<PAGE>
As filed with the Securities and Exchange Commission on September 17, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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PETRO STOPPING CENTERS HOLDINGS, L.P.
(Exact name of each registrant as specified in its charter)
Delaware 5500 74-2922482
(State of Incorporation (Primary standard (I.R.S. employer
or organization) industrial classification identification number)
code number)
PETRO HOLDINGS FINANCIAL CORPORATION
Delaware 9999 74-2922355
(State of Incorporation (Primary standard (I.R.S. employer
or organization) industrial classification identification number)
code number)
6080 Surety Drive
El Paso, Texas 79905
(915) 779-4711
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
J.A. CARDWELL, SR.
President
Petro Stopping Centers Holdings, L.P.
6080 Surety Drive
El Paso, Texas 79905
(915) 779-4711
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
RICHARD M. RUSSO, ESQ.
Gibson, Dunn & Crutcher LLP
1801 California Street
Denver, Colorado 80202
(303) 298-5700
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered 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
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<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered Per unit Offering Price Fee
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<S> <C> <C> <C> <C>
$45,130,000
15% Senior Discounts Notes due 2008.. (1) 100% $45,130,000 $12,547
</TABLE>
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(1) Represents the accreted value of the Notes on the date of issuance.
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED . , 1999
Petro Stopping Centers Holdings, L.P.
Petro Holdings Financial Corporation
LOGO
Offer to Exchange all outstanding
15% Senior Discount Notes Due 2008
for 15% Series B Senior Discount Notes Due 2008
We hereby offer, upon the terms and conditions described in this prospectus,
to exchange all of our outstanding and unregistered 15% Senior Discount Notes
due 2008 (the "Old Notes") for our registered 15% Series B Senior Discount
Notes due 2008 (the "New Notes"). The Old Notes were issued on July 23, 1999
and, as of the date of this prospectus, $113.4 million in principal amount at
stated maturity is outstanding. The terms of the New Notes are substantially
identical to the terms of the Old Notes, except that the New Notes will be
registered under the Securities Act and will not contain any legends
restricting their transfer. The Old Notes and New Notes are sometimes
collectively referred to as the "Notes."
Terms of the Exchange:
. Expiration date of 5:00 p.m., New York City time, on . , 1999, unless
extended.
. Tenders may be withdrawn at any time prior to the expiration date.
. We will exchange New Notes for all validly tendered Old Notes that are not
withdrawn.
. Exchanges of Notes should not be taxable exchanges for U.S. federal income
tax purposes.
. We will not receive any proceeds from the exchange offer.
. If you fail to tender your Old Notes, you will continue to hold unregistered
securities and your ability to transfer them could be adversely affected.
Terms of the Notes:
. Interest will not accrue or be payable on the Notes prior to August 1, 2004.
. Interest on the Notes will accrue at the rate of 15% per annum from August 1,
2004 and will be payable semi-annually on each February 1 and August 1,
commencing February 1, 2005.
. We may redeem some or all of the Notes at any time prior to August 1, 2004 at
the accreted value of the Notes plus a make-whole premium. On or after August
1, 2004, we may redeem some or all of the Notes at certain specified prices.
However, before August 1, 2002, we may redeem all (but not less than all) of
the Notes at 115.0% of their accreted value with money we raise in a public
equity offering.
. If we experience certain changes of control, we must offer to purchase the
Notes at 101% of their (1) accreted value (if prior to August 1, 2004) or (2)
face amount (if after August 1, 2004), plus interest.
See "Risk Factors" beginning on page . of this prospectus for a discussion
of risks associated with owning Notes.
Each broker-dealer that receives New Notes for its own account must
acknowledge that it will deliver a prospectus when it resells them. By doing
so, a broker-dealer will not be deemed to admit that it is an "underwriter"
under the Securities Act of 1933. We have agreed that we will make this
prospectus available to broker-dealers for resales of New Notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the New Notes to be distributed in
the exchange offer or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The date of this prospectus is . , 1999
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, including statements
about our business strategy, our expected financial position and operating
results, and our financing plans and similar matters. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
. General economic and business conditions, both nationally and in our
markets.
. Our expansion opportunities.
. Our expectations and estimates concerning future financial performance,
financing plans and the impact of competition.
. Anticipated trends in our business, including those described in
"Management's Discussion and Analysis of Results of Operations and
Financial Condition."
. Existing and future regulations affecting our business.
. Other risk factors set forth in "Risk Factors."
In addition, in those and other portions of this prospectus, the words
"believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions, as they relate to us or our management, are
intended to identify forward-looking statements. All forward-looking statements
attributable to us or to persons acting on our behalf are expressly qualified
in their entirety by this cautionary statement.
We undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus might not transpire.
WHERE YOU CAN FIND MORE INFORMATION
Petro Stopping Centers Holdings, L.P. and Petro Holdings Financial
Corporation have jointly filed a Registration Statement on Form S-4 to register
with the Securities and Exchange Commission (the "Commission") the New Notes to
be issued in exchange for the Old Notes. This prospectus is part of that
Registration Statement. As allowed by the Commission's rules, this prospectus
does not contain all of the information you can find in the Registration
Statement or the exhibits to the Registration Statement. This prospectus
contains summaries of the material terms and provisions of certain documents
and in each instance we refer you to the copy of such document filed as an
exhibit to the Registration Statement.
Upon the effectiveness of the Registration Statement, of which this
prospectus forms a part, Petro Stopping Centers Holdings, L.P. and Petro
Holdings Financial Corporation will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will file annual, quarterly and other
reports and information with the Commission.
The Registration Statement (including the exhibits and schedules thereto)
and the periodic reports and other information filed by Petro Stopping Centers
Holdings, L.P. and Petro Holdings Financial Corporation with the Commission may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in
New York, New York and Chicago, Illinois, at prescribed rates. Such information
may also be accessed electronically by means of the Commission's homepage on
the Internet at
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http://www.sec.gov., which contains reports, proxy and information statements
and other information regarding registrants, including Petro Stopping Centers
Holdings, L.P. and Petro Holdings Financial Corporation, that file
electronically with the Commission.
Pursuant to the indenture governing the Notes, Petro Stopping Centers
Holdings, L.P. and Petro Holdings Financial Corporation have agreed, whether or
not subject to the informational requirements of the Exchange Act, to provide
the trustee and holders of the Notes with annual, quarterly and other reports
at the times and containing in all material respects the information specified
in Sections 13 and 15(d) of the Exchange Act and to file such reports with the
Commission.
USE OF CERTAIN TERMS
Unless the context otherwise requires, as used in this prospectus, the terms
"we" or "us" mean Petro Stopping Centers Holdings, L.P. (which we refer to as
"Holdings") and its subsidiaries, Petro Holdings Financial Corporation, Petro
Stopping Centers, L.P. and Petro Financial Corporation. Substantially all of
our operations are conducted through Petro Stopping Centers, L.P., which we
refer to as the "Operating Partnership."
Petro Holdings Financial Corporation (which we refer to as "Holdings
Financial Corporation") was formed for the purpose of serving as a co-issuer of
the Old Notes. Petro Financial Corporation was formed for the purpose of
serving as a co-issuer of the Operating Partnership's 10 1/2% Senior Notes Due
2007 (the "10 1/2% Notes") and 12 1/2% Senior Notes Due 2002 (the "12 1/2%
Notes"). Neither Holdings Financial Corporation nor Petro Financial Corporation
have ever been or will be engaged in any business and neither of them has any
employees, assets, liabilities or activities other than their respective roles
as co-issuers referred to herein. When we refer to the "Notes" we mean the Old
Notes and the New Notes, unless the context requires otherwise. When we refer
to the "New Senior Credit Facility" we mean our senior credit facility under
which we have a borrowing capacity of $125.0 million, which consists of a $40.0
million Term Loan B and an $85.0 million revolving credit facility of which
$82.5 million was available for borrowing at September 1, 1999.
When we refer to the "Cardwell Group," we mean J.A. Cardwell, Sr., James A.
Cardwell, Jr., Petro Inc. (a corporation wholly owned by J.A. Cardwell, Sr.)
and JAJCO II, Inc. (a company wholly owned by James A. Cardwell, Jr.). When we
refer to "Mobil," we mean Mobil Long Haul, Inc., an affiliate of
Mobil Corporation. When we refer to "Volvo Trucks," we mean Volvo Petro
Holdings, L.L.C., an affiliate of Volvo Trucks of North America, Inc. When we
refer to "Chartwell" we mean Chartwell Investments, Inc. and its affiliates,
the majority owner of the Operating Partnership prior to the Recapitalization
described below. When we refer to "Kirschner," we mean Kirschner Investments, a
Pennsylvania general partnership, which was a minority owner of the Operating
Partnership prior to the Recapitalization.
We use the term "Recapitalization" to refer to a series of transactions
consummated in July 1999 which included, among other things: (1) the formation
of Holdings, and all of the former owners in the Operating Partnership, other
than Chartwell and Kirschner, becoming owners in Holdings; (2) the investment
in Holdings of new equity capital by Volvo Trucks and additional equity capital
by Mobil; (3) the purchase by Holdings of the interests in the Operating
Partnership held by Chartwell and Kirschner; (4) the Operating Partnership
entering into the New Senior Credit Facility; and (5) the sale of the Old Notes
and the exchangeable warrants (the "Warrants") of Petro Warrant Holdings
Corporation, a corporation that conducts no business other than to issue the
Warrants and hold a common limited partnership interest in Holdings, currently
equal to 10.0% of Holdings' common limited partnership interests, and the
transactions related thereto. When we refer to the sale of the "Units" we mean
the sale of the Old Notes and the Warrants. When we refer to the "Holdings
Partnership Agreement" we mean the partnership agreement for Holdings that was
entered into as part of the Recapitalization. When we refer to the "Indenture"
we mean the indenture for the Notes, and when we refer to the "10 1/2% Notes
Indenture" we mean the indenture for the 10 1/2% Notes.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider with respect to exchanging Old Notes for New Notes. You
should read the entire prospectus carefully, especially the "Risk Factors"'
starting on page . .
Petro Stopping Centers
We are one of the largest operators of full service truck stops in the
country and have a nationwide network of 29 company-operated and 22 franchised
locations in 29 states. Petro Stopping Centers are one-stop, multi-service
facilities. Open 24 hours a day, seven days a week, they offer a broad range of
products and services intended to address all of the personal and professional
needs of truck drivers. We were founded in 1975 and have built our reputation
by providing the "quality difference" -- a high level of customer service and
quality products delivered in a consistently clean and friendly environment.
Our primary customers are commercial trucking fleets and professional truck
drivers that comprise the long-haul sector of the trucking industry. We are a
privately owned company, controlled by affiliates of the Cardwell Group (J.A.
Cardwell, Sr., James A. Cardwell, Jr. and their affiliates), Mobil and Volvo
Trucks.
Petro Stopping Centers generally are built on fifteen to thirty acres
situated at a convenient location with easy interstate highway access. They can
accommodate 200 to 300 trucks and 100 to 175 cars or recreational vehicles in
spacious, well-lit and fenced parking lots, which are designed to provide good
traffic flow, reduce accidents, and enhance security for the drivers, their
trucks and freight. Within the Petro Stopping Center network, we offer
standardized and consistent products and services to accommodate the varied
needs of professional truck drivers and other motorists. These include separate
gas and diesel fueling islands, our award winning home-style "Iron Skillet"
restaurants, truck preventative maintenance and repair services, and travel and
convenience stores offering an array of merchandise selected to cater to
professional truck drivers' needs during long periods away from home.
Additionally, we provide amenities such as telephone, fax, photocopying,
computer, other communication services and postal services. Petro Stopping
Centers also offer certified truck weighing scales, truck washes, laundry
facilities, private showers, game, television and movie rooms, barbershops, and
at some sites, exercise facilities and medical services.
Our principal executive offices are located at 6080 Surety Drive, El Paso,
Texas 79905, and our phone number is (915) 779-4711.
Business Strategy
Our primary strategic goal is to maximize profitability through (1)
continued expansion of products and services available at our Petro Stopping
Centers, (2) increases in our fuel volume, and (3) cross marketing and
promoting the multiple products and services available at Petro Stopping
Centers to direct additional customer traffic to higher margin products and
services. The key components of this strategy include the following
initiatives:
Preserve and Enhance Our High Quality Reputation. We believe our competitive
success is largely attributable to our reputation for providing the "quality
difference" -- a high level of customer service and quality products delivered
in a consistently clean and friendly environment. In a recent study for the
trucking industry, Petro Stopping Centers was named the favorite truck stop of
both owner-operated and fleet drivers, and our Iron Skillet was named the
favorite truck stop restaurant. The physical design and lay-out of a Petro
Stopping Center, which is standardized network-wide, has been created to
attract the professional truck driver
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as well as tourist traffic and local clientele. A typical Petro Stopping Center
is built on approximately 25 acres of land, which we believe is two to three
times larger than the size of our competitors' typical sites. The facility
design and lay-out provides for gas islands in the front of our properties for
appeal to the tourist traffic and local clientele, and diesel fuel islands,
which are self-serve facilities of eight to sixteen lanes, designed to
accommodate the professional truck driver, located in the rear of the
properties.
Given that approximately two out of every three stops by truck drivers are
for a reason other than the purchase of fuel, and that the average length of
time for a truck stop by a truck driver is four to five hours, we have designed
our Petro Stopping Centers to be destination stops with multiple amenities --
meals, laundry, showers, exercise and entertainment, and truck repair and
maintenance -- in addition to fuel. For example, a typical Iron Skillet
restaurant has a seating capacity of 180, with areas designated for both
"trucker"' and "non-trucker" patrons. In addition to the Iron Skillet, we have
introduced nationally branded food offerings such as Blimpie Subs and Salads,
Wendy's, Pizza Hut, and Baskin-Robbins in our facilities, and we intend to
selectively expand these offerings in the future. Our travel stores offer
merchandise such as food, clothing, electronics, toiletries, gifts and truck
accessories from an average retail selling area of approximately 1,900 square
feet.
Capitalize on Alliances with Mobil and Volvo Trucks. We believe our
strategic alliances with Mobil and Volvo Trucks will strengthen our competitive
position by providing high quality brand recognition, increased traffic, and
opportunities to promote integrated products and services to the trucking
industry. Our strategic alliance with Mobil began in 1997 and currently we are
Mobil's second largest domestic distributor of motor fuels. Today Mobil branded
diesel fuel is sold in all of our company-operated Petro Stopping Centers and
Mobil branded gasoline is sold in various of our sites, as designated by Mobil.
Mobil branded oils and lubricants are sold in all company-operated truck
preventative maintenance centers ("Petro:Lubes"). We believe that the Mobil
brand enhances our appeal to highway motorists. In addition, we and Mobil
jointly developed an enhanced diesel additive product that helps our customers
achieve cost savings and improved fuel efficiencies.
We are in the process of developing plans with Volvo Trucks, one of the
world's three largest heavy truck manufacturers, to expand the truck repair and
maintenance services available through our Petro:Lubes. These plans will
include a repair overflow program for Volvo Trucks to be offered in conjunction
with Volvo Trucks' dealership network, and initiatives to jointly market Volvo
Trucks' and our services. We believe that these initiatives with Volvo Trucks
can be accomplished utilizing our existing facility infrastructure. Through our
existing operations and strategic alliances with Volvo Trucks and Mobil, we
believe trucking fleets and owner operators will look to Petro Stopping Centers
as their source for fully integrated, "turn-key" services.
Fleet Marketing Opportunities. In an effort to maximize fuel volumes and
available discounts and rebates, many trucking fleets are narrowing their lists
of approved truck stop chains with whom their truckers are authorized to do
business. In addition, trucking fleets are increasingly concerned with
attracting and retaining truck drivers in an effort to reduce both overhead
expenses and annual driver turnover, which approximates 100% industry-wide. We
believe that our strategic alliance with Volvo Trucks will enhance our ability
to meet the need of trucking fleets to keep their trucks on the road, by
providing a national network of preventative maintenance, warranty and repair
work services and addressing their related data capture needs. We also believe
our nationwide network of full service facilities and our appeal to
professional truck drivers will enable us to capture an additional share of the
fleet market.
Expansion of Nationwide Network and Upgrade of Facilities. We believe that
the expansion of our nationwide network will strengthen our appeal to, and as a
result, increase our volume of business with, trucking fleets. We plan to
expand our network by acquiring vacant land to build new company-operated Petro
Stopping Centers, entering into arrangements for additional franchised Petro
Stopping Centers, and acquiring and upgrading existing independent truck stops.
We estimate that a typical company-operated Petro Stopping
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Center will require between $10 million and $11 million of initial capital
expenditures (including land acquisition costs), take approximately nine to
twelve months to build from the commencement of construction, generate positive
operating contribution within three months of completion and achieve full
operating contribution levels within three years of completion. In addition to
the recently opened Petro Stopping Center in Wheeler Ridge, California
(developed by a limited liability company of which we are a member) and the
Petro Stopping Centers currently under construction in Jackson, Mississippi and
Mebane, North Carolina, our current expansion plans include the commencement of
construction of seven new company-operated locations over the next 24 months.
We are also considering the construction or franchising of up to an additional
seven facilities over the same time period.
During 1998 we evaluated all existing company-operated Petro Stopping
Centers and developed a plan to upgrade, enhance and expand existing facilities
to maximize product and service offerings. The contemplated upgrades include
remodeling bathrooms, showers and our Iron Skillet restaurants, installing
state-of-the-art kitchen equipment, adding lube bay capacity and upgrading our
travel stores. In addition, we have embarked on a systems upgrade effort,
designed to maximize network efficiencies in capturing point-of-sale and
inventory control data and to take advantage of evolving telecommunications
technology.
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The Exchange Offer
Securities to be On July 23, 1999, we issued $113.4 million
Exchanged................... aggregate principal amount at stated maturity of
Old Notes in transactions exempt from the
registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"). The
terms of the New Notes and the Old Notes are
substantially identical in all material respects,
except that the New Notes will be registered
under the Securities Act and therefore will not
be subject to certain transfer restrictions or
entitled to certain registration rights
provisions applicable to the Old Notes.
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount at stated maturity of New Notes for each
$1,000 principal amount at stated maturity of Old
Notes. As of the date hereof, $113.4 million
aggregate principal amount at stated maturity of
Old Notes is outstanding.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on . , 1999, or such later date
and time to which it is extended (the "Expiration
Date").
Withdrawal Rights........... The tender of the Old Notes pursuant to the
exchange offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date. Any Old Notes not accepted for
exchange for any reason will be returned without
expense to the tendering holder thereof as soon
as practicable after the expiration or
termination of the exchange offer.
Interest on the New Notes
and Old Notes...............
Interest on the New Notes will accrue at the rate
of 15% per annum from August 1, 2004. No
additional interest will accrue or be paid on Old
Notes tendered and accepted for exchange.
Conditions of the Exchange The exchange offer is not conditioned upon any
Offer....................... minimum principal amount of Old Notes being
tendered for exchange. The only condition to the
exchange offer is the declaration by the
Commission of the effectiveness of the
Registration Statement of which this prospectus
constitutes a part.
Procedures for Tendering
Old Notes...................
Each holder of the Old Notes wishing to accept
the exchange offer must complete, sign and date
the letter of transmittal, or a copy thereof, in
accordance with the instructions contained in
this prospectus and in the letter of transmittal
itself, and mail or otherwise deliver the letter
of transmittal, or the copy, together with the
Old Notes and any other required documentation,
to the exchange agent at the address set forth in
this prospectus. By executing or agreeing to be
bound by the letter of transmittal, each holder
will represent to us that, among other things:--
. the New Notes acquired pursuant to the
exchange offer are being obtained in the
ordinary course of business of the
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person receiving such New Notes, whether or
not such person is the registered holder of
the Old Notes;
. the holder is not engaging in and does not
intend to engage in a distribution of such
New Notes;
. the holder does not have an arrangement or
understanding with any person to
participate in the distribution of such
New Notes; and
. the holder is not an "affiliate," as
defined under Rule 405 promulgated under
the Securities Act, of us.
Guaranteed Delivery If your Old Notes are not immediately available
Procedures.................. to you or if you cannot deliver your Old Notes or
any other documents required by the letter of
transmittal to the exchange agent prior to the
Expiration Date (or complete the procedure for
book entry transfer on a timely basis), you may
tender your Old Notes according to the guaranteed
delivery procedures set forth in the letter of
transmittal. See "The Exchange Offer Guaranteed
Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes.......
We will accept for exchange any and all Old Notes
which are properly tendered (and not withdrawn)
in the exchange offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The New
Notes issued pursuant to the exchange offer will
be delivered promptly following the Expiration
Date.
Exchange Agent.............. State Street Bank and Trust Company is serving as
exchange agent (in such capacity, the "Exchange
Agent") in connection with the exchange offer.
Federal Income Tax The exchange of Old Notes for New Notes pursuant
Consequences................ to the exchange offer should not be a taxable
event for federal income tax purposes. See
"Certain U.S. Federal Income Tax Consequences."
Resales of the New Notes.... Based on existing interpretations by the staff of
the Commission set forth in no-action letters
issued to third parties, we believe that New
Notes issued pursuant to the exchange offer to a
holder in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a
holder (other than (i) a broker-dealer who
purchased the Old Notes directly from us for
resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the
Securities Act or (ii) a person that is an
affiliate of us 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 holder is acquiring the New Notes in the
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution of the New Notes. Each broker-
dealer that receives New Notes for its own
account in
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exchange for Old Notes, where such Old Notes were
acquired by such broker as a result of market--
making or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See
"The Exchange Offer--Resales of the New Notes"
and "Plan of Distribution."
Effect of Not Tendering Old
Notes for Exchange..........
Old Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the exchange offer, continue to be
subject to the existing restrictions upon
transfer thereof. We will have no further
obligation to provide for the registration under
the Securities Act of such Old Notes.
Fees and Expenses........... All expenses incident to our consummation of the
exchange offer will be borne by us.
Description of the Notes
Except as otherwise indicated, the following description relates both to the
Old Notes and the New Notes. The New Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the same indenture.
The form and terms of the New Notes are the same as the form and terms of the
Old Notes, except that the New Notes have been registered under the Securities
Act and therefore will not bear legends restricting the transfer thereof.
Notes Offered............... $113.4 million principal amount at stated
maturity of 15%
Series B Senior Discount Notes due 2008.
Issuers..................... The Notes will be the obligations of Holdings and
Holdings Financial Corporation. Holdings
Financial Corporation is a wholly-owned
subsidiary of Holdings formed to facilitate the
offering of the Old Notes.
Maturity Date............... August 1, 2008.
Interest.................... Interest on the Notes will not accrue or be
payable prior to August 1, 2004. From August 1,
2004, interest on the Notes will accrue on the
principal amount at maturity at a rate of 15% per
annum, and will be payable semiannually on each
February 1 and August 1, commencing February 1,
2005. For U.S. federal income tax purposes, you
will be required to include original issue
discount on a Note in gross income for each
taxable year in which you hold the Note even
though cash interest on the Note does not begin
to accrue until August 1, 2004, and you will
receive no cash interest payments until February
1, 2005. See "Certain Federal Income Tax
Consequences--Taxation of Notes--Original Issue
Discount."
Optional Redemption......... We may redeem:
. some or all of the Notes at any time prior
to August 1, 2004, at the accreted value
of the Notes plus a make-whole premium
described in the section "Description of
the Notes-Optional Redemption";
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. some or all of the Notes beginning on
August 1, 2004, at the redemption prices
described in the section "Description of
the Notes-Optional Redemption"; or
. all (but not less than all) of the Notes
originally issued at any time prior to
August 1, 2002 at a price of 115.0% of
their accreted value with money we raise
in a public equity offering of either
issuer or a successor entity.
Ranking..................... The Notes are senior unsecured obligations of
ours and rank senior in right of payment to any
of our subordinated indebtedness. The Notes are
effectively subordinated in right of payment to
all existing and future indebtedness and other
liabilities, including trade payables, of all of
Holdings' subsidiaries, including the Operating
Partnership and its subsidiaries. At June 30,
1999, on a pro forma basis giving effect to the
Recapitalization and the offering of the Units,
our subsidiaries had approximately $171.8 million
of total liabilities, including approximately
$229.0 million of indebtedness. In addition, the
Operating Partnership would have had $85.0
million of additional borrowing availability
under the New Senior Credit Facility. Loans under
the New Senior Credit Facility are secured by
substantially all of the assets of the Operating
Partnership and its subsidiaries (other than
immaterial subsidiaries) and the pledge by
Holdings of all of the partnership interests in
the Operating Partnership. The Indenture
restricts our incurrence of additional debt. See
"Description of Other Indebtedness--New Senior
Credit Facility" and "Description of the Notes."
Mandatory Offer to If we sell certain assets or experience certain
Purchase.................... changes of control, we must offer to purchase the
Notes at the prices described in "Description of
the Notes."
Covenants................... The Indenture contains covenants for your
benefit. Such covenants, among other things,
restrict our ability and the ability of certain
of our subsidiaries to:
. incur additional debt;
. pay dividends and make distributions;
. repurchase securities;
. make certain investments;
. create liens;
. issue or sell capital interests of
subsidiaries;
. transfer or sell assets;
. enter into transactions with affiliates;
. enter into sale and leaseback
transactions; or
. merge or consolidate.
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However, these restrictions will be subject to a number of important
qualifications and exceptions. For more details, see "Description of the
Notes--Covenants."
Risk Factors
You should read the "Risk Factors" section of this prospectus, beginning on
page . as well as the other cautionary statements throughout this prospectus
to learn about risks associated with the Old Notes and the New Notes, including
various events that could negatively affect our business.
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary historical consolidated
financial data of Holdings. The summary income statement data for the years
ended December 30, 1994 and December 29, 1995 and the summary balance sheet
data as of December 30, 1994, December 29, 1995, and December 31, 1996, have
been derived and calculated from Holdings' financial statements not included
herein. The summary income statement data for the years ended December 31,
1996, 1997, and 1998 and the summary balance sheet data as of December 31, 1997
and 1998, have been derived and calculated from Holdings' audited financial
statements, included herein. The summary income statement data for the six
months ended June 30, 1998 and 1999, and the summary balance sheet data as of
June 30, 1999 have been derived and calculated from Holdings' unaudited
financial statements, included herein. The summary balance sheet data as of
June 30, 1998 has been derived and calculated from Holdings' unaudited
financial statements not included herein. The unaudited financial statements
include all adjustments (consisting only of normal recurring adjustments) which
Holdings considers necessary for a fair presentation of Holdings' financial
position and results of operations for these periods. Operating results for the
six months ended June 30, 1998 and 1999, are not necessarily indicative of the
results that may be expected for a full year. The Summary Historical
Consolidated Financial Data should be read in conjunction with "Selected
Historical Consolidated Financial Data," "Management's Discussion and Analysis
of Results of Operations and Financial Condition," and Holdings' consolidated
financial statements, including the footnotes thereto, contained elsewhere
herein.
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 30, December 29, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------ -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net revenues
Fuel ...................... $350,570 $385,181 $478,312 $513,571 $464,025 $236,194 $224,898
Non-fuel................... 93,446 100,447 111,410 122,609 136,145 65,691 70,129
Restaurant................. 43,877 47,387 47,335 49,549 53,246 26,204 26,986
-------- -------- -------- -------- -------- -------- --------
Total net revenues........ 487,893 533,015 637,057 685,729 653,416 328,089 322,013
Costs and expenses
Cost of sales.............. 373,436 411,893 511,431 546,581 499,396 253,428 245,115
Operating expenses......... 64,968 73,052 81,522 85,560 93,012 45,511 47,787
General and
administrative............ 11,448 12,053 13,925 17,035 19,335 9,413 9,760
Employee severance, benefit
and placement expenses.... -- -- 2,534 -- -- -- --
Depreciation and
amortization ............. 8,851 11,144 12,204 14,502 15,953 7,580 6,670
(Gain) loss on disposition
of assets................. -- -- -- -- -- -- (849)
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses.. 458,703 508,142 621,616 663,678 627,696 315,932 308,483
-------- -------- -------- -------- -------- -------- --------
Operating income............ $ 29,190 $ 24,873 $ 15,441 $ 22,051 $ 25,720 $ 12,157 $ 13,530
======== ======== ======== ======== ======== ======== ========
Balance Sheet Data:
(at end of period)
Total assets ............... $206,148 $221,699 $209,100 $239,666 $226,999 $236,487 $242,540
Working capital............. (8,922) (9,607) (13,863) 3,850 (3,060) 3,438 (7,787)
Minority interest in
consolidated subsidiaries.. 37,641 39,214 35,201 20,472 20,723 21,125 21,291
Total partners' capital
(deficit).................. (29,673) (27,289) (32,036) (18,825) (17,473) (17,310) (16,204)
Other Financial Data:
EBITDA(a)(b)................ $ 38,041 $ 36,017 $ 32,108 $ 36,553 $ 41,673 $ 19,737 $ 20,200
EBITDA margin............... 7.8% 6.8% 5.0% 5.3% 6.4% 6.0% 6.3%
Capital expenditures(c)..... $ 8,428 $ 19,508 $ 5,523 $ 15,870 $ 20,309 $ 8,035 $ 9,647
Number of truck stops:
(at end of period)
Company-operated........... 24 26 26 28 28 28 29
Franchised................. 13 15 16 18 21 21 22
Independently operated..... 1 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total .................... 38 41 42 46 49 49 51
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
(a) EBITDA, as defined, represents operating income plus depreciation and
amortization. EBITDA data, which is not a measure of financial performance
under generally accepted accounting principles, is presented because such
data is used by certain investors to determine a company's ability to meet
historical debt service requirements. Such data should not be considered as
an alternative to net income as an indicator of Holdings' operating
performance or as an alternative to cash flows as a measure of liquidity.
(b) EBITDA results for fiscal 1996 exclude certain one-time charges related to
the 1997 recapitalization and the change in management and operations.
Included in the one-time charges were $2.5 million related to severance and
hiring costs; $1.4 million in obsolete inventory reserves, included in cost
of sales; and $0.5 million in insurance related costs.
(c) Capital expenditures primarily represent the cost of new Petro Stopping
Centers and maintenance of existing Petro Stopping Centers. Holdings had no
capital expenditures related to new Petro Stopping Centers in 1994. Capital
expenditures related to new Petro Stopping Centers were $13.8 million,
$1.9 million, $7.3 million and $6.1 million in 1995, 1996, 1997 and 1998,
respectively, and were $3.1 million for the first six months of 1999.
10
<PAGE>
RISK FACTORS
You should be aware that there are various risks applicable to the Old Notes
and the New Notes, including those we identify below. You should consider these
risks carefully, together with all of the other information in this prospectus,
before you decide to exchange your Old Notes for New Notes.
Risks Relating to the Exchange of the Notes
There are risks associated with failing to exchange the Old Notes
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the exchange offer will continue to be subject to restrictions on
transfer of their Old Notes. In general, Old Notes may not be offered or sold
unless they are registered under the Securities Act and applicable state
securities laws or an exemption is available therefrom. After this exchange
offer, we do not anticipate registering any Old Notes under the Securities Act.
Accordingly, the liquidity of the market for a holder's Old Notes will be
adversely affected upon the completion of the exchange offer if a holder does
not exchange its Old Notes. See "The Exchange Offer."
Risks Relating to Our Indebtedness and the Notes
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations
We have incurred substantial debt, and, as a result, we have significant
debt service obligations. At June 30, 1999, on a pro forma basis giving effect
to the Recapitalization, our total indebtedness would have been $226.6 million.
We also would have had $85.0 million of additional borrowing availability under
our New Senior Credit Facility. In addition, our New Senior Credit Facility and
the Indenture allow us to incur additional indebtedness under certain
circumstances. Our indebtedness poses important consequences to you, including
risks that:
. we will use a substantial portion of our cash flow from operations to
pay principal and interest on our debt, thereby reducing the funds
available for expansion, construction of new facilities, working
capital, capital expenditures and other general corporate purposes;
. we may be unable to obtain additional financing on satisfactory terms or
to otherwise fund working capital, capital expenditures, acquisitions,
and other general corporate requirements;
. our borrowings under our New Senior Credit Facility will bear interest
at variable rates, which would create higher debt service requirements
if market interest rates increase;
. our degree of leverage may hinder our ability to adjust rapidly to
changing market conditions and could make us more vulnerable to
downturns in the economy generally or in our industry;
. our failure to comply with the financial and other covenants applicable
to our debt could result in an event of default, which, if not cured or
waived, could have a material adverse effect on us.
If we cannot generate sufficient cash flow from operations to meet our
obligations, we may be forced to reduce or delay construction of new facilities
and other capital expenditures, sell assets, restructure or refinance our debt,
or seek additional equity capital. We cannot assure you that these remedies
would be available or satisfactory. Our ability to pay principal and interest
on the Notes and to satisfy our other debt obligations will depend on our
future operating performance. Our operating performance will be affected by
prevailing economic conditions and financial, business and other factors which
may be beyond our control. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Liquidity and Capital Resources,"
"Description of Other Indebtedness--New Senior Credit Facility," and
"Description of the Notes."
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<PAGE>
Holdings is a Holding Partnership and the Notes are Structurally Subordinate
to all Indebtedness of the Operating Partnership
Since Holdings is a holding partnership and conducts its business through
subsidiaries, the Notes are effectively subordinated to all existing and future
claims of creditors of Holdings' subsidiaries because the creditors of the
subsidiaries have the first right of claim against the assets of those
subsidiaries. Thus, the Notes are effectively subordinated to, among other
entities, the following creditors of our subsidiaries:
. the lenders under our New Senior Credit Facility;
. the holders of the 10 1/2% Notes;
. the holders of the 12 1/2% Notes;
. trade creditors; and
. all possible future creditors of any of Holdings' subsidiaries.
Holdings' only significant assets are the partnership interests in the
Operating Partnership. However, all of those interests are pledged as
collateral under the New Senior Credit Facility. Therefore, if we are unable to
pay amounts when due on the Notes, you will not be able to use those
partnership interests to satisfy your claims against us unless (1) you obtain a
judgment against us and (2) all amounts owing under the New Senior Credit
Facility, the 10 1/2% Notes, the 12 1/2% Notes and claims of all other
creditors of the Operating Partnership have been fully satisfied.
In addition, upon any event of default as defined under the New Senior
Credit Facility, the lenders under the New Senior Credit Facility could declare
all the amounts that we and the Operating Partnership owe under the New Senior
Credit Facility to be immediately due and payable. Such action by the lenders
under the New Senior Credit Facility would be an event of default under the 10
1/2% Notes and the Notes, entitling their holders to declare the principal and
any accrued interest or accreted value, as the case may be to be immediately
due and payable. In addition, as secured creditors, the lenders under the New
Senior Credit Facility would control the disposition and sale of the
partnership interests in the Operating Partnership after an event of default
under the New Senior Credit Facility and would not be legally required to
consider your interests as unsecured creditors with respect to any such
disposition or sale. There can be no assurance that our assets, after the
satisfaction of claims of our secured creditors, would be sufficient to satisfy
any amounts we owe you as holders of the Notes.
At June 30, 1999, on a pro forma basis giving effect to the
Recapitalization, our subsidiaries had approximately $171.8 million of total
liabilities, including approximately $229.0 million of indebtedness. Your
rights as holders of the Notes to receive any payments from the sale or
disposition of the assets of any of our subsidiaries upon any such subsidiary's
liquidation will be subject to the prior claims of such subsidiary's creditors.
Because of these other payment priorities, there may not be sufficient assets
remaining to pay amounts due on any or all of your Notes. See "Description of
the Notes" and "Description of Other Indebtedness." The Indenture permits our
subsidiaries to incur additional indebtedness under certain circumstances,
which might also have negative effects on your rights. See "Description of the
Notes."
The 10 1/2% Notes, the 12 1/2% Notes and all amounts owing under the New
Senior Credit Facility will mature prior to the maturity of the Notes. There
can be no assurance that if the Operating Partnership is required to refinance
its 10 1/2% Notes, the 12 1/2% Notes or any amounts under the New Senior Credit
Facility, it will be able to do so under acceptable terms, if at all.
Our Indebtedness May Prevent Us from Engaging in Certain Beneficial
Activities
Our New Senior Credit Facility, the Indenture and the 10 1/2% Notes
Indenture each contain a number of significant covenants. These covenants limit
or restrict our ability to:
. incur additional debt;
. pay dividends and make distributions;
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<PAGE>
. repurchase securities;
. make certain investments;
. create liens;
. issue or sell capital interests of subsidiaries;
. transfer or sell assets;
. enter into transactions with affiliates;
. enter into sale and lease back transactions; or
. merge or consolidate.
These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interests. In addition, our New Senior
Credit Facility also requires us to comply with certain financial ratios. Our
ability to comply with these ratios may be affected by events beyond our
control. If we breach any of the covenants in the New Senior Credit Facility or
the Indenture, or if we are unable to comply with the required financial
ratios, we may be in default under the New Senior Credit Facility and the
Indenture. If we default under the New Senior Credit Facility, the lenders can
declare all borrowings outstanding, including accrued interest and other fees,
due and payable. If we use all of our available cash to repay borrowings under
the New Senior Credit Facility, we may not be able to make payments on the
Notes. See "Description of Other Indebtedness" and "Description of the Notes."
Risks Associated with Holding Company Structure
Holdings is a holding company which has no significant assets other than its
investments in its direct and indirect subsidiaries and, therefore, its ability
to make payments with respect to the Notes depends on the receipt of dividends
(or debt service in respect of intercompany indebtedness) from its direct and
indirect subsidiaries. In particular, our New Senior Credit Facility and the 10
1/2% Notes contain restrictions on the Operating Partnership's ability to make
distributions to Holdings. There can be no assurance that such restrictions
will allow the Operating Partnership to make such distributions.
The Old Notes were and the New Notes will be Issued at an Original Issue
Discount Which Has Income Tax and Repayment Consequences You Should Consider
The Old Notes were and the New Notes will be issued at an original discount,
and you generally are required to include amounts in gross income for federal
income tax purposes in advance of receipt of the cash payments to which such
income is attributable. See "Certain United States Federal Income
Tax Considerations--Original Issue Discount" for a more detailed discussion.
If a bankruptcy case is commenced by or against us under the U.S. Bankruptcy
Code, your claim, as a holder of Notes, for the principal amount we owe you may
be limited to the initial issue price plus that portion of the original issue
discount that is not considered "unmatured interest" under the U.S. Bankruptcy
Code. Any original issue discount that was not amortized as of any such
bankruptcy filing would constitute "unmatured interest."
Potential Conflicts of Interest of Control Parties With Holders of the Notes
The Cardwell Group, Mobil and Volvo Trucks together control Holdings. See
"Description of the Holdings Partnership Agreement." Consequently, pursuant to
the terms of the Holdings Partnership Agreement, they have the power to appoint
all of the members of Holdings' Board of Directors that will control the
direction and future operations of Holdings. Circumstances could arise in which
the interests of our equity
13
<PAGE>
holders conflict with interests of the holders of the Notes. For example, if we
encounter financial difficulties or are unable to pay our debts as they mature,
the interests of our equity investors might conflict with those of the holders
of the Notes. In addition, the equity investors may have an interest in
pursuing acquisitions, divestitures, financings or other transactions that, in
their judgment, could enhance their equity investment, even though such
transactions might involve risks to the holders of the Notes.
Risk of Inability to Finance a Change of Control
Certain changes in our ownership would result in an event of default under
the New Senior Credit Facility. In the event we have not repaid all amounts
outstanding under the New Senior Credit Facility, the lenders party thereto
could accelerate the debt under the New Senior Credit Facility, which would in
turn constitute an event of default under the 10 1/2% Notes Indenture and allow
those notes to be accelerated. In any event, certain changes in our ownership
would require the Operating Partnership to make an offer to repurchase all of
the outstanding 10 1/2% Notes or the 12 1/2 % Notes at a price in cash equal to
101% of the principal amount of such notes plus accrued and unpaid interest. We
cannot assure you that we will have sufficient funds at the time of any change
in our ownership to repay debt under the New Senior Credit Facility and to
redeem the 10 1/2% Notes or the 12 1/2% Notes.
Any failure to pay when due amounts outstanding under the New Senior Credit
Facility, the 12 1/2% Notes or the 10 1/2% Notes would allow the acceleration
of the maturity of the Notes. In any event, certain changes in ownership will
require us to make an offer to repurchase all of the outstanding Notes at a
purchase price in cash equal to (1) 101% of the accreted value if the Notes are
purchased on or prior to August 1, 2004, or (2) 101% of the principal amount at
stated maturity thereof together with accrued interest, if any, if the Notes
are purchased after August 1, 2004. See "Description of the Notes--Change of
Control." We cannot assure you that sufficient funds will be available at the
time of any change in our ownership to redeem the Notes.
The source of funds for any repurchase of debt will be our available cash,
cash from other sources, including borrowings, sales of assets or additional
private or public offerings of debt or equity securities, or cash from
operations of the Operating Partnership. However, the terms of the New Senior
Credit Facility, the 10 1/2% Notes and the Notes may prohibit or restrict
additional borrowings and asset sales, and the terms of the New Senior Credit
Facility and the 10 1/2% Notes may prohibit the Operating Partnership from
distributing funds to Holdings. Moreover, even if they were not prohibited, we
cannot assure you that such financings, if applicable, would be available on
favorable terms.
