which is not paid when due shall
bear interest, payable on demand, at the rate of 12.34% per annum, whether
overdue by acceleration or otherwise. The Company, at its sole cost and expense,
shall upon request of any Purchaser and against surrender by such Purchaser of
its existing Note(s), issue and deliver to such Purchaser a replacement Note or
Notes in an aggregate principal amount equal to the unpaid principal amount of
the surrendered Note(s) in the form of Exhibit A attached hereto, dated the date
to which interest shall have then been paid on the surrendered Note(s). The
failure of a Purchaser to make such request or surrender any Note for
replacement in accordance with this Section 4, shall not, however, affect the
Company's obligation to pay interest on such Note in accordance with the terms
hereof. In addition, Exhibit A attached shall be substituted for the Exhibit A
to the Agreement and any Note issued upon any transfer or exchange of a Note
pursuant to paragraph 13.2 of the Agreement or in replacement of a Note pursuant
to paragraph 13.3 of the Agreement shall be issued solely in the form of Exhibit
A, regardless of whether or not the Note being transferred, exchanged or
replaced shall have previously been reissued in the form of Exhibit A.
5. PARAGRAPH 10.5 OF THE AGREEMENT. From and after the date of this
Waiver subparagraph (i) of paragraph 10.5 of the Agreement shall be amended such
that the words "business entity" shall be substituted for the word
"corporation" each time it appears in such subparagraph (i).
<PAGE>
6. EFFECTIVENESS OF THIS WAIVER. Sections 1, 2, 3 and 4 of this Waiver
shall be effective solely if Market Hub Partners Storage, L.P. and Market Hub
Partners Finance, Inc. shall have sold at least $110,000,000 (but not more than
$115,000,000) in aggregate principal amount of debt securities (such securities,
the "Rule 144A Securities") having a rating at the time of issuance of not
less than BB- by Standard and Poor's Rating Group ("S&P") and Ba3 by Moody's
Investors Service ("Moodys") (and no other rating agency shall have rated such
Rule 144A Securities less favorably) in a private offering effected under Rule
144A under the Securities Act on or before March 31, 1998; PROVIDED, if as of
the date of issuance, the Rule 144A Securities shall have been rated less than
BB- by S&P or Ba3 by Moodys, Sections 1, 2, 3 and 4 of this Waiver shall
nonetheless be effective if at the time of issuance of the Rule 144A Securities
the Notes shall have been rated at least B- by S&P or B3 by Moodys (and no
rating agency shall have rated the Notes less favorably). Nothing in this
Section 6 shall constitute a waiver by the Purchasers of compliance by the
Company with any covenant set forth in the Agreement (as the same is amended
pursuant to this Waiver) in connection with the issuance of the Rule 144A
Securities.
7. NO OTHER AMENDMENTS OR WAIVERS. Except as specifically stated in this
Waiver, this Waiver shall not constitute a waiver of or amendment to any term or
condition of the Note Agreement or a waiver of any Event of Default or Default
now existing or hereafter arising under the Note Agreement and in all respects
the Note Agreement shall remain in full force and effect and unmodified.
8. GOVERNING LAW. THIS AGREEMENT IS TO BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES RELATING TO
CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK).
9. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
2
<PAGE>
[Signature Page to Waiver
and Amendment Agreement]
EXECUTED under seal as of the date first above written.
MARKET HUB PARTNERS, L.P.
By: Market Hub Partners, Inc., the
general partner
By: /s/ Anthony J. Clark
Vice President and Chief
Financial Officer
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Eileen M. Forde
Investment officer
BARNETT & CO. (as nominee of
Signature IA (Cayman), Ltd.,
beneficial owner of Senior
Note No. 3)
By: /s/ George Flores
CIG & CO. (as nominee of Connecticut
General Life Insurance Company,
beneficial owner of Senior Notes
Nos. 4, 5 and 8)
By: /s/ James G. Schelling
James G. Schelling
Partner
CIG & CO. (at the direction of The
Lincoln National Life Insurance
Company, beneficial owner of Senior
Note No. 6)
By: /s/ James G. Schelling
James G. Schelling
Partner
3
<PAGE>
[Signature of Page to Waiver
and Amendment Agreement]
CIG & CO. (at the direction of Lincoln
Life and Annuity Company of New York,
beneficial owner of Senior Note No. 7)
By: /s/JAMES G. SCHELLING
James G. Schelling
Partner
CIG & CO. (as nominee of Connecticut
General Life Insurance Company,
beneficial owner of Senior Note Nos. 9
and 10, on behalf of one or more
separate accounts)
By: /s/JAMES G. SCHELLING
James G. Schelling
Partner
CIG & CO. (as nominee of Life
Insurance Company of North America,
beneficial owner of Senior Note No. 11)
By: /s/JAMES G. SCHELLING
James G. Schelling
Partner
TRAL & CO. (as nominee of The
Travelers Insurance Company, beneficial
owner of Senior Note No. 12)
By: /s/ Frank G. Pattison
Frank G. Pattison
Attorney-in-fact
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Richard C. Morrison
Richard C. Morrison
Managing Director
4
<PAGE>
[Signature Page to Waiver
and Amendment Agreement]
CM LIFE INSURANCE COMPANY
By: /s/ RICHARD C. MORRISON
Investment Officer
GERLACH & CO. (as nominee for
MassMutual Corporate Value Partners
United, beneficial owner of Senior Note
No. 17)
By: _________________________________
5
<PAGE>
DIRECTION TO CIG & CO.
The Lincoln National Life Insurance Company, as beneficial owner of Market
Hub Partners' 10.09% Senior Note No. 6 issued in the original principal amount
of $1,950,375 in favor of CIG & CO., and Lincoln Life and Annuity Company of New
York, as beneficial owner of Market Hub Partners' 10.09% Senior Note No. 7
issued in the original amount of 572,250 in favor of CIG & CO., hereby authorize
and direct CIG & CO. to execute and deliver the foregoing Waiver and Amendment
on their behalf with respect to their interests, respectively, in Senior Note
No. 6 and Senior Note No. 7.
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ TIMOTHY L. POWELL
Timothy L. Powell
Vice President
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK
By Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ TIMOTHY L. POWELL
Timothy L. Powell
Vice President
6
EXHIBIT 10.1
CONFORMED
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT, dated as of March 1, 1998 (the
"Agreement"), is entered into by and among Market Hub Partners Storage, L.P., a
Delaware limited partnership ("Storage LP"), and Market Hub Partners Finance,
Inc., a Delaware corporation ("Finance Corp.").
W I T N E S S E T H
WHEREAS, Storage LP and Finance Corp. (together, the "Issuers")
are to issue and sell $115,000,000 aggregate principal amount of their 8 1/4 %
Senior Notes due 2008 (the "Senior Notes") pursuant to an Indenture (the
"Indenture") dated as of March 1, 1998 among the Issuers, certain wholly owned
subsidiaries of Storage LP, as guarantors, and IBJ Schroder Bank & Trust
Company, as trustee;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined herein
have the meaning assigned to them in the Indenture.
2. The portion, if any, of the proceeds of the issuance and sale
of the Senior Notes which is received by Finance Corp. will be transferred by
Finance Corp. to Storage LP.
3. Storage LP hereby agrees to assume and perform, pay or
discharge in accordance with their terms all obligations of the Issuers
contained in the Indenture and the Senior Notes, including payment of the
principal, premium, if any, Interest and Liquidated Damages, if any, in
connection with the Senior Notes.
4. Storage LP's obligations pursuant to Clause 3 of this
Agreement will rank PARI PASSU, in respect of payment, with Storage LP's
obligations under the Indenture.
5. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
-1-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto on the date first above written.
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage,
L.L.C.,
as sole general partner
By: /s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President, Secretary and
Chief Financial Officer
MARKET HUB PARTNERS FINANCE, INC.
By: /s/ ANTHONY J. CLARK
Anthony J. Clark
Vice President, Secretary and
Chief Financial Officer
-2-
EXHIBIT 10.2
CREDIT AGREEMENT
BETWEEN
MARKET HUB PARTNERS STORAGE, L.P.
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
April 15, 1998
REVOLVING LINE OF CREDIT OF UP TO $50,000,000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above...........................................1
1.2 Additional Defined Terms......................................1
1.3 Undefined Financial Accounting Terms.........................17
1.4 References...................................................17
1.5 Articles and Sections........................................17
1.6 Number and Gender............................................17
1.7 Incorporation of Exhibits....................................18
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit.....................................18
2.2 Use of Loan Proceeds.........................................19
2.3 Interest.....................................................19
2.4 Repayment of Loans and Interest..............................19
2.5 Outstanding Amounts..........................................20
2.6 Time, Place, and Method of Payments..........................20
2.7 Voluntary Prepayments and Conversions of Loans...............20
2.8 Commitment Fee...............................................20
2.9 Facility Fee.................................................20
2.10 Security Interest in Accounts; Right of Offset...............21
2.11 General Provisions Relating to Interest......................21
2.12 Yield Protection.............................................22
2.13 Limitation on Types of Loans.................................23
2.14 Illegality...................................................24
2.15 Regulatory Change............................................24
2.16 Limitations on Interest Periods..............................25
ARTICLE III CONDITIONS
3.1 Receipt of Loan Documents and Other Items....................25
3.2 Each Loan....................................................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization............................................28
4.2 Existence....................................................28
4.3 Partnership Existence........................................28
4.4 Corporate Existence..........................................28
4.5 Valid and Binding Obligations................................29
4.6 Security Instruments.........................................29
4.7 Title to Assets..............................................29
4.8 Scope and Accuracy of Financial Statements...................29
-i-
<PAGE>
4.9 No Material Misstatements....................................29
4.10 Liabilities, Litigation, and Restrictions....................29
4.11 Authorizations; Consents.....................................30
4.12 ERISA........................................................30
4.13 Environmental Laws...........................................30
4.14 Compliance with Federal Reserve Regulations..................30
4.15 Investment Company Act Compliance............................31
4.16 Public Utility Holding Company Act Compliance................31
4.17 Proper Filing of Tax Returns; Payment of Taxes Due...........31
4.18 Casualties or Taking of Property.............................31
4.19 Locations of Borrower........................................31
4.20 Subsidiaries.................................................31
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records and Inspection of
Properties.................................................31
5.2 Quarterly Financial Statements; Compliance Certificates......32
5.3 Annual Financial Statements..................................32
5.4 Title Defects................................................32
5.5 Notices of Certain Events....................................32
5.6 Additional Information.......................................33
5.7 Compliance with Laws.........................................33
5.8 Payment of Assessments and Charges...........................34
5.9 Maintenance of Corporate and Partnership Existence and Good
Standing...................................................34
5.10 Payment of Notes; Performance of Obligations.................34
5.11 Further Assurances...........................................34
5.12 Fees and Expenses of Counsel to Lender.......................34
5.13 Subsequent Fees and Expenses of Lender.......................35
5.14 Operation and Maintenance of Storage Facilities..............35
5.15 Maintenance of Insurance.....................................35
5.16 INDEMNIFICATION..............................................36
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness.................................................37
6.2 Contingent Obligations.......................................37
6.3 Liens........................................................37
6.4 Sales of Assets..............................................37
6.5 Loans or Advances............................................37
6.6 Investments..................................................37
6.7 Dividends and Distributions..................................38
6.8 Issuance of Stock; Changes in Corporate or Partnership
Structure..................................................38
6.9 Transactions with Affiliates.................................38
6.10 Lines of Business............................................38
6.11 Plan Obligations.............................................38
6.12 Tangible Net Worth...........................................38
6.13 Cash Flow Coverage...........................................38
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6.14 Funded Debt to Total Capitalization..........................38
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default.............................39
7.2 Remedies.....................................................41
ARTICLE VIII MISCELLANEOUS
8.1 Transfers; Participations....................................42
8.2 Survival of Representations, Warranties, and Covenants.......42
8.3 Notices and Other Communications.............................42
8.4 Parties in Interest..........................................43
8.5 Rights of Third Parties......................................43
8.6 Renewals; Extensions.........................................43
8.7 No Waiver; Rights Cumulative.................................43
8.8 Survival Upon Unenforceability...............................44
8.9 Amendments; Waivers..........................................44
8.10 Controlling Agreement........................................44
8.11 Disposition of Collateral....................................44
8.12 Confidentiality..............................................44
8.13 No Recourse Against Others...................................45
8.14 GOVERNING LAW................................................45
8.15 JURISDICTION AND VENUE.......................................45
8.16 WAIVER OF RIGHTS TO JURY TRIAL...............................46
8.17 ENTIRE AGREEMENT.............................................46
8.18 Counterparts.................................................46
LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Form of Opinion of Counsel
Exhibit V - Disclosures
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into this 15th day of
April, 1998, by and between MARKET HUB PARTNERS STORAGE, L.P., a Delaware
limited partnership (the "BORROWER"), and BANK ONE, TEXAS, NATIONAL ASSOCIATION,
a national banking association (the "LENDER").
WITNESSETH:
In consideration of the mutual covenants and agreements herein
contained, the Borrower and the Lender hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED ABOVE. As used in this Credit Agreement, the terms
"BORROWER", and "LENDER" shall have the meaning assigned to them hereinabove.
1.2 ADDITIONAL DEFINED TERMS. As used in this Credit Agreement, each
of the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"ACCOUNTS RECEIVABLE" shall have the meaning set forth in the
Indenture.
"ACQUIRED INDEBTEDNESS" shall have the meaning set forth in the
Indenture.
"ADDITIONAL COSTS" shall mean costs which the Lender reasonably
determines are attributable to its obligation to make or its making or
maintaining any Fixed Rate Loan, or any reduction in any amount receivable
by the Lender in respect of any such obligation or any Fixed Rate Loan,
resulting from any Regulatory Change which (a) changes the basis of
taxation of any amounts payable to the Lender under this Agreement or the
Note in respect of any Fixed Rate Loan (other than franchise taxes and
taxes imposed on the overall net income or profits of the Lender), (b)
imposes or modifies any reserve, special deposit, minimum capital, capital
rates, or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, the Lender
(including Fixed Rate Loans and Dollar deposits in the London interbank
market in connection with LIBO Rate Loans), or any commitments of the
Lender hereunder, or (c) imposes any other condition affecting this
Agreement or any of such extensions of credit, liabilities, or
commitments.
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"ADJUSTED LIBO RATE" shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Lender to be equal to the sum of the LIBO Rate for such
Loan plus the Applicable Margin, but in no event exceeding the Highest
Lawful Rate.
"AFFILIATE" shall mean any Person directly or indirectly
controlling, or under common control with, the Borrower and includes any
Subsidiary of the Borrower and any "affiliate" of the Borrower within the
meaning of Reg. ss.240.12b-2 of the Securities Exchange Act of 1934, as
amended, with "control," as used in this definition, meaning possession,
directly or indirectly, of the power to direct or cause the direction of
management, policies or action through ownership of voting securities,
contract, voting trust, or membership in management or in the group
appointing or electing management or otherwise through formal or informal
arrangements or business relationships.
"AGREEMENT" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each type of Loan, the
lending office of the Lender (or an affiliate of the Lender) designated
for such type of Loan on the signature pages hereof or such other office
of the Lender (or an affiliate of the Lender) as the Lender may from time
to time specify to the Borrower as the office by which Loans of such type
are to be made and maintained.
"APPLICABLE MARGIN" shall mean as to each LIBO Rate Loan, two
percent (2%).
"ATTRIBUTABLE INDEBTEDNESS" means, with respect to any particular
lease under which any Person is at the time liable, whether or not
accounted for as a Capitalized Lease Obligation, and at any date as of the
which the amount thereof is to be determined, the present value of the
total net amount of lease payments required to be paid by such Person
under the lease during the primary term thereof, without giving effect to
any renewals at the option of the lessee, discounted from the respective
due dates thereof to the date of determination at a rate per annum equal
to the discount rate that would be applicable to a Capitalized Lease
Obligation with a like term in accordance with GAAP. As used in the
preceding sentence, the "net amount of lease payments" under any such
lease for any such period means the sum of lease, rental and other
payments required to be paid with respect to such period by such lessee
thereunder, excluding any amounts required to be paid by the lessee on
account of maintenance and repairs, insurance, and taxes, assessments or
similar charges. If a lessee under any lease may terminate that lease by
paying a penalty, the "net amount of lease payments" under that lease
shall include the amount of that penalty, but shall exclude all lease
payments after the first date on which that lease may be so terminated.
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"AVAILABLE COMMITMENT" shall mean, at any time, an amount equal to
the Commitment Amount.
"BASE RATE" shall mean the interest rate announced or published by
the Lender from time to time as its general reference rate of interest,
which Base Rate shall change upon any change in such announced or
published general reference interest rate and which Base Rate may not be
the lowest interest rate charged by the Lender.
"BORROWING REQUEST" shall mean each written request, in
substantially the form attached hereto as Exhibit II, by the Borrower to
the Lender for a borrowing, conversion, or prepayment pursuant to Sections
2.1 or 2.7, each of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) when requesting a borrowing, be accompanied by a
Compliance Certificate;
(c) specify the amount and type of Loan requested, and, as
applicable, the Loan to be converted or prepaid and the date of the
borrowing, conversion, or prepayment (which shall be a Business
Day);
(d) when requesting a Floating Rate Loan, be delivered to the
Lender no later than 10:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, on the Business Day of the
requested borrowing, conversion, or prepayment; and
(e) when requesting a LIBO Rate Loan, be delivered to the
Lender no later than 10:00 a.m. Central Standard or Daylight Savings
Time, as the case may be, two Business Days preceding the requested
borrowing, conversion, or prepayment and designate the Interest
Period requested with respect to such Loan.
"BUSINESS DAY" shall mean (a) for all purposes other than as covered
by clause (b) of this definition, a day other than a Saturday, Sunday,
legal holiday for commercial banks under the laws of the State of Texas,
or any other day when banking is suspended in the State of Texas, and (b)
with respect to all requests, notices, and determinations in connection
with, and payments of principal and interest on, LIBO Rate Loans, a day
which is a Business Day described in clause (a) of this definition and
which is a day for trading by and between banks for Dollar deposits in the
London interbank market.