Issuance of the Notes May Be Subject to Fraudulent Conveyance Laws
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if we, at the time
we incurred the debt evidenced by the Notes:
(1) incurred such indebtedness with the intent to hinder, delay or defraud
creditors; or
(2) received less than reasonably equivalent value or fair consideration
for incurring such indebtedness, and
. were insolvent at the time of incurrence;
. were rendered insolvent by reason of such incurrence (and the
application of the proceeds thereof);
. were engaged or were about to engage in a business or transaction
for which our remaining assets constituted unreasonably small
capital to carry on our business; or
. intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they matured;
then, in each case, a court of competent jurisdiction could (1) void, in whole
or in part, the Notes, and direct the repayment of any amounts paid thereunder
to our creditors, (2) subordinate the Notes to our obligations to our existing
and future creditors, or (3) take other actions detrimental to the noteholders.
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The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in such case. Generally, however, we would be considered
insolvent if the sum of our debts, including some measure of contingent
liabilities, were greater than all of our assets at fair valuation or if the
present fair saleable value of our assets were less than the amount that would
be required to pay the probable liability on our existing debts, including
contingent liabilities, as they become absolute and matured.
There can be no assurance as to what standard a court would apply to
determine whether we were "insolvent" as of the date the Notes were issued, or
that, regardless of the method of valuation, a court would not determine that
we were insolvent on that date. Nor can there be any assurance that a court
would not determine, regardless of whether we were insolvent on the date the
Notes were issued, that the payments constituted fraudulent transfers on
another ground.
On the basis of financial and other information, recent operating history
and other factors, we believe that the Old Notes were incurred for proper
purposes and in good faith and that we (1) were solvent and will continue to be
solvent after issuance of the Notes, (2) have sufficient capital for carrying
on our business and (3) will be able to pay our debts as they mature. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."
Risks Relating to Our Business
Importance of Diesel Fuel Sales to Our Performance
During the year ended December 31, 1998, diesel fuel accounted for
approximately 66.5% of our revenues and 24.5% of our gross margins. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition." The volume of diesel fuel sold by us and the profit margins
associated with these sales are affected by numerous factors outside of our
control, including:
. the condition of the long-haul trucking industry;
. the supply and demand for diesel fuel; and
. the pricing policies of competitors.
A change in any of these factors could have a material adverse effect on our
profitability. For more information, see "--Variability of Diesel Fuel Margins;
Risk of Supply Interruption" and "--Risks Associated with Dependence on
Trucking Industry."
Variability of Diesel Fuel Margins; Risk of Supply Interruption
Risks of higher diesel fuel costs. The cost of the diesel fuel we purchase,
the price at which we resell diesel fuel at our Petro Stopping Centers, and the
resulting profit margins we realize, are determined largely by supply and
competitive conditions. Thus, our gross margins on diesel fuel can fluctuate
substantially in relatively short periods of time. A material and sustained
decline in gross margin on diesel fuel sales would adversely affect our
profitability. See "--Uncertainties Associated with a Highly-Competitive
Market."
In 1997, we entered into an agreement with Mobil to supply all of the diesel
fuel sold at all company-operated and some franchise-operated Petro Stopping
Centers, some of which may be purchased by Mobil from third party suppliers.
The price we pay Mobil for diesel fuel is based upon a formula determined by
site, established on an annual basis. The formula allows us to buy diesel
through Mobil from third parties, if Mobil does not have adequate supply or its
prices are not competitive. To the extent that Mobil is unable to meet our fuel
needs from its own supply sources, we retain the right to seek third-party
sources of diesel supply, for which we may have to pay a price different than
the formula based pricing set forth in the Mobil fuel supply agreement.
Numerous factors outside of our control may increase diesel fuel costs. For
example, we experienced rapid increases in diesel fuel costs during the latter
part of 1990, due to a combination of the effects of Iraq's
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invasion of Kuwait and recessionary conditions in the United States. Similarly,
during the first quarter of 1999 fires at three California oil refineries and
OPEC-imposed reductions in oil production resulted in a rapid increase in
diesel fuel costs. While we typically can readily adjust our pump prices to
reflect higher diesel fuel costs, during periods of very rapid increases we may
not be able to keep pace at the retail level with these rising costs because of
competitive market conditions, and therefore our fuel margins could be
adversely affected. In addition, sharp increases in diesel fuel retail prices
at truck stops have historically led to temporary declines in diesel fuel sales
volumes.
Risk of supply interruption. Unforeseeable interruptions in world fuel
markets may cause shortages in, or total curtailment of fuel supplies world-
wide. Moreover, a substantial portion of the oil refining capacity in the
United States is controlled by major oil companies. These companies could limit
the amount of diesel fuel they sell, thereby disrupting supply to our company.
If we suffered a material decrease in our supply of diesel fuel for an extended
time period, it would have a material adverse effect on the results of our
operations.
Risk of adverse effects on sales of non-fuel items. We believe patronage at
our Petro Stopping Centers, by customers desiring to purchase diesel fuel,
accounts for a significant portion of our total customer traffic. This portion
of our customer traffic has an impact on our revenues and profitability of
other site operations, including our restaurant operations and our travel
stores. Accordingly, any significant and sustained reductions in fuel supplies
and/or sustained volatility in fuel prices could result in reductions in the
demand for our diesel fuel which could have a material adverse effect on the
profitability of our operations.
Risks Associated With Projected Growth and Capital Expenditure Program
An important component of our business strategy is accelerating the growth
of our network by building new locations, acquiring existing truck stops and
building or acquiring stand-alone Petro:Lubes. We currently estimate that a
typical Petro Stopping Center will take approximately nine to twelve months to
build from the commencement of construction and will cost between $10 million
and $11 million, including land acquisition costs. The construction costs will
depend on, among other factors, site preparation costs, paving and landscaping
required by local regulations and local construction industry costs. Acquiring
existing truck stops and conforming them to our specifications will also
require significant funds. Our current projected capital expenditures related
to network growth for the years ending December 31, 1999 and 2000 are
approximately $19.5 million and $46.5 million, respectively. This projected
level of expenditures is a significant increase from our historical levels of
capital expenditures related to new Petro Stopping Centers, which was $13.8
million, $1.9 million, $7.3 million and $6.1 million for the years ended 1995,
1996, 1997 and 1998, respectively, and were $3.1 million for the first six
months of 1999. We plan to fund these capital outlays through additional bank
financing under the New Senior Credit Facility, internally generated cash and
additional financing. These estimates are based on current conditions, and our
actual costs will be influenced by weather, market prices for land, labor and
construction materials, and legal and regulatory requirements. If our
construction costs exceed these estimates, expanding our network will require
additional expenditures of funds. There can be no assurance that such funds
will be available or that the expenditure of such funds will not adversely
impact our liquidity. In addition, our ability to add new sites is hindered by
the limited availability of suitable locations along or near interstate
highways and, even if such sites are available, we may not be able to acquire,
lease or franchise them on economically reasonable terms. We cannot assure you
that we will be able to implement our growth strategy successfully, which might
have adverse effects on our future earnings and, consequently, on our ability
to repay the Notes when they become due.
Risks Associated With Inability to Finance Expansion Program
Our current projected capital expenditures related to network growth for the
years ending December 31, 1999 and 2000 are approximately $19.5 million and
$46.5 million, respectively. We plan to fund these capital outlays through
additional bank financing under the New Senior Credit Facility, internally
generated cash and additional financing. However, there can be no assurance
that (1) such debt or equity financing would be
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<PAGE>
available on acceptable terms when, and if, suitable strategic opportunities
arise or (2) we would be able to enter into necessary debt or equity
arrangements due to certain restrictions placed upon our activities in
connection with our obligations under the New Senior Credit Facility, the 10
1/2% Notes and the Notes. If we are unable to generate the necessary funds, we
may be unable to finance our planned expansion program. In addition, to the
extent that we finance our expansion through borrowing, our ability to meet our
debt obligations and our liquidity will be affected. See "--Our Indebtedness
Results in Significant Debt Service Obligations and Limitations" and "--Our
Indebtedness May Prevent Us from Engaging in Certain Beneficial Activities."
Dependence on Key Personnel
Our future success depends, to a significant extent, on the efforts and
abilities of our management team. The loss of the services of some of these
individuals could have a material adverse effect on our business, financial
condition and results of operations.
Larry Zine, who served as our Chief Financial Officer from December 1996
until July 23, 1999 and our President from January 1999 until July 23, 1999,
tendered his resignation from these positions in connection with the
consummation of the Recapitalization. Mr. Zine remains on our Board of
Directors and has agreed to remain with us in a limited employment capacity.
Following Mr. Zine's announcement, we engaged a national search firm to assist
in identifying and retaining an individual to fill his role.
We believe that our future success will depend significantly upon our
ability to attract, motivate and retain additional highly skilled managerial
personnel. Competition for such personnel is intense, and there can be no
assurance that we will be successful in attracting, assimilating and retaining
the personnel we require to grow and operate profitably.
Uncertainties Associated With a Highly-Competitive Market
The truck stop industry is highly competitive and fragmented. Long-haul
trucks can obtain diesel fuel from a wide variety of sources, including their
own fueling terminals, multi-service truck stops, limited service fueling
facilities and some large service stations. Moreover, long-haul truck fleets
often have their truck maintenance performed at dedicated fleet garages. We
believe that, while we compete with all truck stops, our principal competitors
are increasingly other large, multi-service truck stop chains. Our competitors
could gain market share if they adopt pricing strategies or marketing policies
that we are unwilling to meet or if they provide products or services that we
do not offer. In addition, since certain of our principal competitors have
substantially greater financial and marketing resources than we do, they may be
able to offer such products and services and expand their markets with greater
financial flexibility than we have. A loss in our market share could have an
adverse effect on our profitability. Some of our competitors offer diesel fuel
at discount prices, which has occasionally caused severe price competition in
some of our markets. This price competition is often exacerbated by the demands
of fleet purchasers who frequently demand lower prices on fuel purchases and in
some cases choose to do business in a particular market only with lower cost
fuel providers. See "Business--Competition."
Risks Associated With Dependence on Trucking Industry
Our business is dependent upon the trucking industry in general and upon the
long-haul truck segment in particular. In turn, the trucking industry is
dependent on (1) economic factors, such as the level of domestic economic
activity and interest rates, (2) operating factors, such as fuel prices and
fuel taxes, and (3) regulation factors, such as permitted daily driving time,
fuel composition, taxes and tolls. We have no control over these factors, which
could contribute to a decline in truck travel. The long-haul trucking business
is also a relatively mature industry. Any sustained decline in operations by
the long-haul trucking industry would adversely affect our financial
performance. In addition, available data indicate that diesel consumption by
the trucking industry has grown more slowly than trucking ton-miles, as
technological improvements in truck engines have increased their fuel
efficiency. This trend is expected to continue.
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We derive a significant percentage of our revenues as a result of
relationships with fleet accounts, under which we provide diesel fuel, products
and services to fleet vehicles. Travel center and truck stop chains compete
aggressively for fleet account business and any significant reduction in fleet
accounts or sales to those accounts would adversely affect us. No assurance can
be given as to the continuation of the current level of fleet business.
Risk of Environmental Exposure
As part of our business, we store and dispense a significant amount of
petroleum products. These activities are subject to increasingly stringent
regulation by both the federal and state governments. One of these activities
is storing petroleum products in underground storage tanks. During 1998, we
completed upgrading the fuel lines and tanks at all but one of our existing
facilities to comply with federal and state law. At the one remaining facility,
we have upgraded to meet federal standards and have worked with state
authorities to develop an upgrade program to comply with state law. We believe
this program will bring this site into compliance with state law during the
third quarter of 1999. During 1996, 1997, and 1998, our expenditures for
environmental matters were $180,000, $154,000, and $385,000, respectively. Our
environmental expenditures, which will be for upgrades, are currently projected
to be approximately $1.0 million during 1999. See Note 2 to our Consolidated
Financial Statements for the year ended December 31, 1998 for a discussion of
our accounting policies relating to environmental matters. If additional
regulatory requirements are imposed on us in the future, additional
expenditures may be required.
In connection with our ownership or use of the properties and the operation
of our business, we may be subject to liability under various federal, state,
and local environmental laws, ordinances and regulations relating to cleanup
and removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in such properties. Certain laws impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Persons who arrange, or are
deemed to have arranged, for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment site, regardless of whether such site
is owned or operated by such person.
We, along with 55 other companies, are currently party to such a proceeding
with the U.S. Environmental Protection Agency ("EPA"), in which they have named
us as a potentially responsible party regarding the clean-up of a waste oil
storage and recycling plant located in Patterson, Stanislaus County,
California. We and approximately twenty of the other 55 companies identified by
the EPA are working together towards a resolution and plan of action for
completion of the removal activities required by the EPA. We do not believe
that our involvement in this matter will have a material adverse effect on our
consolidated financial condition or results of operation. See Note 15 to our
Consolidated Financial Statements for the year ended December 31, 1998 and
"Business--Governmental Regulation--Environmental Regulation."
Although we are not currently a party to any other environmental litigation
or proceedings relating to petroleum products, given the nature of our business
and the quantity of petroleum products that we handle, there can be no
assurance that hazardous substance contamination does not exist or that
material liability will not be imposed under additional proceedings in the
future.
We are defendants in two lawsuits brought by adjoining landowners alleging
damage to their property resulting from discharge of sewage and other run-off
at one of our Petro Stopping Centers. We do not believe that our involvement in
these matters will have a material adverse effect on our consolidated financial
condition or results of operations.
Relationship with Franchisees
Of our 51 Petro Stopping Centers, 22 are operated under franchise agreements
with franchisees, with certain franchisees operating multiple locations. During
1996, our franchisees expressed dissatisfaction with certain of the terms of
their franchise agreements and their relationship with us. In 1997, new
management
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began work with the franchisees to address their concerns and to modify the
then existing franchise agreements. Although we believe that the relationship
with our franchisees has improved significantly since 1996, there can be no
assurance that such improved relations will continue.
In the spring of 1999 we completed the revised form of our franchise
agreement with significant input from various current Petro Stopping Center
franchisees. Each of our franchisees is being given the option of entering into
the revised franchise agreement or remaining subject to the terms of their
currently existing agreements until such agreements expire, at which time the
franchisee will be expected to enter into the new franchise agreement.
The initial ten year term provided for in six of our oldest franchise
agreements has elapsed. Under the terms of these agreements, unless written
notice of termination is received from the franchisee twelve months prior to
the tenth anniversary date of the opening of the franchise location, the
franchise is automatically renewed for five additional years. No notices of
termination were received from the affected franchisees. By agreement with the
affected franchisees, execution of a renewal franchise agreement was delayed
pending completion of the revised franchise agreement. The revised franchise
agreement has now been given to these franchisees for execution and each
franchisee has been given the choice to either enter into the new agreement or
remain as franchisees under the terms of their existing agreement.
We May Incur Significant Costs to Make Our Systems "Year 2000" Ready
We are aware of the complexity and the significance of the "Year 2000"
issue. The Year 2000 issue is a result of computer programs being written using
two digits, rather than four, to define the applicable year. Any of our systems
that utilize date-sensitive software may recognize a date using "00" as the
year 1900 rather than as the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Our sales, accounts receivable, inventory management, accounts payable,
general ledger, payroll and Electronic Data Interchange systems comprise our
critical information technology ("IT") systems. We have assessed our Year 2000
readiness with regard to critical IT systems and are currently replacing,
upgrading and testing our computer systems and applications. We continue to
assess and communicate with the software vendors, hardware vendors, banks,
utilities, fuel suppliers, merchandise suppliers, customers, partners,
franchisees, service contract suppliers, and insurance companies with whom we
do significant business to determine the extent to which we are vulnerable to
those third parties' failure to remedy their own Year 2000 issues. We have
received responses from a majority of our suppliers, partners, franchisees and
vendors surveyed of which approximately 98% have indicated that they will be
compliant by the end of 1999. We have received responses from a majority of our
major customers of which approximately 98% have indicated that they will be
compliant by the end of 1999. We have assumed non-responsive third parties will
be non-compliant for the purpose of risk assessment. We have received
communications from our key financial and insurance service providers
indicating they are actively working to resolve their Year 2000 service issues.
We do not believe there has been or will be a significant disruption of the
Company's business due to our Year 2000 remediation efforts. We are 90%
complete regarding readiness testing to bring all of our critical IT systems
into Year 2000 readiness by October 1999.
Telecommunication and office automation systems that facilitate operations
of our locations and corporate headquarters, comprise our primary non-IT
systems. We have assessed 100% of the Year 2000 readiness of our non-IT systems
and have begun compliance testing to bring them into readiness by October 1999.
We are using a mixture of internal and external resources to address Year
2000 issues. We estimate the total costs of achieving Year 2000 readiness are
approximately $9.0 million, which includes the costs of software upgrades and
replacements we are currently making. We incurred $5.7 million in costs
attributable to projects that address the Year 2000 issue through the second
quarter of 1999 and expect to incur $3.3 million in such costs in the remainder
of fiscal year 1999.
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Although we have day-to-day operational contingency plans, management is in
the process of updating these plans for possible Year 2000 specific operational
requirements. To facilitate the completion of these plans, we have formed a
committee to handle business interruption scenarios with respect to the Year
2000 issue. We are completing our determination of business interruption
scenarios as we receive and analyze responses to our inquiries made of third
parties. We are in the process of establishing contingency plans for situations
relating to the Year 2000 issues that may arise in our dealings with key third
parties and our IT and non-IT systems. We anticipate completing such
contingency plans by October 1999. There can be no assurance that either we or
our trading partners will not experience Year 2000 readiness difficulties which
could have a material adverse effect on our business, results of operations and
financial condition. The costs and expenses associated with such failure are
not presently estimable.
Risk of Increase in Labor Costs
The federal minimum hourly wage rate was increased from $4.75 in October
1996 to its current rate of $5.15. In addition, certain states have instituted
minimum wage requirements in excess of the federal limits. Further increases in
the minimum wage could result in labor cost increases, which we may be unable
to pass on to our customers through increased prices.
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THE EXCHANGE OFFER
Purpose and Effect; Termination of Certain Rights
On July 23, 1999 (the "Issue Date"), we sold $113.4 million principal amount
at stated maturity of Old Notes in transactions exempt from the registration
requirements of the Securities Act. In connection with the sale of the Old
Notes, we entered into a registration rights agreement, pursuant to which we
agreed, for the benefit of the holders of the Old Notes and at our expense, to:
. file on or prior to the 75th calendar day following the Issue Date
this Registration Statement with the Commission;
. use our best efforts to cause this Registration Statement to be
declared effective under the Securities Act on or prior to the 150th
calendar day following the Issue Date; and
. use our best efforts to consummate the exchange offer on or prior to
the 30th business day following the date this Registration Statement
is declared effective.
We will keep the exchange offer open for not less than 20 business days (or
longer if required by applicable law) after the date we mail notice of the
exchange offer to you. The exchange offer is intended to satisfy our
obligations under the registration rights agreement.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes except that the New Notes have been registered under
the Securities Act and will not bear legends restricting their transfer and,
will not have registration rights, as discussed below. The New Notes will
evidence the same debt as the Old Notes and will be issued pursuant to, and
entitled to the benefits of, the indenture pursuant to which the Old Notes were
issued.
Consequences of Failure to Exchange Old Notes
Following the expiration of the exchange offer, holders of Old Notes not
tendered, or not properly tendered, will not have any further registration
rights, and such Old Notes will continue to be subject to the existing
restrictions on transfer thereof. Accordingly, the liquidity of the market for
a holder's Old Notes will be adversely affected upon expiration of the exchange
offer if such holder elects to not participate in the exchange offer.
Terms of the Exchange Offer
We hereby offer, upon the terms and subject to the conditions set forth
herein and in the accompanying Letter of Transmittal, to exchange $1,000 in
principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. We will accept for exchange any and all Old Notes that
are validly tendered on or prior to 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date. The exchange offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the exchange offer is subject to the terms and
provisions of the registration rights agreement. See "--Conditions of the
Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders of Old Notes may tender less than the aggregate principal
amount represented by the Old Notes held by them, provided that they
appropriately indicate this fact on the Letter of Transmittal accompanying the
tendered Old Notes (or so indicate pursuant to the procedures for book-entry
transfer).
As of the date of this prospectus, $113.4 million in aggregate principal
amount at stated maturity of Old Notes is outstanding. We have fixed the close
of business on . , 1999 as the record date (the "Record Date") for purposes of
determining the persons to whom this prospectus and the Letter of Transmittal
will be
mailed initially. Only a holder of Old Notes (or such holder's legal
representative or attorney-in-fact) may
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participate in the exchange offer. There will be no fixed record date for
determining holders of Old Notes entitled to participate in the exchange offer.
We shall be deemed to have accepted validly tendered Old Notes when, as and
if we have given oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the tendering holders of Old Notes and for
the purposes of receiving the New Notes from us.
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, 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.
Expiration Date; Extensions; Amendments
The Expiration Date shall be . , 1999 at 5:00 p.m., New York City time,
unless we, in our sole discretion, extend the exchange offer, in which case the
Expiration Date shall be the latest date and time to which the exchange offer
is extended.
In order to extend the exchange offer, we will notify the Exchange Agent of
any extension by oral or written notice and will make a public announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
We reserve the right, in our sole discretion, to:
. delay accepting any Old Notes;
. extend the exchange offer;
. if any of the conditions set forth below under "--Conditions of the
Exchange Offer" shall not have been satisfied, terminate the
exchange offer, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent; and
. amend the terms of the exchange offer in any manner.
If the exchange offer is amended in a manner which we determine to
constitute a material change, we will promptly disclose such amendments by
means of a prospectus supplement that will be distributed to the registered
holders of the Old Notes.
Conditions of the Exchange Offer
The exchange offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the exchange offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Registration Statement of which this prospectus constitutes a part.
Accrued Interest
Interest on the New Notes will accrue at the rate of 15% per annum from
August 1, 2004. No additional interest will accrue or be paid on Old Notes
tendered and accepted for exchange. See "Description of Notes--Principal,
Maturity and Interest."
Procedures for Tendering Old Notes
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by us will constitute a binding agreement between the tendering holder
and us upon the terms and subject to the conditions set forth in this
prospectus and in the accompanying Letter of Transmittal. Except as set forth
below, a holder who wishes to tender Old Notes for exchange pursuant to the
exchange offer must transmit such Old Notes, together with a properly completed
and duly executed Letter of Transmittal, including all other documents required
by such
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Letter of Transmittal, to the Exchange Agent at the address set forth on the
back cover page of this prospectus prior to 5:00 p.m., New York City time, on
the Expiration Date. The method of delivery of Old Notes, Letters of
Transmittal and all other required documents is at the election and risk of the
holder. If such delivery is by mail, it is recommended that registered mail,
properly insured, with return receipt requested, be used. Instead of delivery
by mail, it is recommended that you use an overnight or hand delivery service.
In all cases, sufficient time should be allowed to assure timely delivery.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered:
. by a registered holder of the Old Notes who has not completed either
the box entitled "Special Exchange Instructions" or the box entitled
"Special Delivery Instructions" in the Letter of Transmittal or
. by an Eligible Institution (as defined immediately below).
In the event that a signature on a Letter of Transmittal or a notice of
withdrawal, as the case may be, is required to be guaranteed, such guarantee
must be by a firm which is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc., a commercial
bank or trust company having an office or correspondent in the United States or
otherwise be an "eligible guarantor institution" within the meaning of the
Exchange Act (collectively, "Eligible Institutions"). If the Letter of
Transmittal is signed by a person other than the registered holder of the Old
Notes, the Old Notes surrendered for exchange must either:
. be endorsed by the registered holder, with the signature thereon
guaranteed by an Eligible Institution or
. be accompanied by a bond power, in satisfactory form as determined
by us in our sole discretion, duly executed by the registered
holder, with the signature thereon guaranteed by an Eligible
Institution.
The term "registered holder" as used herein with respect to the Old Notes means
any person in whose name the Old Notes are registered on the books of the
Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by us in our sole discretion, which determination shall be final and
binding. We reserve the absolute right to reject any and all Old Notes not
properly tendered and to reject any Old Notes, our acceptance of which might,
in the judgment of the Company or our counsel, be unlawful. We also reserve the
absolute right to waive any defects or irregularities or conditions of the
exchange offer as to particular Old Notes either before or after the Expiration
Date (including the right to waive the ineligibility of any holder who seeks to
tender Old Notes in the exchange offer). Our interpretation of the terms and
conditions of the exchange offer (including the Letter of Transmittal and its
instructions) shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes for exchange
must be cured within such period of time as we shall determine. We will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Notes for exchange but shall not incur any liability
for failure to give such notification. Tenders of the Old Notes will not be
deemed to have been made until such irregularities have been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing and,
unless waived by us, proper evidence satisfactory to us, in our sole
discretion, of such person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old Notes
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender Old Notes in the exchange offer
should contact such registered holder promptly and instruct such registered
holder
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to tender on such Beneficial Owner's behalf. If such Beneficial Owner wishes to
tender directly, such Beneficial Owner must, prior to completing and executing
the Letter of Transmittal and tendering Old Notes, make appropriate
arrangements to register ownership of the Old Notes in such Beneficial Owner's
name. Beneficial Owners should be aware that the transfer of registered
ownership may take considerable time.
By tendering, each registered holder will represent to us that, among other
things:
. the New Notes to be acquired in connection with the exchange offer
by the holder and each Beneficial Owner of the Old Notes are being
acquired by the holder and each Beneficial Owner in the ordinary
course of business of the holder and each Beneficial Owner;
. the holder and each Beneficial Owner are not participating, do not
intend to participate, and have no arrangement or understanding with
any person to participate, in the distribution of the New Notes;
. the holder and each Beneficial Owner acknowledge and agree that any
person participating in the exchange offer for the purpose of
distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection
with a secondary resale transaction of the New Notes acquired by
such person and cannot rely on the position of the staff of the
Commission set forth in no-action letters that are discussed herein
under "--Resales of New Notes;"
. that if the holder is a broker-dealer that acquired Old Notes as a
result of market-making or other trading activities, it will deliver
a prospectus in connection with any resale of New Notes acquired in
the exchange offer;
. the holder and each Beneficial Owner understand that a secondary
resale transaction described in the third bullet point above should
be covered by an effective registration statement containing the
selling security holder information required by Item 507 of
Regulation S-K of the Commission; and
. neither the holder nor any Beneficial Owner is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company except
as otherwise disclosed to us in writing.
In connection with a book-entry transfer, as discussed immediately below,
each participant will confirm that it makes the representations and warranties
contained in the Letter of Transmittal.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") for purposes of the exchange offer within two business days
after the date of this prospectus, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of Old Notes being tendered by causing the Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Old Notes may
be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal or copy thereof, with any required signature
guarantees and any other required documents, must, in any case other than as
set forth in the following paragraph, be transmitted to and received by the
Exchange Agent at the address set forth under "--Exchange Agent" on or prior to
5:00 p.m., New York City time, on the Expiration Date, or the guaranteed
delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the exchange offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in lieu of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender
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Old Notes through ATOP, the electronic instructions sent to DTC and transmitted
by DTC to the Exchange Agent must contain the character by which the
participant acknowledges its receipt of and agrees to be bound by the Letter of
Transmittal.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis) may tender their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
. such tender must be made by or through an Eligible Institution and a
Notice of Guaranteed Delivery (as defined in the Letter of
Transmittal) must be signed by such Holder;
. on or prior to the Expiration Date, the Exchange Agent must have
received from the Holder and the 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 or numbers of
the tendered Old Notes, and the principal amount of tendered Old
Notes, stating that the tender is being made thereby and
guaranteeing that, within four business days after the date of
delivery of the Notice of Guaranteed Delivery, the tendered Old
Notes, a duly executed Letter of Transmittal and any other required
documents will be deposited by the Eligible Institution with the
Exchange Agent; and
. such properly completed and executed documents required by the
Letter of Transmittal and the tendered Old Notes in proper form for
transfer (or confirmation of a book-entry transfer of such Old Notes
into the Exchange Agent's account at the DTC) must be received by
the Exchange Agent within four business days after the Expiration
Date.
Any Holder who wishes to tender Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery and Letter of Transmittal relating to such Old
Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of the conditions to the exchange offer, we will
accept any and all Old Notes that are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes
issued pursuant to the exchange offer will be delivered promptly after
acceptance of the Old Notes. For purposes of the Exchange Offer, we shall be
deemed to have accepted validly tendered Old Notes, when, as, and if we have
given oral or written notice thereof to the Exchange Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents (or of confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at the
DTC); provided, however, that we reserve the absolute right to waive any
defects or irregularities in the tender or conditions of the exchange offer. If
any tendered Old Notes are not accepted for any reason, we will return such
unaccepted Old Notes without expense to the tendering Holder thereof as
promptly as practicable after the expiration or termination of the exchange
offer.
Withdrawal Rights
Tenders of the Old Notes may be withdrawn by delivery of a written notice to
the Exchange Agent, at its address set forth on the back cover page of this
prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must:
. specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor");
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. identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes, as applicable);
. 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 a
bond power in the name of the person withdrawing the tender, in
satisfactory form as determined by us in our sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed
by an Eligible Institution together with the other documents required
upon transfer by the indenture; and
. specify the name in which such Old Notes are to be re-registered, if
different from the Depositor, pursuant to such documents of transfer.
Any questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us, in our sole discretion. The
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the exchange offer. Any Old Notes which have been
tendered for exchange but which are withdrawn will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "The Exchange Offer--Procedures for Tendering Old
Notes" at any time on or prior to the Expiration Date.
The Exchange Agent; Assistance
State Street Bank and Trust Company is the Exchange Agent. All tendered Old
Notes, executed Letters of Transmittal and other related documents should be
directed to the Exchange Agent. Questions and requests for assistance and
requests for additional copies of the prospectus, the Letter of Transmittal and
other related documents should be addressed to the Exchange Agent as follows:
By Registered or Certified Mail:
State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, MA 02102-0778
Attn.: Jacklyn Thompson
By Facsimile:
State Street Bank and Trust Company
(617) 662-1465
Attention: Jacklyn Thompson
Confirm by Telephone: (617) 662-1685
By Overnight Courier:
State Street Bank and Trust Company
2 Avenue de Lafayette
Fifth Floor, Corporate Trust Window
Boston, MA 02111-1724
Attn.: Jacklyn Thompson
By Hand:
State Street Bank and Trust Company
2 Avenue de Lafayette
Fifth Floor, Corporate Trust Window
Boston, MA 02111-1724
Attn.: Jacklyn Thompson
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Fees and Expenses
All expenses incident to our consummation of the exchange offer and
compliance with the Registration Rights Agreement will be borne by us,
including, without limitation:
. all registration and filing fees (including, without limitation,
fees and expenses of compliance with state securities or "blue sky"
laws);
. printing expenses (including, without limitation, expenses of
printing certificates for the New Notes in a form eligible for
deposit with the DTC and of printing prospectuses);
. messenger, telephone and delivery expenses;
. fees and disbursements of our counsel;
. fees and disbursements of our accountants;
. rating agency fees; and
. our internal expenses (including, without limitation, all salaries
and expenses of our officers and other employees performing legal or
accounting duties).
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptance of the exchange offer. We will, however, pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection with the exchange offer.
We will pay all transfer taxes, if any, applicable to the exchange of Old
Notes pursuant to the exchange offer. If, however, a transfer tax is imposed
for any reason other than the exchange of Old Notes pursuant to the exchange
offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in our accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by us for accounting purposes.
The expenses we incur in connection with the exchange offer will be amortized
over the term of the New Notes.
Federal Income Tax Consequences
The following discussion summarizing federal income tax consequences of the
exchange offer reflects the opinion of Gibson, Dunn, & Crutcher LLP, our
counsel, as to material federal income tax consequences expected to result from
the exchange offer. An opinion of counsel is not binding on the IRS or the
courts, and there can be no assurances that the IRS will not take, and that a
court would not sustain, a position contrary to that described below. Moreover,
the following discussion is for general information only and does not
constitute comprehensive tax advice to any particular holder of Old Notes. The
summary is based on the current provisions of the Internal Revenue Code of
1986, as amended, and applicable Treasury Regulations, judicial authority and
administrative pronouncements. The tax consequences described below could be
modified by future changes in the relevant law, which could have retroactive
effect. Each holder of Old Notes should consult its own tax adviser as to these
and any other federal income tax consequences of the exchange offer as well as
any tax consequences to it under foreign, state, local or other law.
Exchanges of Old Notes for New Notes pursuant to the exchange offer should
be treated as a modification of the Old Notes that does not constitute a
material change in their terms, and the Company intends to treat the
27
<PAGE>
exchanges in that manner. Under that approach, a New Note is treated as a
continuation of the corresponding Old Note. An exchanging holder's holding
period for a New Note would include such holder's holding period for the Old
Note. Such holder would not recognize any gain or loss, and such holder's basis
in the New Note would be the same as such holder's basis in the Old Note. The
exchange offer will result in no federal income tax consequences to a non-
exchanging Holder.
Resales of the New Notes
Based on an interpretation by the staff of the Commission set forth in no-
action letters issued to third parties, we believe that the New Notes issued
pursuant to the exchange offer to a holder in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by such holder (other than
(1) a broker-dealer who purchased Old Notes directly from us for resale
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act or (2) a person that is an affiliate of the Company
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 holder is acquiring the New Notes in the ordinary course of
business and is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes.
We have not requested or obtained an interpretive letter from the Commission
staff with respect to this exchange offer, and neither we nor the holders are
entitled to rely on interpretive advice provided by the staff to other persons,
which advice was based on the facts and conditions represented in such letters.
However, the exchange offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in such letters. If any
holder acquires New Notes in the exchange offer for the purpose of distributing
or participating in a distribution of the New Notes, such holder cannot rely on
the position of the staff of the Commission enunciated in Morgan Stanley & Co.
Incorporated (available June 5, 1991) and Exxon Capital Financial Corporation
(available April 13, 1989), or interpreted in the Commission's letter to
Shearman and Sterling (available July 2, 1993), or similar no-action or
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
Sales of New Notes acquired in the exchange offer by holders who are
"affiliates" of the Company within the meaning of the Securities Act will be
subject to certain limitations on resale under Rule 144 of the Securities Act.
Such persons will only be entitled to sell New Notes in compliance with the
volume limitations set forth in Rule 144, and sales of New Notes by affiliates
will be subject to certain Rule 144 requirements as to the manner of sale,
notice and the availability of current public information regarding the
Company. The foregoing is a summary only of Rule 144 as it may apply to
affiliates of the Company. Any such persons must consult their own legal
counsel for advice as to any restrictions that might apply to the resale of
their Notes.
The New Notes will be freely transferable by the holders thereof, subject to
the limitations described in this section.
28
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the exchange of New Notes for Old
Notes. We used the gross proceeds of approximately $40.0 million from the sale
of the Units and approximately $14.8 million from the Old Notes issued to
Chartwell, together with borrowings under the New Senior Credit Facility and
the proceeds of the equity investments by Volvo Trucks and Mobil to purchase
the partnership interests in the Operating Partnership held by Chartwell and
Kirschner, to repay borrowings under our previous senior credit facility, for
general corporate purposes, and to pay fees and expenses associated with the
Recapitalization.
29
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999 on an
actual basis and as adjusted basis to reflect the consummation of the
Recapitalization and the application of the net proceeds therefrom.
<TABLE>
<CAPTION>
Actual As Adjusted
------- -----------
(dollars in
thousands)
<S> <C> <C>
Cash and cash equivalents................................. $19,401 $30,293
======= =======
Long-term debt (including current portion):
New Senior Credit Facility.............................. $36,656 $40,000
12 1/2% Notes........................................... 6,190 6,190
10 1/2% Notes........................................... 135,000 134,325 (a)
Expansion facility...................................... 1,400 --
Capital lease obligation................................ 1,003 1,003
15% Senior Discount Notes Due 2008...................... -- 45,130 (b)
------- -------
Total long-term debt.................................... 180,249 226,648
</TABLE>
<TABLE>
<S> <C> <C>
Other:
Minority interest in consolidated subsidiaries.............. 21,291 (553)
Mandatorily redeemable preferred partnership interests...... 24,207 29,207 (c)
Other partner's capital..................................... -- 9,700 (b)
</TABLE>
<TABLE>
<S> <C> <C>
Partners' deficit......................................... (40,411) (13,705)
--------- ---------
Total capitalization................................ $ 185,336 $ 251,297
========= =========
</TABLE>
- --------
(a) The decrease in the 10 1/2% Notes is due to the consent solicitation fee
paid to the holders of those notes in connection with the Recapitalization.
The fee is treated as a discount under generally accepted accounting
principles.
(b) Reflects the gross proceeds of approximately $40.0 million from the sale of
the Units and approximately $14.8 million from the Old Notes to Chartwell
and the segregation of Petro Warrant Holdings Corporation's capital
contribution of approximately $9.7 million to Other partner's capital.
Holdings has a contingent obligation to purchase the Warrants, which are
exchangeable for all of the common stock of Petro Warrant Holdings
Corporation.
(c) The increase in the preferred partnership interests is due to the
additional $5.0 million investment by Mobil.
30
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma consolidated balance sheet of Holdings as of June
30, 1999 and the pro forma consolidated statements of income of Holdings for
the year ended December 31, 1998 and for the six months ended June 30, 1999
(the "Pro Forma Consolidated Financial Statements") have been prepared to
reflect the consummation of the Recapitalization. The pro forma consolidated
balance sheet has been prepared as if such transactions occurred on June 30,
1999, and the pro forma consolidated statements of income have been prepared as
if such transactions occurred as of January 1, 1998. The Pro Forma Consolidated
Financial Statements include the historical consolidated financial statements
of Holdings and reflect the transactions described above. The Pro Forma
Consolidated Financial Statements are not necessarily indicative of the results
of operations of Holdings had the transactions therein actually been
consummated on the dates assumed and are not necessarily indicative of the
results of operations for any future period. The pro forma adjustments, as
described in the notes to the consolidated pro forma balance sheet and
statements of income, are based on available information and upon certain
assumptions that management believes are reasonable. The Pro Forma Consolidated
Financial Statements should be read in conjunction with "Summary Historical and
Pro Forma Consolidated Financial Data," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and Holdings' consolidated financial statements,
including the footnotes thereto, contained elsewhere herein.
31
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of June 30, 1999
-----------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents.............. $ 19,401 $ 40,000 (a) $ 30,293
30,000 (b)
5,000 (c)
(55,000)(d)
(8,252)(e)
(2,800)(f)
(38,056)(g)
40,000 (h)
Trade accounts receivable, net......... 14,798 14,798
Inventories, net....................... 17,929 17,929
Other current assets................... 2,407 2,407
Due from affiliates.................... 1,766 1,766
--------- -------- ---------
Total current assets................. 56,301 10,892 67,193
Property and equipment, net.............. 164,765 164,765
Deferred debt issuance costs, net........ 10,392 6,299 (e) 14,675
(2,016)(i)
Intangibles and other assets............. 11,082 48,613 (d) 61,868
2,173 (f)
--------- -------- ---------
Total assets......................... $ 242,540 $ 65,961 $ 308,501
========= ======== =========
Liabilities and Partners' Capital
(Deficit)
Current liabilities
Current portion of long-term debt...... $ 6,884 $ (5,000)(g) $ 1,884
Trade accounts payable................. 8,294 8,294
Accrued expenses and other
liabilities........................... 25,651 25,651
Due to affiliates...................... 23,259 23,259
--------- -------- ---------
Total current liabilities............ 64,088 (5,000) 59,088
Long-term debt, excluding current
portion................................. 173,365 30,300 (a) 224,764
14,830 (d)
(675)(e)
(33,056)(g)
40,000 (h)
--------- -------- ---------
Total liabilities.................... 237,453 46,399 283,852
--------- -------- ---------
Commitments and contingencies
Minority interest........................ 21,291 (21,217)(d) (553)
(627)(f)
Mandatorily redeemable preferred
partnership interests................... 24,207 5,000 (c) 29,207
Other partner's capital.................. -- 9,700 (a) 9,700
</TABLE>
<TABLE>
<S> <C> <C> <C>
Partners' capital (deficit)................... (40,411) 30,000 (b) (13,705)
(1,278)(e)
(2,016)(i)
--------- ------- ---------
Total liabilities and partners' capital
(deficit)................................ $ 242,540 $65,961 $ 308,501
========= ======= =========
</TABLE>
32
<PAGE>
Notes to Pro Forma Consolidated Balance Sheet
(a) Reflects the issuance of $40.0 million of Units and the segregation of
Petro Warrant Holdings Corporation's capital contribution of $9.7 million
to other partner's capital. Holdings has a contingent obligation to
purchase the Warrants exchangeable for all of the common stock of Petro
Warrant Holdings Corporation.
(b) Reflects a $30.0 million equity investment by Volvo Trucks in the common
partnership interests of Holdings.
(c) Reflects a $5.0 million additional equity investment by Mobil in the
Convertible Mandatorily Redeemable Preferred Partnership Interests in
Holdings issued upon the Recapitalization.
(d) Reflects the acquisition of 100% of Chartwell's equity investment in the
Operating Partnership for $69.8 million. For purposes of this pro forma
presentation, 100% of the excess of purchase price over net book value of
Chartwell's interest is treated as goodwill. Holdings is required to
allocate the excess first to identifiable tangible and intangible assets
with any remaining excess then allocated to goodwill.
(e) Reflects $8.3 million in transaction costs including, $0.7 million in
consent solicitation costs, a $2.0 million fee paid to the New Senior
Credit Facility lender and $4.3 million in other fees and expenses
($1.3 million of which is assumed to be expensed as incurred and the
remainder is assumed to be capitalized as deferred debt issuance costs
related to the issuance of the Old Notes). These expenses are not reflected
in the Pro Forma Consolidated Statements of Income because only income from
continuing operations is presented.
(f) Reflects the acquisition of 100% of Kirschner's equity investment in the
Operating Partnership for $2.8 million. For purposes of this pro forma
presentation, 100% of the excess of purchase price over net book value of
Kirschner's interest is treated as goodwill. Holdings is required to
allocate the excess first to identifiable tangible and intangible assets
with any remaining excess then allocated to goodwill.
(g) Reflects the repayment of the prior senior credit facility.
(h) Reflects borrowings under the New Senior Credit Facility.
(i) Reflects the write-off of $2.0 million of deferred debt issuance costs
related to the prior senior credit facility. These costs are not reflected
in the Pro Forma Consolidated Statements of Income because only income from
continuing operations is presented and this write-off will be an
extraordinary debt extinguishment under generally accepted accounting
principles.
33
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, 1998 June 30, 1999
--------------------------------- ---------------------------------
Pro Forma Pro Pro Forma Pro
Historical Adjustments Forma Historical Adjustments Forma
---------- ----------- -------- ---------- ----------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Revenues
Fuel.................... $464,025 $ -- $464,025 $224,898 $ -- $224,898
Non-fuel................ 136,145 -- 136,145 70,129 -- 70,129
Restaurant.............. 53,246 -- 53,246 26,986 -- 26,986
-------- ------- -------- -------- ------- --------
Total net revenues...... 653,416 -- 653,416 322,013 -- 322,013
Costs and expenses......
Cost of sales........... 499,396 -- 499,396 245,115 -- 245,115
Operating expenses...... 93,012 -- 93,012 47,787 -- 47,787
General and
administrative......... 19,335 (900)(a) 18,435 9,760 (450)(a) 9,310
Depreciation and
amortization........... 15,953 2,554 (b) 18,507 6,670 1,277 (b) 7,947
(Gain) loss on
disposition of assets.. -- -- -- (849) -- (849)
-------- ------- -------- -------- ------- --------
Total costs and
expenses............... 627,696 1,654 629,350 308,483 827 309,310
-------- ------- -------- -------- ------- --------
Operating income........ 25,720 (1,654) 24,066 13,530 (827) 12,703
Recapitalization costs.. -- -- -- 623 -- 623
Equity in loss of
affiliate.............. -- -- -- 230 -- 230
Interest expense, net... 20,042 8,445 (c) 28,476 10,027 4,223 (c) 14,244
755 (d) 378 (d)
(448)(d) (224)(d)
75 (e) 37 (e)
3,300 (f) 1,650 (f)
(3,693)(g) (1,847)(g)
-------- ------- -------- -------- ------- --------
Income (loss) from
continuing operations
before nonrecurring
charges or credits
directly attributable
to the transaction and
minority interest...... 5,678 (10,088) (4,410) 2,650 (5,044) (2,394)
Minority interest in
earnings (loss) of
consolidated
subsidiaries........... 1,298 (1,342)(i) (44) 1,408 (1,432)(i) (24)
-------- ------- -------- -------- ------- --------
Income (loss) from
continuing operations
before nonrecurring
charges or credits
directly attributable
to the transaction..... $ 4,380 $(8,746) $ (4,366) $ 1,242 $(3,612) $ (2,370)
======== ======= ======== ======== ======= ========
EBITDA(h)............... $ 41,673 $ 42,573 $ 20,200 $ 20,650
======== ======== ======== ========
</TABLE>
34
<PAGE>
Notes to Pro Forma Consolidated Statements of Income
(a) Reflects the elimination of management fee expense paid to Chartwell and
Mobil.
(b) Reflects the amortization of goodwill over 20 years related to the
acquisition of both Chartwell's and Kirschner's interests in the Operating
Partnership. For purposes of this pro forma presentation, 100% of the
excess of the purchase price over net book value of both Chartwell's and
Kirschner's interests is treated as goodwill. Holdings is required to
allocate the excess first to identifiable tangible and intangible assets
with any remaining excess then allocated to goodwill.
(c) Reflects the adjustment to interest expense related to the issuance of the
Old Notes which were issued at a substantial discount from their face
value.
(d) Reflects the adjustment to interest expense related to the amortization of
the deferred debt issuance costs related to the issuance of the Old Notes,
the deferred debt issuance costs related to the New Senior Credit Facility,
and the deferred debt issuance costs related to the retirement of the prior
senior credit facility in place before the New Senior Credit Facility.
(e) Reflects the amortization of the discount associated with the consent
solicitation fee on the 10 1/2% Notes paid in connection with the
Recapitalization.
(f) Reflects the adjustment to interest expense related to borrowings under the
New Senior Credit Facility. Interest expense on the New Senior Credit
Facility is based on the June 30, 1999 Eurodollar rate of 5.25% plus the
applicable spread (3.0%). An interest rate change of 1/8% will have a
$50,000 effect on income.
(g) Reflects the adjustment to interest expense as a result of the retirement
of the prior senior credit facility in place before the New Senior Credit
Facility.
(h) EBITDA, as defined, represents operating income plus depreciation and
amortization. EBITDA data, which is not a measure of financial performance
under generally accepted accounting principles, is presented because such
data is used by certain investors to determine a company's ability to meet
historical debt service requirements. Such data should not be considered as
an alternative to net income as an indicator of Holdings' operating
performance or as an alternative to cash flows as a measure of liquidity.
(i) Reflects the elimination of all minority interests other than the interest
in the Operating Partnership owned by various individuals and entities
affiliated with the Cardwell Group.
35
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial data of Holdings. The selected income statement data for the years
ended December 30, 1994 and December 29, 1995 and the selected balance sheet
data as of December 30, 1994, December 29, 1995, and December 31, 1996, have
been derived and calculated from Holdings' financial statements not included
herein. The selected income statement data for the years ended December 31,
1996, 1997, and 1998 and the selected balance sheet data as of December 31,
1997 and 1998, have been derived and calculated from Holdings' audited
financial statements included elsewhere herein. The selected income statement
data for the six months ended June 30, 1998 and 1999, and the selected balance
sheet data as of June 30, 1998 have been derived and calculated from Holdings'
unaudited financial statements included elsewhere herein. The selected balance
sheet data as of June 30, 1998 have been derived and calculated from Holdings'
unaudited financial statements not included herein. The unaudited financial
statements include all adjustments (consisting only of normal recurring
adjustments) which Holdings considers necessary for a fair presentation of
Holdings' financial position and results of operations for these periods.
Operating results for the six months ended June 30, 1998 and 1999, are not
necessarily indicative of the results that may be expected for a full year. The
Selected Historical Consolidated Financial Data should be read in conjunction
with "Summary Historical and Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and Holdings' consolidated financial statements, including the
footnotes thereto, contained elsewhere herein.
36
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
December 30, December 29, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------ -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net revenues
Fuel........................... $350,570 $385,181 $478,312 $513,571 $464,025 $236,194 $224,898
Non-fuel....................... 93,446 100,447 111,410 122,609 136,145 65,691 70,129
Restaurant..................... 43,877 47,387 47,335 49,549 53,246 26,204 26,986
-------- -------- -------- -------- -------- -------- --------
Total net revenues........... 487,893 533,015 637,057 685,729 653,416 328,089 322,013
Costs and expenses
Cost of sales.................. 373,436 411,893 511,431 546,581 499,396 253,428 245,115
Operating expenses............. 64,968 73,052 81,522 85,560 93,012 45,511 47,787
General and administrative..... 11,448 12,053 13,925 17,035 19,335 9,413 9,760
Employee severance, benefit and
placement expenses............ -- -- 2,534 -- -- -- --
Depreciation and amortization.. 8,851 11,144 12,204 14,502 15,953 7,580 6,670
(Gain) loss on disposition of
assets........................ -- -- -- -- -- -- (849)
-------- -------- -------- -------- -------- -------- --------
Total costs and expenses..... 458,703 508,142 621,616 663,678 627,696 315,932 308,483
-------- -------- -------- -------- -------- -------- --------
Operating income................ 29,190 24,873 15,441 22,051 25,720 12,157 13,530
Recapitalization costs.......... -- -- 2,938 -- -- -- 623
Equity in loss of affiliate..... -- -- -- -- -- -- 230
Interest expense, net........... 18,711 21,098 21,263 20,292 20,042 9,989 10,027
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item, minority
interest in
earnings (loss) of consolidated
subsidiaries, and cumulative
effect of a change in
accounting principle.......... 10,479 3,775 (8,760) 1,759 5,678 2,168 2,650
Extraordinary item(a).......... 5,250 -- -- 12,745 -- -- --
Cumulative effect of a change
in accounting
principle(b)(c)............... -- -- -- 1,579 3,250 -- --
Minority interest in earnings
(loss) of
consolidated subsidiaries..... 2,307 1,729 (4,013) (6,706) 1,298 1,168 1,408
-------- -------- -------- -------- -------- -------- --------
Net income (loss)(d)........... $ 2,922 $ 2,046 $ (4,747) $ (5,859) $ 1,130 $ 1,000 $ 1,242
======== ======== ======== ======== ======== ======== ========
Balance Sheet Data:
(at end of period)
Working capital................ $ (8,922) $ (9,607) $(13,863) $ 3,850 $ (3,060) $ 3,438 $ (7,787)
Total assets................... 206,148 221,699 209,100 239,666 226,999 236,487 242,540
Total debt..................... 161,459 168,392 166,727 183,190 181,328 181,596 180,249
Minority interest in
consolidated subsidiaries..... 37,641 39,214 35,201 20,472 20,723 21,125 21,291
Total partners' capital
(deficit)..................... (29,673) (27,289) (32,036) (18,825) (17,473) (17,310) (16,204)
Other Financial Data:
EBITDA(c)(f)................... $ 38,041 $ 36,017 $ 32,108 $ 36,553 $ 41,673 $ 19,737 $ 20,200
Capital expenditures(g)........ 8,428 19,508 5,523 15,870 20,309 8,035 9,647
</TABLE>
37
<PAGE>
Notes to Selected Historical Consolidated Financial Data
(a) Extraordinary item reflects write-off of deferred debt issuance associated
with retired debt.
(b) Cumulative effect of a change in accounting principle in 1997 reflects
expensing of costs related to process reengineering activities as required
by Emerging Issues Task Force Issue No. 97-13.
(c) Cumulative effect of a change in accounting principle in 1998 reflects
expensing of organization and start-up costs as required by AICPA Statement
of Position 98-5.
(d) No provision for income taxes is reflected in the financial statements as
Holdings is a partnership for which taxable income and tax deductions are
passed through to the individual partners.
(e) EBITDA, as defined, represents operating income plus depreciation and
amortization. EBITDA data, which is not a measure of financial performance
under generally accepted accounting principles, is presented because such
data is used by certain investors to determine a company's ability to meet
historical debt service requirements. Such data should not be considered as
an alternative to net income, as an indicator of Holdings' operating
performance or as an alternative to cash flows as a measure of liquidity.
(f) EBITDA results for fiscal 1996 exclude certain one-time charges related to
the 1997 recapitalization and the change in management and operations.
Included in the one-time charges were $2.5 million related to severance and
hiring costs; $1.4 million in obsolete inventory reserves, included in cost
of sales; and $0.5 million in insurance related costs.
(g) Capital expenditures primarily represent the cost of new Petro Stopping
Centers and maintenance of existing Petro Stopping Centers. Capital
expenditures related to new Petro Stopping Centers were $13.8 million, $1.9
million, $7.3 million and $6.1 million for the years ended 1995, 1996, 1997
and 1998, respectively, and were $2.0 million and $3.1 million for the
first six months of 1998 and 1999, respectively.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Reporting Format
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which we adopted in 1998.
SFAS No. 131 requires us to identify and report certain information regarding
operating segments of our business. The two operating segments identified are
our company-operated truck stops and our franchise-operated truck stops.
Historically, our revenues at each of our Petro Stopping Centers were
recorded to reflect the following divisions: Diesel Fuel Island, Restaurant,
Petro:Lube and Travel and Convenience Stores. In the first quarter of 1997, the
presentation format for results of operations was changed to reflect revenues
from our Fuel, Non-Fuel and Restaurant divisions. We believe this presentation
allows the reader to focus more clearly on the major sources of revenues of our
business. We derive our revenues from (1) the sale of diesel and gasoline
fuels; (2) non-fuel items, including the sale of merchandise and offering of
services including truck tire sales and preventative maintenance, weighing
scales, showers, laundry, video games, franchise royalties and other
operations, and (3) restaurant operations which include Iron Skillet and
certain fast-food operations.
Our fuel revenues and cost of sales include federal and state motor fuel
taxes. Such taxes were $175.9 million for the year ended December 31, 1996,
$192.7 million for the year ended December 31, 1997, and $203.3 million for the
year ended December 31, 1998. Such taxes were $102.2 million for the six-month
period ended June 30, 1999 and $103.8 million for the six-month period ended
June 30, 1998.
No provision for income taxes is reflected in the financial statements
because we are a partnership for which taxable income and tax deductions are
passed through to the individual partners.
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Overview. Our net revenues of $322 million decreased 1.9% in the first six
months of 1999 from $328.1 million in the first six months of 1998. The
decrease is primarily due to a decrease of 4.8% in fuel revenues from the prior
year. Fuel revenues decreased as a result of a 3.5% decline from the prior year
in the retail selling price per gallon and a 1.3% decrease in fuel volume. The
decrease in fuel revenues was partially offset by a 6.8% increase in non-fuel
sales and a 3.0% increase in restaurant sales from the prior year. Operating
expenses increased 5.0% from the prior year due mainly to employee related
costs and system project costs. General and administrative expenses increased
4.0% to approximately $9.8 million compared to $9.4 million in the prior year.
This increase was principally due to employee related costs as a result of
filling previously unfilled positions. Although net revenues decreased from
prior year, our operating income increased 4.1% from the prior year, as a
result of our diversified income stream.
Fuel. Revenues decreased 4.8% to $224.9 million compared to $236.2 million
in 1998 primarily as a result of a 3.5% decline in average fuel prices during
the first six months of 1999 compared to the first six months in 1998 and to a
lesser extent, a 1.3% decline in fuel volumes. Management believes the
decreased volume is due primarily to state tax changes negatively effecting
volumes at two locations and increased competition at another location.
Additionally, during the period, several of our locations' diesel Fuel Islands
were at limited capacity due to the installation of new fuel dispenser
equipment. Gross margin on fuel was $19.0 million for the six months ended June
30, 1999, compared to $19.7 million for the prior year period due mainly to the
decrease in volume.
Non-Fuel. Revenues increased 6.8% overall to $70.1 million from $65.7
million in the prior year. The increase in non-fuel revenues is primarily due
to increased tire and repair part sales and sales at our retail
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stores. Gross margins increased 6.9% to $38.5 million from $36.0 million for
the six months ended June 30, 1999 compared to the prior year period.
Management believes the improved margins reflect the result of management's
continued focus on improving profitability in those areas.
Restaurant. Revenues of $27.0 million were 3.0% over prior year's revenues
of $26.2 million. Management believes revenues were enhanced by the
implementation of new menus and featured meal specials. Gross margins in the
restaurants improved by 2.6% due to continued focus on costs and the
implementation of menu changes.
Costs and Expenses. Total costs and expenses decreased 2.4% or $7.4 million
compared to prior year. Cost of sales decreased 3.3% or $8.3 million from the
prior year, primarily due to reduced fuel volumes and fuel costs experienced
primarily during the current period. Operating expenses increased $2.3 million,
or 5.0%, to $47.8 million. The increase is mainly due to employee related costs
and system project costs. General and administrative expenses increased
$347,000, or 3.7%, compared to total general and administrative expense of $9.4
million during the same period in the prior year. This increase was principally
due to employee related expenses as a result of filling previously unfilled
positions. These costs were offset by an $849,000 gain on the disposition of
location scale equipment as part of our strategy to focus on our core business,
which occurred during June 1999.
Other Income (Expense). Other income (expense) was impacted by approximately
$623,000 of expenses related to the Recapitalization and a $230,000 loss from
startup costs related to our investment in the Wheeler Ridge facility in
Southern California, which opened in June of 1999. Interest expense, net,
increased $38,000 to $10.0 million in the first six months of 1999 due
primarily to a decrease in interest income compared to the prior year.
Year ended December 31, 1998 Compared to Year ended December 31, 1997
Overview. Our net revenues decreased 4.7% to $653.4 million for the year
ended December 31, 1998. The decrease was due primarily to a 9.6% decrease in
fuel revenues from the prior year as a result of a 14.0% decline in the average
retail-selling price per fuel gallon from the prior year which was partially
offset by a 4.3% increase in fuel volumes. The decrease in fuel revenues was
partially offset by an 11.0% increase in non-fuel sales and a 7.5% increase in
restaurant sales from the prior year. Operating expenses increased 8.7% from
the prior year due mainly to employee related costs and the full year effects
of the addition of two new company-operated locations in 1997. General and
administrative expenses increased 13.5% to approximately $19.3 million from
$17.0 million for the same period in the prior year. This increase was
principally due to employee related expenses from the expanding operations and
system costs.
Fuel. Revenues decreased 9.6% to $464.0 million in 1998 from $513.6 million
in 1997. Fuel revenues decreased primarily due to lower pump prices stemming
from lower fuel costs compared to 1997. The decrease in fuel prices was offset
by a 4.3% increase in fuel volumes, which management believes, together with
improved pricing strategies, increased fuel margin dollars by 9.4% compared to
the prior year. On a comparable unit basis, fuel volumes increased 0.8% in 1998
compared to prior year and fuel margin dollars increased 5.8% in 1998 compared
to prior year. A Petro Stopping Center is considered a "comparable unit" as to
a particular period in the current year if it was open during the same period
of the prior year.
Non-Fuel. Revenues increased 11.0% to $136.1 million in 1998 from $122.6
million in 1997. On a comparable unit basis, sales increased 8.0% over the
prior year. The increase in non-fuel revenues is primarily due to increased
tire and repair part sales at our retail stores and the full year effects of
the addition of two new company-operated locations in 1997. Gross margins
increased 12.3% to $74.7 million in 1998 from $66.5 million in 1997.
Restaurant. Revenues increased 7.5% to $53.2 million in 1998 from $49.5
million in 1997. On a comparable unit basis, revenues increased 2.5% compared
to the prior year. Revenue increases were primarily due to the full year
effects of the two new locations added in 1997. Management believes revenues
were
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enhanced by the implementation of new menus and featured menu specials. Gross
margin in the restaurants improved by 8.9% overall and 4.0% on a comparable
unit basis, due to continued management focus on costs and implementation of
menu changes.
Costs and Expenses. Total costs and expenses decreased 5.4% to $627.7
million in 1998 from $663.7 million in 1997. On a comparable unit basis, total
costs and expenses decreased 8.6% in 1998 compared to the prior year. Costs of
sales decreased $47.2 million or 8.6% from the prior year primarily due to
lower fuel costs experienced during the current year. Operating expenses
increased $7.5 million or 8.7% to $93.0 million in 1998. The increase is mainly
due to employee related costs and the full year effects of our two new company-
operated locations added in 1997. General and administrative expenses increased
13.5% to approximately $19.3 million from $17.0 million in 1997. This increase
was principally due to employee related expenses from our expanding operations
and system costs.
Interest Expense, net. Interest expense decreased 1.2% to $20.0 million in
1998 compared to 1997. This decrease was due primarily to lower debt levels as
a result of principal payments and a 0.25% per annum decrease in interest rates
on term loans A and B under the senior credit facility in place before the New
Senior Credit Facility beginning March 31, 1998.
Extraordinary item. Extraordinary item in 1997 reflects a charge to earnings
of $12.7 million for the write-off of debt restructuring costs relating to the
1997 recapitalization.
Cumulative effect of a change in accounting principle. Cumulative effect of
a change in accounting principle in 1998 reflects the write-off of $3.3 million
of previously capitalizable costs. These costs, mainly incurred in prior years,
were related to start-up and organization costs, and as required by the
American Institute of Certified Public Accountants (AICPA) Statement of
Position (SOP) 98-5, were expensed upon adoption during the fourth quarter of
1998. Cumulative effect of a change in accounting principle in 1997 also
reflects the write-off of $1.6 million of costs previously allowed to be
capitalized. These costs are related to process reengineering activities and,
as required by Emerging Issues Task Force (EITF) Issue No. 97-13, were written
off during the fourth quarter of 1997.
Year ended December 31, 1997 Compared to Year ended December 31, 1996
Overview. Our net revenues increased $48.7 million or 7.6% to $685.7 million
for the year ended December 31, 1997. Revenues from comparable units
contributed 80.8% of the increase. The increase was due principally to a 10.1%
increase in fuel gallons and an increase of 10.1% in non-fuel sales and an
increase of 4.7% in restaurant sales from the prior year. The increases in
revenues were offset by product costs associated with higher levels of revenue
and higher general and administrative and operating expenses over the prior
year. General and administrative expenses increased 22.3% to approximately
$17.0 million from $13.9 million for the same period in the prior year. This
increase was principally due to an increase in certain employee expenses,
certain transition costs for new programs, and professional and travel related
expenses in the current year.
Fuel. Revenues increased 7.4% to $513.6 million in 1997 from $478.3 million
in 1996. Fuel revenues increased due to a 10.1% increase in fuel volumes. On a
comparable unit basis, fuel volumes increased 8.7%. Fuel costs were up in the
first quarter, but declined in the latter quarters. On a per gallon basis,
margins remained relatively flat compared to fuel margins in the prior year.
Non-Fuel. Revenues increased 10.1% to $122.6 million in 1997 from $111.4
million in 1996. On a comparable unit basis, sales increased 8.8%. Gross
margins increased 14.7% to $66.5 million in 1997 from $58.0 million in 1996.
This increase was due to improved cost management and lower margins in 1996 due
to establishment of inventory reserves.
Restaurant. Revenues increased 4.7% to $49.5 million in 1997 from $47.3
million in 1996. On a comparable unit basis, revenues increased 2.0%.
Management implemented certain menu changes designed to
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enhance revenues at our Iron Skillet Restaurants in the first quarter, which
contributed to the increased sales. Gross margin in the restaurants improved by
approximately 5.5% in total and approximately 2.9% on a comparable unit basis.
The improvement was due in part to management's focus on costs and
implementation of menu changes.
Costs and Expenses. Total costs and expenses increased 6.8% to $663.7
million in 1997 from $621.6 million in 1996. On a comparable unit basis, total
costs and expenses increased 5.0% in 1997. Costs of sales increased $35.2
million or 6.9% in 1997 from 1996. The increase was due to higher fuel and
product costs for both fuel and non-fuel revenue streams. Operating expenses
increased $4.0 million or 5.0% to $85.6 million in 1997. The increase was
primarily due to employee related expenses. General and administrative expenses
increased 22.3% to approximately $17.0 million from $13.9 million in the prior
year. This increase was principally due to an increase in certain employee
expenses, certain transition costs for new programs, and professional and
travel related expenses in the current year.
Interest Expense, net. Interest expense decreased $971,000 or 4.6% to $20.3
million in 1997 compared to 1996 due to lower interest rates combined with a
reduction in amortization of deferred debt issuance costs and higher interest
income from short term investments. These items were partially offset by a
higher level of debt outstanding.
Extraordinary item. Extraordinary item reflects a charge to earnings of
$12.7 million for the write-off of debt restructuring costs relating to the
1997 recapitalization.
Cumulative effect of a change in accounting principle. Cumulative effect of
a change in accounting principle reflects the write-off of $1.6 million of
costs, previously allowed to be capitalized. These costs are related to process
reengineering activities and, as required by Emerging Issues Task Force
(EITF) Issue No. 97- 13, were written off during the fourth quarter of 1997.
Liquidity and Capital Resources
Capital expenditures through the first six months totaled $8.0 million for
1998 and $9.6 million for 1999. Included in capital expenditures for both 1998
and 1999 were funds spent on new and existing facilities, in addition to
information systems projects.
We had negative working capital of $3.1 million at December 31, 1998 and
$7.8 million at June 30, 1999. Negative working capital is normal in the
truckstop industry. Diesel fuel inventory turns every two to three days, which
is significantly faster than payment is required. A substantial majority of our
sales are cash (or the equivalent in the case of credit card sales or sales
paid for by check on a daily basis by third-party billing companies).
During the quarter ended June 30, 1999, we made principal payments on our
Term Loan A of $1.0 million and our Term Loan B of $125,000, and made principal
payments of $2.0 million on our Term Loan A and $250,000 on our Term Loan B
during the six months ended June 30, 1999.
In accordance with the senior credit facility in place before the New Senior
Credit Facility, the interest rate we were required to pay on its Term Loans A
and B was reduced .25% per annum, effective March 31, 1998, due to our improved
leverage ratio.
At June 30, 1999, we had standby letters of credit issued for approximately
$2.4 million, resulting in availability of approximately $22.6 million on the
revolving senior credit loan. As of June 30, 1999, there were $1.4 million in
borrowings on the expansion loan and no borrowings on the revolving senior
credit loan under the senior credit facility in place before the New Senior
Credit Facility.
Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $1.0 million for the six months ended June 30, 1999. The
dividends are only payable in cash if permitted by our then existing debt
instruments. The Indenture, the Notes and the New Senior Credit Facility
restrict payment of dividends on mandatorily redeemable preferred partnership
interests.
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We, within certain limits, pay our own workers' compensation and general
liability claims. During the second quarter of 1999, we paid claims aggregating
$575,000 relating to workers' compensation and $604,000 relating to general
liability. On a year to date basis, we have paid $1.1 million on claims
relating to workers' compensation and $1.5 million relating to general
liability. We believe we have provided an accrual adequate to cover both
reported and incurred but not reported claims.
In addition to amounts expended during the first six months of 1999, we
currently expect to invest approximately $28.0 million during the remainder of
1999 and $55.0 million during the year ended 2000 on capital expenditures.
These amounts include regular maintenance and new site capital expenditures.
Management believes that internally generated funds, together with amounts
available under the New Senior Credit Facility, will be sufficient to satisfy
its cash requirements for operations through 1999 and the foreseeable future
thereafter. We also expect that current and future expansion and acquisitions
will be financed from funds generated from operations, the New Senior Credit
Facility and to the extent necessary, additional financing.
Impact of the Year 2000 Issue
We are aware of the complexity and the significance of the "Year 2000"
issue. The Year 2000 issue is a result of computer programs being written using
two digits, rather than four, to define the applicable year. Any of our systems
that utilize date-sensitive software may recognize a date using "00" as the
year 1900 rather than as the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Our sales, accounts receivable, inventory management, accounts payable,
general ledger, payroll and Electronic Data Interchange systems comprise our
critical IT systems. We have assessed our Year 2000 readiness with regard to
critical IT systems and are currently replacing, upgrading and testing our
computer systems and applications. We continue to assess and communicate with
the software vendors, hardware vendors, banks, utilities, fuel suppliers,
merchandise suppliers, customers, partners, franchisees, service contract
suppliers, and insurance companies with whom we do significant business to
determine the extent to which we are vulnerable to those third parties' failure
to remedy their own Year 2000 issues. We have received responses from a
majority of our suppliers, partners, franchisees and vendors surveyed of which
approximately 98% have indicated that they will be compliant by the end of
1999. We have received responses from a majority of our major customers of
which approximately 98% have indicated that they will be compliant by the end
of 1999. We have assumed non-responsive third parties will be non-compliant for
the purpose of risk assessment. We have received communications from our key
financial and insurance service providers indicating they are actively working
to resolve their Year 2000 service issues. We do not believe there has been or
will be a significant disruption of our business due to our Year 2000
remediation efforts. We are 90% complete regarding readiness testing to bring
all of our critical IT systems into Year 2000 readiness by October 1999.
Telecommunication and office automation systems that facilitate operations
of our locations and corporate headquarters, comprise our primary non-IT
systems. We have assessed 100% of the Year 2000 readiness of our non-IT systems
and have begun compliance testing to bring them into readiness by October 1999.
We are using a mixture of internal and external resources to address Year
2000 issues. The total costs of achieving Year 2000 readiness is estimated to
be approximately $9.0 million, which includes the costs of software upgrades
and replacements we are currently making. We incurred $5.7 million in costs
attributable to projects that address the Year 2000 issue through the second
quarter of 1999 and expect to incur $3.3 million in such costs in the remainder
of fiscal year 1999.
Although we have day-to-day operational contingency plans, management is in
the process of updating these plans for possible Year 2000 specific operational
requirements. To facilitate the completion of these plans, we have formed a
committee to handle business interruption scenarios with respect to the Year
2000 issue. We
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are completing our determination of business interruption scenarios as we
receive and analyze responses to our inquiries made of third parties. We are in
the process of establishing contingency plans for situations relating to the
Year 2000 issues that may arise in our dealings with key third parties and our
IT and non-IT systems. We anticipate completing such contingency plans by
October 1999. There can be no assurance that either we or our trading partners
will not experience Year 2000 readiness difficulties which could have a
material adverse effect on our business, results of operations and financial
condition. The costs and expenses associated with such failure are not
presently estimable.
Environmental
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Accrued liabilities are exclusive of claims against third
parties and are not discounted.
We are subject to contingencies pursuant to environmental laws and
regulations that in the future may require us to take action to correct the
effects on the environment of prior disposal practices or releases of chemical
or petroleum substances by us or other parties. We have accrued liabilities for
certain environmental remediation activities consistent with the policy set
forth in Note 2 to our Consolidated Financial Statements. At December 31, 1997,
such accrual amounted to approximately $187,000, and as of December 31, 1998,
such accrual amounted to approximately $274,000. At June 30, 1999 such accrual
amounted to approximately $161,000. In management's opinion, these accruals
were appropriate based on existing facts and circumstances. Under the most
adverse circumstances, however, this potential liability could be significantly
higher. In the event that future remediation expenditures are in excess of
amounts accrued, management does not anticipate that they will have a material
adverse effect on the consolidated financial position or results of operations
of Holdings. At June 30, 1999, we have recognized approximately $162,000 in the
consolidated balance sheet related to recoveries of certain remediation costs
from third parties.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allow a derivative's gain and loss to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133 was originally
effective for fiscal years beginning after June 15, 1999, but has been
postponed by Statement of Financial Accounting Standard No. 137, "An Amendment
of SFAS No. 133", for one year with a mandatory effective date for fiscal years
beginning after June 15, 2000. Additionally, SFAS 133 has been modified
regarding recognition in the balance sheet of an embedded derivative that is
required to be separated from the host contract. At the date of initial
application of SFAS 133, an entity may choose either to recognize such embedded
derivatives or to select either January 1, 1998 or January 1, 1999, as a
transition date for embedded derivatives. A company may also implement the
statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1999 and thereafter). A company may also
implement the statement as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1999 and thereafter).
SFAS No. 133 cannot be applied retroactively. Management has not yet quantified
the impact of adopting SFAS No. 133 on our financial statements and has not
determined the timing of, or method of, adoption. However, the implementation
of SFAS No. 133 could increase volatility in earnings.
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BUSINESS
We are one of the largest operators of full service truck stops in the
country and have a nationwide network of 29 company-operated and 22 franchised
locations in 29 states. Petro Stopping Centers are one-stop, multi-service
facilities. Open 24 hours a day, seven days a week, they offer a broad range of
products and services intended to address all of the personal and professional
needs of truck drivers. We were founded in 1975 and have built our reputation
by providing the "quality difference"-- a high level of customer service and
quality products delivered in a consistently clean and friendly environment.
Our primary customers are commercial trucking fleets and professional truck
drivers that comprise the long-haul sector of the trucking industry. We are a
privately owned company, controlled by affiliates of the Cardwell Group (J.A.
Cardwell, Sr., James A. Cardwell, Jr. and their affiliates), Mobil and Volvo
Trucks.
Petro Stopping Centers generally are built on fifteen to thirty acres
situated at a convenient location with easy interstate highway access. They can
accommodate 200 to 300 trucks and 100 to 175 cars or recreational vehicles in
spacious, well-lit and fenced parking lots, which are designed to provide good
traffic flow, reduce accidents, and enhance security for the drivers, their
trucks and freight. Within the Petro Stopping Center network, we offer
standardized and consistent products and services to accommodate the varied
needs of professional truck drivers and other motorists. These include separate
gas and diesel fueling islands, our award winning home-style "Iron Skillet"
restaurants, truck preventative maintenance and repair services, and travel and
convenience stores offering an array of merchandise selected to cater to
professional truck drivers' needs during long periods away from home.
Additionally, we provide amenities such as telephone, fax, photocopying,
computer, other communication services and postal services. Petro Stopping
Centers also offer certified truck weighing scales, truck washes, laundry
facilities, private showers, game, television and movie rooms, barbershops, and
at some sites, exercise facilities and medical services.
Petro Stopping Centers
Of our 29 company-operated Petro Stopping Centers, 26 are full-size
locations and three are Petro:2 Centers ("Petro:2 Centers"). All of the
company-operated Petro Stopping Centers are owned by us except for the Wheeler
Ridge, California facility which is jointly-owned with Tejon Development
Corporation. Of our 22 franchised facilities, seventeen are full-service
locations and five are Petro:2 Centers. Petro:2 Centers provide the same basic
fuel and non-fuel services as full-sized Petro Stopping Centers, but on a
smaller scale and with fewer amenities.
Fuel
Each Petro Stopping Center has a diesel fuel island, which is a self-service
facility for professional drivers and typically consists of eight to sixteen
fueling lanes. The fuel dispensers are computer driven, high speed units. Each
fueling lane permits simultaneous fueling of each of a truck's two tanks.
Pursuant to our strategic alliance with Mobil, we sell Mobil branded diesel
fuel at all of the company-operated diesel fuel islands. All diesel fuel
islands and dispensers we operate carry signage with both the "Petro" and
"Mobil" brand names.
In addition to the diesel fuel island for professional drivers, gasoline and
automobile diesel fuel are sold from a separate auto fuel island at 28 of our
29 company-operated locations. The auto fuel islands are accessed by separate
"auto-only" entrances, which help to separate auto and truck traffic at the
facility. The typical auto fuel island is equipped with four to six fuel
dispensers for convenient and efficient fueling.
Non-fuel
In 1983 we opened our first Petro:Lube facility to provide "while-you-wait"
preventive maintenance service for trucks. Since that time, Petro:Lubes have
been introduced at all but one of our company-operated
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Petro Stopping Centers. In addition to Petro Stopping Center locations, we
opened a stand-alone Petro:Lube in 1996. Petro:Lube facilities offer oil,
filter and lubrication services, new, used and retread tires, as well as tire
and other minor repairs. We believe we were the first truck stop chain to offer
these types of services to truckers on an express basis.
Each Petro:Lube sells a number of high-quality brands such as: Mobil Delvac,
and Chevron Delo heavy duty motor oils and Kelly, Bridgestone, Michelin and
Firestone tires. Petro:Lubes primarily feature Mobil's Delvac brand lubricants
as part of our marketing strategy with Mobil. See "Certain Relationships and
Related Transactions." Each Petro:Lube honors manufacturers' warranties as well
as our warranties for work performed at any Petro:Lube throughout the country.
Petro:Lube services are primarily utilized by owner/operators and small fleets,
but we believe that larger fleets are increasingly looking to outsource their
maintenance needs.
To attract the business of drivers seeking a quick refueling stop, each
diesel fuel island includes a "mini-mart" offering an array of deli take-out
food, snack foods, beverages, toiletries and a basic selection of trucker
accessories and supplies. In addition, other services (including certified
scales, check cashing, permit services, faxing and copying) are available at
the fuel islands. These facilities enable the driver seeking a quick refueling
stop to purchase consumables and services while refueling.
Each Petro Stopping Center also includes a "Travel Store," located in the
main facility away from the fueling islands. Travel Stores feature merchandise
specifically selected to cater to a professional truck driver's shopping needs
during the long periods typically spent away from home. Merchandise categories
include food items, clothing, electronics such as televisions, mobile satellite
dishes, VCR's and CB radios as well as toiletries, gifts and truck accessories
such as cables, fuses, reflectors and antennae. A Travel Store typically
carries approximately 7,500 SKUs and averages 1,900 square feet of selling
space.
To meet the personal and business needs of commercial drivers and other
motorists, we provide numerous additional services at the main facility of our
Petro Stopping Centers. At the typical Petro Stopping Center, customers have
access to telephone, internet, money wire services, fax and other
communications services at our facilities, overnight express drop boxes and
ATMs. In addition, customers may receive their paychecks and cash advances. At
most locations, professional drivers have convenient on-site access to a
certified truck weighing scale and a truck wash operated by a third-party that
leases part of a Petro Stopping Center to provide this service. For a driver's
comfort and relaxation, Petro Stopping Centers provide laundry facilities, game
rooms, television viewing rooms and, at certain Petro Stopping Centers, movie
rooms. We also lease retail space at our Petro Stopping Centers to independent
merchants.
Each full-size Petro Stopping Center features twelve to eighteen private
shower facilities. The showers are fully tiled for easy maintenance and are
professionally cleaned after each use. Each shower room is equipped with a lock
to provide privacy and security.
Since June 1993, the Petro Stopping Centers located in Hammond and
Shreveport, Louisiana, have featured video poker operations. The primary
customers for these activities are local area residents. The video poker
operations at each of these sites feature 50 machines and are conducted in a
stand-alone building, separated from other facilities. A third-party operator
manages the video poker operations and incurs substantially all related
expenses while paying a portion of each machine's "winnings" to us. During
1996, the State of Louisiana enacted a statute requiring the cessation of video
poker operations unless the parish in which the operations were conducted voted
to allow the continued operations of video poker machines. On November 5, 1996,
the parish in which the Shreveport facility is located voted to continue to
allow video poker operations, while the parish in which the Hammond facility is
located voted to disallow video poker operations. Therefore, we were required
to phase out video poker operations at the Hammond facility at the end of
June 1999.
Restaurants
Each full-size Petro Stopping Center includes our trademarked "Iron Skillet"
restaurant. This home-style, sit down restaurant typically seats approximately
180 customers, and features counter and wait service, a soup
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and salad bar and three "All-You-Can-Eat" buffets per day. The Iron Skillet
prides itself on "home cooked" items prepared fresh at each location. Recipes
developed at our test kitchen in El Paso are accessible from each location by
computer.
Iron Skillet restaurants are open 24 hours per day, 365 days per year and
have "drivers only" sections, which are preferred by drivers who like to
socialize and exchange information with other drivers at our restaurants.
Public telephones are generally available throughout the dining area for
customer convenience.
We have introduced nationally branded fast food concepts at nine of our
locations. We currently operate, under franchise agreements, one Wendy's, three
Baskin-Robbins, two Blimpie Subs & Salads and six Pizza Hut Express units and
plan to selectively expand our fast food program during the next several years.
In addition, we have introduced our own branded deli program in certain Petro
Stopping Centers known as "The Filling Station." At June 30, 1999, we had nine
locations that offered Filling Stations and plan to expand the concept in the
future.
Competition
The U.S. truck stop industry is large and highly fragmented. According to
industry data, which is limited, there are approximately 2,000 truck stops
located on interstate highways. Management believes that approximately 25% are
operated by five major national or regional truck stop chains, of which we are
one. Long-haul trucks can obtain diesel fuel from a wide variety of sources,
including their own fueling terminals, chains of large, high-quality truck
stops, limited service fueling facilities and some large service stations.
Moreover, some long haul truck fleets have their truck maintenance performed at
dedicated fleet garages. We believe that, while we compete with all truck
stops, our principal competitors are increasingly large, multi-service truck
stop chains. Certain of our principal competitors have substantially greater
financial and marketing resources than we do.
While we price our diesel fuel competitively, we believe our larger sites
with more amenities offer a competitive advantage. A number of other large,
multi-service truck stop chains build somewhat smaller and less expensive
facilities, emphasizing low-priced diesel fuel and fast food restaurants. Many
of the other truck stop chains employ discount pricing of diesel fuel to
compete. At the same time, increased competition and consolidation among
trucking companies in recent years have increased truck fleet owners' focus on
reducing their operating costs. This trend has put increased pressure on diesel
fuel margins for us and our competitors. In addition, from time to time, we are
subject to intense price competition in some of our markets. Given that
approximately two out of every three stops made by a trucker is for a reason
other than the purchase of fuel, we believe that the variety of non-fuel
services and products we offer will continue to attract professional truck
driver business and provide us a competitive advantage in spite of continued
fuel pricing competition.