"CAPITALIZED LEASE OBLIGATION" means, with respect to any Person,
any obligation of that Person to pay lease payments, rent or other amounts
under a
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lease of (or other similar agreement conveying the right to use) any
Property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligations under GAAP
and, for purposes of this Indenture, the amount of that obligation at any
date shall be the capitalized amount thereof at that date, as determined
in accordance with GAAP.
"CASH FLOW" shall mean net income plus interest, depreciation and
other non-cash charges, less non-cash income.
"CLOSING DATE" shall mean the effective date of this Agreement.
"COLLATERAL" shall mean the Mortgaged Properties and any other
Property now or at any time pledged as security for the payment or
performance of all or any portion of the Obligations.
"COMMITMENT" shall mean the obligation of the Lender, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to Section 2.1.
"COMMITMENT AMOUNT" shall, subject to the applicable provisions of
this Agreement, mean $20,000,000.
"COMMITMENT FEE" shall mean each fee payable to the Lender by the
Borrower pursuant to Section 2.8.
"COMMITMENT PERIOD" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"COMMITMENT TERMINATION DATE" shall mean December 31, 2000, or the
earlier date of the termination in whole of the Commitment pursuant to
Section 2.1(d) or Section 7.2.
"COMMONLY CONTROLLED ENTITY" shall mean any Person which is under
common control with the Borrower or the Guarantors within the meaning of
Section 4001 of ERISA.
"COMPLIANCE CERTIFICATE" shall mean each certificate, substantially
in the form attached hereto as Exhibit III, executed by a Responsible
Officer of the Borrower and furnished to the Lender from time to time in
accordance with Sections 5.2 and 5.3.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, or other obligations of any other Person (for purposes
of this definition, a "PRIMARY OBLIGATION") in any manner, whether
directly or indirectly, including,
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without limitation, any obligation of such Person, regardless of whether
such obligation is contingent, (a) to purchase any primary obligation or
any Property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other
Person in respect of any primary obligation, or otherwise to maintain the
net worth or solvency of any other Person, (c) to purchase Property,
securities or services primarily for the purpose of assuring the owner of
any primary obligation of the ability of the Person primarily liable for
such primary obligation to make payment thereof, or (d) otherwise to
assure or hold harmless the owner of any such primary obligation against
loss in respect thereof, with the amount of any Contingent Obligation
being deemed to be equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made
or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"DEBT SERVICE" shall mean an amount equal to (i) 1/12 of the sum of
the Loan Balance at the end of any fiscal quarter, plus actual interest
payments on such Loan Balance made during such quarter, plus (ii) actual
principal and interest payments on Indebtedness other than payments made
under this Agreement during such quarter.
"DEFAULT" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"DEFAULT RATE" shall mean a per annum interest rate equal to the
Base Rate plus five percent (5%), but in no event exceeding the Highest
Lawful Rate.
"DISQUALIFIED EQUITY INTERESTS" shall have the meaning set forth in
the Indenture.
"DOLLARS" and "$" shall mean dollars in lawful currency of the
United States of America.
"ENVIRONMENTAL COMPLAINT" shall mean any written or oral complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of the Borrower or the Guarantors, (c)
solid or liquid waste disposal, (d) the use, generation, storage,
transportation, or disposal of any Hazardous Substance, or (e) other
environmental, health, or safety matters affecting any Property of the
Borrower or the Guarantors or the business conducted thereon.
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"ENVIRONMENTAL LAWS" shall mean (a) the following federal laws as
they may be cited, referenced, and amended from time to time: the Clean
Air Act, the Clean Water Act, the Safe Drinking Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Endangered Species Act, the Resource Conservation and Recovery Act, the
Occupational Safety and Health Act, the Hazardous Materials Transportation
Act, the Superfund Amendments and Reauthorization Act, and the Toxic
Substances Control Act; (b) any and all equivalent environmental statutes
of any state in which Property of the Borrower or the Guarantors is
situated, as they may be cited, referenced and amended from time to time;
(c) any rules or regulations promulgated under or adopted pursuant to the
above federal and state laws; and (d) any other equivalent federal, state,
or local statute or any requirement, rule, regulation, code, ordinance, or
order adopted pursuant thereto, including, without limitation, those
relating to the generation, transportation, treatment, storage, recycling,
disposal, handling, or release of Hazardous Substances.
"EQUITY INTERESTS" shall have the meaning set forth in the
Indenture.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"EVENT OF DEFAULT" shall mean any of the events specified in Section
7.1.
"FACILITY FEE" shall mean the fee payable to the Lender by the
Borrower pursuant to Section 2.9.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of Dallas, Texas, on
the Business Day next succeeding such day, provided that (a) if the day
for which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding
Business Day, and (b) if such rate is not so published for any day, the
Federal Funds Rate for such day shall be the average rate charged to
Lender on such day on such transactions as determined by the Lender.
"FINAL MATURITY" shall mean December 31, 2000.
"FINANCIAL STATEMENTS" shall mean statements of the financial
condition of the Borrower as at the point in time and for the period
indicated and consisting of at least a balance sheet and related
statements of operations, common stock and other stockholders' equity, and
cash flows for the Borrower and, when required
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by applicable provisions of this Agreement to be audited, accompanied by
the unqualified certification of a nationally-recognized firm of
independent certified public accountants or other independent certified
public accountants acceptable to the Lender and footnotes to any of the
foregoing, all of which shall be prepared in accordance with GAAP
consistently applied and in comparative form with respect to the
corresponding period of the preceding fiscal period.
"FIXED RATE LOAN" shall mean any LIBO Rate Loan.
"FLOATING RATE" shall mean an interest rate per annum equal to the
Base Rate from time to time in effect.
"FLOATING RATE LOAN" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, which bears interest at the Floating Rate, or which pursuant
to the terms hereof is otherwise required to bear interest at the Floating
Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants and in effect in the United
States from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation, country,
commonwealth, territory, government, state, county, parish, municipality,
or other political subdivision and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"GUARANTORS" shall mean Moss Bluff Hub Partners, L.P., a Delaware
limited partnership, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company, Egan Hub Partners, L.P., a Delaware limited partnership
and Egan Hub Partners, L.L.C., a Delaware limited liability company.
"GUARANTEES" shall have the meaning set forth in the Indenture.
"GUARANTIES" shall mean the Guaranties dated the Closing Date
executed by the Guarantors in favor of the Lender, guaranteeing the
payment and performance of the Obligations, as it may be ratified,
amended, restated, or supplemented from time to time.
"HAZARDOUS SUBSTANCES" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos, or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or
related materials, petroleum, petroleum products, associated oil or
natural gas exploration, production, and development wastes, or any
substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," or "toxic substances" under the
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Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substances Control
Act, as amended, or any other law or regulation now or hereafter enacted
or promulgated by any
Governmental Authority.
"HEDGING OBLIGATIONS" means, at any time as to any Person, any
obligation of that Person at that time that is incurred (i) in the
ordinary course of its business pursuant to any exchange agreement, swap,
option, forward sales contract, future contracts or other similar
agreement or arrangement designed to protect against or manage the
exposure of that Person or any of its Subsidiaries to fluctuations in
foreign currency exchange rates or in the price of energy related
commodities, and (ii) pursuant to any arrangement with any other Person
whereby, directly or indirectly, the specified Person is entitled to
receive periodic payments calculated by applying either a floating or a
fixed rate of interest on a stated notional amount in exchange for
periodic payments made by the specified Person calculated by applying a
fixed or floating rate of interest on the same national amount and
includes, without limitation, interest rate swaps, caps, floors, collars
and other similar agreements or arrangements designed to protect against
or manage the exposure of the specified Person or any of its Subsidiaries
to fluctuations in interest rates.
"HIGHEST LAWFUL RATE" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (i) all liabilities of that Person, contingent or otherwise,
for borrowed money or for the deferred purchase price of Property or
service (excluding any trade accounts payable and other accrued current
liabilities incurred in the ordinary course of business of that Person)
and all liabilities of that Person incurred in connection with any letters
of credit, bankers' acceptances or other similar credit transactions or
any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Equity Interests of that Person, or any warrants, rights or
options to acquire that Equity Interest, outstanding on the Closing Date
or thereafter, or any obligations arising out of the sale of Accounts
Receivable of that Person if, and to the extent, any of the foregoing
would appear as a liability on a balance sheet of that Person prepared in
accordance with GAAP, (ii) all obligations of that Person evidence by
bonds, notes, debentures or other similar instruments, if, and to the
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extent, any of the foregoing would appear as a liability on a balance
sheet of that Person prepared in accordance with GAAP, (iii) all
obligations of that Person created or arising under any conditional sale
or other title retention agreement with respect to Property acquired by
that Person (even if the rights and remedies of the seller or lender under
such agreement in the event of a default are limited to repossession or
sale of such Property), (iv) the Attributable Indebtedness of any
Capitalized Lease Obligation of that Person, (v) all obligations of the
types described in eh preceding clauses of this definition and all
dividends and other distributions, the payment of which is secured by (or
for which the holder of such obligations has an existing right, contingent
or otherwise, to be secured by) any Lien upon Property (including, without
limitation, accounts and contract rights) owned by that Person, even
though that Person has not assumed or become liable for the payment of
such Indebtedness (the amount of such obligation so secured), (vi) the
maximum fixed redemption or repurchase price, if any, of all Disqualified
Equity Interests of that Person, (vii) all obligations of that Person
under or in respect Hedging Obligations, and (viii) all Guarantees by that
Person of obligations of the types referred to in clauses (i) through
(vii) of this definition.
"INDENTURE" shall mean the Indenture dated as of March 1, 1998, by
and between Borrower, Guarantors and IBJ Schroder Bank & Trust Company,
Trustee, in regard to $115,000,000 of 8 1/4% Senior Notes due 2008.
"INTEREST PERIOD" shall mean, subject to the limitations set forth
in Section 2.16, with respect to any LIBO Rate Loan, a period commencing
on the date such Loan is made or converted from a Loan of another type
pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically
corresponding day in the calendar month that is one, two, three, or,
subject to availability, six months thereafter, as the Borrower may
request in the Borrowing Request for such Loan.
"INVESTMENT" in any Person shall mean any stock, bond, note, or
other evidence of Indebtedness, or any other security (other than current
trade and customer accounts) of, investment or partnership interest in or
loan to, such Person.
"LIBO RATE" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such Telerate Page shall
not be available, any successor or similar service selected by the Lender
and the Borrower) as of approximately 11:00 a.m., Central Standard or
Daylight Savings Time, as the case may be, on the day two Business Days
prior to the first day of such Interest Period for Dollar deposits in an
amount comparable to the principal amount of such LIBO Rate Loan and
having a term comparable to the Interest Period for such LIBO Rate Loan,
or (b) the Highest Lawful Rate. If neither such Telerate Page 3750 nor any
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successor or similar service is available, the term "LIBO Rate" shall
mean, with respect to any Interest Period for any LIBO Rate Loan, the
lesser of (a) the rate per annum (rounded upwards if necessary, to the
nearest 1/16 of 1%) quoted by the Lender at approximately 11:00 a.m.,
London time (or as soon thereafter as practicable) two Business Days prior
to the first day of the Interest Period for such LIBO Rate Loan for the
offering by the Lender to leading banks in the London interbank market of
Dollar deposits in an amount comparable to the principal amount of such
LIBO Rate Loan and having a term comparable to the Interest Period for
such LIBO Rate Loan, or (b) the Highest Lawful Rate.
"LIBO RATE LOAN" shall mean any Loan and any portion of the Loan
Balance which the Borrower has requested, in the initial Borrowing Request
for such Loan or a subsequent Borrowing Request for such portion of the
Loan Balance, which shall bear interest at the Adjusted LIBO Rate and
which is permitted by the terms hereof to bear interest at the Adjusted
LIBO Rate.
"LIEN" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of such Property,
whether such interest is based on common law, statute, or contract, and
including, but not limited to, the lien or security interest arising from
a mortgage, ship mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt, or a lease, consignment, or bailment
for security purposes (other than true leases or true consignments), liens
of mechanics, materialmen, and artisans, maritime liens and reservations,
exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases, and other title exceptions and
encumbrances affecting Property which secure an obligation owed to, or a
claim by, a Person other than the owner of such Property (for the purpose
of this Agreement, the Borrower shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person for
security purposes), and the filing or recording of any financing statement
or other security instrument in any public office.
"LIMITATION PERIOD" shall mean any period while any amount remains
owing on the Note and interest on such amount, calculated at the
applicable interest rate, plus any fees or other sums payable under any
Loan Document and deemed to be interest under applicable law, would exceed
the amount of interest which would accrue at the Highest Lawful Rate.
"LOAN" shall mean any loan made by the Lender to or for the benefit
of the Borrower pursuant to this Agreement.
"LOAN BALANCE" shall mean, at any time, the outstanding principal
balance of the Note at such time.
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"LOAN DOCUMENTS" shall mean this Agreement, the Note, the
Guaranties, the Security Instruments, and all other documents and
instruments now or hereafter delivered by the Borrower or the Guarantors
pursuant to the terms of or in connection with this Agreement, the Note,
the Guaranties, or the Security Instruments, and all renewals and
extensions of, amendments and supplements to, and restatements of, any or
all of the foregoing from time to time in effect.
"MATERIAL" shall mean material in relation to the business,
operations, affairs, financial condition, assets, Properties, or prospects
of the Borrower and the Guarantors taken as a whole.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the business, operations, affairs, financial condition, assets or
Properties of the Borrower and Restricted Subsidiaries taken as a whole,
or (b) the ability of any Borrower or any Guarantor to perform its
respective obligations under this Agreement or the other Loan Documents,
(c) the validity or enforceability of this Agreement or the other Loan
Documents, or (d) any adverse effect upon the Collateral.
"MORTGAGED PROPERTIES" shall mean all Properties of the Guarantors
constituting the storage facilities of Moss Bluff Hub Partners, L.P. and
Egan Hub Partners, L.P., subject to a perfected first-priority Lien in
favor of the Lender, subject only to Permitted Liens, as security for the
Obligations.
"NON-RECOURSE PURCHASE MONEY INDEBTEDNESS" means Indebtedness of any
Borrower or any Restricted Subsidiary that is incurred to finance the
purchase of any assets of any Borrower or any Restricted Subsidiary within
90 days of such purchase, as long as (i) the amount of that Indebtedness
does not exceed 100% of the purchase cost of such assets, (ii) that
purchase cost is or should be included in "additions to property, plant
and equipment" in accordance with GAAP, (iii) such Indebtedness is
non-recourse to the Borrower and the Restrict Subsidiaries and all of
their respective assets other than the assets so purchased and (iv) the
purchase of such assets is not part of an acquisition of any Person.
"NOTE" shall mean the promissory note of the Borrower, in the form
attached hereto as Exhibit I, together with all renewals, extensions for
any period, increases, and rearrangements thereof.
"OBLIGATIONS" shall mean, without duplication, (a) all Indebtedness
evidenced by the Note, (b) the obligation of the Borrower for the payment
of Commitment Fees and Facility Fees, (c) the obligations of the
Guarantors under the Guaranties, and (f) all other obligations and
liabilities of the Borrower or the Guarantors to the Lender, now existing
or hereafter incurred, under, arising out of or in connection with any
Loan Document, and to the extent that any of the foregoing includes or
refers to the payment of amounts deemed or constituting
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interest, only so much thereof as shall have accrued, been earned and
which remains unpaid at each relevant time of determination.
"PERMITTED LIENS" shall mean the following types of Liens:
(i) Liens existing as of the Closing Date;
(ii) Liens securing the Notes or the Subsidiary Guarantees;
(iii) Liens in favor of the Borrower or, with respect to a
Restricted Subsidiary, Liens in favor of another Restricted Subsidiary;
(iv) Liens securing Permitted Indebtedness of the Borrower and the
Restricted Subsidiaries of the type described in clause (i) of the
definition of Permitted Indebtedness;
(v) Liens securing Indebtedness that constitutes Permitted
Indebtedness of the type described in clause (x) of the definition of
"Permitted Indebtedness" set forth in the Indenture incurred as a
refinancing of any Indebtedness secured by Liens described in clauses (i),
(iv), (xi), (xii) and (xiii) of this definition; provided, however, that
(a) if any Lien securing Indebtedness being refinanced is subordinated or
junior to any Lien granted for the benefit of the Lender, then the Lien
securing the new Indebtedness shall be subordinated or junior to any Lien
granted for the benefit of the Lender at least to the same extent as the
Lien securing the Indebtedness being refinanced and (b) such Liens do not
extend to or cover any Property of a Borrower or any of its Restricted
Subsidiaries not securing the Indebtedness so refinanced;
(vi) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which a Borrower or a Restricted Subsidiary, as the
case may be, has set aside on its books such reserves, or has made such
other appropriate provision, if any, as is required by GAAP;
(vii) Liens of landlords, carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other similar Liens incurred in the
ordinary course of business for sums not delinquent or being contested in
good faith, and as to which a Borrower or a Restricted Subsidiary, as the
case may be, has set aside on its books such reserves, or has made such
other appropriate provision, if any, as is required by GAAP;
(viii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the payment or
performance of tenders, statutory or regulatory obligations, surety and
appeal bonds, bids, government contracts and leases, performance and
return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
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(ix) Liens securing any judgment not giving rise to a Default or
Event of Default and so long as any appropriate legal proceedings that may
have been duly initiated for the review of the judgment has not been
finally terminated or the period within which those proceedings may be
initiated has not expired;
(x) easements, rights-of-way, reservations, zoning and other
restrictions and other similar encumbrances not interfering in any
material respect with the ordinary conduct of business of a Borrower or
any Restricted Subsidiary;
(xi) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease; provided that (a) the Attributable
Indebtedness related thereto constitutes Indebtedness permitted to be
incurred under the terms of this Indenture and (b) with respect to any
Capitalized Lease Obligation, such Liens do not extend to any Property
that is not leased Property subject to such Capitalized Lease Obligation;
(xii) Liens securing Non-Recourse Purchase Money Indebtedness;
provided, however, that (a) the Non-Recourse Purchase Money Indebtedness
shall not be secured by any Property of a Borrower or an Restricted
Subsidiary other than the Property so acquired and any proceeds therefrom
and (b) the Lien securing such Non-Recourse Purchase Money Indebtedness
shall be created within 90 days of such acquisition;
(xiii) Liens securing Acquired Indebtedness incurred in accordance
with Section 10.11(a) of the Indenture; provided that (a) such Liens
secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by a Borrower or a Restricted
Subsidiary and were not granted in connection with, or in anticipation of,
the incurrence of such Acquired Indebtedness by a Borrower or a Restricted
Subsidiary and (b) such Liens do not extend to or cover any Property of a
Borrower or of any Restricted Subsidiary other than the Property that
secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of a Borrower or a Restricted Subsidiary and
are no more favorable to the lienholder than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by a
Borrower or a Restricted Subsidiary;
(xiv) leases or subleases granted to others that do not interfere
with the ordinary conduct of business of a Borrower or any Restricted
Subsidiary;
(xv) rights of a common owner of any interest in Property held by a
Borrower or any Restricted Subsidiary and that common owner as tenants in
common or through other common ownership; and
(xvi) Liens or equitable encumbrances deemed to exist by reason of
(a) fraudulent conveyance or transfer laws or (b) negative pledge or other
agreements to refrain from giving Liens.
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"PERSON" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
"PRINCIPAL OFFICE" shall mean the principal office of the Lender in
Houston, Texas, presently located at 910 Travis, 6th Floor, Houston, Texas
77002.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented
from time to time.
"REGULATORY CHANGE" shall mean the passage, adoption, institution,
or amendment of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing
Date and applying to a class of banks including the Lender or its
Applicable Lending Office.
"RELATED BUSINESS" means (i) the businesses of the Borrower and the
Restricted Subsidiaries on the Closing Date and any business related,
ancillary or complementary to the business of the Borrower and the
Restricted Subsidiaries on that date and (ii) any other business related
to the production, gathering, marketing, treating, storage, selling and/or
transporting of natural gas as long as the principal businesses of the
Borrower and its Restricted Subsidiaries remain the businesses described
in the preceding clause (i).
"RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with a valid permit,
license, certificate, or approval of the relevant Governmental Authority,
of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal
system servicing any Property of the Borrower or the Guarantors.
"REQUIREMENT OF LAW" shall mean, as to any Person, the certificate
or articles of incorporation and by-laws or other organizational or
governing documents of such Person, and any applicable law, treaty,
ordinance, order, judgment, rule, decree, regulation, or determination of
an arbitrator, court, or other Governmental Authority, including, without
limitation, rules, regulations, orders, and requirements for permits,
licenses, registrations, approvals, or
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authorizations, in each case as such now exist or may be hereafter amended
and are applicable to or binding upon such Person or any of its Property
or to which such Person or any of its Property is subject.
"RESPONSIBLE OFFICER" shall mean, as to any Person, its President
Chief Executive Officer or any Vice President.
"RESTRICTED SUBSIDIARY" means any Subsidiary of a Borrower, whether
existing on or after the Closing Date, unless that Subsidiary is
designated as an Unrestricted Subsidiary in the manner described below in
this Section 1.2 in the definition of "Unrestricted Subsidiary".
"SECURITY INSTRUMENTS" shall mean the security instruments executed
and delivered in satisfaction of the condition set forth in Section
3.1(f), and all other documents and instruments at any time executed as
security for all or any portion of the Obligations, as such instruments
may be amended, restated, or supplemented from time to time.
"STATED MATURITY" means, when used with respect to any Indebtedness
or any installment of interest thereon, the date specified in the
instrument evidencing or governing such Indebtedness as the fixed date on
which the principal of that Indebtedness or that installment of interest
is due and payable.
"SUBSIDIARY" means, with respect to any specified Person, (i) a
corporation a majority of whose Voting Equity Interests is at the time,
directly or indirectly, owned by the specified Person, by one or more
Subsidiaries of the specified Person or by the specified Person and one or
more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a partnership, joint venture
or limited liability company, in which the specified Person, one or more
Subsidiaries thereof or the specified Person and one or more Subsidiaries
thereof, directly or indirectly, at the date of determination thereof, has
or have at least a majority of the Voting Equity Interests or other
ownership interests of such Person.
"SUBSIDIARY GUARANTORS" mean (i) Moss Bluff Hub Partners, L.P. and
Egan Hub Partners L.P., each a Delaware limited partnership, and their
general partners, Moss Bluff Hub Partners, L.L.C., and Egan Hub Partners,
L.L.C., respectively, each a Delaware limited liability company and (ii)
any other Subsidiary of a Borrower that executes a Subsidiary Guarantee in
accordance with the provisions of this Agreement, and their respective
successors and assigns.
"SUPERFUND SITE" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
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"TANGIBLE NET WORTH" shall mean (a) total assets, as would be
reflected on a balance sheet of the Borrower prepared on a consolidated
basis and in accordance with GAAP, exclusive of Intellectual Property,
experimental or organization expenses, franchises, licenses, permits, and
other intangible assets, treasury stock, unamortized underwriters debt
discount and expenses, and goodwill, minus (b) total liabilities, as would
be reflected on a balance sheet of the Borrower prepared on a consolidated
basis and in accordance with GAAP.
"TOTAL CAPITALIZATION" shall mean total funded debt, plus partners
capital.
"TRANSFEREE" shall mean any financial institution to which the
Lender has sold, assigned, transferred, or granted a participation in any
of the Obligations, as authorized pursuant to Section 8.1, and any
financial institution acquiring, by purchase, assignment, transfer, or
participation, from any such purchaser, assignee, transferee, or
participant, any part of such Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of a Borrower
that at the time of determination will be designated an Unrestricted
Subsidiary by the Board of Directors as provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of Market Hub Partners Storage, L.P. and the
Subsidiary Guarantors existing on the date of this Agreement, as a
Unrestricted Subsidiary so long as: (i) neither Market Hub Partners
Storage, L.P. nor any Restricted Subsidiary is directly or indirectly
liable for the payment of any Indebtedness of that Subsidiary; (ii) no
default with respect to any Indebtedness of that Subsidiary would permit
(upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of Market Hub Partners Storage, L.P. or any Restricted
Subsidiary to declare a default on that other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity
or require Market Hub Partners Storage, L.P. or any Restricted Subsidiary
to repurchase or secure that other Indebtedness; (iii) such designation as
an Unrestricted Subsidiary would be permitted under Section 10.10 of the
Indenture; (iv) that designation would not result in the creation or
imposition of any Lien on any of the properties or assets of Market Hub
Partners Storage, L.P. or any Restricted Subsidiary (other than any
Permitted Lien); and (v) Market Hub Partners Storage, L.P. could incur at
least $1.00 of additional Indebtedness not constituting Permitted
Indebtedness in accordance with Section 10.11(a) of the Indenture;
provided, however, that with respect to clause (i) of this sentence,
Market Hub Partners Storage, L.P. or a Restricted Subsidiary may be liable
for the payment of Indebtedness of an Unrestricted Subsidiary if (x) the
liability constituted a Permitted Investment or a Restricted Payment
permitted under Section 10.10 of the Indenture, in each case at the time
of incurrence, or (y) the liability would be a Permitted Investment at the
time of designation of that Subsidiary as
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an Unrestricted Subsidiary. Any such designation by the Board of Directors
must be evidenced to the Lender by filing a Board Resolution with the
Lender giving effect to that designation, together with an Officers'
Certificate stating that such designation complies with the requirements
of the Agreement. The Board of Directors may designate any Unrestricted
Subsidiary as a Restricted Subsidiary if, immediately after giving effect
to such designation on a pro forma basis, (i) no Default or Event of
Default has occurred and is continuing, (ii) Market Hub Partners Storage,
L.P. could incur at least $1.00 of additional Indebtedness not
constituting Permitted Indebtedness in accordance with Section 10.11(a) of
the Indenture and (iii) if any of the Properties of Market Hub Partners
Storage, L.P. or any Restricted Subsidiary would on such designation
become subject to any Lien (other than a Permitted Lien), the creation or
imposition of that Lien shall comply with Section 10.13 of the Indenture.
"VOTING EQUITY INTERESTS" shall have the meaning set forth in the
Indenture.
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP at
the time in effect.
1.4 REFERENCES. References in this Agreement to Exhibit, Article, or
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article, or Section in which
such reference appears.
1.5 ARTICLES AND SECTIONS. This Agreement, for convenience only, has
been divided into Articles and Sections; and it is understood that the rights
and other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 NUMBER AND GENDER. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 INCORPORATION OF EXHIBITS. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
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ARTICLE II
TERMS OF FACILITY
2.1 REVOLVING LINE OF CREDIT. (a) Upon the terms and conditions
(including, without limitation, the right of the Lender to decline to make any
Loan so long as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, the Lender agrees,
during the Commitment Period, to make Loans, in immediately available funds at
the Applicable Lending Office or the Principal Office, to or for the benefit of
the Borrower, from time to time on any Business Day designated by the Borrower
following receipt by the Lender of a Borrowing Request; provided, however, no
Loan shall exceed the then existing Available Commitment.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of one
type or with one Interest Period into Loans of another type or with a different
Interest Period. Except for prepayments made pursuant to Section 2.10, each
borrowing, conversion, and prepayment of principal of Loans shall be in an
amount at least equal to $100,000. Each borrowing, prepayment, or conversion of
or into a Loan of a different type or, in the case of a Fixed Rate Loan, having
a different Interest Period, shall be deemed a separate borrowing, conversion,
and prepayment for purposes of the foregoing, one for each type of Loan or
Interest Period. Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBO Rate Loans having the same Interest Period
shall be at least equal to $100,000; and if any LIBO Rate Loan would otherwise
be in a lesser principal amount for any period, such Loan shall be a Floating
Rate Loan during such period.
(c) The Loans shall be made and maintained at the Applicable Lending
Office or the Principal Office and shall be evidenced by the Note.
(d) The Borrower may, fully or partially, reduce the Commitment,
provided that (i) notice of such reduction must be received by the Lender by
10:00 a.m. Houston, Texas, time on the fifth Business Day preceding the
effective date of such reduction, (ii) each such reduction in the Commitment
must be in a minimum amount of $500,000.00 or any whole multiple of $100,000.00
in excess thereof, (iii) Borrower shall not be entitled to an increase in the
Commitment once it has been so reduced, and (iv) if the Loan Balance exceeds the
Commitment as so reduced, Borrower shall make a mandatory prepayment on the
principal amount of the Loan Balance in at least the amount of such excess.
2.2 USE OF LOAN PROCEEDS. Proceeds of all Loans shall be used solely
for general corporate or partnership purposes and working capital needs.
2.3 INTEREST. Subject to the terms of this Agreement (including,
without limitation, Section 2.11), interest on the Loans shall accrue and be
payable at a rate per annum equal to the Floating Rate for each Floating Rate
Loan and the Adjusted LIBO Rate for each LIBO Rate Loan. Interest on all
Floating Rate Loans shall be computed on the basis of a year of 365
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or 366 days, as the case may be, and actual days elapsed (including the first
day but excluding the last day) during the period for which payable. Interest on
all LIBO Rate Loans shall be computed on the basis of a year of 360 days, and
actual days elapsed (including the first day but excluding the last day) during
the period for which payable. Notwithstanding the foregoing, interest on
past-due principal and, to the extent permitted by applicable law, past-due
interest, shall accrue at the Default Rate, computed on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed (including the
first day but excluding the last day) during the period for which payable, and
shall be payable upon demand by the Lender at any time as to all or any portion
of such interest. In the event that the Borrower fails to select the duration of
any Interest Period for any Fixed Rate Loan within the time period and otherwise
as provided herein, such Loan (if outstanding as a Fixed Rate Loan) will be
automatically converted into a Floating Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Floating Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
Rate Loan. Interest provided for herein shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment.
2.4 REPAYMENT OF LOANS AND INTEREST. Accrued and unpaid interest on
each outstanding Floating Rate Loan shall be due and payable quarterly
commencing on the first day of May, 1998, and continuing on the first day of
each third calendar month thereafter while any Floating Rate Loan remains
outstanding, the payment in each instance to be the amount of interest which has
accrued and remains unpaid in respect of the relevant Loan. Accrued and unpaid
interest on each outstanding Fixed Rate Loan shall be due and payable on the
last day of the Interest Period for such Fixed Rate Loan and, in the case of any
Interest Period in excess of three months, on the day of the third calendar
month following the commencement of such Interest Period corresponding to the
day of the calendar month on which such Interest Period commenced, the payment
in each instance to be the amount of interest which has accrued and remains
unpaid in respect of the relevant Loan. The Loan Balance, together with all
accrued and unpaid interest thereon, shall be due and payable at Final Maturity.
At the time of making each payment hereunder or under the Note, the Borrower
shall specify to the Lender the Loans or other amounts payable by the Borrower
hereunder to which such payment is to be applied. In the event the Borrower
fails to so specify, or if an Event of Default has occurred and is continuing,
the Lender may apply such payment as it may elect in its sole discretion.
2.5 OUTSTANDING AMOUNTS. The outstanding principal balance of the
Note reflected by the notations by the Lender on its records shall be deemed
rebuttably presumptive evidence of the principal amount owing on the Note. The
liability for payment of principal and interest evidenced by the Note shall be
limited to principal amounts actually advanced and outstanding pursuant to this
Agreement and interest on such amounts calculated in accordance with this
Agreement.
2.6 TIME, PLACE, AND METHOD OF PAYMENTS. All payments required
pursuant to this Agreement or the Note shall be made in lawful money of the
United States of America and in immediately available funds, shall be deemed
received by the Lender on the next Business Day following receipt if such
receipt is after 2:00 p.m., Central Standard or Daylight Savings Time,
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as the case may be, on any Business Day, and shall be made at the Principal
Office. Except as provided to the contrary herein, if the due date of any
payment hereunder or under the Note would otherwise fall on a day which is not a
Business Day, such date shall be extended to the next succeeding Business Day,
and interest shall be payable for any principal so extended for the period of
such extension.
2.7 VOLUNTARY PREPAYMENTS AND CONVERSIONS OF LOANS. Subject to
applicable provisions of this Agreement, the Borrower shall have the right at
any time or from time to time to prepay Loans and to convert Loans of one type
or with one Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (a) the Borrower shall give the Lender
notice of each such prepayment or conversion of all or any portion of a Fixed
Rate Loan no less than two Business Days prior to prepayment or conversion, (b)
any Fixed Rate Loan may be prepaid or converted only on the last day of an
Interest Period for such Loan, (c) the Borrower shall pay all accrued and unpaid
interest on the amounts prepaid or converted, and (d) no such prepayment or
conversion shall serve to postpone the repayment when due of any Obligation.
2.8 COMMITMENT FEE. In addition to interest on the Note as provided
herein and all other fees payable hereunder and to compensate the Lender for
maintaining funds available, the Borrower shall pay to the Lender, in
immediately available funds, on the first day of April, 1998, and on the first
day of each third calendar month thereafter during the Commitment Period, a fee
in the amount of three-eighths percent (3/8%) per annum, calculated on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day), on the average daily
amount of the Available Commitment during the preceding quarterly period.
2.9 FACILITY FEE. In addition to interest on the Note as provided
herein and all other fees payable hereunder and to compensate the Lender for the
costs of the extension of credit hereunder, the Borrower shall pay to the
Lender, in immediately available funds, a facility fee in the amount of
$125,000. It is acknowledged and agreed to one-half of such fees was paid upon
the receipt of a written commitment from the Lender, and the remaining one-half
shall be payable on the Closing Date.
2.10 SECURITY INTEREST IN ACCOUNTS; RIGHT OF OFFSET. As security for
the payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Lender and grant to the Lender a security interest
in all funds of the Borrower now or hereafter or from time to time on deposit
with the Lender, with such interest of the Lender to be retransferred,
reassigned, and/or released by the Lender, as the case may be, at the expense of
the Borrower upon payment in full and complete performance by the Borrower of
all Obligations. All remedies as secured party or assignee of such funds shall
be exercisable by the Lender upon the occurrence and during the continuance of
any Event of Default, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof. Furthermore, the Borrower hereby grants to the Lender the right,
exercisable upon the occurrence and during the continuance of an Event of
Default at such time as any Obligation shall mature,
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whether by acceleration of maturity or otherwise, of offset or banker's lien
against all funds of the Borrower now or hereafter or from time to time on
deposit with the Lender, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof.
2.11 GENERAL PROVISIONS RELATING TO INTEREST. (a) It is the
intention of the parties hereto to comply strictly with the usury laws of the
State of Texas and the United States of America. In this connection, there shall
never be collected, charged, or received on the sums advanced hereunder interest
in excess of that which would accrue at the Highest Lawful Rate. For purposes of
Article 5069-1.04, Vernon's TEXAS CIVIL STATUTES, as amended, the Borrower
agrees that the Highest Lawful Rate shall be the "indicated (weekly) rate
ceiling" as defined in such Article, provided that the Lender may also rely, to
the extent permitted by applicable laws of the State of Texas or the United
States of America, on alternative maximum rates of interest under other laws of
the State of Texas or the United States of America applicable to the Lender, if
greater.
(b) Notwithstanding anything herein or in the Note to the contrary,
during any Limitation Period, the interest rate to be charged on amounts
evidenced by the Note shall be the Highest Lawful Rate, and the obligation, if
any, of the Borrower for the payment of fees or other charges deemed to be
interest under applicable law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
laws of the State of Texas or the United States of America, the interest rate to
be charged hereunder shall remain at the Highest Lawful Rate until such time as
there has been paid to the Lender (i) the amount of interest in excess of that
accruing at the Highest Lawful Rate that the Lender would have received during
the Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Lender but for the
effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the
Note or under this Agreement or any other Loan Document include amounts which by
law are deemed interest and which would exceed the amount permitted if the
Highest Lawful Rate were in effect, the Borrower stipulates that such payment
and collection will have been and will be deemed to have been, to the extent
permitted by applicable laws of the State of Texas or the United States of
America, the result of mathematical error on the part of the Borrower and the
Lender; and the Lender shall promptly refund the amount of such excess (to the
extent only of such interest payments in excess of that which would have accrued
and been payable on the basis of the Highest Lawful Rate) upon discovery of such
error by the Lender or notice thereof from the Borrower. In the event that the
maturity of any Obligation is accelerated, by reason of an election by the
Lender or otherwise, or in the event of any required or permitted prepayment,
then the consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid which by law are deemed
interest, if any, shall be credited by the Lender on the principal amount of the
Obligations, or if the principal amount of the Obligations shall have been paid
in full, refunded to the Borrower.