Fuel and Lubricant Suppliers
As part of the Recapitalization, we terminated our existing fuel and
lubricant supply agreements and entered into new ten-year supply agreements
with Mobil Oil Corporation pursuant to which Mobil Oil Corporation will supply
the company-operated Petro Stopping Centers' diesel fuel requirements as well
as a portion of their lubricant and gasoline requirements. The diesel fuel sold
at all of our company-operated and some of our franchise operated Petro
Stopping Centers is branded Mobil Diesel, and all of our company-operated
Petro:Lubes feature Mobil Delvac lubricants. Under the new fuel supply
agreement and the agreement for the resale of oils and greases with Mobil Oil
Corporation, both dated July 23, 1999 (collectively, the "Mobil Supply
Agreements") we agreed to purchase Mobil branded lubricant products and Mobil
branded diesel fuel for sale and distribution under Mobil's trademarks at our
company-operated and some of our franchise operated truck stops and Mobil
branded gasoline for sites as selected by Mobil, subject however, to existing
contractual obligations to purchase gasoline from other suppliers. The Mobil
Supply Agreements require that we purchase from Mobil-specified distribution
terminals, a minimum number of gallons of diesel fuel on an annual basis,
subject to product availability and reductions by Mobil Oil Corporation under
certain
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<PAGE>
described circumstances. If we do not purchase any diesel fuel from Mobil Oil
Corporation under our Mobil Supply Agreements, our maximum penalty in any year
would be $0.0035 per gallon multiplied by the annual volume commitment as
provided for in the Mobil Supply Agreements plus additional amounts for each
new Petro Stopping Center we open and which Mobil Oil Corporation agrees to
supply. As a result of the Mobil Supply Agreements and to comply with the laws
governing the branding of diesel fuel, if Mobil Oil Corporation is unable to
supply 100% of our diesel fuel demand due to limited product availability,
Mobil Diesel Supply Corporation ("MDS"), a wholly-owned subsidiary of Mobil Oil
Corporation, purchases additional diesel fuel from third-party suppliers and
then sells it to us. Under the terms of the Mobil Supply Agreements, we
negotiate with such third parties regarding price and other terms, and then
designate them to MDS. Our fuel purchase arrangement with MDS enables us to
meet our diesel fuel needs and to comply with branding laws, which require
Mobil to first take possession of the fuel before it can be branded as Mobil
Diesel.
The Mobil Supply Agreements allow us to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by MDS. If we are
able to obtain a lower diesel fuel price from a third-party supplier in a
particular market area, we may request that Mobil meet such lower price or
allow a portion of our diesel fuel requirements to be supplied from such MDS-
approved third-party supplier, in which case MDS would purchase the diesel fuel
from the supplier and resell the product to us. Any change in supply source,
other than a change resulting from Mobil's inability to supply, does not affect
our requirement to purchase the annual minimum number of gallons from Mobil-
specified distribution terminals fixed by the Mobil Supply Agreements. The
Mobil Supply Agreements also place a monthly limit on the maximum number of
gallons of diesel fuel and gasoline that we may lift from Mobil-specified
distribution terminals. Prices to be charged for fuel sold to us under the
Mobil Supply Agreements are based on certain referenced prices minus discounts
and plus delivery costs. See "Certain Relationships and Related Transactions."
Upon the expiration of the ten year initial term, the Mobil Supply Agreements
are renewable for another five year term at the option of Mobil, subject to our
ability to terminate the agreements at the end of such ten year term at a price
based on a formula set forth in the Mobil Supply Agreements.
We purchase diesel fuel for each of our company-operated Petro Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1998, we purchased 100% of our diesel fuel through
MDS, approximately 64.4% of which was third-party fuel purchased through this
arrangement.
Trademarks and Service Marks
We are the owner in the United States of various registered trademarks and
service marks, including "Petro Stopping Centers," "Petro:Lube," "Iron Skillet"
and "Petro:2." We grant franchisees the non-exclusive right to use these
proprietary marks at franchised locations. We regard our trademarks and service
marks as valuable assets and believe that they have significant value in the
marketing of our products and services. We also have several applications to
register trademarks and service marks currently pending in the United States
Patent and Trademark Office ("PTO").
Governmental Regulation
Environmental Regulation
Our operations and property are subject to extensive federal and state laws,
regulations and requirements relating to environmental matters. We use
underground and above ground storage tanks (each a "UST") to store petroleum
products and waste oils. Statutory and regulatory requirements for UST systems
include requirements for tank construction, integrity testing, leak detection
and monitoring, overfill and spill control, and mandate corrective action in
case of a release from a UST into the environment. We are also subject to
regulation in certain locations relating to vapor recovery and discharges into
the water. During 1998, we continued the installation of cathodic protection
and overfill equipment and devices in our older USTs, as required by federal
and state law, and all such work was completed in December 1998, except in the
Corning,
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California location, where completion of the state-required upgrades is ongoing
pursuant to an agreement between the State of California and the Operating
Partnership. The Corning, California work is contemplated to be completed
during the third quarter of 1999, and we expect to expend $940,000 during 1999
in connection with such work. Some site remediation will be required in
Corning, California as a result of completion of the 1998 upgrade work. Upon
completion of the work at the Corning site, management believes that all of our
USTs will be in compliance in all material respects with applicable
environmental laws, regulations and requirements. Our expenditures for
environmental matters were $180,000 in 1996, $154,000 in 1997 and $385,000 in
1998. See Note 2 to our Consolidated Financial Statements for the year ended
December 31, 1998 for a discussion of our accounting policies relating to
environmental matters.
In connection with our ownership of the properties and the operation of our
business, we may be subject to liability under various federal, state, and
local environmental laws, ordinances and regulations relating to cleanup and
removal of hazardous substances (which may include petroleum and petroleum
products) on, under or in such property. Certain laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Persons who arrange, or are
deemed to have arranged, for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment site, regardless of whether such site
is owned or operated by such person.
We are currently party to one proceeding with the EPA regarding a waste oil
storage and recycling plant located in Patterson, Stanislaus County, California
(the "Patterson Site"). In the ordinary course of our operations, waste oil
products are generated which are required to be transported to off-site
facilities for treatment and disposal. Between June 1991 and February 1995 we
arranged for the transportation of waste oil products from the Corning location
to the Patterson Site. Sometime in 1997 the owners of the Patterson Site
abandoned operation of the site, the condition of the site began to
deteriorate, and in October 1997 the EPA responded to a request for assistance
from the California Department of Toxic Substances Control. Notwithstanding
that our activities with regards to use of the Patterson Site were lawfully
conducted and have not been challenged by the EPA, by Order issued by the EPA
on August 12, 1998 ("Order"), we and 55 other companies were identified by the
EPA as "generators, transporters or arrangers for disposal of hazardous
substances" as those terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C., Sections 9601 to
9675, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), and thus are named in the Order as potentially responsible parties,
strictly liable under CERCLA for removal activities associated with the
Patterson Site. We and approximately 20 of the other 55 companies identified by
the EPA are working together towards a resolution and plan of action for
completion of the removal activities required by the EPA pursuant to the Order.
We do not believe that our involvement in the Patterson Site will have a
material adverse effect on our consolidated financial condition or results of
operation. See Note 15 to our Consolidated Financial Statements for the year
ended December 31, 1998.
We are defendants in two lawsuits brought by adjoining land owners alleging
damage to their property resulting from the discharge of sewage and other run-
off at one of our Petro Stopping Centers. We do not believe that our
involvement in these matters will have a material adverse effect on our
consolidated financial condition or results of operation.
Where required or believed by us to be warranted, we take action at our
locations to correct the effects on the environment of prior disposal practices
or releases of chemical or petroleum substances by us or other parties. In
light of our business and the quantity of petroleum products that we handle,
there can be no assurance that hazardous substance contamination does not exist
or that material liability will not be imposed in the future.
Other Regulations
We are also subject to local licensing ordinances. The issuance of permits
for service station and lubrication operations is generally a matter of
discretion and is subject to the underlying requirement that the
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<PAGE>
granting of the permit be consistent with the health, safety and moral welfare
of the community. Although we believe that careful planning and site selection
reduces the likelihood of significant zoning opposition, significant opposition
to the construction of a Petro Stopping Center, if encountered, may cause us to
incur substantial expenses and delay.
Our restaurant operations are subject to federal, state and local
regulations concerning health standards, sanitation, fire and general safety,
noncompliance with which could result in temporary or permanent curtailment or
termination of a restaurant's operations. In addition, difficulties in
obtaining the required licensing or approvals could result in delays or
cancellations in the openings of new restaurant facilities.
In addition, our video poker operations are subject to oversight at the
state and local level. During 1996, the State of Louisiana enacted a statute
requiring the cessation of video poker operations unless the parish in which
the operations were conducted voted to allow the continued operations of video
poker machines. On November 5, 1996, the parish in which the Shreveport
facility is located voted to continue to allow video poker operations, while
the parish in which the Hammond facility is located voted to disallow video
poker operations. Therefore, we were required to phase out video poker
operations at the Hammond facility at the end of June 1999. We are, in
accordance with normal procedure, in the process of applying to the Louisiana
authorities for a 1999/2000 license for the Shreveport facility.
As a franchisor we are also subject to federal and state regulation in the
states in which we offer franchises or where franchised Petro Stopping Centers
are currently operating. Federal regulations require that we provide each
prospective franchisee with a disclosure document that provides information
regarding the Operating Partnership and the relevant provisions of the
franchise agreement and other ancillary contracts. In addition, certain state
regulations require that the franchisor be registered or be exempt from the
applicable registration requirements. Federal and state franchising laws
prohibit certain "deceptive trade practices" and, in some cases, impose
fairness and "anti-discrimination" standards on us.
In addition to the franchise regulations outlined immediately above, our
operations are subject to the Petroleum Marketing Practices Act ("PMPA"). PMPA
is a federal law that prohibits a franchisor engaged in the sale, consignment
or distribution of refiner-branded motor fuels from terminating or failing to
renew a "franchise" or "franchise relationship," except on specified grounds
and only after compliance with the statute's notification provisions. PMPA
expressly preempts state law concerning the termination, nonrenewal and notice
thereof with respect to motor fuel franchises. PMPA is enforced judicially
through cases interpreting the statute.
We are considered a franchisor under the PMPA because we distribute and sell
diesel fuel and gasoline under Mobil's trademarks to our franchisees. Thus, we
are subject, as a franchisor, to PMPA's termination, nonrenewal and notice
requirements in each of our individual motor fuel contracts with our
franchisees. At the same time, we are entitled to PMPA's protections in our
branded supply agreements with Mobil, as well as other branded suppliers. At
June 30, 1999, we are not party to any PMPA litigation.
Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While we believe our facilities are in
compliance with these requirements, a determination that we are not in
compliance with the ADA could result in the imposition of fines or an award of
damages, which could adversely affect us.
We believe that all of our Petro Stopping Centers are in compliance in all
material respects with existing laws and regulations. However, new laws and
regulations could require us to incur significant additional costs.
Employees
As of June 30, 1999, we had a total of 4,056 employees, of which 3,819 were
full-time and 237 were part time. At that date, 588 of our employees were
salaried and performed executive, management, or administrative functions and
the remaining 3,468 employees were hourly employees. Almost 96% of our
employees worked at the Petro Stopping Centers and most employees at the Petro
Stopping Centers work on an hourly basis.
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We have never had a work stoppage. We believe that we provide working
conditions, wages and benefits that are competitive with other providers of the
kinds of products and services offered by us. We believe that our relations
with our employees are good.
Properties
Our corporate headquarters is located in a three-story building in El Paso,
Texas, which contains approximately 30,000 square feet of space. We lease the
entire building from a member of the Cardwell Group. See "Certain Relationships
and Related Transactions."
We own the underlying land and all facilities at 24 of our 29 company-
operated Petro Stopping Centers, own all but four acres of the West Memphis
Stopping Center site, own the facility and lease the land at the Hammond,
Louisiana site and lease both the Effingham, Illinois and North Baltimore, Ohio
Petro Stopping Center sites in their entirety. The Petro Stopping Center
located in Effingham, Illinois, is leased from an entity owned by current and
former employees of the Operating Partnership. See "Certain Relationships and
Related Transactions."
In 1998, we purchased land in Mebane, North Carolina and Glendale, Kentucky
for the future construction of two new Petro Stopping Centers. In 1998 we also
entered into a ground lease in Jackson, Mississippi on which to build a new
Petro Stopping Center. We also own a site in Green River, Wyoming which is
suitable for the construction of a new Petro Stopping Center. We have options,
which expire in December 2006, to purchase vacant land owned by the Cardwell
Group that is located adjacent to four existing Stopping Centers: Shreveport,
Louisiana (seven acres); Weatherford, Texas (thirty-four acres); Beaumont,
Texas (seventeen acres); and Oklahoma City, Oklahoma (thirty acres). See
"Certain Relationships and Related Transactions."
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The following table outlines the company-operated Petro Stopping Centers at
June 30, 1999:
<TABLE>
<CAPTION>
Size of Main
Petro Stopping Total Location Building
Location Date Opened Center Acreage Acreage (Sq. Ft.)
-------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
El Paso, Texas.......... April 1975 31 51 20,000
Weatherford, Texas...... September 1977 25 25 21,000
Beaumont, Texas......... May 1981 20 20 13,500
San Antonio, Texas...... September 1982 21 21 13,200
Eloy/Casa Grande,
Arizona................ June 1984 23 36 12,300
Corning, California..... May 1985 18 18 12,300
Amarillo, Texas......... June 1985 20 32 17,300
Shreveport, Louisiana... November 1985 18 21 13,800
Hammond, Louisiana...... January 1986 16 21 12,300
West Memphis, Arkansas.. August 1986 24 63 15,700
Milan, New Mexico....... November 1986 23 30 13,800
Knoxville, Tennessee.... March 1987 25 25 13,800
Kingman, Arizona........ December 1987 38 67 18,200
Oklahoma City,
Oklahoma............... May 1988 30 30 14,600
Perrysburg/Toledo,
Ohio................... August 1988 33 74 20,000
Kingdom City, Missouri.. February 1989 25 35 20,500
Bucksville, Alabama..... February 1990 48 51 14,400
Girard/Youngstown,
Ohio................... May 1990 29 98 20,000
Vinton, Texas........... January 1991 8 19 4,800
Effingham, Illinois..... March 1991 30 30 20,000
Kingston Springs,
Tennessee.............. September 1991 9 12 6,900
Shorter, Alabama........ September 1991 9 9 12,700
Atlanta, Georgia........ March 1992 64 69 21,500
Laramie, Wyoming........ October 1993 35 50 15,500
Medford, Oregon......... January 1995 15 15 11,500
Ocala, Florida.......... June 1995 37 170 20,500
North Baltimore, Ohio... August 1997 17 40 29,000
North Little Rock,
Arkansas............... September 1997 17 24 16,000
Wheeler Ridge,
California (1)......... June 1999 51 76 27,900
</TABLE>
- --------
(1) The Wheeler Ridge facility is company-operated and jointly-owned with Tejon
Development Corporation ("Tejon"). See, "Agreement with Tejon."
We also have under construction new Petro Stopping Centers in Jackson,
Mississippi and Mebane, North Carolina.
Franchises
Each existing franchise agreement grants to the franchisee the right and
license to operate a Petro Stopping Center in a specified territory. The
franchise agreements require that the franchisee, at its expense, build and
operate the Petro Stopping Center in accordance with certain requirements,
standards and specifications prescribed by us, including site approval, and
that the franchisee purchase certain products from suppliers approved by us.
We, in turn, are obligated to provide the franchisee with, among other things,
advisory assistance with the operation of the Petro Stopping Center and
advertising and promotional programs.
The agreements require the franchisee to pay us, in addition to certain
initial fees and training fees, a monthly royalty fee and a monthly advertising
fee (administered through an advertising fund for national and regional
advertising). In some instances, we may waive our contractual right to receive
royalties with respect to
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a particular location for short periods of time. During 1998, our revenues from
our 21 franchise locations totaled $4.5 million. In addition, franchisees
contributed $401,000 to the advertising programs.
While a majority of diesel purchases at Petro Stopping Centers are paid for
by third-party billing companies, a portion of diesel fuel purchases are paid
for through direct billing arrangements with particular trucking companies. As
provided in the franchise agreements, we purchase all of the receivables
generated by the franchisees from customers using direct billing arrangements.
These purchases are on a non-recourse basis to the franchisee.
In addition, upon termination or expiration of the franchise agreement in
the event that the franchisee wishes to accept an offer from a third-party to
purchase its facility, each franchise agreement grants us a right of first
refusal to purchase the facility, at the price offered by the third party.
Similarly, in fourteen cases, we have the right to purchase the franchise for
fair market value, as determined by the parties or an independent appraiser,
upon termination or expiration of the franchise agreement.
All franchises are operated under franchise agreements which, with the
exception of one, are for an initial ten-year term and are automatically
renewed for two consecutive five-year terms subject to the satisfaction of
certain conditions, unless the franchisee gives a termination notice at least
twelve months prior to the expiration thereof. As of June 30, 1999, we had 22
franchise locations open and operating in the following markets:
<TABLE>
<CAPTION>
Expiration of
Location Date Opened Initial Franchise Term
-------- ----------- ----------------------
<S> <C> <C>
Elkton, Maryland.......................... Sept. 1985 Sept. 1995(a)
Ft. Chiswell, Virginia.................... Mar. 1986 Mar. 1996(a)
Portage, Wisconsin (b).................... Sept. 1986 Dec. 2001
Joplin, Missouri.......................... Oct. 1987 Oct. 1997(a)
Lake Station, Indiana..................... Oct. 1987 Oct. 1997(a)
Ruther Glen, Virginia..................... Mar. 1988 Mar. 1998(a)
Benton Harbor, Michigan................... July 1989 July 1999(a)
New Paris, Ohio........................... Oct. 1989 Oct. 1999
Salina, Kansas............................ Feb. 1990 Feb. 2000
Jerome/Twin Falls, Idaho.................. Dec. 1990 Dec. 2000
Florence, South Carolina.................. Feb. 1991 Feb. 2001
Rochelle, Illinois........................ Apr. 1992 Apr. 2002
Fargo North Dakota........................ Nov. 1994 Nov. 2004
Carnesville, Georgia...................... Jan. 1995 Jan. 2005
Bordentown, New Jersey.................... Jan. 1996 Jan. 2006
York, Nebraska............................ Dec. 1996 Dec. 2006
Dupont, Pennsylvania...................... May 1997 May 2007
Claysville, Pennsylvania.................. Nov. 1997 Nov. 2007
Breezewood, Pennsylvania.................. Feb. 1998 Feb. 2008
Milton, Pennsylvania...................... Mar. 1998 Mar. 2008
Monee, Illinois........................... April 1998 April 2008
Lowell, Indiana........................... April 1999 April 2009
</TABLE>
- --------
(a) The initial ten year term provided for in six of our oldest franchise
agreements has elapsed. Under the terms of these agreements, unless written
notice of termination is received from the franchisee twelve months prior
to the tenth anniversary date of the opening of the franchise location, the
franchise is automatically renewed for five additional years. No notices of
termination were received from the affected franchisees. By agreement with
the affected franchisees, execution of a renewal franchise agreement was
delayed pending completion of the revised form franchise agreement. The
revised franchise agreement has now been given to these franchisees for
execution and each franchisee has been given the choice to either enter
into the new agreement or remain as franchisees under the terms of their
existing agreement.
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<PAGE>
(b) The franchise agreement for the Portage, Wisconsin location has been
amended so that its initial term is approximately fifteen years (expiring
in December 2001). The agreement provides for only one five-year renewal.
Two franchisees operate four locations, one operates three locations, one
operates two locations, and nine operate one location each. All of the
franchisees are unaffiliated with us, except Highway Service Ventures, Inc.,
which operates four of our franchised locations. See "Certain Relationships and
Related Transactions." In addition to our currently operational 22 franchise
locations, we have signed an agreement for an additional franchise location in
Frederick, Maryland, which is in the final stages of construction.
Agreement with Tejon
We have entered into an operating agreement and formed a limited liability
corporation (the "LLC") with Tejon to build and operate a Petro Stopping Center
branded location in southern California. Pursuant to the terms of the Limited
Liability Company Operating Agreement of Petro Travel Plaza LLC, dated as of
December 5, 1997, among the Operating Partnership, Tejon and Tejon Ranch
Company, as guarantor, we made an initial capital contribution for working
capital and inventory. The agreement contemplates that we and Tejon will
jointly finance construction of the location with a non-recourse credit
facility. Under the agreement, we will receive an administrative fee of
$250,000 per annum and as a 40% member in the limited liability company, will
receive 40% of the location's operating earnings. This location opened in June
1999.
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MANAGEMENT
The following sets forth certain information with respect to the persons who
are members of the Board of Directors and senior management team of Holdings,
Financial Holdings and the Operating Partnership as of September 1, 1999.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
J.A. Cardwell, Sr. ...... 67 Chairman(a), President, Chief Executive
Officer(a), Member of the Executive Committee(a)
and Director
Evan C. Brudahl.......... 44 Senior Vice President of Operations(a)
James A. Cardwell, Jr. .. 39 Senior Vice President of Marketing and Business
Development(a) and Director
Travis R. Roberts........ 63 Vice President of Real Estate Acquisitions(a)
Nancy C. Santana......... 43 Vice President and General Counsel(a) and
Secretary
David Latimer............ 41 Vice President of Petro:Lube(a)
David A. Appleby......... 32 Vice President of Finance, Treasurer and
Assistant Secretary(a)
Nancy B. Carlson......... 43 Director
Kevin T. Weir............ 42 Director and Member of the Audit Committee and
Executive Committee(a)
Larry J. Zine............ 44 Director
Robert Grussing IV....... 41 Director
Martha P. Boyd........... 37 Director
</TABLE>
- --------
(a) Position held only with the Operating Partnership.
J.A. Cardwell, Sr.--J.A. Cardwell, Sr. opened the first Petro Stopping
Center in 1975 and has been serving as our Chairman and Chief Executive Officer
since May 1992. J.A. Cardwell, Sr. has responsibility for our overall
performance, defining our image in the marketplace, identifying growth
opportunities and overseeing employee and customer retention. He served as the
Chairman of the National Association of Truck Stop Operators ("NATSO") in 1983
and 1984 and has worked on various committees of NATSO since that time. He
currently serves as a trustee for Archstone Communities and as a director of El
Paso Electric Company (both publicly traded companies). J.A. Cardwell, Sr. is
the father of James A. Cardwell, Jr.
Evan C. Brudahl--Evan Brudahl is the Senior Vice President of Operations and
is acting as our interim Chief Operating Officer while we complete our search
for a new President and Chief Financial Officer. Mr. Brudahl is responsible for
our operations, overseeing engineering, fuel purchasing and transportation,
franchise operations and the Diesel Fuel Island, Travel and Convenience Stores
and Petro:Lube operations. Mr. Brudahl worked for Mobil Corporation for 21
years holding various management positions. Mr. Brudahl worked for us on
secondment from Mobil Corporation from January 1997 until March 31, 1999, when
he became our employee. From January 1997 to March 31, 1999, while Mr. Brudahl
was still an employee of Mobil Corporation, he served as Mobil's representative
on the Board of Directors, but resigned from the Board when he became our
employee.
James A. Cardwell, Jr.--James A. Cardwell, Jr. is Senior Vice President of
the Marketing and Business Development, responsible for marketing fleet
business and the Iron Skillet and branded fast food operations. Mr. Cardwell
has been involved with the Operating Partnership full time for 15 years and has
held various positions including operations management as Vice President of
Operations from 1986 to 1992. Prior to his current position, he served as Vice
President of National Sales and Promotions from June 1993 to January 1997 and
as Senior Vice President of Operations and Marketing during 1997 and early
1998. James A. Cardwell, Jr. is the son of J.A. Cardwell, Sr.
Travis R. Roberts--Travis Roberts is Vice President of Real Estate
Acquisitions. Mr. Roberts oversees new site selections. Mr. Roberts has been
involved with the Operating Partnership since 1975 and prior to his current
position, he served as Vice President of Engineering from 1992 to 1998.
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<PAGE>
Nancy C. Santana--Nancy Santana joined the Operating Partnership effective
July 1, 1998 in the capacity of Vice President, Secretary and General Counsel,
after a sixteen year legal career in private practice. Prior to joining us, Ms.
Santana was the Chairman of the Real Estate, Banking and Lending section at
Kemp, Smith, Duncan & Hammond, P.C., in El Paso, Texas. Ms. Santana is
responsible for coordination of all our legal matters, real estate acquisitions
and risk management.
David Latimer--David Latimer joined the Operating Partnership in 1983, and
has been serving as Vice President of Petro:Lube since April 1995. Mr. Latimer
also serves as our representative to the National Tire Dealers and Retreaders
Association and The Maintenance Council.
David A. Appleby--David Appleby has been the Vice President of Finance and
Treasurer since March 1999 and is responsible for all accounting, finance,
treasury and credit operations. Prior to assuming this position, Mr. Appleby
was the Controller for the Operating Partnership, a position he had held since
February 1998. Prior to his position with the Operating Partnership, Mr.
Appleby was a Senior Audit Manager with KPMG Peat Marwick, LLP from 1991 to
1998.
Nancy B. Carlson--Nancy Carlson has been a director of the Operating
Partnership since May 1999. Ms. Carlson currently serves as the Manager of the
Automotive Lubricant Business for Mobil's North American business. Prior to her
current position, she served as the Global Brand Manager for Mobil Corporation.
Prior to these positions, Ms. Carlson held several marketing positions within
North America's Marketing and Refining division. Ms. Carlson has been an
employee of Mobil Corporation for 20 years.
Kevin T. Weir--Kevin Weir has been a director of the Operating Partnership
since January 1999. Mr. Weir currently serves as Manager of the North American
Distillate Business for Mobil Oil Corporation Prior to his current position at
Mobil Corporation, he served as Retail Dealer Operations Manager and Surface
Transportation Manager of Mobil Oil Corporation's North America Marketing and
Refining division. Mr. Weir has been an employee of Mobil Corporation for 20
years.
Larry J. Zine--Larry Zine was hired in December 1996 as Executive Vice
President and Chief Financial Officer of the Operating Partnership. In January
1999, Larry Zine was elected President and a member of the Board of Directors
of the Operating Partnership and became responsible for all finance,
accounting, management information systems and insurance and benefit services
for the Operating Partnership. Mr. Zine resigned from these positions effective
upon the consummation of the Recapitalization. Mr. Zine remains a Director and
has agreed to remain with us in a limited employment capacity. Prior to joining
the Operating Partnership Mr. Zine was the Executive Vice President and Chief
Financial Officer for The Circle K Corporation, the second largest chain of
convenience stores in the United States, from 1988 to 1996. Mr. Zine has been a
director of MMH Holdings, Inc., a holding company whose sole direct subsidiary
is Morris Material Handling, Inc., a manufacturer, distributor and service
provider of "through-the-air" material handling equipment, since March 30,
1998.
Effective upon the announcement of Mr. Zine's resignation, Evan Brudahl, who
was formerly an employee of Mobil Corporation and has been working for us since
January 1997, assumed the role of Interim Chief Operating Officer while we
complete our search for a new President. Until Mr. Zine's replacement is found,
David Appleby, who has been with us since February 1998 and is currently our
Vice President of Finance, has assumed Mr. Zine's financial responsibilities
with assistance from Mr. Zine. In addition, J.A. Cardwell, Sr., our founder,
Chairman and Chief Executive Officer, will remain active in our daily
operations.
Robert Grussing IV--Robert Grussing has been a director of the Operating
Partnership since July 1999. Mr. Grussing currently serves as Senior Vice
President, Business Development and Strategic Planning for Volvo Trucks North
America in Greensboro, NC. From 1992 to 1997, he served in a number of
executive positions at Mack Trucks, Inc. in Allentown, PA. From 1980 to 1992,
Mr. Grussing was an employee of General Electric Company. Mr. Grussing
currently serves as Chairman of the Board for Volvo Trucks Canada, Inc. and is
a director of Volvo Trucks de Mexico, S.A. de C.V. and Arrow Truck Sales, Inc.
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<PAGE>
Martha P. Boyd--Martha Boyd has been a director of the Operating Partnership
since July 1999. Ms. Boyd is employed by Volvo Trucks of North America, Inc. as
Special Counsel, Strategic Support. In her current role, she acts as liaison
between Volvo Trucks of North America and companies in which it holds a
substantial interest. She has been employed in the legal department of Volvo
Trucks of North America for nine years, most recently as Vice President,
General Counsel and Secretary. Prior to joining Volvo Trucks of North America,
Ms. Boyd practiced commercial litigation with the law firm of Balch & Bingham.
Employment Agreements
The Operating Partnership entered into employment agreements with J.A.
Cardwell, Sr. and James A. Cardwell, Jr. on February 10, 1999 and with Evan C.
Brudahl on March 1, 1999 (collectively the "Employment Agreements"). The
Employment Agreements commenced on the date of execution and expire on February
10, 2002, with the exception of Mr. Brudahl's agreement, which was effective as
of April 1, 1999 and expires on December 31, 2003. Mr. Brudahl received a one-
time signing bonus of $38,000 upon execution of his Employment Agreement. Our
Employment Agreement with J.A. Cardwell, Sr. is automatically renewable each
year for one additional year, unless either party gives at least three months
prior written notice not to renew the agreement. Under the Employment
Agreements, the annual base salary of J.A. Cardwell, Sr. is $420,000, the
annual base salary of James A. Cardwell, Jr. is $180,000 and the annual base
salary of Mr. Brudahl (the "Executives") is $189,600 and are subject to annual
review and may be increased by the Operating Partnership Board of Directors (or
compensation committee, if one is elected). The Executives are entitled to
receive an annual bonus pursuant to a schedule mutually agreed upon between the
Executive and the Operating Partnership, except J.A. Cardwell, Sr.'s
eligibility for the bonus and the amount of his bonus, which are determined at
the sole discretion of the Operating Partnership Board of Directors.
Pursuant to the Employment Agreements, the Operating Partnership may
terminate an Executive's employment with or without "cause" (as defined in the
Employment Agreements) or due to the Executive's "disability" (as so defined).
Each Executive may terminate his employment pursuant to the Employment
Agreements for or without "good reason" (as so defined) except for J.A.
Cardwell, Sr. whose Employment Agreement does not provide for termination for
good reason. Except in the case of a termination of J.A. Cardwell, Sr.'s
employment, generally termination by the Operating Partnership without cause or
by the Executive for good reason entitles the Executive to receive his base
salary and accrued vacation pay through the date of termination, a lump-sum
payment equal to a multiple of the Executive's then-current base salary,
certain benefits for twelve months following the date of termination, and the
Executive's annual bonus for the year his employment terminates which he would
have otherwise received, pro-rated to the date of termination and, for Mr.
Brudahl only, an additional cash payment of $50,000. The multiple of each
Executive's base salary payable in a lump sum in the event of any such
termination is: Mr. Brudahl, two; and James A. Cardwell, Jr., one. Failure by
the Operating Partnership to negotiate the renewal of Mr. Brudahl's Employment
Agreement in good faith prior to its expiration will also entitle Mr. Brudahl
to a lump sum payment equal to his annual base salary plus an additional
payment of $50,000. Termination by the Operating Partnership with cause or by
the Executive without good reason entitles the Executive to receive only his
base salary and accrued vacation pay through the date of termination. The
employment of J.A. Cardwell, Sr. may be terminated with or without "cause" (as
defined in his Employment Agreement) or he may elect to terminate his
Employment Agreement at any time with 60 days notice; and in any of these
cases, he will be entitled to receive his base salary and accrued vacation pay.
If the Operating Partnership terminates an Executive because of his disability,
that Executive will be entitled to his base salary and accrued vacation pay
through the date of termination, offset dollar for dollar by any disability
insurance benefits he receives from insurance the Operating Partnership
provides. The Employment Agreements contain certain customary non-solicitation
provisions upon termination of such agreements.
Generally, if a third party acquires more than 50% of the common partnership
interests in the Operating Partnership, or the Operating Partnership transfers
more than 50% of its equity interests to an unrelated third party (a "Change in
Control"), and any payments made to Mr. Brudahl in connection with such Change
in
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Control are subject to the excise tax imposed under the Internal Revenue Code
on "excess parachute payments" (as defined in the Code), the Employment
Agreements provide that the Operating Partnership will make an additional tax
gross-up payment to the Executive to reimburse the Executive for all excise
taxes imposed on all such payments and for any income taxes imposed on such
additional gross-up payment.
Executive Compensation
The following tables present information concerning the compensation paid
for services rendered to the Operating Partnership during 1996, 1997 and 1998,
to the Chief Executive Officer of the Operating Partnership and the four other
most highly paid executive officers employed by the Operating Partnership at
the end of 1998, collectively, the "Named Executive Officers." After the
Recapitalization, the individuals listed below, other than Mr. Zine, continued
to hold the same positions with the Operating Partnership, but the option award
obligations described below were assumed on an equivalent economic basis by
Holdings.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------------
Long-Term
Compensation
Name and Other Annual Awards Options All Other
Principal Position Year Salary Bonus Compensation (% Interest)(1) Compensation
- ------------------ ---- -------- ------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.A. Cardwell, Sr. ..... 1998 $398,566 240,000 -- 248,242(2)
Chief Executive Officer 1997 362,700 -- -- 247,177(2)
1996 363,686 -- -- 247,037(2)
Larry J. Zine........... 1998 $328,462 198,000 -- 3,049(3)
Executive Vice President 1997(4) 290,000 174,000 -- 2.75(5) 64,728(6)
&
Chief Financial Officer
Evan C. Brudahl......... 1998 $160,000 96,000 --
Senior Vice President--
Operations 1997(4) 135,000 81,000 -- .90(7)
James A. Cardwell, Jr... 1998 $160,135 96,000 -- 4,692(8)
Senior Vice President-- 1997 135,000 81,000 -- .90(7) 1,326(9)
Marketing & Business
Development 1996 107,882 -- -- 1,179(9)
David Latimer........... 1998 $131,101 64,704 -- 2,772(10)
Vice President--Lube
Operations 1997 128,516 90,959 -- .25(7) 3,166(9)
1996 123,296 -- -- 2,767(9)
</TABLE>
- --------
(1) Options granted to the Named Executive Officers in the Operating
Partnership, expressed as a percent of the Operating Partnership equity.
(2) Represents employer contributions to a 401(k) Plan of $4,702, $3,637 and
$3,497 in 1998, 1997 and 1996, respectively, and life insurance premiums
paid for the benefit of J.A. Cardwell, Sr. in the amount of $243,540
annually for 1998, 1997 and 1996.
(3) Represents employer contributions to a Deferred Compensation Plan.
(4) Mr. Zine's employment commenced December 1996 and Mr. Brudahl's commenced
January 30, 1997.
(5) Represents options to purchase 2.75% of the common partnership interests
of the Operating Partnership granted pursuant to the terms of his
employment agreement; 25% of the options become exercisable on each of
December 31, 1997, 1998, 1999, and 2000.
(6) Represents payments in connection with relocation expenses incurred by Mr.
Zine.
(7) Represents options to purchase the indicated percentage of the Class B
limited partnership interests of the Operating Partnership granted
pursuant to the Option Plan; 25% of the options become exercisable on each
of January 30, 1998, 1999, 2000 and 2001.
(8) Represents employer contributions to a 401(k) Plan and Nonqualified
Deferred Compensation Plan of $3,459 and $1,233, respectively.
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(9) Represents employer contributions to a 401(k) Plan.
(10) Represents employer contributions to a 401(k) Plan and Nonqualified
Deferred Compensation Plan of $1,450 and $1,322, respectively.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-end Option/SAR Values
<TABLE>
<CAPTION>
Operating
Partnership
Interests
Underlying Value of Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
at Fiscal at Fiscal
Amount Acquired Value Year-end(%)(2) Year-end($)(3)
Name on Exercise (%)(1) Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
J.A. Cardwell, Sr. ..... -- -- -- --
Larry J. Zine........... -- -- 1.375/1.375(4) $1,346,125/1,346,125
Evan C. Brudahl......... -- -- .225/.675 220,275/660,825
James A. Cardwell,
Jr. ................... -- -- .225/.675 220,275/660,825
David Latimer........... -- -- .0625/.1875 61,188/183,562
</TABLE>
- --------
(1) No options were exercised in 1998.
(2) Options granted to the Named Executive Officers in the Operating
Partnership, expressed as a percent of the Operating Partnership equity.
(3) No market exists for the partnership interests under option. Fair value for
purposes of this table has been determined based on the values received by
Kirschner and Chartwell for their interests in connection with the
Recapitalization.
(4) The unexercisable portion of Mr. Zine's options became exercisable as a
result of the Recapitalization.
Compensation of Members of the Boards of Directors
Members of the Boards of Directors of Holdings, Holdings Financial
Corporation or the Operating Partnership who are not full-time employees of the
Operating Partnership receive a payment of $3,500 per meeting from the
Operating Partnership for their services. Members who are our full-time
employees or employees of our partners do not receive a salary or any other
payment for their services on the Boards of Directors.
Partnership Interests Option Plan
We have established an equity incentive plan to attract and retain key
personnel, including senior management, and to enhance their interest in our
continued success (the "Option Plan"). We apply Accounting Principles Board
Opinion No. 25 ("APB No. 25") in accounting for our plan.
The plan permits the grant of options to purchase up to 7.25% of the limited
partnership interests in the Operating Partnership. Generally, options to
purchase between 0.03 to 0.90 percent of the Class B limited partnership
interests are granted to eligible employees at an exercise price that is not
less than 100% of the fair market value of such limited partnership interests
determined as of the date the option is granted, subject to certain adjustments
in the event of certain distributions or redemptions. Accordingly, no
compensation cost has been recognized in the Consolidated Statement of
Operations from options issued under the partnership interest option plan.
Class B limited partnership interests represent ownership interests, but do not
include any other rights (such as voting, tax distribution, etc.) of common
limited partnership interests.
Options generally become vested at a rate of 25% per year. Participants
become fully vested upon: (1) the occurrence of a "change in control" (as
defined in the Option Plan), (2) a sale of substantially all of the assets of
the Operating Partnership, (3) the liquidation of the Operating Partnership,
(4) the Operating Partnership's
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<PAGE>
consummation or adoption of a plan to make an "extraordinary distribution" or
"redemption" (as defined in the Option Plan), or (5) a closing of an initial
public offering of equity securities that meets specified criteria. Options may
be exercised at any time, to the extent that such options are vested. All
options expire on the earliest to occur of (a) the tenth anniversary of the
date the option was granted, (b) one year after the participant ceases to be an
employee of the Operating Partnership due to retirement, death or disability,
(c) immediately, if the participant ceases to be an employee of the Operating
Partnership for cause, or (d) ninety days after the occurrence of the
termination of the participant's employment with the Operating Partnership, for
any reason other than (b) or (c) above. If a participant ceases to be an
employee, all nonvested options are forfeited.
Effective upon the consummation of the Recapitalization, the Option Plan,
pursuant to its terms, became sponsored by Holdings, and all then outstanding
options granted under the Option Plan were converted on an equivalent economic
basis to options for equity interests in Holdings on the same terms and
conditions, including their vesting schedules. Due to the necessity of a cash
outlay in order to exercise the options and the illiquid nature of the equity
interest which may thereby be obtained, we are considering the adoption of a
Phantom Option Plan. We believe that the Phantom Option Plan would be more
effective in promoting the goals of equity compensation, while avoiding the
practical and administrative problems inherent in the current Option Plan.
It is anticipated that the Phantom Option Plan would be structured similarly
to the Option Plan, with the exception that awards would be paid in cash, and
no equity interest issued. Under the Phantom Option Plan, the vesting schedule
would be increased to no fewer than six years. However, employees would be
guaranteed awards under the Phantom Option Plan which would be at least equal
to the difference between the current value of equity interest subject to their
option award, minus the current exercise price. Participants in the current
Option Plan would not be eligible to participate in the proposed Phantom Option
Plan unless they agreed to waive any rights under the Option Plan. Employees
who did not elect to participate in the Phantom Option Plan within a specified
period of time following its adoption would not be permitted to enter the plan
at a later date.
We anticipate that the aggregate equity-related interests pursuant to the
Option Plan, the Phantom Option Plan and any future plans will be between 5%
and 10% of the fully-diluted equity interests of Holdings. At December 31,
1998, options covering 6.76% of the partnership interests in the Operating
Partnership were outstanding. At December 31, 1998, approximately 2.3% of the
partnership interests were vested. No options were exercised during 1998.
In connection with his employment agreement, Mr. Zine was granted options
separate from the Option Plan to acquire an ownership interest in the Operating
Partnership, which options became fully vested and exercisable to purchase
partnership interests in Holdings as a result of the Recapitalization.
Compensation Committee
The Operating Partnership does not maintain a formal Compensation Committee.
We administer the compensation program in conjunction with the Chief Executive
Officer, the President and the Board of Directors. The Chief Executive
Officer's salary is determined by the Executive Committee of the Board of
Directors.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Holdings is the owner of approximately 99% of the common limited partnership
interests of the Operating Partnership. Petro, Inc. owns 100% of the general
partnership interests of the Operating Partnership. The following table sets
forth certain information regarding beneficial ownership of Holdings' common
partnership interests by each general partner, each limited partner who owns
more than 5% of Holdings' common partnership interests, each director who
beneficially owns partnership interests, each executive officer who
beneficially owns partnership interests and all directors and executive
officers of Holdings as a group. Except as set forth in the footnotes to the
table, each partner listed below has informed us that such partner will have
(1) sole voting and investment power with respect to such partner's partnership
interests, except to the extent that authority is shared by spouses under
applicable law and (2) record and beneficial ownership with respect to such
partner's partnership interests.
<TABLE>
<CAPTION>
Type of Class of Percentage
Name and Address Interest Interest of Class (1)
- ---------------- --------------- -------- ------------
<S> <C> <C> <C>
J.A. Cardwell, Sr.......................... General Partner Common 1.1%(2)
6080 Surety Drive Limited Partner Common 45.6%(3)
El Paso, Texas 79905
James A. Cardwell, Jr. .................... Limited Partner Common 4.9%(4)
6080 Surety Drive
El Paso, Texas 79905
Mobil Long Haul Inc........................ Limited Partner Common 9.7%
3225 Gallows Road
Fairfax, Virginia 22037
Volvo Petro Holdings, L.L.C................ Limited Partner Common 28.7%
7900 National Service Road
Greensboro, NC 27402-6115
Petro Warrant Holdings Corporation......... Limited Partner Common 10.0%(5)
6080 Surety Drive
El Paso, Texas 79905
All directors and officers as
a group ................................. 51.6%
</TABLE>
- --------
(1) Does not assume conversion of the convertible preferred limited partnership
interests to be owned by Mobil Oil Corporation or the exercise of
management-held options. If conversion of Mobil Oil Corporation's interests
is assumed, Mobil's percentage of the common limited partnership interests
would increase to 13.2% and the interests of the other partners would be
J.A. Cardwell, Sr. (1.0% general partner and 44.0% limited partner), James
A. Cardwell, Jr. (4.6%), Volvo (27.6%) and Petro Warrant Holdings
Corporation (9.6%). In addition to the convertible preferred limited
partnership interests, preferred limited partnership interests are owned by
Mobil Long Haul Inc. ($12.0 million) and the Cardwell Group ($7.6 million)
that are entitled to cumulative preferred returns at the rate of 9.5% and
8%, respectively, and at December 31, 1998 had aggregate accrued unpaid
preferred returns of $3.6 million. See Note 10 of Notes to Consolidated
Financial Statements.
(2) Represents partnership interests owned of record by Petro, Inc. Petro, Inc.
is a wholly owned subsidiary of Nevada Trio, Inc., a Nevada corporation,
which is a wholly owned subsidiary of Card Partners, L.P., a Texas limited
partnership of which J.A. Cardwell, Sr. and Mrs. J.A. Cardwell, Sr. are
limited partners and of which Texas Mec, Inc., a Texas corporation, is the
general partner. J.A. Cardwell, Sr. is the sole shareholder of Texas Mec,
Inc. Accordingly, J.A. Cardwell, Sr. may be deemed to have beneficial
ownership of the partnership interests owned by Petro, Inc.
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<PAGE>
(3) Represents partnership interests owned of record by Petro, Inc. as well as
interests owned individually by J.A. Cardwell, Sr. Until the exchange of
the Warrants, an affiliate of J.A. Cardwell, Sr. is the nominal holder of
the only outstanding share of Petro Warrant Holdings Corporation, which
share will be redeemed for $1.00 upon the exchange of the Warrants. J.A.
Cardwell, Sr. disclaims any beneficial interest in the limited partnership
interests of Holdings held by Petro Warrant Holdings Corporation because of
the limitations on the economic and voting rights of the holder of that
share prior to the exchange of the Warrants and the acquisition of all the
equity interest in Petro Warrant Holdings Corporation by the holders of the
Warrants.
(4) Represents partnership interests owned of record by JAJCO II, Inc. as well
as interests owned by James A. Cardwell, Jr. James A. Cardwell, Jr. is the
sole shareholder of JAJCO II, Inc. and may be deemed to have beneficial
ownership of the partnership interest owned by JAJCO II, Inc.
(5) Until the exchange of the Warrants, an affiliate of J.A. Cardwell, Sr. is
the nominal holder of the only outstanding share of Petro Warrant Holdings
Corporation, which share will be redeemed for $1.00 upon the exchange of
the Warrants. J.A. Cardwell, Sr. disclaims any beneficial interest in the
limited partnership interests of Holdings held by Petro Warrant Holdings
Corporation because of the limitations on the economic and voting rights of
the holder of that share prior to the exchange of the Warrants and the
acquisition of all the equity interest in Petro Warrant Holdings
Corporation by the holders of the Warrants.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1997, all new related party transactions or the renewal of existing
related party transactions have been subject to a process whereby the project
is competitively bid, and, if awarded to a related party, is reviewed by a
disinterested member of senior management to ensure that the contracts contain
arms-length terms and competitive pricing. We believe this process ensures that
our current affiliated transactions are on arms-length terms. Many of the
relationships described below were entered into prior to 1992, when the
Cardwell Group owned 100% of the Operating Partnership.
Recapitalization Agreement
On July 23, 1999, Holdings consummated an agreement with Chartwell, Mobil,
Volvo Trucks, the Cardwell Group, the Operating Partnership and Petro Warrant
Holdings Corporation. Under this agreement, (a) Holdings purchased the
partnership interests held by Chartwell in exchange for $55.0 million in cash
and a note with an Accreted Value on the date of issuance of $14.8 million, (b)
the Cardwell Group and Mobil contributed all or a portion of their common
limited and preferred limited partnership interests in the Operating
Partnership, as the case may be, to Holdings, in exchange for like partnership
interests in Holdings, (c) Mobil invested an additional $5.0 million in
Holdings in exchange for a Class B preferred limited partnership interest in
Holdings, (d) Volvo Trucks invested $30.0 million in Holdings in exchange for a
common limited partnership interest in Holdings, and (e) Petro Warrant Holdings
Corporation invested $9.7 million in Holdings in exchange for a common limited
partnership interest. In connection with the consummation of these
transactions, the Operating Partnership also entered into certain agreements
with Mobil and Volvo Trucks.
On July 23, 1999, Holdings also consummated an agreement with Kirschner,
pursuant to which Holdings purchased the common limited partnership interest
held by Kirschner in the Operating Partnership in exchange for $2.8 million in
cash.
Tax Reimbursements
The Holdings Partnership Agreement requires us to make distributions to each
of the Holdings partners in an amount sufficient to allow each partner to pay
federal, state and local income taxes with respect to allocations of taxable
income to such partner by us. For the fiscal year ended December 31, 1998, tax
distributions made to the partners of the Operating Partnership were $823,000.
No tax distributions were made to the partners of the Operating Partnership in
the fiscal years ending December 31, 1996 and 1997. Tax distributions in the
future will be based on separate allocations of taxable income of Holdings.
Principal Executive Offices
The office building in which our principal executive offices are located is
owned by J.A. Cardwell, Sr. We lease the entire building under a lease expiring
on December 31, 2005. Under the lease, we pay rent totaling $336,000 per year,
as well as taxes, maintenance and other operating expenses. For each of the
fiscal years ended December 31, 1996, 1997 and 1998, we made annual rental
payments of $336,000.
Effingham, Illinois Stopping Center
The Stopping Center located in Effingham, Illinois is owned by Truck Stop
Property Owners, Inc. ("Truck Stop"), which is owned by Travis Roberts, who is
a current officer of the Operating Partnership, and five former employees of
the Operating Partnership. Mr. Roberts owns 22% of the stock of Truck Stop. We
lease the Effingham Center under a lease expiring in May 2006, which provides
for adjustable rental payments tied to interest rates (the "Basic Rent"), plus
taxes and operating expenses. We have three consecutive options to renew the
lease for terms of five years each at rental rates equal to the Basic Rent,
plus certain adjustments at
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<PAGE>
the time of renewal. We also have a right of first refusal to purchase the
Petro Stopping Center at any purchase price agreed upon between Truck Stop and
a third party. We made rental payments to Truck Stop of $1.1 million in 1996,
$1.1 million in 1997 and $1.1 million in 1998.
Highway Service Ventures, Inc.
Highway Service Ventures, Inc. ("HSV"), a corporation in which J.A.
Cardwell, Sr. owns a 32.5% interest, operates four franchised Petro Stopping
Centers located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South
Carolina; and Carnesville, Georgia. The original franchise agreements with
respect to two of these Petro Stopping Centers have expired and HSV has been
unwilling to enter into long-term extensions of its franchise agreements. HSV
continues to operate all four locations as Petro Stopping Centers under the
terms of the prior agreements. We have finalized a new form of franchise
agreement with input from HSV, and we expect HSV to enter into this new
agreement. Alternatively, HSV has been given the choice to continue to operate
under the terms of its existing franchise agreement. See "Risk Factors--
Relationship with Franchisees." None of these franchise agreements contains
terms that are any more favorable to HSV than the terms in any of our other
franchise agreements.
Petro:Tread
In May 1992, we leased a facility in El Paso, Texas from a trust, in which
J.A. Cardwell, Sr. is a 50% beneficiary, to operate our retread plant, which
produces retread tires for sale at Petro Stopping Centers (including
franchisees) and to others. The lease, which expired in October 1995, provided
for two consecutive renewal options for terms of five years each. We exercised
our first renewal option in October 1995 to renew the lease for five years
commencing November 1, 1995. We made lease payments of $72,000, for the fiscal
years ended December 31, 1996, 1997 and 1998. In addition, we sell retread
tires to El Paso Tire Center, Inc., a corporation in which J.A. Cardwell, Sr.
owns 100% of the equity interest. Such sales amounted to $153,000 in 1996,
$47,000 in 1997 and $60,000 in 1998.
Product Services Agreement and Fuel Sales Agreement
Pursuant to an exemption from the exclusive terms of the Mobil Gasoline
Supply Agreement and under the terms of three petroleum products agreements
with C&R Distributing, Inc. ("C&R") (the "C&R Fuel Agreement"), we currently
purchase Chevron branded gasoline and motor oils at cost for three of our
facilities from C&R, a corporation in which J.A. Cardwell, Sr. is the sole
shareholder. The C&R Fuel Agreement requires us to keep Chevron unleaded
gasoline, regular gasoline and motor oils continuously stocked and offered for
sale in quantities sufficient to meet demand. Under the C&R Fuel Agreement, we
and C&R have also agreed to notify each other if either party has petroleum
products for sale with no obligation to purchase any portion of such products.
In addition, in January 1997, we entered into a product services agreement with
C&R which terminates in December 2004 (the "C&R Services Agreement"), under
which C&R provides us with fuel hauling and fuel pump maintenance and services
within the El Paso, Texas metropolitan area, if requested by us. The C&R
Services Agreement provides that C&R will charge us for these services at the
lowest rates charged by C&R for similar services and, in any event, at rates
that will not exceed rates available from unrelated parties providing similar
services. The C&R Fuel Agreement is exclusive but allows us to cancel the
agreement with 30 prior days notice. The C&R Services Agreement is non-
exclusive and allows us to enter into similar agreements with other parties. We
made purchases from C&R under these two agreements aggregating $11.4 million in
1996, $5.1 million in 1997 and $4.0 million in 1998. We made sales of diesel
fuel to C&R under these two agreements aggregating $4.6 million in 1996, $3.3
million in 1997 and $169,000 in 1998.
Option and Right of First Refusal Agreement
In connection with the formation of the Operating Partnership in April 1992
under an Option and Right of First Refusal Agreement, J.A. Cardwell, Sr. and
James A. Cardwell, Jr. granted to the Operating Partnership and another third
party options, which expire in December 2006, to purchase certain properties
owned by the
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<PAGE>
Cardwell Group that are located near or adjacent to our Petro Stopping Centers
located in Shreveport, Louisiana (seven acres), Weatherford, Texas (thirty-four
acres), Beaumont, Texas (seventeen acres) and Oklahoma City, Oklahoma (thirty
acres) (the "Option Properties"), and a right of first refusal on each of the
Option Properties. All rights under the Option and Right of First Refusal
Agreement have been assigned to Mobil, Petro Holdings GP Corporation and Petro
Holdings LP Corporation. The price at which an Option Property may be purchased
will be equal to the fair market value of the property when the option is
exercised as determined by an independent appraisal.
Alcohol Sales and Servicing Agreements
To continue engaging in retail sales of beer, wine or wine coolers at a
limited number of its facilities after the formation of the Operating
Partnership in 1992, we entered into agreements with C and PPR, Inc. ("C&PPR"),
Petro Truckstops, Inc. ("Petro Truckstops") and Petro Beverage, Inc., which
collectively hold permits or licenses to sell alcoholic beverages in the states
of Louisiana, Texas and Oregon. J.A. Cardwell, Sr. owns 60% of the stock, James
A. Cardwell, Jr. owns 30% of the stock and Mrs. J.A. Cardwell, Sr. owns 10% of
the stock of C&PPR. James A. Cardwell, Jr. is the sole shareholder of Petro
Truckstops and Petro Beverage, Inc. The agreements continue in effect until
terminated by either party. Under the servicing and license agreements with
C&PPR dated April 30, 1992, we have agreed to operate the alcohol sales
business at three locations in exchange for 10% of the gross receipts generated
from alcoholic beverage sales, plus reimbursement of all operating expenses.
Under similar agreements with Petro Truckstops, dated January 26, 1995, and
April 8, 1994, and with Petro Beverage, Inc., dated February 10, 1995, each of
which has a one year initial term and continues in effect until terminated by
either party, we receive 10% of gross receipts generated from alcoholic
beverage sales. In each of the agreements, the net payments to us are
approximately equal to the gross profit received by the above entities.
Motor Media Arrangements
In connection with the formation of the Operating Partnership in May 1992,
Motor Media, Inc., a company owned 100% by James A. Cardwell, Jr. ("Motor
Media"), entered into a five year agreement with us (the "Motor Media
Agreement"), under which Motor Media leases floor and wall space at all Petro
Stopping Centers operated by us and sells space for in-store advertising to
third parties. Under the agreement, Motor Media pays the Operating Partnership
25% of the gross revenues generated by the advertising. Motor Media received
$214,000 in 1996, $234,000 in 1997 and $215,000 in 1998 before its selling,
maintenance and administrative expenses, representing its share of the gross
receipts generated. Motor Media has entered into similar floor and wall space
leases with other truck stops nationwide. The Operating Partnership and Motor
Media have extended the term of the Motor Media Agreement through April 2002,
which will be automatically extended until canceled by either party with 60
days written notice.
Amusement and Video Poker Games Agreements
Under an agreement (the "Amusement Agreement") between us and El Paso
Vending and Amusement Company ("EPAC"), of which J.A. Cardwell, Sr. owns 99%
and James A. Cardwell, Jr. owns 1%, EPAC furnishes video and other games to 24
of our Petro Stopping Centers and services these games. Pursuant to that
agreement 50% of the revenues from the gaming operations goes to EPAC and 50%
goes to us. Although most of the sites are serviced under the terms of the
Amusement Agreement (as amended), at one site, we are guaranteed a minimum
annual revenue of $180,000. At another site, we pay 40% of the revenues
generated by the games to EPAC and we retain the remaining 60%. EPAC received
$2.0 million in 1996, $2.4 million in 1997 and $2.6 million in 1998 in revenues
generated from the furnishing and servicing of games located at the Petro
Stopping Centers. Payments to us under this arrangement aggregated $2.0 million
during 1996, $2.1 million during 1997 and $2.2 million during 1998. The
Amusement Agreement has been amended to extend its term through May 2002.
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Since June 1993, the two Petro Stopping Centers located in Louisiana have
featured video poker games housed in a separate on-site facility and operated
by a third party under terms of a contract, which turns over a specified
portion of the revenue generated from the machines. The licenses to operate
video gaming in Louisiana are issued to Petro Truckstops, Inc., a company
wholly owned by James A. Cardwell, Jr. Previously, Petro Truckstops, Inc.
leased from the Operating Partnership only that portion of the facility
premises in Shreveport and Hammond whereat the video gaming was conducted. As a
result of meetings with the Louisiana State Gaming Commission and in order to
satisfy certain state gaming law requirements, the Operating Partnership and
Petro Truckstops, Inc. have now entered into a property lease agreement for the
entire truck stop facility premises, exclusive of the portions of the property
where the Petro:Lube, truck scales and truck wash facilities are located. Petro
Truckstops, Inc. pays to the Operating Partnership a fair market value rental
under the terms of the lease. Petro Truckstops, Inc. contracts with a third
party operator to run the video games. During 1996, the State of Louisiana
enacted a statute requiring the cessation of video poker operations unless the
parish in which the operations were conducted voted to allow the continued
operation of video poker machines. On November 5, 1996, the parish in which the
Shreveport facility is located voted to continue to allow video poker
operations, while the parish in which the Hammond facility is located voted to
disallow video poker operations. Therefore, we were required to phase out video
poker operations at the Hammond facility at the end of June 1999.
Indemnity Agreements
In connection with the Recapitalization, and in compliance with applicable
Internal Revenue Code and Treasury Regulation provisions dealing with recourse
debt, J.A. Cardwell, Sr., James A. Cardwell, Jr., Petro, Inc. and JAJCO II,
Inc. each entered into an indemnity agreement under which each agreed to
indemnify the Operating Partnership, the general partners and certain limited
partners in the event that the indemnified party is required to pay certain of
our indebtedness after a default, acceleration by the creditor and exhaustion
of any collateral securing the credit facility.
Motor Fuels Franchise Agreement
On July 23, 1999, the Operating Partnership and Mobil Oil Corporation
entered into a fuel supply agreement whereby we agreed to purchase Mobil
branded diesel fuel and gasoline for sale and distribution under Mobil's
trademarks at our truck stops. See "Business--Fuel Suppliers." Under our
previous fuel supply agreement with Mobil Oil Corporation, we purchased diesel
fuel from Mobil Diesel Supply in 1997 and 1998 totaling 285.6 million in 1997
and 458.2 million gallons in 1998. We purchased gasoline under our previous
fuel supply agreement from Mobil Diesel Supply in 1997 and 1998 totaling 6.6
million gallons in 1997 and 15.4 million gallons in 1998.
Master Supply Contract for Resale of Oils and Greases
On July 23, 1999, Mobil Oil Corporation and the Operating Partnership also
entered into a ten year supply agreement whereby we will purchase and feature
certain Mobil branded oils and lubricants at the truck stop locations operated
by us. Under the terms of our previous oil and lubricant supply agreement with
Mobil Oil Corporation, our purchases of Mobil branded oils and lubricants from
Mobil in 1997 and 1998 totaled 561,000 gallons in 1997 and 765,000 gallons in
1998.
Marketing Relationships
Contemporaneously with the consummation of the Recapitalization, Volvo
Trucks and the Operating Partnership entered into an Operating Agreement which
reflects the desire and intention of both companies to cooperate in certain
business activities which (1) enhance each company's brand image and awareness;
(2) expands the truck parts and service support segment of each company's
business; (3) develops closer ties with Volvo Trucks' franchised dealers; (4)
improves the lifestyle of truck drivers and results in innovative approaches to
customer services; and (5) supports both companies' growth and expansion. The
Volvo
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Operating Agreement addresses the warranty, maintenance and service work Petro
will provide to Volvo managed vehicles, the sale by Petro of Volvo truck parts,
on a preferred basis, joint advertising and marketing initiatives, and the co-
development of truck stops by Volvo and Petro so as to utilize truck stop space
for Volvo truck sales and marketing. In addition, under the terms of the Volvo
Operating Agreement, Volvo and Petro have committed to work together to develop
a common maintenance system or data link between Volvo's and Petro's respective
maintenance systems in order to provide individualized customer service to the
truck drivers.
Relationships Between Related Parties, Affiliated Entities and the Cardwell
Group
Each of the related parties and/or affiliates of Holdings involved in the
transactions described in this section, with the exception of Mobil Oil
Corporation, Volvo Trucks and the Effingham, Illinois Stopping Center, is owned
or controlled to some degree by a member or members of the Cardwell Group.
Related party transactions, other than those specifically discussed above,
generally arise in the ordinary course of business as a result of our purchase
of trade accounts receivable or receipt of franchisee fees from certain related
parties who own properties which are part of our network.
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DESCRIPTION OF OTHER INDEBTEDNESS
New Senior Credit Facility
In connection with the Recapitalization, the Operating Partnership amended
its existing senior credit facility with BankBoston, N.A. ("BKB"), individually
and as agent for the lenders, BancBoston Robertson Stephens Inc., as arranger,
and the lenders party thereto, to provide for: (1) a five-year revolving/term
facility in an aggregate principal amount of up to $85.0 million, which
includes a $10.0 million sublimit for stand-by letters of credit (the
"Revolver") and (2) a seven-year term loan in an aggregate principal amount of
$40.0 million (the "Term Loan B"). Proceeds of the loans under the New Senior
Credit Facility were used to provide additional financing to effect the
Recapitalization, and may be used to refinance certain existing indebtedness,
to finance capital expenditures, to pay fees and expenses relating to the
Recapitalization and for general corporate and working capital purposes.
Repayment. On the third anniversary of the closing date, the portion of any
principal amount outstanding under the Revolver in excess of $25.0 million will
automatically convert to a term loan (the "Term Loan A" and, together with the
Term Loan B, the "Term Loans"). Following the conversion, $25.0 million will
continue to be available under the Revolver. The Term Loan A will mature on the
fifth anniversary of the closing date and will amortize in eight consecutive
quarterly installments, each equal as near as possible to one eighth of the
principal amount outstanding on the third anniversary of the closing date. The
Term Loan B is expected to be amortized in consecutive quarterly installments
commencing on September 30, 2000 as follows: the first 16 quarterly
installments of $250,000 each, the next four quarterly installments of $3.0
million each and the last three quarterly installments of $6.0 million each,
with the remaining unpaid balance of Term Loan B being due in full on the
maturity date.
The Revolver and the Term Loans will also, in certain circumstances, be
required to be prepaid with certain proceeds from certain asset sales, equity
issuances and insurance claims subject to certain reinvestment rights. The
Revolver and the Term Loans will also be required to be prepaid with an amount
equal to 50% of the excess cash flow of the Operating Partnership, which
requirement will be waived as long as a specified leverage ratio is maintained
by the Operating Partnership and no default exists under the New Senior Credit
Facility.
Security; Guaranty. The New Senior Credit Facility is secured by a perfected
first priority lien on substantially all of the property, rights and interests
of the Operating Partnership and its domestic subsidiaries (other than
immaterial subsidiaries) and the pledge by Holdings of all of the partnership
interests in the Operating Partnership. The New Senior Credit Facility is
guaranteed by Holdings and all material domestic subsidiaries of the Operating
Partnership.
Interest Rates. The Operating Partnership may elect that all or a portion of
the Term Loans and the Revolver (other than the stand-by letters of credit)
bear interest at (i) the eurodollar rate (the "Eurodollar Rate") or (ii) the
base rate (the "Base Rate"), plus the applicable interest margin. The Base Rate
is expected to be defined as the higher of (i) the annual rate of interest
announced from time to time by BKB's head office as its "base rate" and (ii)
the federal funds rate plus one-half of one percent ( 1/2%). The Eurodollar
Rate is expected to be defined as the applicable reserve-adjusted rate at which
eurodollar deposits for specified monthly periods are offered to BKB in the
interbank eurodollar market. For Base Rate loans, the applicable interest
margin for the Revolver and Term A Loans will range from 0.75% to 1.25%, based
on the consolidated leverage ratio of the Operating Partnership and its
subsidiaries, and will be 1.50% for Term B Loans. For Eurodollar Rate loans,
the applicable interest margin for the Revolver and Term A Loans will range
from 2.25% to 2.75%, based on the consolidated leverage ratio, and will be
3.00% for Term B Loans. Stand-by letters of credit will be subject to an
issuance fee equal to one-eighth of one percent ( 1/8%) plus an applicable
margin ranging from 2.25% to 2.75%, based on the consolidated leverage ratio.
Interest on Base Rate loans will be payable quarterly. Interest on
Eurodollar Rate loans will be payable either at the end of each applicable
interest period or, if longer than three month interest periods, then at three
month intervals.
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Covenants. The New Senior Credit Facility contains customary representations
and warranties and affirmative and negative covenants including, among others,
covenants relating to financial and compliance reporting, covenants restricting
Holdings, the Operating Partnership and its subsidiaries from incurring debt
(including guarantees); creating liens; consummating certain transactions such
as dispositions of assets, mergers, acquisitions, reorganizations and
recapitalizations; making certain investments and loans, making dividends and
other distributions; and transactions with affiliates. The New Senior Credit
Facility also requires the Operating Partnership to meet certain financial
tests including interest coverage, cash flow and maximum leverage ratios, and
limitations on operating leases.
The New Senior Credit Facility also contains customary events of default
including, among others, upon a change of control. An event of default under
the New Senior Credit Facility will allow the lenders to accelerate or, in
certain cases, will automatically cause the acceleration of, the maturity of
the debt under the New Senior Credit Facility.
10 1/2% Notes
In 1997, the Operating Partnership and Petro Financial Corporation issued
$135.0 million principal amount of 10 1/2% Notes. The 10 1/2% Notes are
redeemable at the option of the Operating Partnership during the twelve month
period commencing February 1, 2002 at 105.25% of the principal amount thereof,
during the twelve month period commencing February 1, 2003 at 103.50% of the
principal amount thereof, during the twelve month period commencing on February
1, 2004 at 101.75% of the principal amount thereof and thereafter at 100% of
the principal amount thereof, in each instance plus accrued and unpaid
interest.
The 10 1/2% Notes Indenture contains certain covenants including limitations
on indebtedness, limitations on restricted payments, limitations on sales of
restricted subsidiary stock, limitations on transactions with affiliates,
limitations on liens, limitations on disposition of proceeds of asset sales,
limitations on dividends and other payment restrictions affecting restricted
subsidiaries and restrictions on mergers and certain transfers of assets.
Pursuant to a solicitation for consent from the holders of the 10 1/2% Notes
dated June 15, 1999 and extended to July 21, 1999 we received consent to amend
the definitions of "Change of Control" and "Permitted Holders" in the 10 1/2%
Notes Indenture to reflect the new holding company ownership structure and to
match the definitions to be included in the Indenture.
12 1/2% Notes
In 1994, Petro PSC Properties, L.P., a Delaware limited partnership (the
predecessor of the Operating Partnership) and Petro Financial Corporation
issued, in units, $100.0 million principal amount of 12 1/2% Notes and 100,000
exchangeable debt warrants. The 12 1/2% Notes are redeemable at our option
during the twelve month period commencing June 1, 1999 at 103.57% of the
principal amount thereof, during the twelve month period commencing June 1,
2000 at 101.79% of the principal amount thereof and thereafter at 100% of the
principal amount thereof, in each instance plus accrued and unpaid interest.
In 1997, $93.8 million of the 12 1/2% Notes and all of the exchangeable debt
warrants were acquired by the Operating Partnership. Currently, $6.2 million of
the 12 1/2% Notes are outstanding.
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DESCRIPTION OF THE NOTES
The Old Notes were issued, and the New Notes will be issued, under the
Indenture, dated July 23, 1999, among Holdings, Holdings Financial Corporation
and State Street Bank and Trust Company, as Trustee (the "Trustee"). The terms
of the Notes include those stated in the Indenture and those made a part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act").
We summarize below certain provisions of the Indenture and the Notes, but do
not restate the Indenture and the Notes in their entirety. We urge you to read
the Indenture because it, and not this description, defines your rights as a
Holder of the Notes. You can obtain a copy of the Indenture in the manner
described under "Available Information."
Key terms used in this section are defined under "--Certain Definitions."
When we refer to "Holdings" and "Holdings Financial Corporation" in this
section, we mean Petro Stopping Centers Holdings L.P. and Petro Holdings
Financial Corporation, respectively, and when we refer to Issuer and Issuers,
we mean Holdings, Holdings Financial Corporation or both, as the context
requires. Unless otherwise indicated, references under this section to Sections
or Articles are references to sections and articles of the Indenture.
General
The Notes are general senior unsecured obligations of ours, ranking senior
in right of payment to any of our subordinated indebtedness. The Notes are
effectively subordinated in right of payment to all existing and future
obligations of Holdings' subsidiaries, including the Operating Partnership.
After giving effect to the Recapitalization, as of June 30, 1999, there would
have been approximately $283.9 million of total liabilities, including $226.6
million of indebtedness to which the Notes were effectively subordinated. The
Old Notes were issued at a substantial discount to their aggregate principal
amount at maturity such that the gross proceeds from the issuance of the Old
Notes (excluding the Notes issued to Chartwell) was approximately $40.0
million. Based on the issue price thereof, the yield to maturity of the Notes
is 15% per annum (computed on a semi-annual bond equivalent basis and excluding
the segregation of Petro Warrant Holdings Corporation's capital contribution of
$9.7 million to Other Partner's capital.)
Maturity, Interest and Principal
The Notes will mature on August 1, 2008. Interest will not accrue or be
payable on the Notes prior to August 1, 2004. From August 1, 2004, interest on
the Notes will accrue at the rate of 15% per annum and will be payable semi-
annually on each February 1 and August 1, commencing February 1, 2005, to the
holders of record of Notes at the close of business on the January 15 and July
15 immediately preceding such interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from August 1, 2004. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. For U.S. federal
income tax purposes, you will be required to include original issue discount on
a Note in gross income for each taxable year in which you hold the Note even
though cash interest on the Note does not begin to accrue until August 1, 2004,
and you will receive no cash interest payments until February 1, 2005. See
"Certain Federal Income Tax Consequences--Taxation of the Notes--Original Issue
Discount."
Principal of and premium, if any, and interest on the Notes will be payable,
and the Notes will be transferable, at the office or agency of the Issuers in
The City of New York maintained for such purposes, which, initially, will be
the office of the Trustee or an agent thereof; provided, however, that payment
of interest, if any, may be made at the option of Holdings by check mailed to
the Person entitled thereto as shown on the security register. The Old Notes
were issued, and the New Notes will be issued, only in fully registered form
without coupons, in denominations of $1,000 and any integral multiple thereof.
No service charge will be made for any registration of transfer, exchange or
redemption of Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith.
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Additional Notes
Subject to the limitations set forth under "Covenants--Limitation on Debt,"
we may incur additional debt. At our option, this additional Debt may consist
of additional Notes ("Additional Notes") in one or more transactions, which
have identical terms as the Notes. Holders of Additional Notes would have the
right to vote together with Holders of the Notes as one class.
Sinking Fund
There are no mandatory sinking fund payment obligations with respect to the
Notes.
Optional Redemption
The Notes are subject to redemption, at our option, in whole or in part, at
any time, upon not less than 30 nor more than 60 days notice, at a Redemption
Price equal to:
. if the Redemption Date is prior to August 1, 2004, the Accreted Value of
the Notes, plus the Make-Whole Premium, as of the Redemption Date; or
. if the Redemption Date is on or after August 1, 2004, the following
Redemption Prices (expressed as percentages of principal amount at
Stated Maturity) set forth below, plus accrued and unpaid interest, if
any, to the 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 the Redemption Date), if
redeemed during the 12 month period beginning on August 1, of the years
indicated:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004........................................................... 107.500%
2005........................................................... 105.000%
2006........................................................... 102.500%
2007 and thereafter............................................ 100.000%
</TABLE>
In addition to the optional redemption of the Notes in accordance with the
provisions of the preceding paragraph, prior to August 1, 2002, we may, with
the net proceeds of a Public Equity Offering of Qualified Capital Interests in
either Holdings or a Successor Entity, redeem all, but not less than all, of
the aggregate principal amount of the outstanding Notes at a Redemption Price
equal to 115.0% of the Accreted Value thereof; provided that any such
redemption occurs within 90 days following the closing of any such Public
Equity Offering.
If we are not redeeming all of the Notes, the Trustee shall select the Notes
to be redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange, on a pro rata basis, by lot
or in another fair and reasonable manner chosen at the discretion of the
Trustee. The Notes will be redeemable in whole or in part upon not less than 30
nor more than 60 days' prior written notice, mailed by first class mail to a
holder's address as it shall appear on the register maintained by the Registrar
of the Notes. On and after any redemption date, Accreted Value will cease to
accrete or interest will cease to accrue, as the case may be, on the Notes or
portions thereof called for redemption unless we shall fail to redeem any such
Note.
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Change of Control
Upon the occurrence of a Change of Control, Holdings will make an Offer to
Purchase all of the outstanding Notes at a Purchase Price in cash equal to:
(x) 101% of the Accreted Value thereof, if the Purchase Date is on or prior
to August 1, 2004, or
(y) 101% of the principal amount at Stated Maturity thereof, together with
accrued interest, if any, to the Purchase Date if the Purchase Date is after
August 1, 2004.
For purposes of the foregoing, an Offer to Purchase shall be deemed to have
been made if:
(i) within 30 days following the date of the consummation of a transaction
or series of transactions that constitutes a Change of Control, Holdings
commences an Offer to Purchase all outstanding Notes at the Purchase Price
(provided that the running of such 30-day period shall be suspended, for up to
a maximum of 30 days, during any period when the commencement of such Offer to
Purchase is delayed or suspended by reason of any court's or governmental
authority's review of or ruling on any materials being employed by Holdings to
effect such Offer to Purchase, so long as Holdings has used and continues to
use its best efforts to make and conclude such Offer to Purchase promptly) and
(ii) all Notes properly tendered pursuant to the Offer to Purchase are
purchased on the terms of such Offer to Purchase.
The phrase "all or substantially all," as used in the definition of "Change
of Control," has not been interpreted under New York law (which is the
governing law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the Holders of the Notes elected to exercise their
rights under the Indenture and Holdings elected to contest such election, there
could be no assurance how a court interpreting New York law would interpret the
phrase.
The provisions of the Indenture may not afford Holders protection in the
event of a highly leveraged transaction, reorganization, restructuring, merger
or similar transaction affecting Holdings that may adversely affect Holders, if
the transaction is not the type of transaction included within the definition
of Change of Control. A transaction involving the management of Holdings or its
Affiliates, or a transaction involving a recapitalization of Holdings, will
result in a Change of Control only if it is the type of transaction specified
in the definition. The definition of Change of Control may be amended or
modified with the written consent of a majority in aggregate principal amount
at Stated Maturity of outstanding Notes. See "--Amendment, Supplement and
Waiver."
There can be no assurance that Holdings will have adequate resources to
refinance or fund the repurchase of the Notes in the event of a Change of
Control. The failure of Holdings, following a Change of Control, to make an
Offer to Purchase or to pay when due the Purchase Price of Notes tendered in
conformity with an Offer will give the Trustee and the Holders the rights
described under "Events of Default".
Holdings will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Securities Exchange Act of 1934 and other securities laws
or regulations in connection with any repurchase of the Notes as described
above.
The existence of a Holder's rights to require Holdings to repurchase Notes
in connection with a Change of Control may deter a third party from acquiring
Holdings in a transaction that would constitute a "Change of Control."
Holdings will not be required to make an Offer to Purchase upon a Change of
Control if a third party makes an Offer to Purchase contemporaneously with or
upon a Change of Control in the manner, at the times and otherwise in
compliance with the requirements of the Indenture and purchases all Notes
validly tendered and not withdrawn under its Offer to Purchase.
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Restrictive Covenants
Set forth below are descriptions of certain restrictive covenants contained
in the Indenture:
Limitation on Debt
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, Incur any Debt (including Acquired Debt), unless immediately after giving
effect to the Incurrence of such Debt and the receipt and contemporaneous
application of the proceeds therefrom,
(a) the Interest Coverage Ratio of Holdings and its Restricted Subsidiaries
for the last four fiscal quarters for which financial information is available
at the date of determination (the "Specified Period"), determined on a pro
forma basis as if any such Debt, and any other Debt Incurred since the
beginning of the Specified Period, had been Incurred and the proceeds thereof
had been applied at the beginning of the Specified Period, and any other Debt
repaid since the beginning of the Specified Period had been repaid at the
beginning of the Specified Period, would be (1) at any time prior to August 1,
2001, greater than 1.75:1 and (2) at any time on or after August 1, 2001,
greater than 2.0:1; and
(b) no Default or Event of Default shall have occurred and be continuing at
the time or as a consequence of the Incurrence of such Debt.
If, during the Specified Period or subsequent thereto and prior to the date
of determination, Holdings or any of its Restricted Subsidiaries shall have
engaged in any Asset Sale or acquisition or shall have designated any
Restricted Subsidiary to be an Unrestricted Subsidiary or any Unrestricted
Subsidiary to be a Restricted Subsidiary, EBITDA, as defined, and Adjusted
Interest Expense for the Specified Period shall be calculated on a pro forma
basis giving effect to such Asset Sale or acquisition or designation, as the
case may be, and the application of any proceeds therefrom as if such Asset
Sale or acquisition or designation had occurred on the first day of the
Specified Period.
If the Debt which is the subject of a determination under this provision is
Acquired Debt, or Debt Incurred in connection with the simultaneous acquisition
of any Person, business, property or assets, or Debt of an Unrestricted
Subsidiary being designated as a Restricted Subsidiary, then such ratio shall
be determined by giving effect (on a pro forma basis, as if the transaction had
occurred at the beginning of the Specified Period) to both the Incurrence or
assumption of such Acquired Debt or such other Debt by Holdings or any of its
Restricted Subsidiaries and the inclusion in EBITDA, as defined, of the EBITDA,
as defined, of the acquired Person, business, property or assets or
redesignated Subsidiary.
Notwithstanding the first paragraph above, Holdings and its Restricted
Subsidiaries may Incur Permitted Debt.
The Incurrence of Debt solely to develop a Stopping Center shall be
determined in accordance with the definition of "Incur" set forth herein. The
accretion of original issue discount (and any accruals of interest or payment
of interest in Additional Notes) on the Notes shall not be deemed an incurrence
of Debt for purposes of this covenant.
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Limitations on Restricted Payments
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, make any Restricted Payment unless, at the time of
and after giving effect to the proposed Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
will occur as a consequence thereof;
(b) after giving effect to such Restricted Payment on a pro forma basis,
Holdings would be permitted to Incur at least $1.00 of additional Debt (other
than Permitted Debt) pursuant to the provisions described in the first
paragraph under the "Limitation on Debt" covenant; and
(c) after giving effect to such Restricted Payment on a pro forma basis, the
aggregate amount expended or declared for all Restricted Payments made on or
after the date of initial issuance of the Notes shall not exceed the sum
(without duplication) of:
(1) 50% of the Adjusted Net Income (or, if Adjusted Net Income shall be a
deficit, minus 100% of such deficit) of Holdings accrued on a cumulative basis
during the period (taken as one accounting period) beginning on the first day
of the fiscal quarter in which the initial issuance of the Notes occurred and
ending on the last day of the fiscal quarter immediately preceding the date of
such proposed Restricted Payment, plus
(2) 100% of the aggregate net cash proceeds received by Holdings subsequent
to the initial issuance of the Notes from the issuance and sale (other than to
a Restricted Subsidiary) of its Qualified Capital Interests, including
Qualified Capital Interests issued upon the conversion of Debt or Redeemable
Capital Interests of Holdings issued after the initial issuance of the Notes,
and from the exercise of options, warrants or other rights to purchase such
Qualified Capital Interests, plus
(3) 100% of the net reduction in Investments (other than Permitted
Investments), subsequent to the date of the initial issuance of the Notes, in
any Person, resulting from payments of interest on Debt, dividends, repayments
of loans or advances (but only to the extent such interest, dividends or
repayments are not included in the calculation of Adjusted Net Income), in each
case to Holdings or any Restricted Subsidiary from any Person (including,
without limitation, from Unrestricted Subsidiaries) or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries in accordance with the
Indenture, not to exceed in the case of any Person the amount of Investments
previously made by Holdings or any Restricted Subsidiary in such Person, plus
(4) $5,000,000.
Notwithstanding the foregoing provisions, Holdings and its Restricted
Subsidiaries may take the following actions, provided that with respect to
clauses (ii), (iii), (iv), (vi) and (vii) below, immediately after giving
effect to such action, no Default or Event of Default has occurred and is
continuing:
(i) the payment of any dividend on Capital Interests in Holdings or a
Restricted Subsidiary within 60 days after declaration thereof if at the
declaration date such payment would not have been prohibited by the foregoing
provisions of this covenant;
(ii) the retirement of any Qualified Capital Interests of Holdings or any
Restricted Subsidiary by conversion into, or by or in exchange for, Qualified
Capital Interests, or out of net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of Holdings) of other Qualified Capital
Interests of Holdings;
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(iii) the redemption, defeasance, repurchase or acquisition or retirement
for value of any Debt of Holdings that is subordinate in right of payment to
the Notes out of the net cash proceeds of a substantially concurrent issue and
sale (other than to a Restricted Subsidiary) of new subordinated Debt of
Holdings incurred in accordance with the Indenture;
(iv) payments due under the Permitted Affiliate Agreements that would
otherwise constitute Restricted Payments (other than pursuant to clause (v)
below);
(v) cash distributions by Holdings to its partners on its Capital Interests,
for so long as it is organized as a partnership or other substantially similar
pass-through entity for federal income tax purposes, in aggregate amounts not
exceeding the aggregate amount of Permitted Tax Distributions accrued after
December 31, 1997;
(vi) the purchase, redemption, retirement or other acquisition for value of
Capital Interests in Holdings held by employees or former employees of Holdings
or any Restricted Subsidiary (or their estates or beneficiaries under their
estates) upon death, disability, retirement, termination of employment or
pursuant to the terms of any agreement under which such Capital Interests were
issued; provided that the aggregate cash consideration paid for such purchase,
redemption, retirement or other acquisition of such Capital Interests does not
exceed $1,000,000 in any fiscal year;
(vii) payments that would otherwise constitute Restricted Payments, not to
exceed $100,000 in any fiscal year;
(viii) the purchase on the Issue Date of the Chartwell Interests and the
Kirschner Interests;
(ix) the purchase of any Warrants; and
(x) the conversion of employee options issued under the Option Plan into
rights under the Phantom Option Plan.