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(d) All sums paid, or agreed to be paid, to the Lender for the use,
forbearance and detention of the proceeds of any advance hereunder shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full term hereof until paid in full so that the actual
rate of interest is uniform but does not exceed the Highest Lawful Rate
throughout the full term hereof.
2.12 YIELD PROTECTION. (a) Without limiting the effect of the other
provisions of this Section (but without duplication), the Borrower shall pay to
the Lender from time to time such amounts as the Lender may reasonably determine
are necessary to compensate it for any Additional Costs incurred by the Lender.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lender from
time to time on request such amounts as the Lender may reasonably determine are
necessary to compensate the Lender for any costs attributable to the maintenance
by the Lender (or any Applicable Lending Office), pursuant to any Regulatory
Change, of capital in respect of the Commitment, such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of the Lender (or any Applicable Lending Office) to a level
below that which the Lender (or any Applicable Lending Office) could have
achieved but for such Regulatory Change.
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the Lender such
amounts as shall be sufficient in the reasonable opinion of the Lender to
compensate it for any loss, cost, or expense incurred by and as a result of:
(i) any payment, prepayment, or conversion by the Borrower of a Fixed Rate
Loan on a date other than the last day of an Interest Period for such Loan; or
(ii) any failure by the Borrower to borrow a Fixed Rate Loan from the
Lender on the date for such borrowing specified in the relevant Borrowing
Request;
such compensation to include, without limitation, with respect to any LIBO Rate
Loan, an amount equal to the excess, if any, of (A) the amount of interest which
would have accrued on the principal amount so paid, prepaid, converted, or not
borrowed for the period from the date of such payment, prepayment, conversion,
or failure to borrow to the last day of the then current Interest Period for
such Loan (or, in the case of a failure to borrow, the Interest Period for such
Loan which would have commenced on the date of such failure to borrow) at the
applicable rate of interest for such Loan provided for herein over (B) the
interest component (as reasonably deter mined by the Lender) of the amount (as
reasonably determined by the Lender) the Lender would have bid in the London
interbank market for Dollar deposits of amounts comparable to such principal
amount and maturities comparable to such period.
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(d) Determinations by the Lender for purposes of this Section of the
effect of any Regulatory Change on capital maintained, its costs or rate of
return, maintaining Loans, its obligation to make Loans, or on amounts
receivable by it in respect of Loans, or such obligations, and the additional
amounts required to compensate the Lender under this Section shall be PRIMA
FACIE evidence that such amounts are due and owing, absent manifest error,
provided that such determinations are made on a reasonable basis. The Lender
shall furnish the Borrower with a certificate setting forth in reasonable detail
the basis and amount of increased costs incurred or reduced amounts receivable
as a result of any such event, and the statements set forth therein shall be
PRIMA FACIE evidence that such amounts are due and owing, absent manifest error.
The Lender shall (i) notify the Borrower, as promptly as practicable after the
Lender obtains knowledge of any Additional Costs or other sums payable pursuant
to this Section and determines to request compensation therefor, of any event
occurring after the Closing Date which will entitle the Lender to compensation
pursuant to this Section; provided that the Borrower shall not be obligated for
the payment of any Additional Costs or other sums payable pursuant to this
Section to the extent such Additional Costs or other sums accrued more than 90
days prior to the date upon which the Borrower was given such notice; and (ii)
designate a different Applicable Lending Office for the Loans of the Lender
affected by such event if such designation will avoid the need for or reduce the
amount of such compensation and will not, in the sole opinion of the Lender, be
disadvantageous to the Lender. If the Lender requests compensation from the
Borrower under this Section, the Borrower may, by notice to the Lender, require
that the Loans by the Lender of the type with respect to which such compensation
is requested be converted into Floating Rate Loans in accordance with Section
2.7. Any compensation requested by the Lender pursuant to this Section shall be
due and payable to the Lender within fifteen days of delivery of any such notice
by the Lender to the Borrower.
(e) The Lender agrees that it shall not request, and the Borrower
shall not be obligated to pay, any Additional Costs or other sums payable
pursuant to this Section unless similar additional costs and other sums payable
are also generally assessed by the Lender against other customers of the Lender
similarly situated where such customers are subject to documents providing for
such assessment.
2.13 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, no more than six separate Loans shall be outstanding at any one
time, with, for purposes of this Section, all Floating Rate Loans constituting
one Loan, and all LIBO Rate Loans for the same Interest Period constituting one
Loan. Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any interest rate for any LIBO Rate Loan for any Interest
Period therefor:
(a) the Lender determines (which determination shall be conclusive)
that quotations of interest rates for the deposits referred to in the
definition of "LIBO Rate" in Section 1.2 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for such Loan as provided in this
Agreement; or
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(b) the Lender determines (which determination shall be conclusive)
that the rates of interest referred to in the definition of "LIBO Rate" in
Section 1.2 upon the basis of which the rate of interest for such Loan for
such Interest Period is to be determined do not accurately reflect the
cost to the Lender of making or maintaining such Loan for such Interest
Period,
then the Lender shall give the Borrower prompt notice thereof; and so long as
such condition remains in effect, the Lender shall be under no obligation to
make LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans,
and the Borrower shall, on the last day of the then current Interest Period for
each outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert
such Loan into another type of Loan in accordance with Section 2.7. Before
giving such notice pursuant to this Section, the Lender will designate a
different available Applicable Lending Office for LIBO Rate Loans or take such
other action as the Borrower may request if such designation or action will
avoid the need to suspend the obligation of the Lender to make LIBO Rate Loans
hereunder and will not, in the reasonable opinion of the Lender, be
disadvantageous to the Lender.
2.14 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender or its
Applicable Lending Office to (a) honor its obligation to make any type of Fixed
Rate Loans hereunder, or (b) maintain any type of Fixed Rate Loans hereunder,
then the Lender shall promptly notify the Borrower thereof; and the obligation
of the Lender hereunder to make such type of Fixed Rate Loans and to convert
other types of Loans into Fixed Rate Loans of such type shall be suspended until
such time as the Lender may again make and maintain Fixed Rate Loans of such
type, and the outstanding Fixed Rate Loans of such type shall be converted into
Floating Rate Loans in accordance with Section 2.7. Before giving such notice
pursuant to this Section, the Lender will designate a different available
Applicable Lending Office for Fixed Rate Loans or take such other action as the
Borrower may request if such designation or action will avoid the need to
suspend the obligation of the Lender to make Fixed Rate Loans and will not, in
the reasonable opinion of the Lender, be disadvantageous to the Lender.
2.15 REGULATORY CHANGE. In the event that by reason of any
Regulatory Change, the Lender (a) incurs Additional Costs based on or measured
by the excess above a specified level of the amount of a category of deposits or
other liabilities of the Lender which includes deposits by reference to which
the interest rate on any Fixed Rate Loan is determined as provided in this
Agreement or a category of extensions of credit or other assets of such Lender
which includes any Fixed Rate Loan, or (b) becomes subject to restrictions on
the amount of such a category of liabilities or assets which it may hold, then,
at the election of the Lender with notice to the Borrower, the obligation of the
Lender to make such Fixed Rate Loans and to convert Floating Rate Loans into
such Fixed Rate Loans shall be suspended until such time as such Regulatory
Change ceases to be in effect, and all such outstanding Fixed Rate Loans shall
be converted into Floating Rate Loans in accordance with Section 2.7.
2.16 LIMITATIONS ON INTEREST PERIODS. Each Interest Period selected
by the Borrower (a) which commences on the last Business Day of a calendar month
(or, with respect
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to any LIBO Rate Loan, any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month, (b) which would otherwise end
on a day which is not a Business Day shall end on the next succeeding Business
Day (or, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day), (c) which would otherwise
commence before and end after Final Maturity shall end on Final Maturity, and
(d) shall have a duration of not less than one month, as to any LIBO Rate Loan,
and, if any Interest Period would otherwise be a shorter period, the relevant
Loan shall be a Floating Rate Loan during such period.
ARTICLE III
CONDITIONS
The obligations of the Lender to enter into this Agreement and to
make Loans are subject to the satisfaction of the following conditions
precedent:
3.1 RECEIPT OF LOAN DOCUMENTS AND OTHER ITEMS. The Lender shall have
no obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein, including, without
limitation, the review by the Lender or its counsel of the title of the
Guarantors to their respective Properties, shall be reasonably satisfactory to
the Lender, and the Lender shall have received, reviewed, and approved the
following documents and other items, appropriately executed when necessary and,
where applicable, acknowledged by one or more authorized officers of the
Borrower or the Guarantors, as the case may be, all in form and substance
reasonably satisfactory to the Lender and dated, where applicable, of even date
herewith or a date prior thereto and reasonably acceptable to the Lender:
(a) multiple counterparts of this Agreement and the Guaranties, as
requested by the Lender;
(b) the Note;
(c) copies of the Articles of Incorporation or Certificate of
Incorporation and all amendments thereto and the bylaws and all amendments
thereto of the limited liability company Guarantors and general partner of
Borrower and the limited partner Guarantors, accompanied by a certificate
issued by the secretary or an assistant secretary of the Guarantors, as
the case may be, to the effect that each such copy is correct and
complete;
(d) certificates of incumbency and signatures of all officers of the
Guarantors and general partner of Borrower and the limited partner
Guarantors who are authorized to execute Loan Documents on behalf of such
entities, each such certificate being executed by the secretary or an
assistant secretary of the
1701059.9:WGD:003566.00097:04/30/98:2:48PM
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Guarantors and general partner of Borrower and the limited partner
Guarantors, as the case may be;
(e) copies of corporate resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly adopted
by the boards of directors of the Guarantors and general partner of
Borrower and the limited partner Guarantors, accompanied by certificates
of the secretary or an assistant secretary of the Guarantors and general
partner of Borrower and the limited partner Guarantors, as the case may
be, to the effect that such copies are true and correct copies of
resolutions duly adopted at a meeting or by unanimous consent of the board
of directors of the Guarantors and general partner of Borrower and the
limited partner Guarantors, as the case may be, and that such resolutions
constitute all the resolutions adopted with respect to such transactions,
have not been amended, modified, or revoked in any respect, and are in
full force and effect as of the date of such certificate;
(f) copies of partnership documents authorizing and approving the
Loan Documents and authorizing the transaction contemplated herein;
(g) multiple counterparts, as requested by the Lender, of the
following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Lender in and to the
Collateral:
(i) Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment of
Production, and Financing Statement and Louisiana Act of Mortgage (collectively,
the "MORTGAGE") covering the Mortgaged Properties and all improvements, personal
property, and fixtures related thereto covering only three contracts and any
renewals or extensions of such contracts to wit:
a. Firm Gas Balancing Contract by and
between Egan Gas Storage Company, Inc. and
Northern Indiana Public Service Company
dated November 23, 1993, covering the La-1
Gas Storage Facility, Acadian Parish,
Louisiana;
b. Firm Gas Storage Contract by and between Moss Bluff Gas Storage
Systems and Northern Indiana Public Service Company dated effective
November 1, 1991, intrastate service for the Moss Bluff Gas Storage
Facility, Chambers and Liberty Counties, Texas; and
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c. Firm Gas Storage Contract by and between Moss Bluff Gas Storage
Systems and Northern Indiana Public Service Company dated effective
November 1, 1991, covering interstate service pursuant to the
provisions of 18.C.F.R. ss. 284.224 for the Moss Bluff Gas Storage
Facility, Chambers and Liberty Counties, Texas;
(ii) Financing Statements from the Egan Hub Partners,
L.P. and Moss Bluff Hub Partners, L.P., as debtors, constituent to
the instrument described in clause (i) above;
(h) audited Financial Statements of the Borrower as of December 31,
1997;
(i) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the existence
or qualification and good standing of the Borrower and the Guarantors in
their respective jurisdictions of incorporation and in any other
jurisdictions where any of them do business;
(j) results of searches of the UCC Records of the Secretary of State
of the States of Texas and Louisiana from a source acceptable to the
Lender and reflecting no Liens against any of the Collateral as to which
perfection of a Lien is accomplished by the filing of a financing
statement other than in favor of the Lender;
(k) confirmation, acceptable to the Lender, of the title of the
Guarantors to the Mortgaged Properties, free and clear of Liens other than
Permitted Liens;
(l) the opinion of Baker & Botts, L.L.P., counsel to the Borrower
and the Guarantors, in the form attached hereto as Exhibit IV, with such
changes thereto as may be approved by the Lender;
(m) the opinion of Phelps, Dunbar, L.L.P., Louisiana Counsel,
covering the validity of the Louisiana Act of Mortgage;
(n) certificates evidencing the insurance coverage required pursuant
to Section 5.15; and
(o) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may reasonably
request.
3.2 EACH LOAN. In addition to the conditions precedent stated
elsewhere herein, the Lender shall not be obligated to make any Loan unless:
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(a) the Borrower shall have delivered to the Lender a Borrowing
Request at least the requisite time prior to the requested date for the
relevant Loan; and each statement or certification made in such Borrowing
Request, as the case may be, shall be true and correct in all material
respects on the requested date for such Loan;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan;
(c) each of the representations and warranties of the Borrower and
the Guarantors contained in this Agreement shall be true and correct in
all material respects and shall be deemed to be repeated by the Borrower
as if made on the requested date for such Loan; and
(d) the Guaranties and all of the Security Instruments shall be in
full force and effect and provide to the Lender the security intended
thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the
Loans, the Borrower and Guarantors represent and warrant to the Lender (which
representations and warranties shall survive the delivery of the Note) that:
4.1 DUE AUTHORIZATION. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Note, the repayment of the Note and interest and fees provided
for in the Note and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate or partnership action by the
Borrower, and do not and will not (a) require the Borrower to obtain the consent
of any Governmental Authority, (b) contravene or conflict with any Requirement
of Law applicable to the Borrower, (c) contravene or conflict with any
indenture, instrument, or other agreement to which the Borrower is a party or by
which any Property of the Borrower may be presently bound or encumbered, or (d)
result in or require the creation or imposition of any Lien in, upon or of any
Property of the Borrower under any such indenture, instrument, or other
agreement, other than the Loan Documents.
4.2 EXISTENCE. As of the Closing Date, Moss Bluff Hub Partners,
L.L.C. and Egan Hub Partners, L.L.C. are limited liability companies duly
organized, legally existing, and in good standing under the laws of the State of
Delaware and are duly qualified as a foreign limited liability company and are
in good standing in all jurisdictions wherein the ownership of
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Property or the operation of their businesses necessitates same, other than
those jurisdictions wherein the failure to so qualify will not have a Material
Adverse Effect.
4.3 PARTNERSHIP EXISTENCE. As of the Closing Date, Market Hub
Partners Storage, L.P., Moss Bluff Hub Partners, L.P. and Egan Hub Partners,
L.P. are limited partnerships duly organized, legally existing, and in good
standing under the laws of their states of formation and are duly qualified as
limited partnerships and are in good standing in all jurisdictions wherein the
ownership of Property or the operation of their businesses necessitates same,
other than those jurisdictions wherein the failure to so qualify will not have a
Material Adverse Effect.
4.4 VALID AND BINDING OBLIGATIONS. All Loan Documents, when duly
executed and delivered by the Borrower and Guarantors, will be the legal, valid,
and binding obligations of the Borrower and Guarantors, enforceable against the
Borrower and Guarantors in accordance with their respective terms.
4.5 SECURITY INSTRUMENTS. The provisions of each Security Instrument
executed by Moss Bluff Hub Partners, L.P. and Egan Hub Partners, L.P. are
effective to create in favor of the Lender, a legal, valid, and enforceable Lien
in all right, title, and interest of Moss Bluff Hub Partners, L.P. and Egan Hub
Partners, L.P. in the Collateral described therein, which Liens, assuming the
accomplishment of recording and filing in accordance with applicable laws prior
to the intervention of rights of other Persons, shall constitute fully perfected
first-priority Liens on all right, title, and interest of Moss Bluff Hub
Partners, L.P. and Egan Hub Partners, L.P. in the Collateral described therein,
subject to Permitted Liens.
4.6 TITLE TO ASSETS. Subject to Permitted Liens, Moss Bluff Hub
Partners, L.P. has good and sufficient title to the Moss Bluff Facility, (b)
Egan Hub Partners, L.P. has good and sufficient title to the Egan Facility and
(c) the Borrower and the Restricted Subsidiaries have good and sufficient title
to its respective other properties that individually or in the aggregate are
Material (except as sold or otherwise disposed of in compliance with this
Agreement).
4.7 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS. The Financial
Statements of the Borrower as of December 31, 1997, present fairly the financial
position and results of operations and cash flows of the Borrower in accordance
with GAAP as at the relevant point in time or for the period indicated, as
applicable. As of the Closing Date, no event or circumstance has occurred since
December 31, 1997, which could reasonably be expected to have a Material Adverse
Effect.
4.8 NO MATERIAL MISSTATEMENTS. No written information, exhibit,
written statement, or report furnished to the Lender by or at the direction of
the Borrower and Guarantors in connection with this Agreement contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading as of the date
made or deemed made; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
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4.9 LIABILITIES, LITIGATION, AND RESTRICTIONS. Other than as listed
under the heading "Liabilities" on Exhibit V attached hereto, the Borrower and
Guarantors have no liabilities, direct, or contingent, which may materially and
adversely affect its business or operations or their ownership of the
Collateral. Except as set forth under the heading "Litigation" on Exhibit V
hereto, no litigation or other action of any nature affecting the Borrower and
Guarantors is pending against any Borrower or any Guarantor before any
Governmental Authority or, to the best knowledge of the Borrower and Guarantors,
threatened against the Borrower and Guarantors which might reasonably be
expected to result in any impairment of its ownership of any Collateral or have
a Material Adverse Effect.
4.10 AUTHORIZATIONS; CONSENTS. Except as expressly contemplated by
this Agreement, and except as has been obtained or which will be obtained when
required, no authorization, consent, approval, exemption, franchise, permit, or
license of, or filing with, any Governmental Authority or any other Person is
required to authorize or is otherwise required to be obtained by any Borrower or
any Guarantor in connection with the valid execution and delivery by the
Borrower and Guarantors of the Loan Documents or any instrument contemplated
hereby, the repayment by the Borrower and Guarantors of the Note and interest
and fees provided in the Note and this Agreement, or except where failure would
not have a Material Adverse Effect, the performance by the Borrower and
Guarantors of the Obligations.
4.11 ENVIRONMENTAL LAWS. To the best knowledge and belief of the
Borrower and Guarantors, except as would not have a Material Adverse Effect, or
as described on Exhibit V under the heading "Environmental Matters:"
(a) no Property of the Borrower and Guarantors is currently on or
has ever been on, or is adjacent to any Property which is on or has ever
been on, any federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported, and/or
disposed of by the Borrower and Guarantors at a site which was, at the
time of such generation, transportation, and/or disposal, or has since
become, a Superfund Site;
(c) except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval of the relevant
Governmental Authority, no Release of Hazardous Substances by the Borrower
and Guarantors or from, affecting, or related to any Property of the
Borrower and Guarantors or adjacent to any Property of the Borrower and
Guarantors has occurred; and
(d) no Environmental Complaint has been received by the Borrower and
Guarantors.
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4.12 COMPLIANCE WITH FEDERAL RESERVE REGULATIONS. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations G, T, U, or X.
4.13 INVESTMENT COMPANY ACT COMPLIANCE. The Borrower is not, nor is
the Borrower directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or an "affiliated person" of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.14 PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. The Borrower is
not a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.15 PROPER FILING OF TAX RETURNS; PAYMENT OF TAXES DUE. The
Borrower has duly and properly filed its United States income tax return and all
other tax returns which are required to be filed and has paid all taxes due
except such as are being contested in good faith and as to which adequate
provisions and disclosures have been made. The respective charges and reserves
on the books of the Borrower with respect to taxes and other governmental
charges are adequate.
4.16 CASUALTIES OR TAKING OF PROPERTY. As of the Closing Date,
except as disclosed on Exhibit V under the heading "Casualties," since December
31, 1997, neither the business nor any Property of the Borrower and the
Guarantors has been materially adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property, or cancellation
of contracts, permits, or concessions by any Governmental Authority, riot,
activities of armed forces, or acts of God.
4.17 LOCATIONS OF BORROWER. The principal place of business and
chief executive office of the Borrower is located at the address of the Borrower
set forth in Section 8.3 or at such other location as the Borrower may have, by
proper written notice hereunder, advised the Lender, provided that such other
location is within a state in which appropriate financing statements from the
Borrower in favor of the Lender have been filed.
4.18 SUBSIDIARIES. As of the Closing Date, the Borrower has no
Subsidiaries except those described on Exhibit V under the heading
"Subsidiaries", and the Guarantors have no Subsidiaries other than on Exhibit V.
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ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower and Guarantors shall:
5.1 MAINTENANCE AND ACCESS TO RECORDS AND INSPECTION OF PROPERTIES.
Keep adequate records, in accordance with GAAP, of all its transactions so that
at any time, and from time to time, its true and complete financial condition
may be readily determined, and promptly following the reasonable request of the
Lender, make such records available for inspection by the Lender and, at the
expense of the Borrower, allow the Lender to make and take away copies thereof.
Permit, upon reasonable prior notice, any authorized representative of the
Lender to visit and inspect, at the expense of the Borrower and/or Guarantors,
any tangible Property of the Borrower and/or the Guarantors.
5.2 QUARTERLY FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES. Deliver
to the Lender, (a) on or before the 60th day after the close of each of the
first three quarterly periods of each fiscal year of the Borrower, a copy of the
unaudited consolidated and consolidating Financial Statements of the Borrower
and the Guarantors as at the close of such quarterly period and from the
beginning of such fiscal year to the end of such period, such Financial
Statements to be certified by Responsible Officers of the Borrower and the
Guarantors as having been prepared in accordance with GAAP consistently applied
and as a fair presentation of the condition of the Borrower and the Guarantors,
subject to changes resulting from normal year-end audit adjustments, and (b) on
or before the 60th day after the close of each fiscal quarter, with the
exception of the last fiscal quarter, a Compliance Certificate.
5.3 ANNUAL FINANCIAL STATEMENTS. Deliver to the Lender, on or before
the 120th day after the close of each fiscal year of the Borrower, a copy of the
annual audited consolidated and consolidating Financial Statements of the
Borrower and the Guarantors and a Compliance Certificate.
5.4 TITLE DEFECTS. In the event the Lender receives notice of any
defect in the title to Mortgaged Property after the Closing Date which defect
occurred after the Closing Date, which would result in a breach of Section 4.7
and which is Material in the opinion of the Lender, the Borrower or the
Mortgagors shall clear such title defects, after the Lender gives written notice
of such defect to the Borrower and, in the event any such title defects are not
cured in a timely manner, pay all related costs and fees incurred by the Lender
to do so.
5.5 NOTICES OF CERTAIN EVENTS. Deliver to the Lender, promptly upon
having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or circumstance and
the steps being taken by the Borrower or the Guarantors with respect to such
event or circumstance:
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(a) any Default or Event of Default;
(b) any default or event of default under any contractual obligation
of the Borrower or the Guarantors, or any litigation, investigation, or
proceeding between the Borrower or the Guarantors and any Governmental
Authority which, in either case, if not cured or if adversely determined,
as the case may be, could reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding involving the Borrower or the
Guarantors as a defendant or in which any Property of the Borrower or the
Guarantors is subject to a claim and in which the amount involved is
$1,000,000 or more and which is not covered by insurance or in which
injunctive or similar relief is sought;
(d) the receipt by the Borrower and/or Guarantors of any written
Environmental Complaint by a Governmental Authority regarding any
violation or alleged violation of Environmental Laws by the Borrower
and/or Guarantors which violation would have a Material Adverse Effect;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority concerning the environmental
condition of, or relating to, any Property of the Borrower and/or
Guarantors following any written allegation of a violation by a Borrower
or a Guarantor of any Requirement of Law;
(f) any Release of Hazardous Substances by the Borrower and/or
Guarantors or from, affecting, or related to any Property of the Borrower
and/or Guarantors except in accordance with applicable Requirements of Law
or the terms of a valid permit, license, certificate, or approval of the
relevant Governmental Authority, or the violation of any Environmental Law
by any Borrower or any Guarantor, or the revocation, suspension, or
forfeiture of or failure to renew, any permit, license, registration,
approval, or authorization in favor of any Borrower or any Guarantor
which, in each case, could reasonably be expected to have a Material
Adverse Effect; and
(g) any change in the senior management or general partner of the
Borrower or the senior management of any general partner of the Borrower.
5.6 ADDITIONAL INFORMATION. Furnish to the Lender, within five days
after any material report (other than financial statements) or other
communication is sent by the Borrower, the Guarantors, or any Subsidiary of the
Guarantors to its stockholders or filed by the Borrower, the Guarantors, or any
Subsidiary of the Guarantors with the Securities and Exchange Commission or any
successor or analogous Governmental Authority, copies of such report or
communication and, promptly upon the request of the Lender, such additional
financial or other information concerning the assets, liabilities, operations,
and transactions of the Borrower as the Lender may from time to time reasonably
request; and notify the Lender not less than ten Business Days prior to the
occurrence of any condition or event that may change the proper location for the
filing of
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any financing statement or other public notice or recording for the purpose of
perfecting a Lien in any Collateral, including, without limitation, any change
in its name or the location of its principal place of business or chief
executive office; and upon the reasonable request of the Lender, execute such
additional Security Instruments as may be necessary or appropriate in connection
therewith.
5.7 COMPLIANCE WITH LAWS. Except as described on Exhibit V and
except to the extent the failure to comply or cause compliance would not have a
Material Adverse Effect, comply with all applicable Requirements of Law,
including, without limitation, (a) the Natural Gas Policy Act of 1978, as
amended, (b) ERISA, (c) Environmental Laws, and (d) all permits, licenses,
registrations, approvals, and authorizations (i) related to any natural or
environmental resource or media located on, above, within, in the vicinity of,
related to or affected by any Property of the Borrower and Guarantors, (ii)
required for the performance of the operations of the Borrower and Guarantors,
or (iii) applicable to the use, generation, handling, storage, treatment,
transport, or disposal of any Hazardous Substances; and cause all employees,
crew members, agents, contractors, subcontractors, and future lessees (pursuant
to appropriate lease provisions) of the Borrower and Guarantors, while such
Persons are acting within the scope of their relationship with the Borrower and
Guarantors, to comply with all such Requirements of Law as may be necessary or
appropriate to enable the Borrower and Guarantors to so comply.
5.8 PAYMENT OF ASSESSMENTS AND CHARGES. Pay all taxes, assessments,
governmental charges, Material rent, and lawful Material claims for labor,
materials and supplies which, if unpaid, might become by law a Lien against the
Property of the Borrower and Guarantors, except any of the foregoing being
contested in good faith and as to which adequate reserve in accordance with GAAP
has been established or unless failure to pay would not have a Material Adverse
Effect.
5.9 MAINTENANCE OF CORPORATE AND PARTNERSHIP EXISTENCE AND GOOD
STANDING. Except as otherwise permitted by this Agreement, Borrower and
Guarantors shall maintain their corporate or partnership existence or
qualification and good standing in its jurisdictions of incorporation or
formation and in all jurisdictions wherein the Property now owned or hereafter
acquired or business now or hereafter conducted necessitates same, provided,
however, that the Borrower shall not be required to preserve any such existence
of its Restricted Subsidiaries, rights of franchises, if the Board of Directors
of the Borrower shall determine that the preservation hereof is no longer
desirable in the conduct of the business of the Borrower and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not disadvantageous
in any material respect to the Lender.
5.10 PAYMENT OF NOTES; PERFORMANCE OF OBLIGATIONS. Pay the Note
according to the reading, tenor, and effect thereof, as modified hereby, and do
and perform every act and discharge all of its other Obligations (after giving
effect to all applicable notice and cure periods).
5.11 FURTHER ASSURANCES. Promptly cure any defects in the execution
and delivery of any of the Loan Documents by the Borrower and/or the Guarantors
and all agreements contemplated thereby, and execute, acknowledge, and deliver
such other assurances and
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instruments as shall, in the reasonable opinion of the Lender, be necessary to
fulfill the terms of the Loan Documents.
5.12 FEES AND EXPENSES OF COUNSEL TO LENDER. Upon request by the
Lender, promptly reimburse the Lender for all reasonable fees and expenses of
Jackson Walker L.L.P., special counsel to the Lender, in connection with the
preparation of this Agreement and all documentation contemplated hereby, the
satisfaction of the conditions precedent set forth herein, the filing and
recordation of Security Instruments, and the consummation of the transactions
contemplated in this Agreement and to ratify, amend, restate, or prepare
additional Loan Documents, as the case may be and for the filing and recordation
of Security Instruments.
5.13 SUBSEQUENT FEES AND EXPENSES OF LENDER. Upon the occurrence and
during the continuance of any Event of Default, upon request by the Lender,
promptly reimburse the Lender (to the fullest extent permitted by law) for all
amounts reasonably expended, advanced, or incurred by or on behalf of the Lender
to collect the Obligations; to enforce the rights of the Lender under any of the
Loan Documents; and to protect the Properties or business of the Borrower and
the Guarantors, including, without limitation, the Collateral, which amounts
shall be deemed compensatory in nature and liquidated as to amount upon notice
to the Borrower by the Lender and which amounts shall include, but not be
limited to (a) all court costs, (b) reasonable attorneys' fees, (c) reasonable
fees and expenses of auditors and accountants incurred to protect the interests
of the Lender, (d) fees and expenses incurred in connection with the
participation by the Lender as a member of the creditors' committee in a case
commenced under any Insolvency Proceeding, (e) fees and expenses incurred in
connection with lifting the automatic stay prescribed in ss.362 Title 11 of the
United States Code, and (f) fees and expenses incurred in connection with any
action pursuant to ss.1129 Title 11 of the United States Code all reasonably
incurred by the Lender in connection with the collection of any sums due under
the Loan Documents, together with interest at the per annum interest rate equal
to the Floating Rate, calculated on a basis of a calendar year of 365 or 366
days, as the case may be, counting the actual number of days elapsed, on each
such amount from the date of notification that the same was expended, advanced,
or incurred by the Lender until the date it is repaid to the Lender, with the
obligations under this Section surviving the non-assumption of this Agreement in
a case commenced under any Insolvency Proceeding and being binding upon the
Borrower and/or a trustee, receiver, custodian, or liquidator of the Borrower
appointed in any such case.
5.14 OPERATION AND MAINTENANCE OF STORAGE FACILITIES. Develop,
maintain, and operate the Moss Bluff and Egan facilities and any other
facilities hereinafter acquired in a prudent and workmanlike manner in
accordance with industry standards.
Subject to Section 6.4, maintain all of its Material tangible
Properties in good repair and condition, ordinary wear and tear excepted; make
all necessary replacements thereof and operate such Properties in a good and
workmanlike manner.
5.15 MAINTENANCE OF INSURANCE. The Borrower shall at all times keep
all of its, and cause its Restricted Subsidiaries to keep their Properties which
are of an insurable nature insured with insurers, believed by the Borrower to be
responsible, against loss or damage to the
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extent that property of similar character and in a similar location is usually
so insured by corporations similarly situated and owning like Properties.
The Borrower or any Restricted Subsidiary may adopt such other plan
or method of protection, in lieu of or supplemental to insurance with insurers,
whether by the establishment of an insurance fund or reserve to be held and
applied to make good losses from casualties, or otherwise, conforming to the
systems of self-insurance maintained by similarly situated companies, as may be
determined by the Board of Directors of the Borrower or such Restricted
Subsidiary.
5.16 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER AND ITS
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND EACH TRUSTEE (THE "INDEMNIFIED PARTIES") FOR THE BENEFIT OF THE
LENDER UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE
AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS
AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES
AND EXPENSES) (COLLECTIVELY, "DAMAGES"), ARISING DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER,
OR FROM ANY PROPERTY OF THE BORROWER AND GUARANTORS, OCCURRING PRIOR TO THE
RELEASE DATE, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY
CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER AND GUARANTORS
OCCURRING PRIOR TO THE RELEASE DATE, WHETHER PRIOR TO OR DURING THE TERM HEREOF,
AND WHETHER BY THE BORROWER AND GUARANTORS OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER AND GUARANTORS OR
ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN
CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION,
CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME
LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON
OR UNDER ANY PROPERTY OF THE BORROWER AND GUARANTORS OCCURRING PRIOR TO THE
RELEASE DATE, (D) ANY CONTAMINATION OCCURRING PRIOR TO THE RELEASE DATE OF ANY
PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE,
HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE
BORROWER AND GUARANTORS OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF
THE BORROWER AND GUARANTORS WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH THE BORROWER AND GUARANTORS, IRRESPECTIVE OF WHETHER ANY
OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE
REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY LOAN
DOCUMENT,
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OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT
OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF
THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, EXCLUDING GROSS
NEGLIGENCE AND WILFUL MISCONDUCT OF ANY INDEMNIFIED PARTY OR ANY VIOLATION OF
ANY LOAN DOCUMENT OR REQUIREMENT OF LAW BY AN INDEMNIFIED PARTY, WHETHER SOLE OR
CONCURRENT, ON THE PART OF THE LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE
FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT AND EXCLUDING ANY OF
THE FOREGOING ARISING FROM CLAIMS BETWEEN INDEMNIFIED PARTIES; WITH THE
FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT. "RELEASE DATE" AS USED HEREIN MEANS THE EARLIER
OF THE FOLLOWING TWO DATES: (I) THE DATE ON WHICH THE INDEBTEDNESS AND
OBLIGATIONS SECURED HEREBY HAVE BEEN PAID AND PERFORMED IN FULL, OR (II) THE
DATE ON WHICH THE LIEN OF THE SECURITY INSTRUMENTS IS FULLY AND FINALLY
FORECLOSED OR A CONVEYANCE BY DEED IN LIEU OF SUCH FORECLOSURE IS FULLY AND
FINALLY EFFECTIVE, AND POSSESSION OF THE MORTGAGED PROPERTY HAS BEEN GIVEN TO
THE PURCHASER OR GRANTEE.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any
Commitment exists, the Borrower and Guarantors will not:
6.1 INDEBTEDNESS. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise; provided, however, the
foregoing restriction shall not apply to (a) the Obligations, (b) unsecured
accounts payable incurred in the ordinary course of business, which are not
unpaid in excess of 60 days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by GAAP has been made or (c)
Indebtedness permitted by the Indenture.
6.2 CONTINGENT OBLIGATIONS. Create, incur, assume, or suffer to
exist any Contingent Obligation; provided, however, the foregoing restriction
shall not apply to (a) performance guarantees and performance surety or other
bonds provided in the ordinary course of business, (b) trade credit incurred or
operating leases entered into in the ordinary course of business, or (c) any
Contingent Obligation permitted by the Indenture.
6.3 LIENS. Create, incur, assume, or suffer to exist any Lien on any
of its Properties, whether now owned or hereafter acquired; provided, however,
the foregoing restrictions shall not apply to (a) Permitted Liens, or (b) Liens
permitted by the Indenture.
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6.4 SALES OF ASSETS. Without the prior written consent of the
Lender, sell, transfer, or otherwise dispose of, in one or any series of
transactions, assets, whether now owned or hereafter acquired, or enter into any
agreement to do so, provided, however, the foregoing shall not apply to sales,
transfers or dispositions permitted by the Indenture.
6.5 LOANS OR ADVANCES. Make or agree to make or allow to remain
outstanding any loans or advances to any Person; provided, however, the
foregoing restrictions shall not apply to (a) advances or extensions of credit
in the form of accounts receivable incurred in the ordinary course of business
and upon terms common in the industry for such accounts receivable, (b) advances
to employees of the Borrower for the payment of expenses in the ordinary course
of business, or (c) loans or advances permitted by the Indenture.
6.6 INVESTMENTS. Acquire Investments in, or purchase or otherwise
acquire all or substantially all of the assets of, any Person; provided,
however, the foregoing restriction shall not apply to any purchase or
acquisition permitted by the Indenture, or the purchase or acquisition of (a)
Investments in the form of (i) debt securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof, with maturities of no more than one year, (ii)
commercial paper of a domestic issuer rated at the date of acquisition at least
P-2 by Moody's Investor Service, Inc. or A-2 by Standard & Poor's Corporation
and with maturities of no more than one year from the date of acquisition, or
(iii) repurchase agreements covering debt securities or commercial paper of the
type permitted in this Section, certificates of deposit, demand deposits,
eurodollar time deposits, overnight bank deposits and bankers' acceptances, with
maturities of no more than one year from the date of acquisition, issued by or
acquired from or through the Lender or any bank or trust company organized under
the laws of the United States or any state thereof and having capital surplus
and undivided profits aggregating at least $100,000,000, (b) other short-term
Investments similar in nature and degree of risk to those described in clause
(c) of this Section, or (d) money-market funds.