The actions described in clauses (i), (ii), (iv), (vi) and (vii) of the
immediately preceding paragraph shall reduce, but without duplication, the
amount that would otherwise be available for Restricted Payments under clause
(c) of the first paragraph under this "Limitations on Restricted Payments"
covenant.
If Holdings makes a Restricted Payment which, at the time of the making of
such Restricted Payment, in the good faith determination of the Board of
Directors of Holdings, would 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 adjustment made in
good faith to Holdings' financial statements affecting Adjusted Net Income.
If any Person in which an Investment is made, which Investment constitutes a
Restricted Payment when made, thereafter becomes a Restricted Subsidiary in
accordance with the Indenture, all such Investments previously made in such
Person shall no longer be counted as Restricted Payments for purposes of
calculating the aggregate amount of Restricted Payments pursuant to clause (c)
above, in each case to the extent such Investments would otherwise be so
counted.
If Holdings or a Restricted Subsidiary transfers, conveys, sells, leases or
otherwise disposes of an Investment not in violation of the "Limitation on
Asset Sales" covenant, which Investment was originally included in the
aggregate amount expended or declared for all Restricted Payments pursuant to
clause (c) of the definition of "Restricted Payments", the aggregate amount
expended or declared for all Restricted Payments shall be reduced by the lesser
of:
(i) the Net Cash Proceeds from the transfer, conveyance, sale, lease or
other disposition of such Investment; or
(ii) the amount of the original Investment,
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in each case, to the extent originally included in the aggregate amount
expended or declared for all Restricted Payments pursuant to clause (c) of the
definition of "Restricted Payments."
For purposes of this covenant, if a particular Restricted Payment involves a
non-cash payment, including a distribution of assets, then such Restricted
Payment shall be deemed to be an amount equal to the cash portion of such
Restricted Payment, if any, plus an amount equal to the Fair Market Value of
the noncash portion of such Restricted Payment.
Limitations on Liens
Holdings will not create, incur or otherwise cause or suffer to exist or
become effective any Liens of any kind (other than Permitted Liens) upon any
property or asset of Holdings (including, without limitation, any Capital
Interest or Debt of any Restricted Subsidiary), now owned or hereafter acquired
by Holdings, unless:
(i) if such Lien secures Debt which is pari passu with the Notes, then the
Notes are secured on an equal and ratable basis with the obligations so secured
until such time as such obligation is no longer secured by a Lien; or
(ii) if such Lien secures Debt which is subordinated to the Notes, any such
Lien shall be subordinated to the Lien granted to the Holders of the Notes to
the same extent as such subordinated Debt is subordinated to the Notes.
Limitation on Issuance and Sale of Capital Interests in Restricted
Subsidiaries
Holdings will not permit any Restricted Subsidiary of Holdings to issue any
Capital Interest (other than any required directors' qualifying shares) to any
Person other than Holdings or a Wholly-Owned Restricted Subsidiary thereof.
Holdings will not sell, and will not permit any of its Restricted Subsidiaries
to sell, any Capital Interests in any Restricted Subsidiary to any Person other
than Holdings or a Wholly-Owned Restricted Subsidiary unless all such Capital
Interests owned by Holdings and its Restricted Subsidiaries are sold in one or
more contemporaneous transactions; provided, however, that Holdings will not
sell any Capital Interest in Holdings Financial Corporation to any Person other
than a Wholly-Owned Restricted Subsidiary.
Limitation on Asset Sales
Holdings will not consummate an Asset Sale unless Holdings:
(i) receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the property or assets sold or otherwise disposed of;
(ii) at least 85% of the consideration received by Holdings for such
property or assets consists of cash or Eligible Cash Equivalents; provided that
the amount of any liabilities (as shown on Holdings' most recent balance sheet)
of Holdings (other than contingent liabilities and liabilities that are by
their terms subordinate to the Notes) that are assumed or forgiven by the
transferee of any such assets will be deemed to be cash for the purposes of
this clause (ii); and
(iii) the Net Cash Proceeds received by Holdings are applied, to the extent
Holdings or any Restricted Subsidiary elects or is required,
(A) to repay or purchase and permanently reduce outstanding Debt of a
Restricted Subsidiary, and to permanently reduce any commitments in respect
thereof, provided, however, that such repayment and commitment reduction occurs
within 270 days following the receipt of such Net Cash Proceeds; or
(B) to an investment in Replacement Assets, provided, however, that such
investment occurs or Holdings or such Restricted Subsidiary enters into
contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 270th
day following receipt of such Net Cash Proceeds (the "Reinvestment Date") and
Net Cash Proceeds contractually committed are so applied within 365 days
following the receipt of such Net Cash Proceeds.
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Notwithstanding any provision of this "Limitation on Asset Sales" covenant,
Asset Swaps and Fuel Hedging Obligations entered into in the ordinary course of
business shall not be subject to clause (ii) of the immediately preceding
sentence.
Any Net Cash Proceeds from any Asset Sale that are not used to reinvest in
Replacement Assets and/or repay Debt of a Restricted Subsidiary shall
constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10,000,000, Holdings
shall make an Offer to Purchase, from all Holders, Notes:
(x) having an aggregate Accreted Value as of the Purchase Date, if the
Purchase Date is on or prior to August 1, 2004, or
(y) in an aggregate principal amount at Stated Maturity, if the Purchase
Date is after August 1, 2004,
in either case equal to the Excess Proceeds, at a Purchase Price in cash equal
to:
(x) 100% of the Accreted Value thereof, if the Purchase Date is on or prior
to August 1, 2004, or
(y) 100% of the principal amount thereof, together with accrued interest, if
any, to the Purchase Date, if the Purchase Date is after August 1, 2004.
If the aggregate Purchase Price of Notes surrendered by Holders exceeds the
amount equal to the Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. To the extent that any amount of Excess Proceeds
remains after completion of such Offer to Purchase, Holdings may use such
remaining amount for general corporate purposes, and the amount of Excess
Proceeds shall be reset to zero.
Holdings will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act and other securities laws or regulations in
the event that an Asset Sale Offer is required under the circumstances
described therein.
Transactions with Affiliates
Holdings will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, conduct any business or enter into or permit to
exist any transaction or series of related transactions (including, but not
limited to, the purchase, sale or exchange of property, the making of any
Investment, the giving of any Guarantee or the rendering of any service) with
any Unrestricted Subsidiary or any Affiliate of Holdings or any Restricted
Subsidiary other than transactions solely among any of Holdings and its
Restricted Subsidiaries (an "Affiliate Transaction") unless:
(i) such business, transaction or series of related transactions is on terms
no less favorable to Holdings or such Restricted Subsidiary than those that
could be obtained in a comparable arm's length transaction between unaffiliated
parties; and
(ii) with respect to an Affiliate Transaction involving an amount or having
a value in excess of $500,000, Holdings delivers to the Trustee an officers'
certificate stating that such business, transaction or series of related
transactions complies with clause (i) above.
In the case of an Affiliate Transaction involving an amount or having a value
in excess of $2,000,000 but less than or equal to $5,000,000, Holdings must
obtain a resolution of the Board of Directors (including a majority of
Disinterested Directors, if any) certifying that such Affiliate Transaction
complies with clause (i) above. In the case of an Affiliate Transaction
involving an amount or having a value in excess of $5,000,000, Holdings must
obtain a written opinion of a nationally recognized investment banking firm or
other expert stating that the transaction is fair to Holdings or such
Restricted Subsidiary from a financial point of view. The foregoing limitation
does not limit, and shall not apply to,
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(1) any transaction or series of related transactions pursuant to the terms
of the Permitted Affiliate Agreements,
(2) cash distributions permitted under clause (v) of the second paragraph of
the Limitations on Restricted Payments covenant, relating to Permitted Tax
Distributions,
(3) the payment of reasonable and customary fees to members of the Board of
Directors of Holdings or a Restricted Subsidiary who are outside directors,
(4) the payment of reasonable and customary compensation to officers and
employees of Holdings or any Restricted Subsidiary as determined by the Board
of Directors thereof in good faith,
(5) any transaction pursuant to an agreement, arrangement or understanding
existing on the Issue Date and described elsewhere in this Offering Memorandum
and any amendment to such agreements, arrangements or understandings that is
not adverse to Holdings, and
(6) any transaction, approved by the Board of Directors of Holdings, with an
officer or director of Holdings or of any Subsidiary in his or her capacity as
officer or director entered into in the ordinary course of business.
Holdings may in addition pay advisory fees to an Affiliate of Holdings with
respect to specific transactions, provided such payments would be permitted
under the first paragraph of the Limitations on Restricted Payments covenant.
In addition, for purposes of this "Transactions with Affiliates" covenant, any
transaction or series of related transactions between Holdings or any
Restricted Subsidiary and an Affiliate of Holdings that is approved by a
majority of the Disinterested Directors, if any, shall be deemed to comply with
clause (i) above. Notwithstanding the provisions of this covenant, Holdings and
its Restricted Subsidiaries will be permitted to consummate the Transactions
and to pay fees on the Closing Date in connection with the consummation of the
Transactions as described in this Offering Memorandum.
Limitation on Sale and Leaseback Transactions
Holdings will not, and will not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction unless:
(i) the consideration received in such Sale and Leaseback Transaction is at
least equal to the fair market value of the property sold, as determined by a
board resolution of Holdings, and
(ii) immediately prior to and after giving effect to the Attributable Debt
in respect of such Sale and Leaseback Transaction, Holdings could incur at
least $1.00 of additional Debt (other than Permitted Debt) in compliance with
the covenant described under "Limitation on Debt."
Provision of Financial Information
Whether or not we are subject to Section 13(a) or 15(d) of the Exchange Act,
or any successor provision thereto, we will, to the extent accepted by the
Commission and not prohibited under the Exchange Act, file with the Commission
the annual reports, quarterly reports and other documents which we would have
been required to file with the Commission pursuant to such Section 13(a) or
15(d) or any successor provision thereto if we were subject thereto, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which we would have been required to file
them. We will also, in any event,
(a) within 15 days of each Required Filing Date:
(i) transmit by mail to all Holders, as their names and addresses appear
in the security register, without cost to such Holders, and
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(ii) file with the Trustee copies of the annual reports, quarterly reports
and other documents which we would have been required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or any
successor provisions thereto if we were subject thereto and
(b) if filing such documents by us with the Commission is not accepted by
the Commission or is prohibited under the Exchange Act, promptly upon written
request, supply copies of such documents to any prospective Holder.
We will, upon request, provide to any Holder of Notes or any prospective
transferee of any such Holder any information concerning us (including
financial statements) necessary in order to permit such Holder to sell or
transfer Notes in compliance with Rule 144A under the Securities Act; provided,
however, that we shall not be required to furnish such information in
connection with any request made on or after the date which is two years from
the later of (i) the date such Note (or any predecessor Note) was acquired from
us or (ii) the date such Note (or any predecessor Note) was last acquired from
an "affiliate" of us within the meaning of Rule 144 under the Securities Act.
Payments for Consent
Neither Holdings nor any of its Restricted Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes that so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
Limitation on Creation of Unrestricted Subsidiaries
Holdings may designate any Subsidiary of Holdings to be an "Unrestricted
Subsidiary" as provided below in which event such Subsidiary and each other
Person that is then or thereafter becomes a Subsidiary of such Subsidiary will
be deemed to be an Unrestricted Subsidiary. "Unrestricted Subsidiary" means:
(1) any Subsidiary designated as such by the Board of Directors as set forth
below where;
(a) neither Holdings nor any of its Restricted Subsidiaries;
(i) provides credit support for, or Guarantee of, any Debt of such
Subsidiary or any Subsidiary of such Subsidiary (including any undertaking,
agreement or instrument evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such Subsidiary or
any Subsidiary of such Subsidiary, and
(b) no default with respect to any Debt of such Subsidiary or any
Subsidiary of such Subsidiary (including any right which the holders thereof
may have to take enforcement action against such Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of Holdings and its
Restricted Subsidiaries to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity; and
(2) any Subsidiary of an Unrestricted Subsidiary.
Holdings may designate any Subsidiary (other than the Operating Partnership or
Petro Financial Corporation) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Interests of, or owns or holds any Lien on any
property of, any other Restricted Subsidiary of Holdings, provided that either:
(x) the Subsidiary to be so designated has total assets of $1,000 or less;
or
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(y) immediately after giving effect to such designation, Holdings could
Incur at least $1.00 of additional Debt pursuant to the first paragraph under
"Limitation on Debt" and provided, further, that Holdings could make a
Restricted Payment in an amount equal to the greater of the fair market value
or book value of such Subsidiary pursuant to "Limitation on Restricted
Payments" and such amount is thereafter treated as a Restricted Payment for the
purpose of calculating the aggregate amount available for Restricted Payments
thereunder.
An Unrestricted Subsidiary may be designated as a Restricted Subsidiary if:
(i) all the Debt of such Unrestricted Subsidiary could be Incurred under the
"Limitation on Debt" covenant; and
(ii) all the Liens on the property and assets of such Unrestricted
Subsidiary could be incurred pursuant to the "Limitations on Liens" covenant.
Limitation on Conduct of Business of Holdings Financial Corporation
Except to the extent permitted under "Consolidation, Merger, Conveyance,
Transfer or Lease," Holdings Financial Corporation will not hold any operating
assets or other properties or conduct any business other than to serve as an
Issuer and co-obligor with respect to the Notes and will not own any Capital
Interest of any other Person.
Consolidation, Merger, Conveyance, Transfer or Lease
Holdings will not, and will not permit any Restricted Subsidiary to, in any
transaction or series of transactions, consolidate with or merge into any other
Person (other than a merger of a Restricted Subsidiary into Holdings in which
Holdings is the continuing Person or the merger of a Restricted Subsidiary into
or with another Restricted Subsidiary or another Person that as a result of
such transaction becomes a Restricted Subsidiary), or transfer all or
substantially all of the assets of Holdings and its Restricted Subsidiaries,
taken as a whole, to any other Person, unless, in the case of Holdings:
(i) either:
(a) Holdings shall be the continuing Person; or
(b) the Person (if other than Holdings) formed by such consolidation or into
which Holdings is merged, or the Person that acquires, by sale, assignment,
conveyance, transfer, lease or disposition, all or substantially all of the
property and assets of Holdings (such Person, the "Surviving Entity"),
(1) shall be a corporation, partnership, limited liability company or
similar entity organized and validly existing under the laws of the United
States, any political subdivision thereof or any state thereof or the District
of Columbia and
(2) shall expressly assume, by a supplemental indenture, the due and
punctual payment of all amounts due in respect of the principal of (and
premium, if any) and interest on all the Notes and the performance of the
covenants and obligations of Holdings under the Indenture;
provided that at any time Holdings or its successor is a limited partnership,
there shall be a co-issuer of the Notes that is a corporation;
(ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Debt Incurred or anticipated to be Incurred in connection with
or in respect of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing or would result
therefrom;
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(iii) immediately after giving effect to any such transaction or series of
transactions on a pro forma basis (including, without limitation, any Debt
Incurred or anticipated to be Incurred in connection with or in respect of
such transaction or series of transactions) as if such transaction or series
of transactions had occurred on the first day of the determination period,
Holdings (or the Surviving Entity if Holdings is not continuing) could Incur
$1.00 of additional Debt (other than Permitted Debt) under the first paragraph
of the "Limitation on Debt" covenant;
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any Debt
Incurred or anticipated to be Incurred in connection with or in respect of
such transaction or series of transactions), Holdings (or the Surviving Entity
if Holdings is not continuing) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of Holdings immediately prior to such
transaction; and
(v) Holdings delivers, or causes to be delivered, to the Trustee, in form
and substance reasonably satisfactory to the Trustee, an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
conveyance, assignment, transfer, lease or other disposition comply with the
requirements of the Indenture.
Notwithstanding the foregoing, if, in the good faith determination of the
Board of Directors of Holdings,
(I) the purpose of such transaction is:
(A) to transform Holdings into a corporation or
(B) to change the state of organization of Holdings or a Restricted
Subsidiary, and
(II) no material adverse effect on the creditworthiness of Holdings (or the
Surviving Entity if Holdings is not continuing) and its Restricted
Subsidiaries, taken as a whole, shall result as a consequence of the
transaction, then clauses (iii) and (iv) above shall not apply; it being
recognized that such reorganization shall not be considered to have a material
adverse effect on the creditworthiness of Holdings solely because the
Surviving Entity is subject to income taxation.
For all purposes of the Indenture and the Notes, Subsidiaries of any
Surviving Entity will, upon such transaction or series of transactions, become
Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to
the Indenture and all Debt, and all Liens on property or assets, of the
Surviving Entity and its Subsidiaries that was not Debt, or were not Liens on
property or assets, of Holdings and its Subsidiaries immediately prior to such
transaction or series of transactions shall be deemed to have been Incurred
upon such transaction or series of transactions.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, conditions described in the
immediately preceding paragraphs, the Surviving Entity shall succeed to, and
be substituted for, and may exercise every right and power of, Holdings or
Holdings Financial Corporation, as the case may be, under the Indenture with
the same effect as if such Surviving Entity had been named as Holdings or
Holdings Financial Corporation therein; and when a Surviving Person duly
assumes all of the obligations and covenants of Holdings or Holdings Financial
Corporation, as the case may be, pursuant to the Indenture and the Notes,
except in the case of a lease, the predecessor Person shall be relieved of all
such obligations.
Events of Default
Each of the following is an "Event of Default" under the Indenture:
(1) default in the payment in respect of the principal of (or premium, if
any, on) any Note at its maturity (whether at Stated Maturity or upon
repurchase, acceleration, optional redemption or otherwise);
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(2) default in the payment of any interest upon any Note when it becomes due
and payable, and continuance of such default for a period of 30 days;
(3) default in the making of an Offer to Purchase as required by the
Indenture;
(4) failure to perform or comply with the Indenture provisions described
under "Consolidation, Merger, Conveyance, Lease or Transfer";
(5) default in the performance, or breach, of any covenant or agreement of
an Issuer in the Indenture (other than a covenant or agreement a default in
whose performance or whose breach is specifically dealt with in (1), (2), (3)
or (4) above), and continuance of such default or breach for a period of 30
days after written notice thereof has been given to Holdings by the Trustee or
to Holdings and the Trustee by the Holders of at least 25% in aggregate
principal amount at Stated Maturity of the outstanding Notes;
(6) a default or defaults under any bonds, debentures, notes or other
evidences of Debt (other than the Notes) by Holdings or any Restricted
Subsidiary having, individually or in the aggregate, a principal or similar
amount outstanding of at least $5,000,000, whether such Debt now exists or
shall hereafter be created, which default or defaults shall have resulted in
the acceleration of the maturity of such Debt prior to its express maturity or
shall constitute a failure to pay such Debt when due and payable after the
expiration of any applicable grace period with respect thereto;
(7) the entry against Holdings or any Restricted Subsidiary of a final
judgment or final judgments for the payment of money in an aggregate amount in
excess of $5,000,000 by a court or courts of competent jurisdiction, which
judgments remain undischarged, unwaived, unstayed, unbonded or unsatisfied for
a period of 60 consecutive days; or
(8) certain events in bankruptcy, insolvency or reorganization affecting
Holdings or any Significant Subsidiary.
If an Event of Default (other than an Event of Default specified in clause
(8) above) occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount at Stated
Maturity of the outstanding Notes may declare, by a notice in writing to
Holdings (and to the Trustee if given by Holders), the Notes to be due and
payable immediately in an amount equal to:
(x) the Accreted Value of the Notes outstanding on the date of acceleration,
if such declaration is made on or prior to August 1, 2004, or
(y) the entire principal amount at Stated Maturity of the Notes outstanding
on the date of acceleration plus accrued but unpaid interest, if any, to the
date of acceleration, if such declaration is made after August 1, 2004;
provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the Holders of a majority in aggregate principal
amount of the outstanding Notes may, under certain circumstances, rescind and
annul such acceleration if all Events of Default, other than the nonpayment of
accelerated principal of or interest on the Notes, have been cured or waived as
provided in the Indenture. If an Event of Default specified in clause (8) above
occurs, the principal of and any accrued interest on the Notes then outstanding
shall ipso facto become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. For further information as
to waiver of defaults, see "--Amendment, Supplement and Waiver." The Trustee
may withhold from Holders notice of any Default (except in payment of principal
of, premium, if any, and interest) if the Trustee determines that withholding
notice is in the best interest of the Holders to do so.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a
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continuing Event of Default and unless also the Holders of at least 25% in
aggregate principal amount at Stated Maturity of the outstanding Notes shall
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, and the Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the outstanding
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. Such limitations do not apply,
however, to a suit instituted by a Holder of a Note for enforcement of payment
of the principal of (and premium, if any) or interest on such Note on or after
the respective due dates expressed in such Note.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of Holdings with the
intention of avoiding payment of the premium that Holdings would have had to
pay if Holdings then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
Holdings will be required to furnish to the Trustee annually a statement as
to the performance of certain obligations under the Indenture and as to any
default in such performance. Holdings also is required to notify the Trustee
upon becoming aware of the occurrence of any Default or Event of Default.
Amendment, Supplement and Waiver
Without the consent of any Holders, we and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental to the
Indenture for any of the following purposes:
(1) to evidence the succession of another Person to us and the assumption by
any such successor of our covenants in the Indenture and in the Notes; or
(2) to add to our covenants for the benefit of the Holders, or to surrender
any right or power herein conferred upon us; or
(3) to add additional Events of Default; or
(4) to provide for uncertificated Notes in addition to or in place of the
certificated Notes; or
(5) to evidence and provide for the acceptance of appointment under the
Indenture by a successor Trustee; or
(6) to secure the Notes; or
(7) to cure any ambiguity, to correct or supplement any provision in the
Indenture which may be defective or inconsistent with any other provision in
the Indenture, or to make any other provisions with respect to matters or
questions arising under the Indenture, provided that such actions pursuant to
this clause shall not adversely affect the interests of the Holders in any
material respect; or
(8) to issue Additional Notes or Exchange Notes; or
(9) to comply with any requirements of the Commission in order to effect and
maintain the qualification of the Indenture under the Trust Indenture Act.
With the consent of the Holders of not less than a majority in aggregate
principal amount at Stated Maturity of the outstanding Notes, we and the
Trustee may enter into an indenture or indentures supplemental to the Indenture
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of modifying in any
manner the rights of the Holders under the Indenture, including the definitions
therein; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each outstanding Note affected thereby,
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(1) change the Stated Maturity of any Note or of any installment of interest
on any Note, or reduce the amount payable in respect of the Accreted Value or
the principal thereof or the rate of interest thereon or any premium payable
thereon, or reduce the amount that would be due and payable on acceleration of
the maturity thereof, or change the place of payment where, or the coin or
currency in which, any Note or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof, or
(2) reduce the percentage in aggregate principal amount at Stated Maturity
of the outstanding Notes, the consent of whose Holders if required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the Indenture, or
(3) modify our obligations to make Offers to Purchase upon a Change of
Control or from the Excess Proceeds of Asset Sales, or
(4) subordinate, in right of payment, the Notes to any other of our Debt, or
(5) modify any of the provisions of this paragraph or provisions relating to
waiver of defaults or certain covenants, except to increase any such percentage
required for such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the Holder of
each outstanding Note affected thereby, or
(6) release any Guarantees required to be maintained under the Indenture.
The Holders of not less than a majority in aggregate principal amount at
Stated Maturity of the outstanding Notes may on behalf of the Holders of all
the Notes waive any past default under the Indenture and its consequences,
except a default
(1) in any payment in respect of the principal of (or premium, if any) or
interest on any Notes (including any Note which is required to have been
purchased pursuant to an Offer to Purchase which has been made by us), or
(2) in respect of a covenant or provision hereof which under the Indenture
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected.
Satisfaction and Discharge of the Indenture; Defeasance
We may terminate the obligations under the Indenture, when:
(1) either:
(A) all Notes theretofore authenticated and delivered have been delivered
to the Trustee for cancellation, or
(B) all such Notes not theretofore delivered to the Trustee for
cancellation:
(i) have become due and payable, or
(ii) will become due and payable within 60 days or are to be called for
redemption within 60 days (a "Discharge") under irrevocable arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in our name, and at our expense, and we 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 Notes, not theretofore delivered
to the Trustee for cancellation, for principal of, premium, if any, on and
interest to the date of deposit or Stated Maturity or date of redemption;
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(2) we have paid or caused to be paid all other sums then due and payable
hereunder by us; and
(3) we have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
We may elect, at their option, to have their obligations discharged with
respect to the outstanding Notes ("defeasance"). Such defeasance means that we
will be deemed to have paid and discharged the entire indebtedness represented
by the outstanding Notes, except for:
(1) the rights of Holders of such Notes to receive payments in respect of
the principal of and any premium and interest on such Notes when payments are
due solely from the monies held in trust,
(2) Our obligations with respect to such Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and
the maintenance of an office or agency for payment and money for security
payments held in trust,
(3) the rights, powers, trusts, duties and immunities of the Trustee,
(4) our right of optional redemption, and
(5) the defeasance provisions of the Indenture.
In addition, we may elect, at our option, to have their obligations released
with respect to certain covenants, including without limitation their
obligation to make Offers to Purchase in connection with Asset Sales and any
Change of Control, in the Indenture ("covenant defeasance") and any omission
to comply with such obligation shall not constitute a Default or an Event of
Default with respect to the Notes. In the event covenant defeasance occurs,
certain events (not including non-payment, bankruptcy and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either defeasance or covenant defeasance with respect
to outstanding Notes:
(1) we must irrevocably have deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely to the
benefits of the Holders of such Notes:
(A) money in an amount, or
(B) U.S. government obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms will
provide, not later than the due date of any payment, money in an amount, or
(C) a combination thereof, in each case sufficient without reinvestment,
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 to
pay and discharge, the entire indebtedness in respect of the principal of and
premium, if any, and interest on such Notes on the Stated Maturity thereof or
(if we have made irrevocable arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in our name and at our expense)
the redemption date thereof, as the case may be, in accordance with the terms
of the Indenture and such Notes;
(2) in the case of defeasance, we shall have delivered to the Trustee an
opinion of counsel stating that:
(A) we have received from, or there has been published by, the Internal
Revenue Service a ruling or
(B) since the date of the Indenture, there has been a change in the
applicable federal income tax law,
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in either case (A) or (B) to the effect that, and based thereon such opinion
shall confirm that, the Holders of such Notes will not recognize gain or loss
for federal income tax purposes as a result of the deposit, defeasance and
discharge to be effected with respect to such Notes and will be subject to
federal income tax on the same amount, in the same manner and at the same times
as would be the case if such deposit, defeasance and discharge were not to
occur;
(3) in the case of covenant defeasance, we shall have delivered to the
Trustee an opinion of counsel to the effect that the Holders of such
outstanding Notes will not recognize gain or loss for federal income tax
purposes as a result of the deposit and covenant defeasance to be effected with
respect to such Notes and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would be the case if such
deposit and covenant defeasance were not to occur;
(4) no Default or Event of Default with respect to the outstanding Notes
shall have occurred and be continuing at the time of such deposit after giving
effect thereto or, in the case of defeasance, either:
(A) we shall have delivered to the Trustee an opinion of counsel to the
effect that, based upon existing precedents, if the matter were properly
briefed, a court should hold that the deposit of moneys and/or U.S. government
obligations as provided in clause (1) would not constitute a preference
voidable under Section 547 or 548 of the federal bankruptcy laws; or
(B) no Default or Event of Default relating to bankruptcy or insolvency
shall have occurred and be continuing at any time on or prior to the 91st day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 91st day);
(5) such defeasance or covenant defeasance shall not cause the Trustee to
have a conflicting interest within the meaning of the Trust Indenture Act
(assuming all Notes are in default within the meaning of such Act);
(6) such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which either of us is a party or by which we are bound;
(7) such defeasance or covenant defeasance shall not result in the trust
arising from such deposit constituting an investment company within the meaning
of the Investment Company Act of 1940, as amended, unless such trust shall be
registered under such Act or exempt from registration thereunder; and
(8) we shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent with respect to
such defeasance or covenant defeasance have been complied with.
In connection with a Discharge, in the event either Issuer becomes insolvent
within the applicable preference period after the date of deposit, monies held
for the payment of the Notes may be part of the bankruptcy estate of such
Issuer, disbursement of such monies may be subject to the automatic stay of the
bankruptcy code and monies disbursed to Holders may be subject to disgorgement
in favor of the estate of the bankrupt Issuer. Similar results may apply upon
the insolvency of an Issuer during the applicable preference period following
the deposit of monies in connection with covenant defeasance.
The Trustee
State Street Bank and Trust Company, the Trustee under the Indenture, will
be the initial paying agent and registrar for the Notes. The Trustee from time
to time may extend credit to us in the ordinary course of business. The
Trustee's current address is 2 Avenue de Lafayette, Sixth Floor, Boston,
Massachusetts 02111-1724. Except during the continuance of an Event of Default,
the Trustee will perform only such duties as are specifically set forth in the
Indenture. During the existence of an Event of Default, the Trustee will
exercise such of the rights and powers vested in it by the Indenture and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
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The Indenture and the Trust Indenture Act contain certain limitations on the
rights of the Trustee, should it become a creditor of Holdings or Holdings
Financial Corporation, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any "conflicting interest" (as defined in the Trust
Indenture Act) it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue or resign.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, subject to certain exceptions. The Indenture
provides that in case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by the
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs. Subject to such provisions, the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by the
Indenture at the request or direction of any of the Holders pursuant to the
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction.
No Personal Liability of Stockholders, Partners, Officers or Directors
No director, officer, employee, stockholder, general or limited partner or
incorporator, past, present or future, of Holdings or any of its Subsidiaries,
as such or in such capacity, shall have any personal liability for any
obligations of either Issuer under the Notes, any Guarantee or the Indenture by
reason of his, her or its status as such director, officer, employee,
stockholder, general or limited partner or incorporator. This limitation of
liability does not apply to any claim under the Securities Act or the Exchange
Act, and, in purchasing the Notes, a Holder is not waiving any rights under
such laws. Likewise, this limitation of liability does not apply to any partner
who is a party to an indemnity and hold harmless agreement in favor of Holdings
and the general and limited partners of Holdings.
Governing Law
The Indenture and the Notes are governed by, and will be construed in
accordance with, the laws of the State of New York.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any capitalized term used herein for which no definition
is provided.
"10 1/2% Notes" means the 10 1/2% Senior Notes Due 2007 issued by the
Operating Partnership and PETRO FINANCIAL CORPORATION pursuant to the 10 1/2%
Notes Indenture.
"10 1/2% Notes Indenture" means the indenture among the Operating
Partnership, PETRO FINANCIAL CORPORATION and the Trustee, dated January 30,
1997, as amended as of the date of the Recapitalization.
"12 1/2% Notes" means the 12 1/2% Notes Due 2002 issued in 1994 by Petro PSC
Properties, L.P., a Delaware limited partnership (the predecessor of the
Operating Partnership) and Petro Financial Corporation.
"Accreted Value" means, as of any date prior to August 1, 2004, an amount
per $1,000 principal amount at Stated Maturity of Notes that is equal to the
sum of (a) $ 483.64 and (b) the portion of the excess of the principal amount
at Stated Maturity of each Note over $483.64 which shall have been amortized on
a daily basis and compounded semi-annually on each February 1 and August 1 at
the rate of 15% per annum from the Issue Date through the date of determination
computed on the basis of a 360-day year of twelve 30-day
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months; and, as of any date on or after August 1, 2004, the Accreted Value of
each Note shall mean the aggregate principal amount at Stated Maturity of such
Note; provided however, that the Issue Date for any Additional Notes shall be
deemed to be the original Issue Date of the Notes.
"Acquired Debt" means Debt of a Person (including an Unrestricted
Subsidiary) existing at the time such Person becomes a Restricted Subsidiary
or assumed in connection with the acquisition of assets from such Person.
"Adjusted Interest Expense" means, for any period, without duplication, an
amount equal to the sum of:
(i) the aggregate amount of interest charges (excluding fees and expenses
incurred at or prior to Closing in connection with the Transactions and any
expenses or charges related to Petro Warrant Holdings Corporation, the
Warrants or the obligation or right of Holdings to purchase the Warrants),
whether expensed or capitalized, incurred or accrued by Holdings and its
Restricted Subsidiaries, determined on a consolidated basis in accordance with
GAAP for such period (including non-cash interest payments); plus
(ii) to the extent not included in clause (i) above, an amount equal to the
sum of:
(A) net costs associated with Interest Swap Obligations and Currency
Hedge Obligations (including any amortization of discounts); plus
(B) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptances or similar facilities paid
or accrued, or scheduled to be paid or accrued, during such period; plus
(C) dividends on Preferred Interests and Redeemable Capital Interests (if
paid to a Person other than Holdings or one of its Restricted Subsidiaries)
declared and payable in cash; plus
(D) the portion of any Attributable Debt in respect of any Sale and
Leaseback Transaction that is allocable to interest expense (determined as if
such Sale and Leaseback Transaction were treated as a Capital Lease
Obligation); plus
(E) to the extent any Debt of any other Person is Guaranteed or secured
by Holdings or a Restricted Subsidiary in the manner described in clause (ix)
of the definition of "Debt", the aggregate amount of interest expense of such
other Person during such period attributable to any such Debt determined in
accordance with GAAP; minus
(F) amortization or write-off of deferred financing costs during such
period and any charge related to any premium or penalty paid in connection
with redeeming or retiring any Debt of Holdings and its Restricted
Subsidiaries prior to the Stated Maturity thereof.
For purposes of calculating Adjusted Interest Expense on a pro forma basis,
the interest on Debt bearing a floating rate of interest shall be the interest
rate in effect at the time of determination (taking into account on a pro
forma basis any Interest Swap Obligation applicable to such Debt if such
Interest Swap Obligation has a remaining term at the date of determination in
excess of twelve months).
"Adjusted Net Income" means, for any period, the consolidated net income
(or net loss) of Holdings and its Restricted Subsidiaries determined in
accordance with GAAP for such period minus (to the extent made or reserved)
Permitted Tax Distributions, plus any Permitted Tax Distributions repaid to
Holdings; provided that there shall be excluded therefrom, without
duplication:
(i) all items classified as extraordinary, unusual or nonrecurring
(including fees and expenses incurred at or prior to Closing and write-offs,
in each case in connection with the Transactions);
(ii) any net loss or net income of any Person that is not a Restricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to Holdings or its Restricted Subsidiaries by such
other Person during such period;
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(iii) the net income of any Person acquired by Holdings or a Restricted
Subsidiary thereof in a pooling-of-interests transaction for any period prior
to the date of such acquisition;
(iv) any gain or loss, net of taxes, realized on the termination of any
employee pension benefit plan;
(v) gains (but not losses) in respect of Asset Sales by Holdings or its
Restricted Subsidiaries;
(vi) with regard to any Restricted Subsidiary all of the Capital Interests
which are not owned by Holdings or another Restricted Subsidiary, any aggregate
net income (or loss) in excess of Holdings' or such other Restricted
Subsidiary's pro rata share of such Restricted Subsidiary's net income (or
loss); and
(vii) any expenses or charges related to Petro Warrant Holdings Corporation,
the Warrants or the obligation or right of Holdings to purchase the Warrants.
In computing Adjusted Net Income under clause (c) under the "Limitations on
Restricted Payments" covenant, Holdings:
(i) shall use audited financial statements for the portion of the relevant
period for which such statements are available on the date of determination and
unaudited financial statements and other current financial data based on the
books and records of Holdings for the remaining portion of such period; and
(ii) shall be permitted to rely in good faith for the balance of the
relevant period for which audited financial statements are not available on the
financial statements and other financial data derived from the books and
records of Holdings that are available on the date of determination.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings that correspond to the foregoing. For purposes of
the Indenture, the term "Affiliate," as it relates to Holdings, shall include
Mobil Oil for so long as Mobil Oil is entitled to designate at least one member
of the Board of Directors of Holdings and Volvo Trucks for so long as Volvo
Trucks is entitled to designate at least one member of the Board of Directors
of Holdings, and shall not include Warrant Holdings or any holder (other than
Holdings or any partner of Holdings) of Warrants or Warrant Shares.
"Asset Sale" means any transfer, conveyance, sale, lease or other
disposition (including, without limitation, dispositions pursuant to any
consolidation or merger) by Holdings or any of its Restricted Subsidiaries to
any Person (other than to Holdings or one or more of its Restricted
Subsidiaries) in any single transaction or series of transactions of:
(i) Capital Interests in another Person (other than directors' qualifying
shares);
(ii) any other property or assets (other than in the ordinary course of
business, including any sale or other disposition of obsolete or permanently
retired equipment);
provided, however, that the term "Asset Sale" shall exclude:
(a) any asset disposition permitted by the provisions described under
"Consolidation, Merger, Conveyance, Lease or Transfer" that constitutes a
disposition of all or substantially all of the assets of Holdings and its
Restricted Subsidiaries taken as a whole;
(b) any transfer, conveyance, sale, lease or other disposition of property
or assets, the gross proceeds of which (exclusive of indemnities) do not exceed
$500,000;
(c) sales of Eligible Cash Equivalents;
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(d) the Incurrence of any Lien, to the extent not prohibited by the terms
of the Indenture;
(e) sales of Unrestricted Subsidiaries; and
(f) any of the Transactions.
For purposes of this definition, any series of related transactions that, if
effected as a single transaction, would constitute an Asset Sale, shall be
deemed to be a single Asset Sale effected when the last such transaction which
is a part thereof is effected.
"Asset Swap" means any exchange of property or assets of Holdings or any
Restricted Subsidiary of Holdings for property or assets of a third party which
consist of property or assets described in clause (d) of the definition of
"Permitted Investments."
"Attributable Debt" under the Indenture in respect of a Sale and Leaseback
Transaction means, as at the time of determination, the greater of:
(i) the fair value of the property subject to such arrangement (as
determined in good faith by the Board of Directors); and
(ii) the present value (discounted at the rate of interest implicit in such
transaction) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of any date of determination, with respect to any
Debt, the quotient obtained by dividing:
(i) the sum of the products of:
(x) the number of years from the date of determination to the dates of
each successive scheduled principal payment (including any sinking fund or
mandatory redemption payment requirements) of such Debt multiplied by
(y) the amount of such principal payment by
(ii) the sum of all such principal payments.
"Board of Directors" means:
(i) with respect to Holdings or any Restricted Subsidiary, its Board of
Directors;
(ii) with respect to a corporation, the board of directors of such
corporation or any duly authorized committee thereof; and
(iii) with respect to any other entity, the board of directors or similar
body of the general partner or managers of such entity or any duly authorized
committee thereof.
"Capital Interests" in any Person means any and all shares, interests
(including Preferred Interests), participations or other equivalents in the
equity interest (however designated) in such Person and any rights (other than
Debt securities convertible into an equity interest), warrants or options to
acquire an equity interest in such Person.
"Capital Lease Obligation" of any Person means the obligation to pay rent or
other payment amounts under a lease of (or other Debt arrangement conveying the
right to use) real or personal property of such Person, to the extent such
obligations are required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person in accordance with
GAAP. The Stated Maturity of any
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Capital Lease Obligation shall be the date of the last payment of rent or any
other amount due under such lease (or other Debt arrangement) prior to the
first date upon which such lease (or other Debt arrangement) may be terminated
by the user of such real or personal property without payment of a penalty, and
the amount of any Capital Lease Obligation shall be the capitalized amount
thereof determined in accordance with GAAP.
"Cardwell Group" means J.A. Cardwell, Sr., James A. Cardwell, Jr., and their
respective spouses, lineal descendents, estates and Affiliates, including Petro
Inc. (a corporation wholly owned by J. A. Cardwell, Sr.) and JAJCO II, Inc. (a
company wholly owned by James A. Cardwell, Jr.).
"Change of Control" means the occurrence of any of the following events:
(i) prior to a Public Equity Offering, either:
(A) the Permitted Holders cease to be the "beneficial owner" (as such term
is used in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate of a majority of the Common Interests in Holdings,
whether as a result of issuance of securities of Holdings or any parent company
of Holdings, any merger, consolidation, liquidation or dissolution of Holdings,
any direct or indirect transfer of securities by Holdings or otherwise, or
(B) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) other than one or more Permitted Holders has the
power or right to designate a majority of the members of Holdings' Board of
Directors;
(ii) after the consummation of a Public Equity Offering,
(A) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as such term is used in Rules 13d-3 and 13d-5
under the Exchange Act, except that for purposes of this clause (ii) such
person or group shall be deemed to have "beneficial ownership" of all shares
that any such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the Common Interests in Holdings and
(B) the Permitted Holders "beneficially own" (as defined in this clause
(ii)), directly or indirectly, in the aggregate a lesser percentage of the
total Common Interests of Holdings than such other person or group;
(iii) Holdings ceases to own directly or indirectly at least 99% of the
total voting power and economic benefit of the Capital Interests of the
Operating Partnership;
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by the Board of Directors or
whose nomination for election by the stockholders of Holdings was approved by a
vote of a majority of the directors of Holdings then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute 66 2/3% of Holdings' Board of Directors then in office; or
(v) Holdings sells, conveys, transfers or leases (either in one transaction
or a series of related transactions) all or substantially all of its assets to
a Person other than a Restricted Subsidiary of Holdings or a Successor Entity
in which a majority or more of the voting power of the Voting Interests is held
by the Permitted Holders.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Chartwell Interests" means Capital Interests in the Operating Partnership
held by Chartwell.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Common Interests" of any Person means Capital Interests in such Person that
do not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to Capital Interests of any other class in such Person.