6.7 DIVIDENDS AND DISTRIBUTIONS. Declare, pay, or make, whether in
cash or Property of the Borrower, any dividend or distribution on, or purchase,
redeem, or otherwise acquire for value, any share of any class of its capital
stock; declare, pay, or make any distributions or return any capital to any of
its partners, whether in cash or other Property, other than distributions
permitted by the Indenture.
6.8 ISSUANCE OF STOCK; CHANGES IN CORPORATE OR PARTNERSHIP
STRUCTURE. Except as otherwise permitted by the Indenture, issue or agree to
issue additional shares of capital stock, in one or any series of transactions;
enter into any transaction of consolidation, merger, or amalgamation; liquidate,
wind up, or dissolve (or suffer any liquidation or dissolution).
6.9 TRANSACTIONS WITH AFFILIATES. Except as among the Borrower and
the Guarantors, directly or indirectly, enter into any transaction (including
the sale, lease, or exchange of Property or the rendering of service) with any
of its Affiliates, other than upon fair and reasonable terms no less favorable
than could be obtained in an arm's length transaction with a Person which was
not an Affiliate and notwithstanding the foregoing, the Borrower and the
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Guarantors may not, directly or indirectly, enter into any transaction
(including the sale, lease, or exchange of Property or the rendering of service)
with Market Hub Partners Finance, Inc.
6.10 LINES OF BUSINESS. Expand, on its own or through any
Subsidiary, into any line of business other than in a Related Business.
6.11 TANGIBLE NET WORTH. Permit Tangible Net Worth of Market Hub
Partners Storage, L.P. at the close of any fiscal quarter to be less than
$50,000,000.
6.12 CASH FLOW COVERAGE. Permit as of the close of any fiscal
quarter, the ratio of Cash Flow to Debt Service to be less than 1.40 to 1.00 for
Market Hub Partners Storage, L.P.
6.13 FUNDED DEBT TO TOTAL CAPITALIZATION. Permit as of the close of
any fiscal quarter, the ratio of total funded debt to Total Capitalization to be
more than sixty-five percent (65%) for Market Hub Partners Storage, L.P.
ARTICLE VII
EVENTS OF DEFAULT
7.1 ENUMERATION OF EVENTS OF DEFAULT. Any of the following events
shall constitute an Event of Default:
(a) default shall be made in the payment when due of any installment
of principal or interest under this Agreement or the Note or in the
payment when due of any fee or other sum payable under any Loan Document;
(b) default shall be made by the Borrower or the Guarantors in the
due observance or performance of any of their respective obligations under
the Loan Documents, and such default shall continue for 30 days after the
earlier of notice thereof to the Borrower by the Lender or knowledge
thereof by the Borrower, provided, however, that if with respect to a
Default under the Security Instruments, it is not reasonable to remedy
such Default within 30 days, but such Default is of a nature that can be
remedied, then such time shall be extended to a period of 60 days, if and
only if the Borrower or the Guarantors, as the case may be, promptly
commence the remedying of such Default and diligently continue such
process until the Default has been remedied;
(c) any representation or warranty made by the Borrower or the
Guarantors in any of the Loan Documents proves to have been untrue in any
Material respect;
(d) default shall be made by the Borrower or the Guarantors (as
principal or guarantor or other surety) in the payment or performance of
the Indenture or any bond, debenture, note, or other Indebtedness or under
any credit agreement,
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loan agreement, indenture, promissory note, or similar agreement or
instrument executed in connection with any of the foregoing, provided that
the aggregate principal amount of the Indebtedness which is the subject of
such Default exceeds $2,500,000, and such default shall remain unremedied
for in excess of the period of grace, if any, with respect thereto;
(e) the entry of a decree or order by a court having jurisdiction in
the premises (a) for relief in respect of any Borrower or any Restricted
Subsidiary in an involuntary case or proceeding under the Federal
Bankruptcy Code or any other applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, or (b) adjudging any
Borrower or any Restricted Subsidiary bankrupt or insolvent, or approving
a petition seeking reorganization, arrangement, adjustment or composition
of any Borrower or an Restricted Subsidiary under the Federal Bankruptcy
Code or any applicable federal or state law, or appointing under any such
law a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of any Borrower or any Restricted Subsidiary or of
a substantial part of its consolidated assets, or ordering the winding up
or liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days;
(f) the commencement by any Borrower or any Restricted Subsidiary of
a voluntary case or proceeding under the Federal Bankruptcy Code or any
other applicable federal or state bankruptcy, insolvency, reorganization
or other similar law or any other case or proceeding to be adjudicated
bankrupt or insolvent, or the consent by any Borrower or any Restricted
Subsidiary to the entry of a decree or order for relief in respect thereof
in an involuntary case or proceeding under the Federal Bankruptcy Code or
any other applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by
any Borrower or any Restricted Subsidiary of a petition or consent seeking
reorganization or relief under any applicable federal or state law, or the
consent by it under any such law to the filing of any such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar official)
of any Borrower or and Restricted Subsidiary or of any substantial part of
its consolidated assets, or the making by it of an assignment for the
benefit of creditors under any such law, or the admission by it in writing
of its inability to pay its debts generally as they become due or taking
of corporate action by any Borrower or any Restricted Subsidiary in
furtherance of any such action;
(g) the levy against $2,500,000 of the Property of the Borrower or
the Guarantors, or any execution, garnishment, attachment, sequestration,
or other writ or similar proceeding which is not permanently dismissed or
discharged within 30 days after the levy;
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(h) a final and non-appealable order, judgment, or decree shall be
entered against the Borrower or the Guarantors for money damages and/or
Indebtedness due in an amount in excess of $2,500,000, and such order,
judgment, or decree shall not be dismissed or stayed within 60 days;
(i) either the Borrower or the Guarantors shall have (i) concealed,
removed, or diverted, or permitted to be concealed, removed, or diverted,
any part of its Property, with intent to hinder, delay, or defraud its
creditors or any of them, (ii) made or suffered a transfer of any of its
Property which may be fraudulent under any bankruptcy, fraudulent
conveyance, or similar law, (iii) made any transfer of its Property to or
for the benefit of a creditor at a time when other creditors similarly
situated have not been paid, or (iv) shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its Property
through legal proceedings or distraint which is not vacated within 60 days
from the date thereof; or
(j) any Security Instrument shall for any reason not, or cease to,
create valid and perfected first-priority Liens against the Collateral
purportedly covered thereby (subject to Permitted Liens), except due to
the action or inaction of the Lender.
7.2 REMEDIES. (a) Upon the occurrence of an Event of Default
specified in Sections 7.1(e) or 7.1(f), immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lender
in writing; and (iii) the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Lender and any and all other
indebtedness at any time owing by the Lender to or for the credit or account of
the Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(b) Upon the occurrence of any Event of Default other than those
specified in Sections 7.1(e) or 7.1(f), (i) the Lender may, by notice to the
Borrower, declare all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lender
in writing; and (iii) the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Lender and any and all other
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indebtedness at any time owing by the Lender to or for the credit or account of
the Borrower against any and all of the Obligations although such Obligations
may be unmatured.
(c) Upon the occurrence of any Event of Default, the Lender may, in
addition to the foregoing in this Section, exercise any or all of its rights and
remedies provided by law or pursuant to the Loan Documents.
ARTICLE VIII
MISCELLANEOUS
8.1 TRANSFERS; PARTICIPATIONS. Upon the prior written consent of the
Borrower, the Lender may, at any time, sell, transfer, assign, or grant
participations in the Obligations or any portion thereof; and, subject to
Section 8.12, the Lender may forward to each Transferee and prospective
Transferee all documents and information relating to such Obligations, whether
furnished by the Borrower or otherwise obtained, as the Lender determines
necessary or desirable.
8.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. All
representations and warranties of the Borrower and Guarantors and all covenants
and agreements herein made shall survive the execution and delivery of the Note
and the Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
8.3 NOTICES AND OTHER COMMUNICATIONS. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
when deposited in the mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when receipt thereof is
acknowledged orally or by written confirmation report, addressed as follows:
(a) if to the Lender, to:
Bank One, Texas, National Association 910 Travis, 6th Floor
Houston, Texas 77002-5860 Attention: Energy Group, 6th Floor
(or for notice by mail, to:
P.O. Box 2629
Houston, Texas 77252-2629
Attention: Energy Group, 6th Floor
Telecopy: (713) 751-7894
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(b) if to the Borrower, to:
Market Hub Partners Storage, L.P.
16420 Park Ten Place, Suite 420
Houston, Texas 77084
Attention: Mr. Tony Clark
Telecopy: (281) 597-6799
(c) if to the Guarantors:
Moss Bluff Hub Partners, L.P.
Moss Bluff Hub Partners, L.L.C.
Egan Hub Partners, L.P.
Egan Hub Partners, L.L.C.
16420 Park Ten Place, Suite 420
Houston, Texas 77084
Attention: Mr. Tony Clark
Telecopy: (281) 597-6799
Any party may, by proper written notice hereunder to the others,
change the individuals or addresses to which such notices to it shall thereafter
be sent.
8.4 PARTIES IN INTEREST. Subject to applicable restrictions
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrower or the Lender shall be binding upon and inure to the benefit of
the Borrower or the Lender, as the case may be, and their respective legal
representatives, successors, and assigns.
8.5 RIGHTS OF THIRD PARTIES. All provisions herein are imposed
solely and exclusively for the benefit of the Lender and the Borrower. No other
Person shall have any right, benefit, priority, or interest hereunder or as a
result hereof or have standing to require satisfaction of provisions hereof in
accordance with their terms, and any or all of such provisions may be freely
waived in whole or in part by the Lender at any time if in its sole discretion
it deems it advisable to do so.
8.6 RENEWALS; EXTENSIONS. All provisions of this Agreement relating
to the Note shall apply with equal force and effect to each promissory note
hereafter executed which in whole or in part represents a renewal or extension
of any part of the Indebtedness of the Borrower under this Agreement, the Note,
or any other Loan Document.
8.7 NO WAIVER; RIGHTS CUMULATIVE. No course of dealing on the part
of the Lender, its officers or employees, nor any failure or delay by the Lender
with respect to exercising any of its rights under any Loan Document shall
operate as a waiver thereof. The rights of the Lender under the Loan Documents
shall be cumulative and the exercise or partial exercise of any such right shall
not preclude the exercise of any other right. The making of any Loan shall not
constitute a waiver of any of the covenants, warranties, or conditions of the
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Borrower contained herein. In the event the Borrower is unable to satisfy any
such covenant, warranty, or condition, the making of any Loan shall not have the
effect of precluding the Lender from thereafter declaring such inability to be
an Event of Default as hereinabove provided.
8.8 SURVIVAL UPON UNENFORCEABILITY. In the event any one or more of
the provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
8.9 AMENDMENTS; WAIVERS. Neither this Agreement nor any provision
hereof may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
8.10 CONTROLLING AGREEMENT. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
8.11 DISPOSITION OF COLLATERAL. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Lender; provided, however, that in no event shall the
Lender violate applicable law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in equity.
8.12 CONFIDENTIALITY. For purposes of this Section 8.12,
"CONFIDENTIAL INFORMATION" means information delivered to the Lender by or on
behalf of any Borrower or any Subsidiary or Affiliate in connection with the
transaction contemplated by or otherwise pursuant to this Agreement that is
proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by the Lender as being confidential
information of the Borrower or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to the Lender
prior to the time of such disclosure, (b) subsequently becomes publicly known
through no act or omission by the Lender or any Person acting on the Lender's
behalf, (c) otherwise becomes known to the Lender other than through disclosure
by the Borrower or any Subsidiary, or (d) constitutes financial statements
delivered to the Lender under Section 5.2 or Section 5.3 that are otherwise
publicly available. The Lender will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by the Lender in
good faith to protect confidential information of third parties delivered to the
Lender, provided that the Lender may deliver or disclose confidential
Information to (i) the Lender's directors, officers, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by the Lender's Notes), (ii)
the Lender's financial advisors and other professional advisors who agree for
the benefit of the Borrower to hold confidential the Confidential Information
substantially in
44
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accordance with the terms of this Section 8.12, (iii) any other holder of any
Note, (iv) any Transferee to which the Lender sells or offers to sell such Note
or any part thereof or any participation therein (if such Person has agreed in
writing for the benefit of the Borrower prior to its receipt of such
confidential Information to be bound by the provisions of this Section 8.12),
(v) any federal or state regulatory authority having jurisdiction over the
Lender, or (vi) any other Person to which such delivery and disclosure to be
necessary or appropriate (A) to effect compliance with any law, rule, regulation
or order applicable to the Lender, (B) in response to any subpoena or other
legal process, (C) in connection with any litigation to which the Lender is a
party or (D) if an Event of Default has occurred and is continuing, to the
extent the Lender may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under the Lender's Notes, the Security Instruments or this
Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to
have agreed to be bound by and to be entitled to the benefits of this Section
8.12 as though it were a party to this Agreement. On a reasonable request by the
Borrower in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Borrower embodying
the provisions of this Section 8.12.
8.13 NO RECOURSE AGAINST OTHERS. A director, officer, employee,
stockholder, limited partner, member, incorporator or Affiliate as such, past,
present or future, of any Borrower or any Guarantor shall not have any personal
liability under the Note or any other Loan Document by reason of his or its
status as a director, officer, employee, stockholder, limited partner, member,
incorporator or Affiliate or any liability for any obligations of any Borrower
or any Guarantor under the Note or any other Loan Document or for any claim
based on, in respect of or by reason of such obligations or their creation.
Lender, by accepting the Note, waives and releases all such liability to the
extent permitted by applicable law.
8.14 GOVERNING LAW. THIS AGREEMENT, AND THE NOTE AND THE GUARANTIES
SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
8.15 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT
TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR
FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN HOUSTON, HARRIS
COUNTY, TEXAS. THE BORROWER, GUARANTORS AND THE LENDER HEREBY SUBMIT TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS, AND HEREBY WAIVE ANY RIGHTS THEY
45
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MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST THEM IN ACCORDANCE WITH THIS SECTION.
8.16 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER AND GUARANTORS AND
THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE
LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT.
8.17 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES
HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING,
WITHOUT LIMITATION, THE CORRESPONDENCE DATED FEBRUARY 5, 1998, FROM THE LENDER
TO THE BORROWER AND THE TERM SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS
REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH
PARTIES.
8.18 COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is deemed executed effective as
of the date first above written.
BORROWER:
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.,
its general partner
By:
Anthony J. Clark
Vice President and Chief Financial
Officer
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GUARANTORS:
MOSS BLUFF HUB PARTNERS, L.P.
By: Moss Bluff Hub Partners, L.L.C.,
its general partner
By:
Anthony J. Clark
Vice President and Chief Financial
Officer
EGAN HUB PARTNERS, L.P.
By: Egan Hub Partners, L.L.C.,
its general partner
By:
Anthony J. Clark
Vice President and Chief Financial
Officer
MOSS BLUFF HUB PARTNERS, L.L.C.
By:
Anthony J. Clark
Vice President and Chief Financial
Officer
EGAN HUB PARTNERS, L.L.C.
By:
Anthony J. Clark
Vice President and Chief Financial
Officer
LENDER:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
47
<PAGE>
By:
Michelle A. Wolpert
Vice President
48
<PAGE>
EXHIBIT I
FORM OF NOTE
PROMISSORY NOTE
$50,000,000 Houston, Texas April 15, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ("MAKER")
promises to pay to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION ("PAYEE"),
at its banking quarters in Houston, Harris County, Texas, the sum of FIFTY
MILLION DOLLARS ($50,000,000), (or the unpaid balance of all principal advanced
against this Note, if that amount is less) pursuant to the Credit Agreement
dated of even date herewith by and between Maker and Payee (as amended,
restated, or supplemented from time to time, the "CREDIT AGREEMENT"), together
with interest at the rates and calculated as provided in the Credit Agreement.
The unpaid principal balance of the Note at any time shall be the total of all
principal lent or advanced against this Note less the sum of all principal
payments and permitted prepayments on this Note by or for the account of the
Maker.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the holder hereof to accelerate the maturity of all amounts due
hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is payable
as provided in the Credit Agreement. Subject to compliance with applicable
provisions of the Credit Agreement, Maker may at any time pay the full amount or
any part of this Note without the payment of any premium or fee, but such
payment shall not, until this Note is fully paid and satisfied, excuse the
payment as it becomes due of any payment on this Note provided for in the Credit
Agreement.
The principal of this Note shall be due and payable on the date of
Final Maturity. Accrued and unpaid interest shall be due and payable as provided
in the Credit Agreement and at maturity of this Note.
Without being limited thereto or thereby, this Note is secured by
the Security Instruments.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE
OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH
REGULATES CERTAIN REVOLVING CREDIT
I-i
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LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO
THIS NOTE.
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.,
its general partner
By:___________________________________
Printed Name:_________________________
Title:________________________________
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EXHIBIT II
FORM OF BORROWING REQUEST
Bank One, Texas, National Association
910 Travis
Houston, Texas 77002-5860
Attention: Energy Group, 6th Floor
Re: Credit Agreement dated as of April 15, 1998, by and between Bank
One, Texas, National Association and Market Hub Partners Storage,
L.P. (as amended, restated, or supplemented from time to time, the
"CREDIT AGREEMENT")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the
request indicated below:
1. Loans
(a) Amount of new Loan: $
(b) Requested funding date: , 19
(c) $ of such Loan is to be a Floating Rate Loan;
----------------
$________________ of such Loan is to be a LIBO Rate Loan.
(d) Requested Interest Period for LIBO Rate Loan: ____ months.
2. Continuation or conversion of LIBO Rate Loan maturing on :
(a) Amount to be continued as a LIBO Rate Loan is $ ___________________
, with an Interest
Period of _____ months;
(b) Amount to be converted to a Floating Rate Loan is $_______________;
and
3. Conversion of Floating Rate Loan:
(a) Requested conversion date: ________, 19___.