"Consolidated Net Worth" of Holdings means, as of any date, the aggregate of
capital, surplus and retained earnings of Holdings and its Restricted
Subsidiaries as would be shown on a consolidated balance sheet of Holdings and
its Restricted Subsidiaries prepared as of such date in accordance with GAAP,
less all amounts, if any, attributable to Redeemable Capital Interests in such
Person.
"Credit Agreement" means one or more secured or unsecured credit agreements
providing, inter alia, for revolving credit loans, term loans and/or letters of
credit between Holdings or any Subsidiary and one or more lenders, together
with all related notes, letters of credit, collateral documents, guarantees,
and any other related agreements and instruments executed and delivered in
connection therewith, in each case as amended, modified, supplemented,
refinanced, refunded or replaced in whole or in part from time to time.
"Currency Hedge Obligations" means the obligations of a Person Incurred
pursuant to any foreign currency exchange agreement, option or futures contract
or other similar agreement or arrangement designed to protect against or manage
such Person's exposure to fluctuations in foreign currency exchange rates on
Debt permitted under the Indenture.
"Damage Amount" means an amount to be paid as liquidated damages by us to
each Holder of Notes under certain circumstances in accordance with the terms
of the Registration Rights Agreement.
"Debt" means at any time (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person, or non-
recourse, and whether or not contingent, the following:
(i) all indebtedness of such Person for money borrowed, excluding any trade
payables, other current liabilities incurred in the ordinary course of business
and any liability for federal, state or local income taxes or other taxes owed
by such Person;
(ii) all obligations (other than interest, premium and additional payments,
if any) of such Person evidenced by bonds, debentures, notes, or other similar
instruments;
(iii) all obligations of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person;
(iv) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property or assets acquired by such
Person (even if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property or assets);
(v) all Capital Lease Obligations of such Person;
(vi) the maximum fixed redemption or repurchase price of Redeemable Capital
Interests in such Person at the time of determination;
(vii) any Interest Swap Obligations and Currency Hedge Obligations of such
Person at the time of determination;
(viii) Attributable Debt with respect to any Sale and Leaseback Transaction
to which such Person is a party; and
(ix) all obligations of the types referred to in clauses (i) through (viii)
of this definition of another Person and all dividends and other distributions
of another Person, the payment of which, in either case,
(A) such Person has Guaranteed or
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(B) is secured by (or the holder of such Debt or the recipient of such
dividends or other distributions has an existing right, whether contingent or
otherwise, to be secured by) any Lien upon the property or other assets of such
Person, even though such Person has not assumed or become liable for the
payment of such Debt, dividends or other distributions.
For purposes of the foregoing:
(a) the maximum fixed repurchase price of any Redeemable Capital Interests
that do not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Capital Interests as if such Redeemable
Capital Interests were repurchased on any date on which Debt shall be required
to be determined pursuant to this Indenture; provided, however, that, if such
Redeemable Capital Interests are not then permitted to be repurchased, the
repurchase price shall be the book value of such Redeemable Capital Interests;
(b) the amount outstanding at any time of any Debt issued with original
issue discount is the principal amount of such Debt less the remaining
unamortized portion of the original issue discount of such Debt at such time as
determined in conformity with GAAP, but such Debt shall be deemed Incurred only
as of the date of original issuance thereof;
(c) the amount of any Debt described in clause (ix)(A) above shall be the
maximum liability under any such Guarantee; and
(d) the amount of any Debt described in clause (ix)(B) above shall be the
lesser of:
(I) the maximum amount of the obligations so secured; and
(II) the Fair Market Value of such property or other assets.
Notwithstanding the foregoing, neither the Warrants nor any obligation to
purchase the Warrants that may arise under the Warrant Agreement shall be Debt.
"Default" means any event that is, or after notice or passage of time, or
both, would be, any Event of Default.
"Disinterested Director" means, with respect to any proposed transaction
between:
(i) Holdings or a Restricted Subsidiary, as applicable, and
(ii) an Affiliate thereof (other than Holdings or a Restricted Subsidiary),
a member of the Board of Directors of Holdings or such Restricted Subsidiary,
as applicable, who would not be a party to, or have a financial interest in,
such transaction and is not an officer, director or employee of, and does not
have a financial interest in, such Affiliate.
For purposes of this definition, no person would be deemed not to be a
Disinterested Director solely because such person holds Capital Interests in
Holdings.
"EBITDA" means, with respect to Holdings and its Restricted Subsidiaries,
for any period, the sum of Adjusted Net Income plus, to the extent reflected in
Adjusted Net Income for such period for which Adjusted Net Income is
determined, without duplication,
(i) Adjusted Interest Expense,
(ii) income tax expense (or Permitted Tax Distributions in lieu thereof),
(iii) depreciation expense,
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(iv) amortization expense,
(v) any charge related to any premium or penalty paid in connection with
redeeming or retiring any Debt prior to its Stated Maturity and
(vi) any other non-cash items reducing Adjusted Net Income; minus any non-
cash items increasing Adjusted Net Income.
"Eligible Bank" means a bank or trust company that:
(i) is organized and existing under the laws of the United States of America
or Canada, or any state, territory, province or possession thereof; and
(ii) as of the time of the making or acquisition of an Investment in such
bank or trust company, has combined capital and surplus in excess of
$500,000,000, the senior Debt of which is rated at least "A-2" by Moody's or at
least "A" by Standard & Poor's.
"Eligible Cash Equivalents" means any of the following Investments:
(i) securities issued or directly and fully guaranteed or insured by the
United States or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) maturing
not more than one year after the date of acquisition;
(ii) time deposits in and certificates of deposit of any Eligible Bank,
provided that such Investments have a maturity date not more than two years
after date of acquisition and that the Average Life of all such Investments is
one year or less from the respective dates of acquisition;
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with any Eligible Bank;
(iv) direct obligations issued by any state of the United States or any
political subdivision or public instrumentality thereof, provided that such
Investments mature, or are subject to tender at the option of the holder
thereof, within 90 days after the date of acquisition and, at the time of
acquisition, have a rating of at least A from Standard & Poor's or A-2 from
Moody's (or an equivalent rating by any other nationally recognized rating
agency);
(v) commercial paper of any Person other than an Affiliate of Holdings,
provided that such Investments have one of the two highest ratings obtainable
from either Standard & Poor's or Moody's and mature within 90 days after the
date of acquisition;
(vi) overnight and demand deposits in and bankers' acceptances of any
Eligible Bank and demand deposits in any bank or trust company to the extent
insured by the Federal Deposit Insurance Corporation against the Bank Insurance
Fund; and
(vii) money market funds substantially all of the assets of which comprise
Investments of the types described in clauses (i) through (vi).
"Exchange Notes" has the meaning set forth under "Exchange Offer;
Registration Rights."
"Expiration Date" has the meaning set forth in the definition of "Offer to
Purchase."
"Fair Market Value" means, with respect to the consideration received or
paid in any transaction or series of transactions, the fair market value
thereof as determined in good faith by the Board of Directors.
"Franchisee Receivables" means fuel, lube, repair and other receivables
purchased by Holdings or any Restricted Subsidiary from any of their
franchisees, licensees or third party contractors operating a Stopping Center
affiliated with the Operating Partnership's network of Stopping Centers.
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"Fuel Hedging Obligations" means the obligations of a Person pursuant to
fuel price swap, fuel price cap, fuel price collar and fuel price floor and
similar agreements and hedging obligations and arrangements, in the ordinary
course of business, designed to protect against or manage such Person's
exposure to fluctuations in fuel prices.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied, as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, that are applicable to the circumstances as of the date of
determination.
"Guarantee" means, as applied to any Debt of another Person,
(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 such Debt,
(ii) any direct or indirect obligation, contingent or otherwise, of a Person
guaranteeing or having the effect of guaranteeing the Debt of any other Person
in any manner and
(iii) an agreement of a Person, 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 such Debt of another Person (and "Guaranteed", "Guaranteeing" and
"Guarantor" shall have meanings that correspond to the foregoing).
"Holder" means a Person in whose name a Note is registered in the security
register.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Debt or other obligation on the balance sheet of such Person; provided,
however, that a change in GAAP that results in an obligation of such Person
that exists at such time becoming Debt shall not be deemed an Incurrence of
such Debt. Debt otherwise Incurred by a Person before it becomes a Subsidiary
of Holdings shall be deemed to be Incurred at the time at which such Person
becomes a Subsidiary of Holdings. With respect to Debt the proceeds of which
are to be used solely to develop one or more Stopping Centers and to be
borrowed pursuant to a binding commitment previously entered into in good faith
with a lending institution, Holdings or any Restricted Subsidiary shall, at its
election, be deemed to have Incurred Debt in a designated amount of up to the
completion cost of the project, based on the good faith estimate of management
in accordance with past practices and certified and so designated to the
Trustee in an officers' certificate, including a resolution of the Board of
Directors, at the time of such designation, but only to the extent such
proceeds are actually borrowed within 365 days after such delivery date, in
which case the excess of the committed amount over the amount actually borrowed
shall not be deemed Incurred for the purposes of this definition. "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings that correspond to
the foregoing. A Guarantee by Holdings or a Restricted Subsidiary of Debt
incurred by Holdings or a Restricted Subsidiary, as applicable, shall not be a
separate incurrence of Debt.
"Interest Coverage Ratio" means, at any date of determination, the ratio of:
(i) EBITDA, as defined, to
(ii) Adjusted Interest Expense, in both cases for the Specified Period.
"Interest Swap Obligations" means the obligations of a Person pursuant to
any interest rate swap agreement, interest rate cap, collar or floor agreement
or other similar agreement or arrangement designed to
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protect against or manage such Person's exposure to fluctuations in interest
rates on Debt permitted under the Indenture.
"Investment" by any Person means any direct or indirect loan, advance (or
other extension of credit) or capital contribution to (by means of any transfer
of cash or other property or assets to another Person or any other payments for
property or services for the account or use of another Person), including
without limitation the following:
(i) the purchase or acquisition of any Capital Interest or other evidence of
beneficial ownership in another Person;
(ii) the purchase, acquisition or Guarantee of the Debt of another Person or
the issuance of a "keep well" with respect thereto; and
(iii) the purchase or acquisition of the business or assets of another
Person;
but shall exclude:
(a) accounts receivable and other extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices;
(b) the acquisition of property and assets from suppliers and other vendors
in the ordinary course of business;
(c) prepaid expenses and workers' compensation, utility, lease and similar
deposits, in the ordinary course of business; and
(d) the purchase or exchange of the Warrants.
"Issue Date" means the first date of issuance of the Notes under the
Indenture.
"Kirschner" means Kirschner Investments and its Affiliates.
"Kirschner Interests" means Capital Interests in the Operating Partnership
held by Kirschner.
"Lien" means, with respect to any property or other asset any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien (statutory or otherwise), charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or other
asset (including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"Make-Whole Premium" means, with respect to any Note on any Redemption Date,
the greater of (i) 1.0% of the Accreted Value of such Note and (ii) the excess
of (A) the present value at such time of the redemption price of such Note at
August 1, 2004 (such redemption price being set forth in the table in "Optional
Redemption" above) computed using a discount rate equal to the Treasury Rate
plus 0.50% per annum, over (B) the Accreted Value of such Note on such
Redemption Date.
"Mobil Oil" means Mobil Oil Corporation and its Affiliates.
"Net Cash Proceeds" means, with respect to Asset Sales of any Person, cash
and Eligible Cash Equivalents received net of:
(i) all reasonable out-of-pocket expenses of such Person incurred in
connection with such a sale, including, without limitation, all legal, title
and recording tax expenses, commissions and other fees and expenses incurred
and all federal, state, foreign and local taxes arising in connection with such
an Asset Sale
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that are paid or required to be accrued as a liability under GAAP by such
Person, and Permitted Tax Distributions attributable thereto;
(ii) all payments made by such Person on any Debt that is secured by such
Properties or other assets in accordance with the terms of any Lien upon or
with respect to such Properties or other assets or that must, by the terms of
such Lien or such Debt, or in order to obtain a necessary consent to such
transaction or by applicable law, be repaid to any other Person (other than
Holdings or a Restricted Subsidiary thereof) in connection with such Asset
Sale; and
(iii) all contractually required distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such Person as a result
of such transaction;
provided, however, that:
(a) in the event that any consideration for an Asset Sale (which would
otherwise constitute Net Cash Proceeds) is required by
(I) contract to be held in escrow pending determination of whether a
purchase price adjustment will be made or
(II) GAAP to be reserved against other liabilities in connection with such
Asset Sale,
such consideration (or any portion thereof) shall become Net Cash Proceeds only
at such time as it is released to such Person from escrow or otherwise; and
(b) any non-cash consideration received in connection with any transaction,
which is subsequently converted to cash, shall become Net Cash Proceeds only at
such time as it is so converted.
"Offer" has the meaning set forth in the definition of "Offer to Purchase".
"Offer to Purchase" means a written offer (the "Offer") sent by Holdings by
first class mail, postage prepaid, to each Holder at his address appearing in
the security register on the date of the Offer offering to purchase up to the
aggregate:
. Accreted Value of Notes, if the Purchase Date is on or prior to August
1, 2004, or
. principal amount of Notes at Stated Maturity, if the Purchase Date is
after August 1, 2004,
set forth in such Offer at the purchase price set forth in such Offer (as
determined pursuant to the Indenture). Unless otherwise required by applicable
law, the Offer shall specify an expiration date (the "Expiration Date") of the
Offer to Purchase which shall be, subject to any contrary requirements of
applicable law, not less than 30 days or more than 60 days after the date of
mailing of such Offer and a settlement date (the "Purchase Date") for purchase
of Notes within five business days after the Expiration Date. Holdings shall
notify the Trustee at least 15 days (or such shorter period as is acceptable to
the Trustee) prior to the mailing of the Offer of Holdings' obligation to make
an Offer to Purchase, and the Offer shall be mailed by Holdings or, at
Holdings' request, by the Trustee in the name and at the expense of Holdings.
The Offer shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Offer to Purchase. The Offer shall also
state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase is
being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount at Stated Maturity of the outstanding
Notes offered to be purchased pursuant to the Offer to Purchase (including, if
less than 100%, the manner by which such amount has been determined pursuant to
Indenture covenants requiring the Offer to Purchase) (the "Purchase Amount");
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(4) the purchase price to be paid by Holdings for each $1,000 principal
amount of Notes at Stated Maturity accepted for payment (as specified pursuant
to the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes registered in
the name of such Holder and that any portion of a Note tendered must be
tendered in an integral multiple of $1,000 principal amount at Stated Maturity;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that, unless Holdings defaults in making such purchase, any Note
accepted for purchase pursuant to the Offer to Purchase will, after the
Purchase Date, cease
(x) to accrete value, if the Purchase Date is on or prior to August 1,
2004, or
(y) to accrue interest, if the Purchase Date is after August 1, 2004,
but that any Note not tendered or tendered but not purchased by Holdings
pursuant to the Offer to Purchase will continue to accrete value or to accrue
interest at the same rate, as the case may be;
(8) that, on the Purchase Date, the Purchase Price will become due and
payable upon each Note accepted for payment pursuant to the Offer to Purchase;
(9) that each Holder electing to tender a Note pursuant to the Offer to
Purchase will be required to surrender such note at the place or places set
forth in the Offer prior to the close of business on the Expiration Date (such
Note being, if Holdings or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
Holdings and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of Notes
tendered if Holdings (or its paying agent) receives, not later than the close
of business on the Expiration Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the aggregate principal amount
of the Notes the Holder tendered, the certificate number of the Note the Holder
tendered and a statement that such Holder is withdrawing all or a portion of
his tender;
(11) that:
(a) if Notes having an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer
to Purchase, Holdings shall purchase all such Notes and
(b) if Notes having an aggregate principal amount in excess of the
Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, Holdings shall purchase Notes having an aggregate principal amount
equal to the Purchase Amount on a pro rata basis (with such adjustments as may
be deemed appropriate so that only Notes in denominations of $1,000 principal
amount or integral multiples thereof shall be purchased); and
(12) that, in the case of any Holder whose Note is purchased only in part,
we shall execute, and the Trustee shall authenticate and deliver to the Holder
of such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in the aggregate principal amount
equal to and in exchange for the unpurchased portion of the aggregate principal
amount of the Notes so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Operating Partnership" means Petro Stopping Centers, L.P.
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"Option Plan" means the 1997 Class B Common Limited Partnership Interests
Option Plan.
"Permitted Affiliate Agreements" means the agreements between and among
Holdings or any Restricted Subsidiary and each of the Cardwell Group, Mobil
Oil and Volvo Trucks North America, listed in the Indenture in effect
immediately after the initial issuance of the Notes and as the same may be
amended from time to time subject to the provisions of the covenant described
under "Transactions with Affiliates," provided that, notwithstanding such
covenant, such agreements may be extended from time to time or otherwise
amended, to the extent the Board of Directors of Holdings has determined in
good faith that no material adverse effect on the creditworthiness of Holdings
and its Restricted Subsidiaries, taken as a whole, shall result as a
consequence thereby. See "Certain Relationships and Related Transactions"
above.
"Permitted Debt" means:
(i) Debt Incurred pursuant to Credit Agreements (other than pursuant to the
first paragraph of the Limitation on Debt covenant) in an aggregate principal
amount not to exceed $45,000,000 at any one time outstanding, less the
aggregate amount of all Net Cash Proceeds from any Asset Sale that have been
applied to permanently reduce the outstanding amount of Debt under such Credit
Agreement borrowed under this clause (i); provided that the sum of the
aggregate principal amount of Debt under this clause (i) plus the aggregate
principal amount of Debt under clauses (xi), (xii) and (xiii) shall not exceed
$45,000,000;
(ii) Debt outstanding under the Notes and contribution, indemnification and
reimbursement obligations owed by any Issuer to any of the other of them in
respect of amounts paid or payable on such Notes;
(iii) Debt of Holdings or any Restricted Subsidiary outstanding at the time
of the initial issuance of the Notes;
(iv) Debt owed to and held by Holdings or a Wholly-Owned Restricted
Subsidiary;
(v) Guarantees Incurred by Holdings or any Restricted Subsidiary in the
ordinary course of business;
(vi) Guarantees by Holdings or any Restricted Subsidiary of Debt of
Holdings or any Restricted Subsidiary, including Guarantees by Holdings or any
Restricted Subsidiary of Debt under a Credit Agreement, provided that such
Debt (other than Debt Incurred under clauses (i) and (ii) of this definition)
is Incurred in accordance with the "Limitation on Debt" covenant;
(vii) Debt in respect of performance, surety or appeal bonds provided in
the ordinary course of business;
(viii) Debt under Interest Swap Obligations and Currency Hedge Obligations;
(ix) Debt owed by Holdings to any Restricted Subsidiary, provided that if
for any reason such Debt ceases to be held by a Restricted Subsidiary, such
Debt shall cease to be Permitted Debt and shall be deemed Incurred as Debt of
Holdings for purposes of the Indenture;
(x) Debt Incurred to pay for any Notes, any 12 1/2% Notes and any 10 1/2%
Notes tendered pursuant to an Offer to Purchase in connection with a Change of
Control, provided that:
(a) the principal amount of such Debt does not exceed the principal of
the notes purchased (plus the amount of reasonable expenses incurred in
connection therewith, including the applicable purchase premium, but excluding
accrued interest, if any) and
(b) such Debt:
(1) has an Average Life to Stated Maturity at least equal to or greater
than the remaining Average Life to Stated Maturity of the notes and
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(2) does not mature prior to the Stated Maturity of the notes;
(xi) Debt of a Person:
(a) existing at the time such Person becomes a Restricted Subsidiary or
(b) assumed in connection with the acquisition of assets from such
Person, other than Debt Incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary or such acquisition, as the case
may be, provided that the sum of the aggregate principal amount of Debt under
this clause (xi) plus the aggregate principal amount of Debt under clauses
(i), (xii) and (xiii) shall not exceed $45,000,000;
(xii) Debt of Holdings or any Restricted Subsidiary pursuant to Capital
Lease Obligations and Purchase Money Debt Incurred in the ordinary course of
business, provided that the aggregate principal amount of such Debt
outstanding at any time may not exceed $5,000,000 in the aggregate, provided
further that the aggregate principal amount of Debt under this clause (xiii)
plus the aggregate principal amount of Debt under clauses (i), (xi) and (xiii)
shall not exceed $45,000,000;
(xiii) Debt of Holdings or any Restricted Subsidiary not otherwise
permitted pursuant to this definition, in an aggregate principal amount not to
exceed $15,000,000 at any time outstanding, provided that the aggregate
principal amount of Debt under this clause (xiii) plus the aggregate principal
amount of Debt under clauses (i), (xi) and (xii) shall not exceed $45,000,000;
(xiv) Refinancing Debt; and
(xv) Debt of Holdings or any Restricted Subsidiary, the proceeds of which
are used to purchase Warrants or that is issued in exchange for Warrants.
"Permitted Holders" means (1) the Cardwell Group, (2) Mobil Oil and (3)
Volvo Trucks.
"Permitted Investments" means:
(a) Investments in existence on the date of initial issuance of the Notes;
(b) Investments required pursuant to any agreement or obligation of
Holdings or a Restricted Subsidiary, in effect on the Issue Date, to make such
Investments;
(c) Eligible Cash Equivalents;
(d) Investments in property and other assets, including Stopping Centers
and Franchisee Receivables, owned or used by Holdings or any Restricted
Subsidiary in the ordinary course of business;
(e) Investments by Holdings or any of its Restricted Subsidiaries in
Holdings or any Restricted Subsidiaries;
(f) Investments by Holdings or any Restricted Subsidiary in a Person, if as
a result of such Investment:
(A) such Person becomes a Restricted Subsidiary or
(B) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated or
wound-up into, Holdings or a Restricted Subsidiary;
(g) loans and advances to employees made in the ordinary course of business
in an amount not to exceed $750,000 in the aggregate at any time outstanding;
(h) Interest Swap Obligations and Currency Hedge Obligations;
(i) non-cash consideration received in conjunction with an Asset Sale that
is otherwise permitted under the "Limitations on Asset Sales" covenant;
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(j) Fuel Hedging Obligations Incurred in the ordinary course of business;
(k) Investments received in settlement of obligations owed to Holdings or
any Restricted Subsidiary and as a result of bankruptcy or insolvency
proceedings or upon the foreclosure or enforcement of any Lien in favor of
Holdings or any Restricted Subsidiary; and
(l) Investments by Holdings or any Restricted Subsidiary not otherwise
permitted under this definition, in an aggregate amount not to exceed
$10,000,000 at any one time outstanding.
"Permitted Liens" means:
(a) Liens existing at the time of the initial issuance of the Notes;
(b) Liens to secure Debt under Credit Agreements or Debt Incurred under
clause (xiii) of the definition of "Permitted Debt," in the aggregate, of up to
$170,000,000 aggregate principal amount;
(c) Liens on property or assets of Holdings securing Debt Incurred in
compliance with clause (xii) of the definition of "Permitted Debt";
(d) any Lien for taxes or assessments or other governmental charges or
levies not then due and payable (or which, if due and payable, are being
contested in good faith and for which adequate reserves are being maintained,
to the extent required by GAAP);
(e) any statutory warehousemen's, materialmen's, landlord's or other similar
Liens for sums not then due and payable (or which, if due and payable, are
being contested in good faith and with respect to which adequate reserves are
being maintained, to the extent required by GAAP);
(f) any title exception, easement, right-of-way, lease, sub-lease or other
similar Lien that does not materially impair the use or value of the property
subject thereto in its use in the business of Holdings or a Restricted
Subsidiary thereof;
(g) Liens on property or other assets:
(i) in connection with workers' compensation, unemployment insurance and
other types of statutory obligations or the requirements of any official body,
or
(ii) to secure the performance of tenders, bids, surety or performance
bonds, leases, purchase, construction, sales or servicing contracts and other
similar obligations Incurred in the ordinary course of business consistent with
industry practice; or
(iii) to obtain or secure obligations with respect to letters of credit,
Guarantees, bonds or other sureties or assurances given in connection with the
activities described in clauses (i) and (ii) above, in each case not Incurred
or made in connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of property or services or
imposed by ERISA or the Internal Revenue Code in connection with a "plan" (as
defined in ERISA) (other than any Lien imposed in connection with the Holdings'
401(k) Plan) or
(iv) arising in connection with any attachment or judgment unless such
Liens shall not be satisfied or discharged or stayed pending appeal within 60
days after the entry thereof or the expiration of any such stay;
(h) Liens on property of a Person existing at the time such Person is merged
with or into or consolidated with Holdings (and not Incurred in anticipation of
such transaction), provided that such Liens are not extended to the property
and assets of Holdings other than the property or assets acquired;
(i) other Liens incidental to the conduct of the business of Holdings or the
ownership of its assets that do not materially impair the use or value of the
property subject thereto in its use in the business of Holdings;
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(j) Liens securing obligations under Interest Swap Obligations, Currency
Hedge Obligations and Fuel Hedging Obligations Incurred in connection with
managing interest or currency risk resulting from or related to a Credit
Agreement; and
(k) Liens to secure any permitted extension, renewal, refinancing or
refunding (or successive extensions, renewals, refinancings or refundings), in
whole or in part, of any Debt secured by Liens referred to in the foregoing
clauses (a) through (j); provided that such Liens do not extend to any other
property or assets and the principal amount of the Debt secured by such Liens
is not increased.
"Permitted Tax Distribution" means for any fiscal year or portion thereof
(the "Tax Year") of any Person in which period such Person is a partnership or
other substantially similar pass-through entity for federal income tax
purposes, distributions to enable the partners or members of such Person to
make payments of federal, state and local income taxes (including estimates
thereof) in respect of the Taxable Income of such partner or member with
respect to each such Tax Year in an aggregate amount equal to the product of:
(i) the excess of:
(A) the sum of the highest marginal federal income tax rate applicable
during such Tax Year to either corporations or individuals and the State Income
Tax Rate over
(B) the product of such federal rate and the State Income Tax Rate; and
(ii) such partner's or member's Taxable Income for such Tax Year.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Phantom Option Plan" means the incentive plan to be adopted by Holdings
substantially as described in this offering memorandum.
"Preferred Interests," as applied to the Capital Interests in any Person,
means Capital Interests in such Person of any class or classes (however
designated) that rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Common Interests in such
Person.
"Public Equity Offering" means any underwritten public offering of Capital
Interests of Holdings or a Successor Entity pursuant to an effective
registration statement (other than a registration statement on Form S-4 or Form
S-8 or any successor or similar form) under the Securities Act.
"Purchase Amount" has the meaning set forth in the definition of "Offer to
Purchase."
"Purchase Date" has the meaning set forth in the definition of "Offer to
Purchase."
"Purchase Money Debt" means Debt:
(i) Incurred to finance the purchase or construction of any assets of such
Person or any Restricted Subsidiary; and
(ii) that is secured by a Lien on such assets where the lender's sole
security is to the assets so purchased or constructed, in either case that does
not exceed 100% of the cost and to the extent the purchase or construction
prices for such assets are or should be included in "addition to property,
plant or equipment" in accordance with GAAP.
"Purchase Price" has the meaning set forth in the definition of "Offer to
Purchase."
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"Qualified Capital Interests" in any Person means a class of Capital
Interests other than Redeemable Capital Interests.
"Redeemable Capital Interests" in any Person means any equity security of
such Person that by its terms (or by terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including the
passage of time or the happening of an event), is required to be redeemed, is
redeemable at the option of the holder thereof in whole or in part (including
by operation of a sinking fund), or is convertible or exchangeable for Debt of
such Person at the option of the holder thereof, in whole or in part, at any
time prior to the Stated Maturity of the Notes; provided, however, that
Preferred Interests of Holdings or any Restricted Subsidiary thereof that are
issued with the benefit of provisions requiring a change of control offer to
be made for such Preferred Interests in the event of a change of control of
Holdings or any Restricted Subsidiary, which provisions have substantially the
same effect as the provisions of the Indenture described under "Change of
Control," shall not be deemed to be Redeemable Capital Interests solely by
virtue of such provisions; provided further that none of the Warrants, the
partnership interest held by Warrant Holdings, or the obligation to purchase
the Warrants shall be Redeemable Capital Interests.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to the Indenture.
"Redemption Date," when used with respect to any Note to be redeemed, means
the date on which it is to be redeemed pursuant to the Indenture.
"Refinancing Debt" means Debt that refunds, refinances, renews, replaces or
extends any Debt permitted to be incurred by Holdings or any Restricted
Subsidiary pursuant to the terms of the Indenture, whether involving the same
or any other lender or creditor or group of lenders or creditors, but only to
the extent that:
(i) the Refinancing Debt is subordinated to the Notes to at least the same
extent as the Debt being refunded, refinanced or extended, if at all,
(ii) the Refinancing Debt is scheduled to mature either:
(a) no earlier than the Debt being refunded, refinanced or extended,
or
(b) at least 91 days after the maturity date of the Notes,
(iii) the Refinancing Debt has a weighted average life to maturity at the
time such Refinancing Debt is incurred that is equal to or greater than the
weighted average life to maturity of the Debt being refunded, refinanced,
renewed, replaced or extended,
(iv) such Refinancing Debt is in an aggregate principal amount that is less
than or equal to the sum of:
(a) the aggregate principal or accreted amount (in the case of any Debt
issued with original issue discount, as such) then outstanding under the Debt
being refunded, refinanced, renewed, replaced or extended,
(b) the amount of accrued and unpaid interest, if any, and premiums owed,
if any, not in excess of preexisting prepayment provisions on such Debt being
refunded, refinanced or extended and
(c) the amount of customary fees, expenses and costs related to the
incurrence of such Refinancing Debt, and
(v) such Refinancing Debt is incurred by the same Person (or its successor)
that initially incurred the Debt being refunded, refinanced, renewed, replaced
or extended, except that Holdings may incur Refinancing Debt to refund,
refinance, renew, replace or extend Debt of any Wholly-Owned Restricted
Subsidiary of Holdings.
"Registration Rights Agreement" means the Registration Rights Agreement, to
be dated July 23, 1999, among Holdings, Holdings Financial Corporation, Petro
Holdings LP Corp. and First Union Capital Markets Corp. and CIBC World Markets
Corp.
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"Replacement Asset" means, with respect to any Asset Sale, a property or
asset that consists of a Stopping Center or that, as determined by the Board of
Directors as evidenced by a board resolution, is used or will be used in the
Stopping Center business of Holdings or a Restricted Subsidiary or a business
reasonably related thereto.
"Restricted Payment" is defined to mean any of the following:
(a) any dividend or other distribution declared and paid on the Capital
Interests in Holdings or on the Capital Interests in any Restricted Subsidiary
of Holdings that are held by, or declared and paid to, any Person other than
Holdings or a Wholly-Owned Restricted Subsidiary of Holdings (other than
dividends, distributions or payments made solely in Qualified Capital Interests
in Holdings);
(b) any payment made by Holdings or any of its Restricted Subsidiaries to
purchase, redeem, acquire or retire any Capital Interests in Holdings
(including the conversion into, or exchange for, Debt, of any Capital
Interests);
(c) any payment made by any Restricted Subsidiary of Holdings, other than to
Holdings or another Restricted Subsidiary of Holdings, to purchase, redeem,
acquire or retire any Capital Interests in a Restricted Subsidiary (other than
payments made with Qualified Capital Interests in Holdings);
(d) any payment made by Holdings or any of its Restricted Subsidiaries
(other than a payment made solely in Qualified Capital Interests in Holdings)
to redeem, repurchase, defease (including an in substance or legal defeasance)
or otherwise acquire or retire for value (including pursuant to mandatory
repurchase covenants), prior to any scheduled maturity, scheduled sinking fund
or mandatory redemption payment, Debt of either of us that is subordinate
(whether pursuant to its terms or by operation of law) in right of payment to
the Notes and which was scheduled to mature on or after the maturity of the
Notes;
(e) any Investment by Holdings or a Restricted Subsidiary in any Person,
other than a Permitted Investment;
(f) any designation of a Restricted Subsidiary as an Unrestricted Subsidiary
on the basis of the greater of the fair market or book value of such
Subsidiary; and
(g) any advisory fee paid to an Affiliate with respect to a specific
transaction (other than fees that were payable on the Closing Date upon
consummation of the Transactions).
"Restricted Subsidiary" means any Subsidiary, at least 75% of the
outstanding Common Interests of which are owned and controlled, directly or
indirectly, by Holdings that has not been designated as an "Unrestricted
Subsidiary" in accordance with the Indenture.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
pursuant to which property is sold or transferred by Holdings or a Restricted
Subsidiary and is thereafter leased back from the purchaser or transferee
thereof by Holdings or a Restricted Subsidiary.
"Significant Subsidiary" has the meaning set forth in Rule 1-02 of
Regulation S-X under the Securities Act and Exchange Act but shall include any
direct or indirect Restricted Subsidiary of Holdings owning one or more
Stopping Centers, but shall not include any Unrestricted Subsidiary.
"State Income Tax Rate" means, with respect to any Person, the weighted
average highest marginal state and local income tax (inclusive of franchise or
other taxes in the nature of income taxes) rates applicable to corporations or
to individuals in any state in which such Person does business. The highest
applicable marginal state and local income tax rates of the states from which
the Person derives net income shall be weighted by the ratio of the Person's
net income apportioned to a state by that state to the sum of the Person's net
income apportioned to all states in which such Person is doing business.
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"Stated Maturity," when used with respect to:
(i) any Note or any installment of interest thereon, means the date
specified in such Note as the fixed date on which the principal amount of such
Note or such installment of interest is due and payable; and
(ii) any other Debt or any installment of interest thereon, means the date
specified in the instrument governing such Debt as the fixed date on which the
principal of such Debt or such installment of interest is due and payable.
"Stopping Centers" means multi-service truck stops or travel plaza
facilities, including "full-sized" and "Petro:2" units and Petro:Lube
maintenance facilities, which provide services and amenities to commercial
truck drivers as well as to other highway motorists and local residents,
including without limitation, facilities currently operated by Holdings and its
Restricted Subsidiaries and businesses related or ancillary thereto.
"Subsidiary" means, with respect to any Person, any corporation, limited or
general partnership, trust, association or other business entity of which an
aggregate of at least a majority of the outstanding Capital Interests therein
is, at the time, directly or indirectly, owned by such Person and/or one or
more Subsidiaries of such Person.
"Successor Entity" means a corporation or other entity that succeeds to and
continues the business of Holdings.
"Taxable Income" means, with respect to any partner or member of a Person
that is a partnership or substantially similar pass-through entity for federal
income tax purposes, such partner's allocation of taxable income from such
Person for federal income tax purposes inclusive of each item of taxable gain,
loss, income, and deduction required to be taken into account separately by the
partners or members of such Person and taking into account allocations pursuant
to Section 704(c) of the Code. The character of each separately stated item
shall be disregarded for purposes of determining Taxable Income; provided, that
net capital loss, as defined in Section 1222(10) of the Code, shall not be
taken into account in determining Taxable Income.
"Transactions" means:
(a) the investment in Holdings of equity capital by Volvo Trucks and Mobil
Oil;
(b) the purchase of the Chartwell Interests and the Kirschner Interests by
Holdings;
(c) the execution of, and consummation of borrowings under, a Credit
Agreement to be entered into by the Operating Partnership and Holdings with
BankBoston and a syndicate of lenders;
(d) the amendment of the 10 1/2% Notes Indenture; and
(e) the consummation of the sale of the Units.
"Treasury Rate" means the yield to maturity at the time of computation of
U.S. Treasury securities with a constant maturity (as compiled and published in
the most recent Federal Reserve Release H.15 (519) which has become publicly
available at least two business days prior to the Redemption Date (or, if such
statistical release is no longer published, any publicly available source of
similar market data)) closest to the period from the Redemption Date to August
1, 2004; provided, however, that if the period from the Redemption Date to
August 1, 2004, is not equal to the constant maturity of a U.S. Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of one
year) from the weekly average yields of U.S. Treasury securities for which such
yields are given, except that if the period from the Redemption Date to August
1, 2004, is less than one year, the weekly average yield on actually traded
U.S. Treasury securities adjusted to a constant maturity of one year shall be
used.
"Volvo Trucks" means Volvo Trucks of North America, Inc. and its Affiliates.
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"Voting Interests" means, with respect to any Person, securities of any
class or classes of Capital Interests in such Person entitling the holders
thereof generally to vote on the election of members of the board of directors
or comparable body of such Person.
"Warrant Agreement" means that certain warrant agreement among Warrant
Holdings, Holdings, Sixty Eighty, LLC First Union Capital Markets Corp., CIBC
World Markets Corp. and State Street Bank and Trust Company.
"Warrant Holdings" means Petro Warrant Holdings Corporation, a Delaware
corporation.
"Warrants" means the exchangeable warrants issued by Warrant Holdings
pursuant to the Warrant Agreement.
"Wholly-Owned" means, with respect to a Subsidiary, any Subsidiary, at least
99% of the outstanding voting securities (other than directors' qualifying
shares) of which are owned, directly or indirectly, by Holdings.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated federal income
tax consequences with respect to the exchange of Old Notes for New Notes and
the ownership and disposition of the New Notes by holders acquiring the Old
Notes on original issuance at the issue price (the Old Notes and New Notes are
collectively referred to herein as the "Notes"), and, where specifically
indicated, constitutes the opinion of Gibson, Dunn & Crutcher LLP, our counsel
("Counsel") regarding such material consequences. This discussion is general in
nature, and does not discuss all aspects of federal income taxation that may be
relevant to a particular investor in light of the investor's particular
circumstances, or to certain types of investors subject to special treatment
under federal tax laws (for example, dealers in securities or currencies,
banks, insurance companies, regulated investment companies, S corporations,
nonresident aliens, foreign corporations, tax-exempt entities, holders owning
Notes as part of a straddle, hedge, conversion transaction or any other
integrated transaction, traders in securities electing to mark-to-market,
holders with a functional currency other than a United States dollar and
holders subject to the alternative minimum tax). In addition, this discussion
does not consider the effect of any foreign, state, local, or other tax laws,
or any United States tax consequences other than income tax (e.g., estate or
gift tax) consequences, that may be applicable to particular investors. This
summary is based upon the Internal Revenue Code of 1986 (the "Code") and
applicable Treasury Regulations (including proposed regulations), rulings,
administrative pronouncements and decisions as of the date hereof, all of which
are subject to change or differing interpretations at any time and in some
circumstances with retroactive effect.
This discussion assumes the holders are U.S. holders that hold their Notes
as "capital assets" within the meaning of Section 1221 of the Code. A "U.S.
holder" is a holder of a Note who is a United States citizen or resident, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate the
income of which is subject to U.S. federal income taxation regardless of its
source, a trust if a United States court exercises primary jurisdiction over
its administration and one or more United States persons have the authority to
control all of its substantial decisions, or certain electing trusts that were
in existence on August 19, 1996, and treated as domestic trusts on such date.
No rulings from the Internal Revenue Service (the "Service") have been or
will be requested with respect to any of the tax issues discussed herein.
Accordingly, there can be no assurance that the Service will not challenge one
or more of the tax consequences described herein.
THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX
ADVICE. WE URGE EACH HOLDER TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES TO IT OF THE
EXCHANGE, OWNERSHIP AND DISPOSITION OF THE NOTES.
The Notes
Exchange of Old Notes for New Notes. In the opinion of Counsel, the exchange
of Old Notes for New Notes with terms substantially identical to those of the
Old Notes will not be a taxable event to holders of the Old Notes.
Consequently, as a result of such exchange, no gain or loss will be recognized
by a holder, and each holder will continue to be required to include original
issue discount ("OID") in it gross income as discussed below, and will continue
to have the same adjusted issue price, adjusted basis and holding period in the
New Notes as it had immediately before the exchange.
Allocation of Purchase Price Between Old Notes and Warrants. For federal
income tax purposes, an Old Note and the accompanying Warrant will be treated
as an investment unit. The issue price of a Unit for federal income tax
purposes will be the first price at which a substantial amount of Units is sold
for money (excluding sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers). The issue price of a Unit must be allocated between the Old Note
and the Warrant based on the relative fair market values of each such component
of the Unit on the issue date. For this
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purpose, the Company intends to allocate $366.36 to each Old Note and $117.28
to each Warrant. Although Holdings' allocation is not binding on the Service, a
holder of a Unit must use Holdings' allocation unless the holder discloses on
its federal income tax return for the year in which it acquired the Unit that
it plans to use an allocation that is inconsistent with Holdings' allocation.