(b) Amount to be converted to a LIBO Rate Loan is $ , with an Interest
Period of _____ months.
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<PAGE>
The undersigned certifies that he/she is the of the Borrower, has
obtained all consents necessary, and as such he/she is authorized to execute
this request on behalf of the Borrower. The undersigned further certifies,
represents, and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested borrowing, continuation, or conversion under the terms
and conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.,
its general partner
By:___________________________________
Printed Name:_________________________
Title:________________________________
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<PAGE>
EXHIBIT III
FORM OF COMPLIANCE CERTIFICATE
, 19
Bank One, Texas, National Association
910 Travis
Houston, Texas 77002-5860
Attention: Energy Group, 6th Floor
Re: Credit Agreement dated as of April 15, 1998, by and between Bank
One, Texas, National Association and Market Hub Partners Storage,
L.P. (as amended, restated, or supplemented from time to time, the
"CREDIT AGREEMENT")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as a Responsible Officer of the Borrower, hereby certifies to you
the following information as true and correct as of the date hereof or for the
period indicated, as the case may be:
1. To the best of the knowledge of the undersigned, no Default or Event of
Default exists as of the date hereof or has occurred since the date of our
previous certification to you, if any.
1. To the best of the knowledge of the undersigned, the following Defaults
or Events of Default exist as of the date hereof or have occurred since
the date of our previous certification to you, if any, and the actions set
forth below are being taken to remedy such circumstances:
2. The compliance of the Borrower with the financial covenants of the
Credit Agreement, as of the close of business on , is evidenced by the
following:
(a) Section 6.12: TANGIBLE NET WORTH. Permit Tangible Net Worth of
Market Hub Partners Storage, L.P. at the close of any fiscal quarter
to be less than $50,000,000.
REQUIRED ACTUAL
(b) Section 6.13: CASH FLOW COVERAGE. Permit as of the close of any
fiscal quarter, the ratio of Cash Flow to Debt Service to be less
than 1.40 to 1.00 for Market Hub Partners Storage, L.P.
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REQUIRED ACTUAL
(c) Section 6.14: FUNDED DEBT TO TOTAL COMPENSATION. Permit as of the
close of any fiscal quarter, the ratio of total funded debt to total
capitalization to be more than sixty percent (60%) for Market Hub
Partners Storage, L.P.
REQUIRED ACTUAL
3. No Material Adverse Effect has occurred since the date of the Financial
Statements dated as of .
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
MARKET HUB PARTNERS STORAGE, L.P.
By: Market Hub Partners Storage, L.L.C.,
its general partner
By:___________________________________
Printed Name:_________________________
Title:________________________________
III-ii
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EXHIBIT IV
FORM OF OPINION OF COUNSEL
Closing Date
Bank One, Texas, National Association
910 Travis
Houston, Texas 77002-5860
Attention: Energy Group, 6th Floor
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 3.1(1) of
the Credit Agreement (as such term is hereinafter defined). We have acted as
counsel to Market Hub Partners Storage L.P., a Delaware limited liability
company, (the "BORROWER") and Moss Bluff Hub Partners, L.P., a Delaware limited
partnership ("MBHP"), Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company, Egan Hub Partners, L.P., a Delaware limited partnership and
Egan Hub Partners, L.L.C., a Delaware limited liability company (collectively,
the "GUARANTORS", and together with the Borrower, the "LOAN PARTIES") in
connection with the Credit Agreement of even date (the "CREDIT AGREEMENT"),
among the Borrower and Bank One, Texas, National Association (the "LENDER").
Each capitalized term used herein and not otherwise defined herein or in any
exhibit hereto shall have the meaning assigned to such term in the Credit
Agreement. As used herein, the term "TRANSACTIONS" shall refer to the
transactions contemplated by the documents listed on EXHIBIT A hereto (the
"DOCUMENTS") by the parties thereto in accordance with the terms thereof.
In rendering the opinions expressed below, we have examined executed
counterparts (or copies thereof) of each of the Documents, the originals or
conformed copies of such partnership records, agreements and instruments of the
Loan Parties, certificates of public officials and officers of the Issuers and
such other documents and records as to factual matters, and such matters of law,
as we have deemed necessary as a basis for the opinions hereinafter expressed.
Based upon the foregoing and subject to the limitations,
qualifications, assumptions and exceptions set forth herein, we are of the
opinion that:
1. ORGANIZATION, ETC. Each of the Loan Parties has been duly
organized, is validly existing as a limited partnership or limited liability
company in good standing under the laws of its respective jurisdiction of
organization and has all requisite power and authority under its constituent
documents and applicable partnership or limited liability company laws to enter
into and perform the Documents to which it is a party.
IV-i
<PAGE>
The Borrower, Moss Bluff Hub Partners, L.P. and Moss Bluff Hub
Partners, L.L.C. are each duly qualified and in good standing as a foreign
entity authorized to do business in the State of Texas. The Borrower, Egan Hub
Partners, L.P. and Egan Hub Partners, L.L.C. are each duly qualified and in good
standing as a foreign entity authorized to do business in the State of
Louisiana.
2. AUTHORIZATION. Each of the Loan Parties has taken all necessary
action to authorize the execution, delivery and performance of the Documents to
which it is a party. The Documents to which they are a party have been duly
executed and delivered by the Loan Parties.
3. ENFORCEABILITY. The Documents (other than the Act of Mortgage)
constitute the legal, valid and binding obligations of each Loan Party which is
party thereto, enforceable against such Loan Party in accordance with their
terms.
4. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution and
delivery by the Loan Parties of the Documents to which each is a party do not
(a) violate any provision of the partnership agreement, limited liability
company agreement, charter or bylaws, as the case may be, of any Loan Party, (b)
violate any Applicable Law, (c) conflict with or result in the breach of or
constitute a default under any Document or, to our actual knowledge, any
indenture, bond, mortgage, deed of trust or loan or credit agreement or any
other similar agreement of which we have actual knowledge to which any Loan
Party is a party, or (d) to our actual knowledge, result in, or require, the
creation or imposition of any Lien (other than the security interests and liens
created by the Security Instruments executed by the Loan Parties) with respect
to any of the properties now owned by any Loan Party.
5. GOVERNMENTAL CONSENTS. No notice, consent, approval or
authorization of, or declaration or filing with, any federal or Texas
governmental authority is required on the part of any Loan Party for the valid
execution, delivery and performance of the Documents by any Loan Party which is
a party thereto except (a) those recordations and filings with respect to the
Deed of Trust and the related Financing Statements as are set forth in
Paragraphs 8 and 9 below, (b) such consents, approvals, authorizations,
declarations or filings as have been obtained, and (c) as are excepted in
Exception A below.
6. REGULATIONS G, T, U AND X. The execution and delivery of the Note
under the circumstances contemplated by the Credit Agreement do not violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
7. INVESTMENT COMPANY ACT; PUHCA. Neither Borrower is an "investment
company", or a company "controlled" by an "investment company", under the
Investment Company Act of 1940, as amended. Neither Borrower is a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility Holding Company Act of
1935, as amended.
IV-ii
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8. DEED OF TRUST.
(a) The Deed of Trust, the acknowledgments thereto, and the Texas
Financing Statement comply with the laws of the State of Texas including all
applicable recording, filing and registration laws and regulations and are
adequate and legally sufficient to provide the security intended thereby. The
property descriptions of the real property contained in the Deed of Trust, if
accurate, are legally sufficient descriptions of such properties for the
purposes of creating and maintaining the liens therein purported to be created
by the Deed of Trust and for the purposes of all applicable recording, filing
and registration laws of the State of Texas. The Texas Financing Statement is in
proper form for filing with the office of the Secretary of State of the State of
Texas. The Deed of Trust (including, without limitation, the descriptions of the
Mortgaged Property set forth therein and in the exhibits thereto) creates (i) a
deed of trust lien upon the interests of MBHP in the Mortgaged Property referred
to therein (including after acquired property) constituting real property
located in the State of Texas (such interests are referred to collectively as
the "SUBJECT REAL PROPERTY"), and (ii) a security interest in the interests of
MBHP in such Mortgaged Property (including after acquired property) constituting
"fixtures" within the meaning of Article 9 of the Uniform Commercial Code as in
effect on the date hereof in the State of Texas (the "TEXAS UCC") located in the
State of Texas (the "SUBJECT INTERESTS").
(b) The Deed of Trust creates in favor of the Lender a valid
security interest in the Personal Property (as such term is described therein)
constituting inventory and equipment located in the State of Texas (other than
equipment which is mobile goods), general intangibles and accounts (as such
terms are defined in the Texas UCC). Upon the proper filing of the Texas
Financing Statement with the Office of the Secretary of State of the State of
Texas, the Lender will have a perfected security interest (within the meaning of
Chapter 9 of the Texas UCC) on all right, title and interest of MBHP in such
Personal Property for which filing with the Office of the Secretary of State of
the State of Texas may effect perfection (the "TEXAS UCC COLLATERAL").
9. RECORDATION. The recordation of the Deed of Trust in the office
of the County Clerk of Liberty and Chambers Counties, Texas, and the filing of
the Texas Financing Statement in the Office of the Secretary of State of the
State of Texas are the only recordation, registrations and filings required by
the laws of the State of Texas to perfect the liens and security interests
intended to be created by the Deed of Trust in the Subject Real Property and the
Subject Interests and Texas UCC Collateral.
The opinions set forth above are subject to the following
limitations, qualifications, assumptions and exceptions:
A. This opinion is limited in all respects to matters of the laws of the
State of Texas, the General Corporation Law, Limited Liability Company Act
and Revised Uniform Limited Partnership Act of the State of Delaware, and
the applicable federal laws of the United States, each as in effect on the
date hereof ("Applicable Law"); PROVIDED, HOWEVER, we express no opinion
as to the application or effect of regulations or orders by state agencies
regulating the ownership or operation of the storage facilities, the
Federal Energy Regulatory Commission or the Railroad Commission of Texas,
or with respect to compliance with, or any
IV-iii
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governmental filing, approval, authorization, license or consent required
by, (i) any securities law, (ii) any Environmental Law (as defined in the
Credit Agreement), (iii) any state or federal antitrust law or (iv) any
law or regulation relating to ownership or operation of, or financial,
reporting or other legal requirements imposed on, Persons engaged in
ownership or operation of gas pipelines or gas storage facilities by
reason of such status, activities or operations.
B. As to each Person party to a Document other than the Loan Parties, we have
assumed: (a) each is duly organized, validly existing and in good standing
under the jurisdiction of its formation and has all requisite power and
authority to enter into the transactions contemplated by the Documents to
which it is a party and to execute and deliver all Documents to which it
is a party and perform its obligations thereunder, (b) all Documents to
which it is a party have been have been duly authorized, executed and
delivered by such Person, and (c) that all obligations of said Persons
under the Documents to which they are a party constitute the legal, valid
and binding obligations of such Persons enforceable against such Persons
in accordance with their respective terms.
C. Our opinion set forth in Paragraph 1 above as to the existence and good
standing of the Loan Parties is based solely on our examination of
certificates of public officials of the State of Delaware, and the State
of Texas, copies of which have been delivered to you as of the date
hereof.
D. Our opinions set forth in Paragraphs 3 and 8 above are subject to the
effect of (i) applicable bankruptcy, insolvency, reorganization,
rearrangement, fraudulent transfer or conveyance, moratorium,
conservatorship and similar laws affecting creditors' rights generally;
(ii) general principles of equity (whether considered in a proceeding in
equity or at law), including, without limitation, concepts of materiality
and commercial reasonableness; and (iii) any implied covenant of good
faith or fair dealing. We also call to your attention that the
enforceability of certain of the remedial, waiver and other provisions of
the Documents may be limited by applicable laws but such laws do not
(subject to the other qualifications and limitations set forth herein)
adversely affect the validity of the Documents or prevent the practical
realization of the benefits of the security provided for in such
Documents, except for the economic consequences of any procedural delay or
excess costs of proceedings that may result from such laws.
E. We have assumed that each Person granting a security interest has
sufficient right in the Collateral for a security interest to attach.
F. We express no opinion as to:
(1) any Person's title to, or the value or existence of, or the
accuracy or completeness of any description of, or the location or
characterization of, any property or the Storage Facilities;
IV-iv
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(2) the priority or rank of any security interests and Liens created
by, or purported to be created by, the Documents; and
(3) except as set forth in Paragraphs 8 and 9 above, the creation or
perfection of any security interests and Liens created by, or purported to
be created by, the Documents under any applicable law.
Without limiting the generality of the foregoing, we express no opinion as to
title to any gas or other minerals; however, we understand that with respect to
any gas constituting Inventory (as defined in the Deed of Trust), such gas has
been and will be extracted by being produced by a third party and subsequently
reduced to possession by MBHP and injected into and stored in the Moss Bluff
Facility by MBHP.
G. We express no opinion with respect to any lien or security interest
created under the Security Instruments that purports to secure any present
or future obligations or liabilities of the Borrower (other than the
obligations and liabilities of the Borrower arising under the Documents)
that are determined, in the case of obligations or liabilities of any
Borrower to the Lender created in the future, not to constitute "future
advances" within the meaning of Section 9.204 of the Texas UCC, or are
determined not to have been within the contemplation of the Borrower and
the Lender at a time the Documents were executed, or are determined not to
be of the same character or class as the obligations and liabilities of
the Borrower to the Lender created or arising under the Documents.
H. We have made no examination and express no opinion with respect to the
physical condition of the Mortgaged Property (as defined in the Deed of
Trust) and do not purport to opine as to the compliance of the Mortgaged
Property with any building code or ordinance or any other law,
regulations, restriction or ordinance that is dependent or contingent upon
the physical or structural existence or condition of all or any part of
the Mortgaged Property.
I. We express no opinion as to the validity or enforceability of any of the
following provisions: (i) provisions purporting to grant self-help
remedies to the extent limited by generally applicable rules of law that
limit the rights of creditors to use force or cause a breach of the peace
in enforcing rights or relate to the sale or disposition of collateral or
the requirements of a commercially reasonable sale; (ii) relate to waivers
of rights or purport to preclude any party from asserting claims or
defenses or from obtaining certain rights or remedies (provided we do not
except from our opinion the enforceability of the waivers of notice of
intent to accelerate or notice of acceleration contained in the Note and
Credit Agreement, assuming that the Lender and the Trustee do not unduly
delay taking action to accelerate following any Event of Default that
would permit such acceleration); (iii) provisions relating to subrogation
rights, delay or omission of enforcement of rights or remedies, provisions
related to severability to the extent limited by generally applicable
rules of law that may, where less than all of the contract may be
unenforceable, limit the enforceability of the balance of the contract to
circumstances in which the unenforceable portion is not an essential part
of the agreed exchange, waivers or ratification of future acts, provisions
that purport to release, exculpate from or indemnify the parties thereto
against their own
IV-v
<PAGE>
negligence or willful misconduct, consent judgments, marshaling of assets,
or sales in inverse order of alienation; (iv) provisions purporting to
preserve and maintain a Person's liability despite the fact the debt is
unenforceable due to its illegality; (v) provisions purporting to apply
the Uniform Commercial Code whether or not it applies; (vi) provisions
purporting to revive Documents after their termination or expiration;
(vii) provisions relating to set-offs or offsets; (viii) provisions
purporting to provide standards of care of Collateral other than as
provided in Section 9.207 of the Texas UCC; (ix) provisions purporting to
authorize conclusive or presumptive determinations; (x) provisions
purporting to establish any evidentiary standard or to waive any defense
to the performance of a contract obligation that cannot, as matter of law,
be effectively waived; (xi) provisions purporting to waive any notice that
cannot, as a matter of law, be waived; (xii) provisions that purport to
obligate parties to reach agreements in the future and (xiii) certain
other rights, remedies and waivers of rights provided for in the Documents
that may be unenforceable or unavailable in whole or in part, or may be of
limited efficacy, under the laws of the State of Texas; but the inclusion
of such provisions will not adversely affect the validity of the
Documents, and the unenforceability, unavailability or limited efficacy of
such provisions will not prevent the practical realization by the Lender
and the Trustee of the principal rights and benefits or security intended
to be afforded thereby, except for the economic consequences of any
procedural delay which may result from the application of such provisions.
J. We have not made any investigation of the location of any real property or
interest in real property, or the accuracy of the property descriptions or
recording references contained in the Deed of Trust, and express no
opinion with respect to such matters.
K. We express no opinion on the enforceability of the assignments of rents,
incomes, revenues, profits and leases contained in the Documents at any
time prior to the time when the Trustee or the Lender has obtained lawful
possession of the Collateral, or the Trustee or the Lender has taken some
action judicially deemed to be the equivalent thereof.
L. The validity, perfection and priority of the liens and security interests
in the Collateral and Mortgaged Property are subject to the following
further qualifications:
(1) we express no opinion as to the perfection of a security
interest or lien on goods which are installed in or affixed to, or become
a part of a product or mass with goods which are not items of the
Mortgaged Property as set forth in Section 9.314 and 9.315 of the Texas
UCC;
(2) recordings or filings may be necessary, to maintain perfection
within four years of the maturity of the indebtedness secured by the Deed
of Trust, if the indebtedness is extended; and rerecordings or refilings
may be necessary to maintain perfection if the Deed of Trust shall be
hereafter amended or modified at the time of such amendment or
modification;
(3) in the case of property that becomes Mortgaged Property after
the date hereof, section 552 of the Federal Bankruptcy Code limits the
extent to which property acquired by
IV-vi
<PAGE>
a debtor after the commencement of a case under the Federal Bankruptcy
Code may be subject to a security interest arising from a security
agreement entered into by the debtor before the commencement of such case;
(4) we express no opinion with respect to the perfection of a
security interest in any collateral which is subject to a state statute or
a statute or treaty of the United States which provides for a certificate
of title or national or international registration;
(5) where perfection of the Lender's security interest in the Texas
UCC Collateral is obtained by filing the Texas Financing Statement
relating thereto in the State of Texas, changes in the name, identity or
corporate structure (including, without limitation, changes through a
merger or consolidation) of a Borrower may result in the lapse of
perfection of the security interest in such collateral acquired by such
Borrower more than four (4) months after such change, unless a new,
appropriate financing statement is properly filed in the appropriate place
within four (4) months after each such change;
(6) we express no opinion with respect to the perfection of security
interests in any collateral to the extent that Section 9.103 of the Texas
UCC provides that perfection and the effect of perfection or nonperfection
of a security interest in such collateral is governed by the laws of a
jurisdiction outside of the State of Texas;
(7) removal of the Texas UCC Collateral (other than accounts and
general intangibles) from the State of Texas may result in the lapse of
the Lender's security interest in the Texas UCC Collateral;
(8) our opinion with respect to the perfection of the Lender's
security interest in any Texas UCC Collateral (other than accounts and
general intangibles) does not relate to any of such collateral now or
hereafter located in any jurisdiction other than the State of Texas;
(9) we have assumed that there are no agreements between the Lender,
the Trustee, and any third party varying rights established by the Texas
UCC or altering the priority or perfection, or both, of any security
interest;
(10) we have further assumed that no part of the accounts included
in the Texas UCC Collateral is an account received or receivable from any
government or any agency, authority or political subdivision thereof;
(11) we express no opinion with respect to the priority of the
Lender's lien in any Texas UCC Collateral;
In connection with the foregoing qualifications, you are advised
that the Texas UCC presently requires the periodic filing of continuation
statements with the Secretary of State of the State of Texas and the appropriate
county clerk's office not more than six (6) months prior to and not later than
the expiration of the five year period from the date of filing of the UCC-1
financing
IV-vii
<PAGE>
statements and the expiration of each subsequent five year period after the
original filing, in order to maintain the perfection and priority of security
interests and to keep the financing statements in effect.
M. All statements in this opinion which are limited to our actual knowledge
are based solely upon (i) discussion with responsible officers of the Loan
Parties, (ii) facts that are set forth in the Documents and (iii) our
actual knowledge obtained during the course of our representation of the
Loan Parties by those attorneys who have performed services for them in
connection with the transactions contemplated by the Documents.
N. Except as set forth in Paragraphs 8 and 9 as to the Subject Real Property
and the Subject Interests, we express no opinion as to the creation or
perfection of any Lien as it relates to any property granted as Collateral
to the extent that the creation or perfection of such Lien in such
Collateral is not governed by Chapter 9 of the Texas UCC.
O. We have assumed, without independent investigation, that the filing and
recording of the Financing Statements will be performed correctly by the
filing and recording officer in the jurisdictions and offices described in
Paragraph 9.
P. You should be aware that, pursuant to the provisions of Sections 9.307,
9.308 and 9.309 of the Texas UCC, qualifying purchasers of equipment,
inventory, chattel paper, instruments, negotiable documents of title and
securities take title free and clear of a security interest perfected by
filing.
Q. Any opinion as to proceeds herein is qualified by Section 9.306 of the
Texas UCC.
R. In the event foreclosure proceedings are instituted to enforce the
Documents, we advise you that Sections 51.003, 51.004 and 51.005 of the
Texas Property Code provide that enforcement of any deficiency judgment
against a borrower or enforcement of a claim against a guarantor following
a foreclosure sale must be brought within two (2) years of the sale and
may be limited to the difference between the outstanding balance of the
debt and the fair market value of the collateral sold or credited against
the debt as of the date of such foreclosure. The enforcement of
obligations under the Documents may be limited by such provisions of the
Texas Property Code if foreclosure proceedings are instituted to enforce
the Documents.
S. We express no opinion as to any financial matters relating to the Loan
Parties or the financial conditions of the Loan Parties.
T. We express no opinion as to whether the Transactions comply with any
statutory, regulatory or other laws which prescribe permissible and lawful
investments applicable to the Lender or comply with any other statutes,
laws, rules or regulations which prescribe permissible and lawful
investments for the Lender (either as to type, amount, percentage of total
investment or otherwise).
IV-viii
<PAGE>
U. We express no opinion with respect to the enforceability of the Security
Instruments by the Trustee or the Lender, if any such Person shall fail to
comply with any state or federal law (including court decisions), rule, or
regulation applicable to the Transactions (or applicable to the
qualification or filing requirements of such Person under the laws of the
State of Texas generally) because of the nature of such Person's business.
V. We have assumed that (a) each document submitted to us for review is
accurate and complete, each such document that is an original is
authentic, each such document that is a copy conforms to an authentic
original, and all signatures other than those of any of the Issuers on
each such document are genuine, (b) each certificate from governmental
officials reviewed by us is accurate, complete and authentic and all
official public records are accurate and complete, (c) there has not been
any mutual mistake of fact or misunderstanding, fraud, duress or undue
influence, (d) the conduct of the parties has complied with any
requirement of good faith, fair dealing and conscionability, (e) there are
no agreements or understandings among the parties, written or oral, and
there is no usage of trade or course of prior dealing among the parties
that would, in either case, define, supplement or qualify the terms of any
of the agreements or documentation on which we have opined, (f) all
parties to the agreement and documents on which we have opined will act in
accordance with, and will refrain from taking any action that is forbidden
by, the terms and conditions of such agreements and documents and (g) no
party to the agreements and documents on which we have opined will in the
future take any discretionary action (including a decision not to act)
permitted under such agreements and documents that would result in a
violation of law or constitute a breach or default under any other
agreement to which such party is a party or by which it or its property is
bound or under any court or administrative order, writ, judgment, or
decree that names such party or is directed to it or its property.
W. We express no opinion as to whether the anti-fraud provisions of
applicable federal and state securities laws have been complied with in
connection with the offer, issue, sale and delivery of the Note.
This opinion is limited to matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. We disclaim any
obligation to up-date this opinion or to advise you of any changes in any of the
opinions or other matters set forth herein.
This opinion is being furnished only to you in connection with the
Credit Agreement and is solely for your benefit. This opinion may not be used,
circulated, quoted, relied upon or otherwise referred to by any other Person or
for any other purpose without our prior written consent.
Very truly yours,
IV-ix
<PAGE>
EXHIBIT A
SCHEDULE OF DOCUMENTS
1. Credit Agreement between the Lender and the Borrower dated ___________,
1998. Note executed by the Borrower in favor of Lender dated
________________, 1998.
2. Guaranty executed by the Guarantors dated ______________________, 1998.
3. Mortgage, Deed of Trust, Assignment, Security Agreement and Financing
Statement between MBHP and the Collateral Agent dated ___________________,
1998.
4. Act of Mortgage, Assignment, Security Agreement and Financing Statement
between Egan Hub Partners, L.P. and the Collateral Agent dated
_____________________, 1998.
5. The Financing Statement attached hereto as EXHIBIT B (the "TEXAS FINANCING
STATEMENT").
Very truly yours,
IV-x
<PAGE>
EXHIBIT V
DISCLOSURES
Section 4.9 LIABILITIES
None
LITIGATION
None
Section 4.11 ENVIRONMENTAL MATTERS
(a) None
(b) None
(c) None
(d) None
Section 4.16 CASUALTIES
None
Section 4.18 SUBSIDIARIES *
I. Market Hub Partners Storage, L.P.
Market Hub Partners Finance, Inc.
Moss Bluff Hub Partners, L.L.C.
99.99% interest in Moss Bluff Hub Partners, L.P.
Egan Hub Partners, L.L.C.
99.99% interest in Egan Hub Partners, L.P.
II. Moss Bluff Hub Partners, L.L.C.
.01% interest in Moss Bluff Hub Partners, L.P.
III. Moss Bluff Hub Partners, L.P.
None
V-i
<PAGE>
IV. Egan Hub Partners, L.L.C.
.01% interest in Egan Hub Partners, L.P.
V. Egan Hub Partners, L.P.
None
* Unless otherwise indicated, the Borrower or Guarantor's interest in the
listed subsidiary is a 100% interest.
V-ii
MARKET HUB PARTNERS STORAGE, L.P. EXHIBIT 12.1
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 21,
1994 (INCEPTION) TO HISTORICAL
DECEMBER 31, YEARS ENDED DECEMBER 31,
1994 1995 1996 1997 PRO FORMA
-------------------------------------- --------------
<S> <C> <C> <C> <C> <C>
Fixed Charges as defined:
(1) Interest on long-term debt ........................... $ 18 $2,246 $2,934 $ 4,752 $ 9,846
(2) One-third rent expense ............................... 1 13 21 43 43
------------------------------------- -------
(3) Total fixed charges .................................. $ 19 $2,259 $2,955 $ 4,795 $ 9,889
===================================== =======
Earnings as defined:
(4) Earnings (loss) before extraordinary item ............ $(622) $1,170 $6,010 $10,049 $ 4,955
(5) Total fixed charges .................................. 19 2,259 2,955 4,795 9,889
------------------------------------- -------
(6) Earnings (loss) before extraordinary
item and fixed charges ............................. $(603) $3,429 $8,965 $14,844 $14,844
===================================== =======
Ratio of Earnings to Fixed Charges
(line 6 divided by line 3) ...........................................(a) N/A 1.5 3.0 3.1 1.5
===================================== =======
Coverage Deficiency ..................................................... $(622) $ -- $ -- $ -- $ --
------------------------------------- -------
(a) Earnings are inadequate to cover
fixed charges for 1994.
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Market Hub Partners
Storage, L.P. on Form S-4 of our report dated April 15, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Houston, Texas
May 1, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all reference to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Houston, Texas
May 1, 1998
EXHIBIT 24.1
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in his capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as his true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/ DONALD B. RUSSELL
Donald B. Russell
President and Chief Executive Officer
2 of 2
<PAGE>
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in his capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as his true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/DONALD N. FURMAN
Donald N. Furman
Chairman of the Board and Director
2 of 2
<PAGE>
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in his capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as his true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/ M. SCOTT JONES
M. Scott Jones
Director
2 of 2
<PAGE>
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in his capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as his true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/LON C. MITCHELL
Lon C. Mitchell
Director
2 of 2
<PAGE>
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in her capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as her true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in her name, place and stead in her capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/EILEEN A. MORAN
Eileen A. Moran
Director
2 of 2
<PAGE>
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in his capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as his true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/JAMES W. TOMASIAK
James W. Tomasiak
Director
2 of 2
<PAGE>
POWER OF ATTORNEY
WHEREAS, Market Hub Partners Storage, L.L.C., a Delaware limited
liability company ("MHP Storage GP"), is the general partner of Market Hub
Partners Storage, L.P., a Delaware limited partnership ("MHP Storage"); and
WHEREAS, Moss Bluff Hub Partners, L.L.C., a Delaware limited
liability company ("Moss Bluff GP"), is the general partner of Moss Bluff Hub
Partners, L.P., a Delaware limited partnership ("Moss Bluff"); and Egan Hub
Partners, L.L.C., a Delaware limited liability company ("Egan GP"), is the
general partner of Egan Hub Partners, L.P., a Delaware limited partnership
("Egan"); and
WHEREAS, MHP Storage and Market Hub Partners Finance, Inc., a
Delaware corporation and a wholly owned subsidiary of MHP Storage ("Finance
Corp." and, together with MHP Storage, the "Issuers"), together with the Moss
Bluff GP, Moss Bluff, Egan GP and Egan, each a direct or indirect wholly owned
subsidiary of MHP Storage (together, the "Subsidiary Guarantors"), intend to
file with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, a Registration Statement on Form S-4,
including a prospectus, with such amendment or amendments thereto, whether
pre-effective or post-effective, in each case as may be necessary or
appropriate, together with any and all exhibits and other documents having
relation to said Registration Statement (collectively, the "Registration
Statement") in connection with the registration by the Issuers and the
Subsidiary Guarantors of, respectively, (i) 8 1/4% Senior Notes due 2008 (the
"Exchange Notes"), which are to be exchanged for certain outstanding 8 1/4%
Senior Notes due 2008 (the "Old Notes") pursuant to an exchange offer, and (ii)
certain subsidiary guarantees with respect thereto.
NOW, THEREFORE, the undersigned, in his capacity as a director or
officer or both, as the case may be, of MHP Storage GP, Finance Corp., Moss
Bluff GP and Egan GP does hereby appoint David W. Hooker and Anthony J. Clark,
and each of them severally, as his true and lawful attorneys with power to act
with or without the other and with full power of substitution and
resubstitution, to execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of MHP Storage GP, Finance Corp.,
Moss Bluff GP and Egan GP, said Registration Statement and all instruments
necessary or incidental in connection therewith, with such amendment or
amendments thereto in each case as may be necessary or appropriate, together
with any and all exhibits and other documents relating thereto. Said attorneys
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of said attorneys.
1 of 2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 24th day of April, 1998.
/s/JEFFREY W. YUNDT
Jeffrey W. Yundt
Director
2 of 2
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. national bank Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
MARKET HUB PARTNERS STORAGE, L.P.
MARKET HUB PARTNERS FINANCE, INC.
(Exact name of obligor as specified in its charter)
Delaware 76-0558052
Delaware (Applied for)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16420 Park 10 Place
Suite 420
Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
8 1/4% SENIOR NOTES DUE 2008
(Title of 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.
New York State Banking Department
Two Rector Street, New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such other
indenture.
None
2
<PAGE>
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section (310)(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indentures.
Not applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
None
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether there
has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not applicable
3
<PAGE>
Item 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust
Company as amended to date. (See Exhibit 1A to Form
T-1, Securities and Exchange Commission File No.
22-18460).
*2. A copy of the Certificate of Authority of the
trustee to Commence Business (Included in Exhibit 1
above).
*3. A copy of the Authorization of the trustee to exercise
corporate trust powers, as amended to date (See Exhibit
4 to Form T-1, Securities and Exchange Commission File
No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as
amended to date (See Exhibit 4 to Form T-1, Securities
and Exchange Commission File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
4
<PAGE>
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
5
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
IBJ Schroder Bank & Trust Company, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York, and State of New York, on the 27th day of April, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By:______________________________
Stephen J. Giurlando
Assistant Vice President
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
IBJ Schroder Bank & Trust Company, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York, and State of New York, on the 27th day of April, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ STEPHEN J. GIURLANDO
Stephen J. Giurlando
Assistant Vice President
7
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issuance by Market Hub Partners
Storage, L.P. and Market Hub Partners Finance, Inc. Of its 8 1/4% Senior Notes
due 2008, we hereby consent that reports of examinations by Federal, State,
Territorial, or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ STEPHEN J. GIURLANDO
Stephen J. Giurlando
Assistant Vice President
Dated: April 27, 1998
8
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of December 31, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
------------
<S> <C>
ASSETS
1. Cash and balance due from depository institutions:
a. Noninterest-bearing balances and currency and coin ...................$ 45,276
b. Interest-bearing balances...............................................$ 121,534
2. Securities:
a. Held-to-maturity securities.............................................$ 184,821
b. Available-for-sale securities...........................................$ 74,043
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:
Federal Funds sold and Securities purchased under agreements to resell.....$ 202,104
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income....................$ 1,797,414
b. LESS: Allowance for loan and lease losses...................$ 61,962
c. LESS: Allocated transfer risk reserve.......................$ -0-
d. Loans and leases, net of unearned income, allowance, and reserve........$1,735,452
5. Trading assets held in trading accounts....................................$ 479
6. Premises and fixed assets (including capitalized leases)...................$ 2,952
7. Other real estate owned....................................................$ -0-
8. Investments in unconsolidated subsidiaries and associated companies........$ -0-
9. Customers' liability to this bank on acceptances outstanding...............$ 1,447
10.Intangible assets..........................................................$ -0-
11.Other assets...............................................................$ 67,256
12.TOTAL ASSETS...............................................................$2,435,364
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
13.Deposits:
<S> <C>
a. In domestic offices.....................................................$ 791,520
(1)Noninterest-bearing ........................................$ 247,397
(2)Interest-bearing ...........................................$ 544,123
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs...........$1,229,810
(1)Noninterest-bearing ........................................$ 14,607
(2)Interest-bearing ...........................................$ 1,215,203
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:
Federal Funds purchased and Securities sold under agreements to repurchase.$ 10,000
15.a. Demand notes issued to the U.S. Treasury................................$ 5,000
b. Trading Liabilities.....................................................$ 108
16.Other borrowed money:
a. With a remaining maturity of one year or less...........................$ 83,453
b. With a remaining maturity of more than one year.........................$ 1,763
c. With a remaining maturity of more than three years......................$ 2,242
17.Not applicable.
18.Bank's liability on acceptances executed and outstanding...................$ 1,447
19.Subordinated notes and debentures..........................................$ -0-
20.Other liabilities..........................................................$ 70,284
21.TOTAL LIABILITIES..........................................................$2,195,627
22.Limited-life preferred stock and related surplus...........................$ -0-
EQUITY CAPITAL
23.Perpetual preferred stock and related surplus..............................$ -0-
24.Common stock...............................................................$ 29,649
25.Surplus (exclude all surplus related to preferred stock)...................$ 217,008
26.a. Undivided profits and capital reserves..................................$ (7,130)
b. Net unrealized gains (losses) on available-for-sale securities..........$ 210
27.Cumulative foreign currency translation adjustments........................$ -0-
28.TOTAL EQUITY CAPITAL.......................................................$ 239,737
29.TOTAL LIABILITIES AND EQUITY CAPITAL.......................................$2,435,364
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001060241
<NAME> MARKET HUB PARTNERS STORAGE, L.P.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 2,153 326 0
<SECURITIES> 0 0 0
<RECEIVABLES> 3,418 3,094 0
<ALLOWANCES> 0 0 0
<INVENTORY> 2,031 2,031 0
<CURRENT-ASSETS> 7,607 5,692 0
<PP&E> 158,364 128,587 0
<DEPRECIATION> 10,391 5,471 0
<TOTAL-ASSETS> 159,887 131,916 0
<CURRENT-LIABILITIES> 10,931 9,937 0
<BONDS> 49,043 53,492 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 99,913 68,487 0
<TOTAL-LIABILITY-AND-EQUITY> 159,887 131,916 0
<SALES> 27,486 18,586 7,874
<TOTAL-REVENUES> 27,486 18,586 7,874
<CGS> 0 0 0
<TOTAL-COSTS> 13,931 10,171 6,138
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 3,506 2,405 566
<INCOME-PRETAX> 10,049 6,010 1,170
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 10,049 6,010 1,170
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 452 0
<CHANGES> 0 0 0
<NET-INCOME> 10,049 5,558 1,170
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