No assurance can be given that the Service will accept the Company's
allocation. If the Service successfully challenged the Company's allocation,
the issue price, original issue discount accrual on the Old Note and gain or
loss on the sale or disposition of an Old Note or Warrant would be different
from that resulting under the allocation determined by the Company.
Original Issue Discount. In general, subject to a de minimis rule, a debt
obligation will be treated as being issued with original issue discount ("OID")
if the "stated redemption price at maturity" of the instrument exceeds such
instrument's "issue price."
The stated redemption price at maturity of a debt obligation is the
aggregate of all payments due to the holder under such debt obligation at or
prior to its maturity date, other than interest payments that (among other
things) are actually and unconditionally payable at least annually ("QSIP").
Because interest will not be payable on the Notes until February 1, 2005, none
of the payments on the Notes will qualify as QSIP, so the stated redemption
price at maturity of the Notes will include all payments of principal and
interest required under the Notes. The issue price of a New Note will be as
described for an Old Note above under "Allocation of Purchase Price between Old
Notes and Warrants." The New Notes will be issued at a substantial discount.
The Old Notes and New Notes (which for tax purposes are treated as a
continuation of the Old Notes) will have OID for federal income tax purposes.
Since the Old Notes issued to Chartwell do not have Warrants attached, the
relative OID on such Notes is less than the Notes issued with Warrants. The
Notes have a total OID of $68.2 million. Accordingly, a holder of a Note must
include in gross income for federal income tax purposes the sum of the daily
portions of the OID with respect to the Note for each day during the taxable
year or portion of a taxable year on which such holder holds the Note. The
daily portion is determined by allocating to each day of each accrual period a
pro rata portion of an amount equal to the adjusted issue price of the Notes at
the beginning of the accrual period multiplied by the yield to maturity
(generally, the discount rate that, when used in computing the present value of
all principal and stated interest payments to be made on the Note, produces an
amount equal to its issue price) of the Note (determined by compounding at the
close of each accrual period and adjusting for the length of the accrual
period). The adjusted issue price of a Note at the start of any accrual period
will be the issue price of the Note increased by the accrued OID for each prior
accrual period. Under these rules, holders will have to include in gross income
increasingly greater amounts of OID in each successive accrual period. The
amount of OID for each holder for any period will differ significantly from the
amount of interest payments on the Notes during such period. A holder's
original tax basis for determining gain or loss on the sale or other
disposition of a Note will be increased by any accrued OID includible in such
holder's gross income, and reduced by the payments previously received by the
holder with respect to the Note.
There are several circumstances under which Holdings could make a payment on
a Note that would affect the yield to maturity of the Note, including the
redemption or repurchase of Notes (as described under "Description of Notes").
According to Treasury Regulations, the possibility of a change in the yield
will not affect the amount of OID required to be realized by a holder (or the
timing of such recognition) if the likelihood of change, as of the date the
debt obligations were issued, is remote. Holdings intends to report on the
basis that the likelihood of any change in the yield on the Notes is remote.
Sale or Retirement of Notes. Upon the sale, redemption, retirement at
maturity or other disposition of a Note (other than as discussed in "Exchange
of Old Notes for New Notes"), a holder will generally recognize taxable gain or
loss equal to the difference between the sum of the cash and the fair market
value of all other property received on such disposition of a Note and such
holder's adjusted federal income tax basis in the Note. The adjusted basis of
the Note generally will equal the holder's cost, increased by any OID
includible in income by the holder with respect to such Note, and reduced by
the payments previously received by the holder with respect to the instrument.
Any gain or loss recognized on the sale, exchange, redemption, retirement at
maturity or other disposition of a Note will generally be capital gain or loss,
and will be long-term capital gain or loss if, at the time of such disposition,
the holder's holding period for the Note is more than one year. In the
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case of individuals, the maximum federal income tax rate that would apply to
such capital gain is 20% if the holder has held the Note for more than twelve
months at the time of disposition. The deductibility of capital losses is
subject to limitations as described in the Code.
Applicable High Yield Discount Rules. The deduction for interest (including
OID) is limited in the case of "applicable high yield discount obligations"
("AHYDOs") issued by a corporation. In the situation where a partnership with a
corporate partner issues the obligation, the AHYDO rules are applied to each
corporate partner, but are not applied to non-corporate partners. An AHYDO is a
debt obligation whose yield to maturity exceeds the "applicable federal rate"
in effect at the time of their issuance (the "AFR") plus 500 basis points and
certain other requirements are met. For Notes with semiannual compounding
issued in July 1999, the applicable AFR equals 5.74%.
The terms of the Notes meet the requirements of an AHYDO obligation.
Accordingly, each corporate partner of Holdings (including Warrant Holdings)
will not be able to deduct its allocable share of interest deductions
(including OID) attributable to the Notes until such amounts are actually paid,
and the "disqualified portion" of such interest (including OID) (defined as the
portion that is attributable to the yield on the Notes in excess of the AFR
plus 600 basis points) will be permanently nondeductible. Although the
corporate partners may not deduct a portion of their allocable share of
interest deductions until such amounts are actually paid, the holders of the
Notes will still be required to include in income the OID amount as described
under "Original Issue Discount." Additionally, the holders of the Notes will be
required to treat the "disqualified portion" of such interest as a dividend
from each of the corporate partners of Holdings to the extent of the current or
accumulated earnings and profits of each such corporate partner, subject to the
dividends received deduction allowed to corporate holders. Holders of the Notes
may contact the office of Holdings' Chief Financial Officer at 915-779-4711 to
obtain more information as to the percentage of each Note that will be subject
to the AHYDO rules discussed above.
While Holdings Financial Corporation, a wholly-owned corporate subsidiary of
Holdings, is jointly and severally liability for the amounts due under the
Notes, Holdings believes the Notes are being issued by Holdings and not
Holdings Financial Corporation for federal income tax purposes; thus, only the
portion of the Notes attributable to Holdings' corporate partners will be
subject to the AHYDO rules. This is based on the fact that (i) Holdings
Financial Corporation was recently incorporated to act as co-obligor solely to
allow certain institutional investors to invest in the Units, (ii) Holdings
Financial Corporation has nominal assets and will not conduct any operations,
and (iii) it is anticipated that Holdings Financial Corporation will not make
any payment and will not deduct any interest with respect to the Notes.
Backup Withholding
In general, a holder of a Note will be subject to backup withholding at the
rate of 31% with respect to interest, OID, principal and premium, if any, paid
on a Note, and the proceeds of a sale of a Note unless such holder (i) is an
entity that is exempt from withholding (including corporations, tax-exempt
organizations and certain qualified nominees) and, when required, demonstrates
this fact, or (ii) provides the payor with its taxpayer identification number
("TIN") (which for an individual would be the holder's social security number),
certifies that the TIN provided to the payor is correct and that the holder has
not been notified by the Service that it is subject to backup withholding due
to underreporting of interest, and otherwise complies with applicable
requirements of the backup withholding rules. In addition, such payments of
principal, OID, premium and interest to, and the proceeds of, a sale of a Note
by holders that are not exempt entities will generally be subject to
information reporting requirements. A holder who does not provide the payor
with his correct TIN may be subject to penalties imposed by the Service.
We will report to the holders and to the Service the amount of any
"reportable payments" (including any interest paid) and any amounts withheld
with respect to the Notes during the calendar year. The amount of any backup
withholding from a payment to a holder will be allowed as a credit against such
holder's federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the Service.
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DESCRIPTION OF HOLDINGS PARTNERSHIP AGREEMENT
The Holdings Partnership Agreement and the Fourth Amended and Restated
Limited Partnership Agreement of the Operating Partnership (the "Operating
Partnership Agreement") provide that each partnership will be managed by a
seven member Board of Directors and a three member Executive Committee.
Membership of the Boards of Directors and Executive Committees of both
partnerships will be identical. The Boards of Directors consists of two
designees each appointed by each of the Cardwell Group, Mobil and Volvo Trucks.
The seventh director is Larry J. Zine. The Executive Committees consists of one
designee appointed by each of the Cardwell Group, Mobil, and Volvo Trucks. See
"Management." Each of the Cardwell Group, Mobil and Volvo Trucks have veto
rights over certain major partnership decisions.
The Holdings Partnership Agreement provides for the issuance of preferred
partnership interests. The Class A preferred partnership interests held by the
Cardwell Group will accrue cumulative preferred returns at a rate of 8% per
annum. The Class A preferred partnership interests held by Mobil accrue
cumulative preferred returns at a rate of 9 1/2% per annum. The preferred
returns accrue, but are only payable in cash if permitted by the Operating
Partnership's then existing debt instruments. Accrued but unpaid returns
compound semiannually. The Class A preferred partnership interests are
mandatorily redeemable by Holdings on October 27, 2008. The Class A preferred
partnership interests are not convertible into common partnership interests.
The Class A preferred partnership interests as well as the Class B preferred
partnership interests described below have liquidation preferences equal to all
their accrued and unpaid preferred return plus all their unrecovered capital.
The Class B preferred partnership interests owned by Mobil accrue cumulative
preferred returns at a rate of 12% per annum and are convertible into 3.9% of
the common partnership interests in Holdings at any time prior to mandatory
redemption on the tenth anniversary date of the closing of the
Recapitalization. Upon conversion into a common partnership interest (or as
soon thereafter as cash may be available) the accrued preferred return on the
Class B preferred partnership interest will be paid.
The Holdings Partnership Agreement requires Holdings to make distributions
to each of its partners in an amount sufficient to allow each partner to pay
federal, state and local income taxes with respect to allocations of taxable
income to such partner by Holdings. Tax distributions to partners will be based
on the taxable income of Holdings.
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DESCRIPTION OF PETRO WARRANT HOLDINGS CORPORATION
Petro Warrant Holdings Corporation ("Warrant Holdings") is a limited partner
in Holdings, currently owning 10% of the common limited partnership interests.
Warrant Holdings has no right to appoint representatives to the Board of
Directors of Holdings. In addition, certain actions of Holdings, including
amendment of the Holdings Partnership Agreement and the admission of new
limited partners, require the unanimous approval of the Cardwell Group, Mobil,
and Volvo Trucks.
As a limited partner holding a common partnership interest, Warrant Holdings
will be allocated partnership profits and losses in accordance with the terms
of the Holdings Partnership Agreement. Holdings' available cash will be
distributed first to each limited partner (including Warrant Holdings) on a
quarterly basis in an amount equal to each limited partner's estimated federal
and state income tax liability related to that partner's investment in
Holdings; next, to the Class A preferred partnership interests unless the Class
B preferred partnership interests have been converted, in which case
distributions will be made first to Class B preferred partnership interests and
then to Class A preferred partnership interests; next, pro rata, to partners
who have distribution shortfalls; then, to the preferred and then common
partnership interests to the extent of unrecovered capital; and lastly, to the
partners in accordance with their positive capital account balances.
Upon liquidation of Holdings, the proceeds will be distributed first to
creditors of Holdings; next, to the Class A and Class B preferred partnership
interests; next, pro rata, to partners who have distribution shortfalls; then
to the common partnership interests to the extent of unrecovered capital; and
lastly, pro rata, to the partners in accordance with their positive capital
account balances.
The Common Partnership Interest in Holdings which is owned by Warrant
Holdings is transferable only in very limited circumstances.
As a limited partner, Warrant Holdings is not liable for the obligations of
Holdings, and under the terms of the Holdings Partnership Agreement, Warrant
Holdings may, but is not required to, make capital contributions to Holdings.
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BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes initially will be issued in the
form of one or more permanent global certificates in definitive, fully
registered form without interest coupons (the "Global Notes"). The Global Notes
will be deposited with the Trustee as custodian for The Depository Trust
Company ("DTC") and registered in the name of a nominee of such depositary.
The Global Notes. We expect that pursuant to procedures established by DTC:
. upon the issuance of the Global Notes, DTC or its custodian will
credit, on its internal system, the principal amount of Notes of the
individual beneficial interests represented by such Global Notes to
the respective accounts of persons who have accounts with such
depositary and
. ownership of beneficial interests in the Global Notes will be shown
on, and the transfer of such ownership will be effected only
through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with
respect to interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes
will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture with respect
to the Notes.
Payments of the principal of, premium (if any) and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner of the Notes. None of the Company, the Trustee or any Paying Agent 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 interest.
We expect that DTC or its nominee, upon receipt of any payment of principal,
premium, if any, and interest on the Global Notes, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Notes as shown on the records
of DTC or its nominee. We also expect that payments by participants to owners
of beneficial interests in the Global Notes held through such participants will
be governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell Notes to persons in
states that require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Notes, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in the Global Notes are credited and only in respect of such
portion of the aggregate principal amount of Notes as to which such participant
or participants has or have given such direction. However, if there is an Event
of Default under the Indenture, DTC will exchange the Global Notes for
certificated securities, which it will distribute to its participants.
DTC has advised us as follows:
. DTC is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act;
112
<PAGE>
. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions
between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for
physical movement of certificates;
. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations;
. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among participants of DTC, it is
under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and we do not appoint a successor
depositary within 90 days, certificated securities will be issued in exchange
for the Global Notes.
113
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New Notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, starting on the Expiration Date and
ending on the close of business one year after the Expiration Date, we will
make this prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale. In addition, until . ,
1999, all dealers effecting transactions in the New Notes may be required to
deliver a prospectus.
We will not receive any proceeds from any sales of New Notes by broker-
dealers. New Notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Notes. Any broker-dealer that resells New Notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit of any such resale of New Notes and any commissions or concessions
received by such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of one year after the Expiration Date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. We have agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the Notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
Registration Statement, to the extent and for the periods indicated in their
report, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
LEGAL MATTERS
The validity of the New Notes will be passed upon for us by Gibson Dunn &
Crutcher LLP, a limited liability partnership including professional
corporations.
114
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Reference
---------
<S> <C>
PETRO STOPPING CENTERS HOLDINGS, L.P.
Unaudited Condensed Consolidated Balance Sheets as of December 31,
1998 and June 30, 1999............................................ F-2
Unaudited Condensed Consolidated Statements of Operations for the
Six Months Ended June 30, 1998 and 1999........................... F-3
Unaudited Condensed Consolidated Statement of Changes in Partners'
Capital (Deficit) for the Six Months Ended June 30, 1999.......... F-4
Unaudited Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1999........................... F-5
Notes to Unaudited Condensed Consolidated Financial Statements..... F-6
Consolidated Balance Sheets as of December 31, 1997 and 1998....... F-8
Consolidated Statements of Operations for the Years Ended December
31, 1996, 1997 and 1998........................................... F-9
Consolidated Statements of Changes in Partners' Capital (Deficit)
for the Years Ended December 31, 1996, 1997 and 1998.............. F-10
Consolidated Statements of Cash Flows for the Years Ended December
31, 1996, 1997 and 1998........................................... F-11
Notes to Consolidated Financial Statements......................... F-13
Report of Independent Public Accountants........................... F-33
</TABLE>
F-1
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 13,183 $ 19,401
Trade accounts receivable, net...................... 10,631 14,798
Inventories, net.................................... 16,459 17,929
Other current assets................................ 2,892 2,407
Due from affiliates................................. 1,163 1,766
--------- ---------
Total current assets.............................. 44,328 56,301
Property and equipment, net........................... 162,274 164,765
Deferred debt issuance costs, net..................... 11,229 10,392
Other assets.......................................... 9,168 11,082
--------- ---------
Total assets...................................... $ 226,999 $ 242,540
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Current portion of long-term debt................... $ 4,967 $ 6,884
Trade accounts payable.............................. 4,214 8,294
Accrued expenses and other liabilities.............. 21,439 25,651
Due to affiliates................................... 16,768 23,259
--------- ---------
Total current liabilities......................... 47,388 64,088
Long-term debt, excluding current portion............. 176,361 173,365
--------- ---------
Total liabilities................................. 223,749 237,453
--------- ---------
Commitments and contingencies
Minority interest in consolidated subsidiaries........ 20,723 21,291
Mandatorily redeemable preferred partnership
interests............................................ 23,172 24,207
Partners' capital (deficit):
General partners.................................... (868) (1,370)
Limited partners.................................... (39,777) (39,041)
--------- ---------
Total partners' capital (deficit)................. (40,645) (40,411)
--------- ---------
Total liabilities and partners' capital
(deficit)........................................ $ 226,999 $ 242,540
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
F-2
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1999
--------- ---------
<S> <C> <C>
Net revenues (including motor fuel taxes):
Fuel.................................................. $ 236,194 $ 224,898
Non-fuel.............................................. 65,691 70,129
Restaurant............................................ 26,204 26,986
--------- ---------
Total net revenues.................................. 328,089 322,013
--------- ---------
Costs and expenses:
Cost of sales (including motor fuel taxes)............ 253,428 245,115
Operating expenses.................................... 45,511 47,787
General and administrative............................ 9,413 9,760
Depreciation and amortization......................... 7,580 6,670
(Gain) loss on disposition of assets.................. -- (849)
--------- ---------
Total costs and expenses............................ 315,932 308,483
--------- ---------
Operating income.................................... 12,157 13,530
Other income (expense):
Recapitalization costs.................................. -- (623)
Equity in earnings (loss) of affiliate.................. -- (230)
Interest expense, net............................... (9,989) (10,027)
--------- ---------
Income (loss) before minority interest.................. 2,168 2,650
Minority interest in earnings of consolidated
subsidiaries........................................... 1,168 1,408
--------- ---------
Net income.......................................... $ 1,000 $ 1,242
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
F-3
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN PARTNERS' CAPITAL (DEFICIT)
For the Six Months Ended June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Capital Capital Capital
(Deficit) (Deficit) (Deficit)
--------- --------- ---------
<S> <C> <C> <C>
Balances, December 31, 1998.................. $ (868) $ (39,777) $ (40,645)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests.. (9) (481) (490)
Partners' minimum tax distributions.......... (518) -- (518)
Net income................................... 25 1,217 1,242
-------- --------- ---------
Balances, June 30, 1999...................... $ (1,370) $ (39,041) $ (40,411)
======== ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements
F-4
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
-----------------
1998 1999
-------- -------
<S> <C> <C>
Cash flows provided by operating activities:
Net income................................................ $ 1,000 $ 1,242
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest in earnings of consolidated
subsidiaries........................................... 1,168 1,408
Depreciation and amortization........................... 7,580 6,670
Deferred debt issuance cost amortization................ 813 837
Bad debt expense........................................ 114 122
Equity on loss of affiliate............................. -- 230
Loss (gain) on disposition of assets.................... -- (849)
Increase (decrease) from changes in:
Trade accounts receivable............................... (805) (4,289)
Inventories............................................. (1,130) (1,470)
Other current assets.................................... 222 485
Due from affiliates..................................... 196 (603)
Due to affiliates....................................... 3,156 7,611
Trade accounts payable ................................. (3,739) 4,080
Accrued expenses and other liabilities.................. (3,169) 4,212
-------- -------
Net cash provided by operating activities............. 5,406 19,686
-------- -------
Cash flows used in investing activities:
Proceeds from disposition of assets....................... -- 1,394
Purchases of property and equipment....................... (8,007) (9,647)
Increase in other assets, net............................. (623) (2,201)
-------- -------
Net cash used in investing activities................. (8,630) (10,454)
-------- -------
Cash flows used in financing activities:
Repayments of long-term debt and capital lease............ (1,594) (2,479)
Proceeds from expansion loan ............................. -- 1,400
Tax distribution to partners ............................. -- (1,935)
-------- -------
Net cash used in financing activities ................ (1,594) (3,014)
-------- -------
Net (decrease) increase in cash and cash equivalents........ (4,818) 6,218
Cash and cash equivalents, beginning of period.............. 24,796 13,183
-------- -------
Cash and cash equivalents, end of period ................... $ 19,978 $19,401
======== =======
Supplemental cash flow information--
Interest paid during the period, net of capitalized
interest of $0 and $21 in 1998
and 1999 ................................................ $ 9,357 $ 9,255
Non-cash financing activities:
Preferred return on mandatorily redeemable preferred
partnership interests.................................. 980 1,033
</TABLE>
See accompanying notes to unaudited consolidated financial statements
F-5
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Company Formation and Description of Business
Company Formation
Petro Stopping Centers Holdings, L.P. ("Holdings"), a Delaware limited
partnership, was formed on July 23, 1999 as a holding partnership and conducts
substantially all of its operations through Petro Stopping Centers, L.P. (the
"Operating Partnership"), which holds the operating assets of Holdings. As a
result of the Recapitalization (described below), the partners of Holdings are
as follows:
General Partners
Petro, Inc.
Limited Partners
Various individuals and entities affiliated with the Cardwell Group
Mobil Long Haul, Inc., an affiliate of Mobil Oil Corporation
Volvo Petro Holdings, L.L.C., an affiliate of Volvo Trucks North
America, Inc.
Petro Warrant Holdings Corporation
Petro, Inc. and various individuals and entities affiliated with Petro, Inc.
are controlled by the president of Holdings and are collectively referred to as
the Cardwell Group.
Recapitalization
On July 23, 1999, the Operating Partnership, certain of its partners and
Volvo Trucks North America, Inc. ("Volvo") consummated a transaction pursuant
to which Holdings was formed, and all of the present owners in the Operating
Partnership (other than Petro Holdings GP Corp. and Petro Holdings LP Corp.,
each of which were affiliates of Chartwell Investments, Inc. (collectively,
"Chartwell"); Kirschner Investments ("Kirschner"), a company franchisee)
exchanged their interests in the Operating Partnership for identical interests
in Holdings and became owners of Holdings. Petro Holdings Financial Corporation
("Financial Holdings") was formed for the purpose of serving as co-issuer of
New Senior Discount Notes (as defined below). Financial Holdings, the Operating
Partnership and its subsidiary, Petro Financial Corporation, became
subsidiaries of Holdings. Petro Warrant Holdings Corporation ("Warrant
Holdings") was formed for the purpose of owning a common limited partnership
interest in Holdings and issuing the Warrants (see below). In addition, Volvo
Petro Holdings L.L.C. ("Volvo Trucks"), an affiliate of Volvo, invested
$30,000,000 to acquire limited common partnership interests in Holdings while
Mobil Long Haul, Inc. ("Mobil"), an affiliate of Mobil Corporation, invested an
additional $5,000,000 in convertible preferred partnership interests of
Holdings. Holdings purchased the common interest in the Operating Partnership
owned by affiliates of Chartwell for aggregate consideration of approximately
$69,800,000, which consisted of a $55,000,000 cash payment and the issuance to
Chartwell of approximately $14,800,000 in accreted value of 15.0% New Senior
Discount Notes (as defined below) due 2008, without Warrants. Holdings also
purchased the common interests in the Operating Partnership owned by Kirschner
for cash consideration of $2,800,000. The foregoing is referred to as the
"Recapitalization."
As part of the Recapitalization, Holdings issued 82,707 units each
consisting of $1,000 principal amount at stated maturity of Holdings 15.0%
Senior Discount Notes due 2008 and 82,707 exchangeable Warrant Holdings'
Warrants ("New Senior Discount Notes"). Upon an exchange event, the Warrants
will be exchanged, for no additional consideration, for 100% of the common
stock of Warrant Holdings, whose sole asset is currently approximately 10.0% of
the common limited partnership interests in Holdings.
As a result of the Recapitalization, Holdings is the owner of approximately
99.0% of the common interests of the Operating Partnership. The common limited
partnership interests of Holdings are owned by the Cardwell
F-6
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(1) Company Formation and Description of Business--(Continued)
Group (approximately 51.6%), Volvo Trucks (approximately 28.7%), Mobil
(approximately 9.7%) and Warrant Holdings (approximately 10.0%) and the
mandatorily redeemable preferred partnership interests of Holdings are owned by
Mobil ($17,000,000) and the Cardwell Group ($7,600,000). The minority interest
is owned by various individuals and affiliates of the Cardwell Group.
The formation of Holdings (whereby certain of the Operating Partnership's
partners exchanged their interests in the Operating Partnership for identical
interests in Holdings) has been reflected in the accompanying consolidated
financial statements in a manner similar to a pooling-of-interests.
Accordingly, the accompanying consolidated financial statements reflect the
historical amounts and results of operations of Holdings' consolidated
subsidiaries as if the exchange referred to above had occurred on the first day
of the first period presented.
The Operating Partnership also amended its senior collateralized credit
facility (the "Existing Senior Credit Facility" and, as amended, the "New
Senior Credit Facility") as part of the Recapitalization. The New Senior Credit
Facility consists of an $85,000,000 revolving credit facility and a $40,000,000
Term Loan B. The proceeds of the New Term Loan B were used to repay amounts due
under the Term A and B Loans and the Expansion Facility of the Existing Senior
Credit Facility of approximately $38,271,000, plus accrued interest. The New
Senior Credit Facility is collateralized by substantially all of the Operating
Partnership's assets and contains certain covenants similar to those described
in Note 6 of the Company's Consolidated Financial Statements for the years
ended December 31, 1996, 1997 and 1998.
In connection with the Recapitalization, Holdings capitalized debt issuance
and other costs of approximately $388,000 as of June 30, 1999.
As further discussed above, Holdings funded a portion of its purchase of
Chartwell's and Kirschner's interests in the Operating Partnership with debt.
Holdings currently has no operations of its own and is, therefore, dependent
upon the earnings and cash flows of the Operating Partnership to satisfy its
obligations under the New Senior Discount Notes.
Unless otherwise noted, Holdings and its subsidiaries are hereinafter
referred to as the "Company."
(2) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
the Company and its subsidiaries have been prepared in accordance with the
instructions to Form 10-Q and, therefore, certain financial information has
been condensed and certain footnote disclosures have been omitted. Such
information and disclosures are normally included in the financial statements
prepared in accordance with generally accepted accounting principles.
These unaudited condensed consolidated financial statements should be read
in conjunction with the financial statements and notes thereto in the audited
consolidated financial statements of the Company for the year ended December
31, 1998, included elsewhere herein. Capitalized terms used in this report and
not defined herein have the meaning ascribed to such terms in the Company's
December 31, 1998 financial statements. In the opinion of management of the
Company, the accompanying financial statements contain all adjustments
necessary to present fairly the financial position of the Company at December
31, 1998 and June 30, 1999, the results of operations and cash flows for the
six months ended June 30, 1998 and 1999. The results of operations for the six
months ended June 30, 1999 are not necessarily indicative of the results to be
expected for the full calendar year.
F-7
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 24,796 $ 13,183
Trade accounts receivable, net.................... 12,548 10,631
Inventories, net.................................. 16,362 16,459
Other current assets.............................. 2,551 2,892
Due from affiliates............................... 980 1,163
Land held for sale................................ 4,442 --
-------- --------
Total current assets............................ 61,679 44,328
Property and equipment, net....................... 153,363 162,274
Deferred debt issuance and organization costs,
net.............................................. 16,353 11,229
Other assets...................................... 8,271 9,168
-------- --------
Total assets.................................... $239,666 $226,999
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Current portion of long-term debt................. $ 3,000 $ 4,967
Trade accounts payable............................ 9,350 4,214
Accrued expenses and other liabilities............ 26,491 21,439
Due to affiliates................................. 18,988 16,768
-------- --------
Total current liabilities....................... 57,829 47,388
Long-term debt, excluding current portion......... 180,190 176,361
-------- --------
Total liabilities............................... 238,019 223,749
Commitments and contingencies
Minority interest in consolidated subsidiaries...... 20,472 20,723
Mandatorily redeemable preferred partnership
interests.......................................... 21,202 23,172
Partners' capital (deficit):
General partners'................................. (855) (868)
Limited partners'................................. (39,172) (39,777)
-------- --------
Total partners' capital (deficit)............... (40,027) (40,645)
-------- --------
Total liabilities and partners' capital
(deficit)...................................... $239,666 $226,999
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-8
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues (including motor fuel
taxes):
Fuel................................. $478,312 $513,571 $464,025
Non-fuel............................. 111,410 122,609 136,145
Restaurant........................... 47,335 49,549 53,246
-------- -------- --------
Total net revenues................. 637,057 685,729 653,416
Costs and expenses:
Cost of sales (including motor fuel
taxes).............................. 511,431 546,581 499,396
Operating expenses................... 81,522 85,560 93,012
General and administrative........... 13,925 17,035 19,335
Employee severance, benefit and
placement expenses.................. 2,534 -- --
Depreciation and amortization........ 12,204 14,502 15,953
-------- -------- --------
Total costs and expenses........... 621,616 663,678 627,696
-------- -------- --------
Operating income................... 15,441 22,051 25,720
Recapitalization costs................. 2,938 -- --
Interest expense, net.................. 21,263 20,292 20,042
-------- -------- --------
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle ... (8,760) 1,759 5,678
Extraordinary item--write off of debt
restructuring costs associated with
retired debt ......................... -- 12,745 --
Cumulative effect of a change in
accounting principle.................. -- 1,579 3,250
-------- -------- --------
Minority interest in income (loss) of
consolidated subsidiaries............. (4,013) (6,706) 1,298
-------- -------- --------
Income (loss) before minority
interest.............................. (8,760) (12,565) 2,428
Net income (loss)...................... $ (4,747) $ (5,859) $ 1,130
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-9
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Capital Capital Capital
(Deficit) (Deficit) (Deficit)
--------- --------- ---------
<S> <C> <C> <C>
Balance, December 29, 1995....................... $(7,902) $(19,387) $(27,289)
Net loss....................................... (783) (3,964) (4,747)
------- -------- --------
Balance, December 31, 1996....................... (8,685) (23,351) (32,036)
Conversion of interest......................... 8,021 5,989 14,010
Capital contributions.......................... -- 4,218 4,218
Assignment of mandatorily redeemable preferred
partnership interests......................... -- (19,600) (19,600)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests.... (15) (745) (760)
Net loss....................................... (176) (5,683) (5,859)
------- -------- --------
Balance, December 31, 1997....................... (855) (39,172) (40,027)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests.... (18) (917) (935)
Accrual of partner minimum tax distributions... (18) (795) (813)
Net income..................................... 23 1,107 1,130
------- -------- --------
Balance, December 31, 1998....................... $ (868) $(39,777) $(40,645)
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-10
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss).................... $ (4,747) $ (5,859) $ 1,130
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Minority interest in income
(loss) of consolidated
subsidiaries.................... (4,013) (6,706) 1,298
Depreciation and amortization.... 12,204 14,502 15,953
Extraordinary item--write-off of
debt restructuring costs
associated with retired debt.... -- 12,745 --
Cumulative effect of a change in
accounting principle............ -- 1,579 3,250
Deferred debt issuance cost
amortization.................... 1,485 1,749 1,637
Accretion of original issue
discount........................ 978 47 --
Bad debt expense................. 215 271 236
Increase (decrease) from changes
in:
Accounts receivable.............. 852 (2,418) 1,681
Inventories...................... 1,124 (1,167) (97)
Other current assets............. 324 (1,147) (341)
Due from affiliates.............. (571) 1,111 114
Due to affiliates................ 297 16,663 (3,340)
Trade accounts payable........... 1,535 (6,373) (5,136)
Accrued expenses and other
liabilities..................... 4,985 5,331 (5,052)
-------- --------- --------
Net cash provided by operating
activities.................... 14,668 30,328 11,333
-------- --------- --------
Cash flows used in investing
activities:
Purchase of property and
equipment....................... (5,523) (15,870) (20,309)
Proceeds from disposition of
assets.......................... -- 3,102 2,165
Decrease (increase) in other
assets, net..................... 186 (3,011) (1,515)
-------- --------- --------
Net cash used in investing
activities.................... (5,337) (15,779) (19,659)
-------- --------- --------
Cash flows (used in) provided by
financing activities:
Repayments of notes payable...... (25,000) (23,639) --
Proceeds from notes payable...... 26,061 2,000 --
Repayments of long-term debt and
capital lease................... (3,704) (152,800) (3,287)
Proceeds from issuance of long-
term debt....................... -- 185,190 --
Capital contributions............ -- 4,218 --
Capital contributions from
minority partners of
consolidated subsidiaries........ -- 6,829 --
Payment of debt issuance costs... (203) (14,733) --
Decrease in cash overdrafts...... (8,991) -- --
-------- --------- --------
Net cash (used in) provided by
financing activities.......... (11,837) 7,065 (3,287)
-------- --------- --------
Net (decrease) increase in cash and
cash equivalents.................... (2,506) 21,614 (11,613)
Cash and cash equivalents, beginning
of period........................... 5,688 3,182 24,796
-------- --------- --------
Cash and cash equivalents, end of
period.............................. $ 3,182 $ 24,796 $ 13,183
======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Supplemental cash flow information--
Interest paid during the period, net
of capitalized interest of $80, $0
and $0 in 1996, 1997 and 1998........ $18,364 $14,028 $20,771
Non-cash transactions--
Acquisition of property and equipment
through capital lease................ -- -- 1,425
Preferred return on mandatorily
redeemable preferred partnership
interests............................ -- 760 935
Partner minimum tax distributions..... -- -- 813
Preferred return from minority
partners of consolidated subsidiaries
on manditorily redeemable preferred
partnership interests................ -- 875 1,037
Partner minimum tax distributions to
minority partners of consolidated
subsidiaries......................... -- -- 10
</TABLE>
See accompanying notes to consolidated financial statements
F-12
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Company Formation and Description of Business
Company Formation
Petro Stopping Centers Holdings, L.P. ("Holdings"), a Delaware limited
partnership, was formed on July 23, 1999 as a holding partnership and conducts
substantially all of its operations through Petro Stopping Centers, L.P. (the
"Operating Partnership"), which holds the operating assets of Holdings. As a
result of the Recapitalization (described below), the partners of Holdings are
as follows:
General Partners
Petro, Inc.
Limited Partners
Various individuals and entities affiliated with the Cardwell Group
Mobil Long Haul, Inc., an affiliate of Mobil Oil Corporation
Volvo Petro Holdings, L.L.C., an affiliate of Volvo Trucks North
America, Inc.
Petro Warrant Holdings Corporation
Petro, Inc. and various individuals and entities affiliated with Petro, Inc.
are controlled by the president of Holdings and are collectively referred to as
the Cardwell Group.
Recapitalization
On July 23, 1999, the Operating Partnership, certain of its partners and
Volvo Trucks North America, Inc. ("Volvo") consummated a transaction pursuant
to which Holdings was formed, and all of the present owners in the Operating
Partnership (other than Petro Holdings GP Corp. and Petro Holdings LP Corp.,
each of which were affiliates of Chartwell Investments, Inc. (collectively,
"Chartwell"); Kirschner Investments ("Kirschner"), a company franchisee)
exchanged their interests in the Operating Partnership for identical interests
in Holdings and became owners of Holdings. Petro Holdings Financial Corporation
("Financial Holdings") was formed for the purpose of serving as co-issuer of
New Senior Discount Notes (as defined below). Financial Holdings, the Operating
Partnership and its subsidiary, Petro Financial Corporation, became
subsidiaries of Holdings. Petro Warrant Holdings Corporation ("Warrant
Holdings") was formed for the purpose of owning a common limited partnership
interest in Holdings and issuing the Warrants (see below). In addition, Volvo
Petro Holdings L.L.C. ("Volvo Trucks"), an affiliate of Volvo, invested
$30,000,000 to acquire limited common partnership interests in Holdings while
Mobil Long Haul, Inc. ("Mobil"), an affiliate of Mobil Corporation, invested an
additional $5,000,000 in convertible preferred partnership interests of
Holdings. Holdings purchased the common interest in the Operating Partnership
owned by affiliates of Chartwell for aggregate consideration of approximately
$69,800,000, which consisted of a $55,000,000 cash payment and the issuance to
Chartwell of approximately $14,800,000 in accreted value of 15.0% New Senior
Discount Notes (as defined below) due 2008, without Warrants. Holdings also
purchased the common interests in the Operating Partnership owned by Kirschner
for cash consideration of $2,800,000. The foregoing is referred to as the
"Recapitalization."
As part of the Recapitalization, Holdings issued 82,707 Units each
consisting of $1,000 principal amount at stated maturity of Holdings 15.0%
Senior Discount Notes due 2008 and 82,707 exchangeable Warrant Holdings'
Warrants ("New Senior Discount Notes"). Upon an exchange event, the Warrants
will be exchanged, for no additional consideration, for 100% of the common
stock of Warrant Holdings, whose sole asset is currently approximately 10.0% of
the common limited partnership interests in Holdings.
As a result of the Recapitalization, Holdings is the owner of approximately
99.0% of the common interests of the Operating Partnership. The common limited
partnership interests of Holdings are owned by the
F-13
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(1) Company Formation and Description of Business--(Continued)
Cardwell Group (approximately 51.6%), Volvo Trucks (approximately 28.7%), Mobil
(approximately 9.7%) and Warrant Holdings (approximately 10.0%) and the
mandatorily redeemable preferred partnership interests of Holdings are owned by
Mobil ($17,000,000) and the Cardwell Group ($7,600,000). The minority interest
is owned by various individuals and affiliates of the Cardwell Group.
The formation of Holdings (whereby certain of the Operating Partnership's
partners exchanged their interests in the Operating Partnership for identical
interests in Holdings) has been reflected in the accompanying consolidated
financial statements in a manner similar to a pooling-of-interests.
Accordingly, the accompanying consolidated financial statements reflect the
historical amounts and results of operations of Holdings' consolidated
subsidiaries as if the exchange referred to above had occurred on the first day
of the first period presented.
The Operating Partnership also amended its senior collateralized credit
facility (the "Existing Senior Credit Facility" and, as amended, the "New
Senior Credit Facility") as part of the Recapitalization. The New Senior Credit
Facility consists of an $85,000,000 revolving credit facility and a $40,000,000
Term Loan B. The proceeds of the New Term Loan B were used to repay amounts due
under the Term A and B Loans and the Expansion Facility of the Existing Senior
Credit Facility of approximately $38,271,000, plus accrued interest. The New
Senior Credit Facility is collateralized by substantially all of the Operating
Partnership's assets and contains certain covenants similar to those described
in Note 6.
As further discussed above, Holdings funded a portion of its purchase of
Chartwell's and Kirschner's interests in the Operating Partnership with debt.
Holdings currently has no operations of its own and is, therefore, dependent
upon the earnings and cash flows of the Operating Partnership to satisfy its
obligations under the New Senior Discount Notes.
Unless otherwise noted, Holdings and its subsidiaries are hereinafter
referred to as the "Company."
1997 Recapitalization
On January 30, 1997, the Operating Partnership consummated a transaction
entered into in October 1996, under which Chartwell and Mobil Long Haul
invested $20,700,000 and $15,000,000, respectively (the "Equity Investment"),
to directly acquire the partnership interests of the Operating Partnership
owned by the Fremont Partners for approximately $25,600,000 and invest
approximately $10,100,000 in the Operating Partnership. The Cardwell Group
maintained its capital investment in the Operating Partnership. Kirschner
Investment ("Kirschner"), a Company franchisee, invested $1,000,000 in the
Operating Partnership (the "Kirschner Investment"). Following the Equity
Investment and the Kirschner Investment, the ownership interests of the
Operating Partnership were owned by Chartwell (approximately 50.6%), the
Cardwell Group (approximately 39.7%). Mobil Long Haul (approximately 7.3%), and
Kirschner (approximately 2.4%), and the preferred partnership interests were
owned by Mobil Long Haul ($12,000,000) and the Cardwell Group ($7,600,000).
Chartwell and the Cardwell Group owned both general and limited partnership
interests and Mobil Long Haul and Kirschner owned only limited partnership
interests. Mobil Oil Company and the Operating Partnership also entered into
certain supply and marketing agreements.
As part of the 1997 Recapitalization, the Company issued $135,000,000 of 10
1/2% senior unsecured notes due 2007 (the "New Notes"), and repurchased
approximately 94% of the existing 12 1/2% Senior Notes due 2002 and
approximately 100% of outstanding Debt Warrants. In connection with the
issuance of the New Notes, the Company capitalized approximately $14,500,000 of
debt issuance costs and wrote off, as an extraordinary item, $12,745,000 of
debt restructuring costs associated with the retired debt.
F-14
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(1) Company Formation and Description of Business--(Continued)
The Company also amended its senior collateralized credit facility (the "Old
Credit Agreement" and, as amended, the "New Credit Agreement"). The New Credit
Agreement consisted of a $25,000,000 revolving credit facility (the "Revolving
Credit Facility"), a $14,000,000 Term Loan A, a $30,000,000 Term Loan B and a
$40,000,000 Expansion Facility (the "Expansion Facility").
Description of Business
The Company, through the Operating Partnership, operates large, multi-
service truck stops known as "Petro Stopping Centers" (the "Stopping Centers"),
that are located along interstate highways and typically offer diesel fuel,
gasoline, home-style restaurants, truck preventative maintenance centers,
travel and convenience stores and a range of other products, services and
amenities to commercial truck drivers, as well as other highway motorists and
local residents. At December 31, 1998, the Company's network consisted of 49
Stopping Centers located in 29 states, of which 28 were operated by the
Operating Partnership and 21 were franchised.
(2) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All significant intercompany
balances have been eliminated in consolidation. Minority interest in
consolidated subsidiaries represents the approximately 1.0% continuing interest
in the Operating Partnership owned by individuals and entities affiliated with
the Cardwell Group, (ii) the interests in the Operating Partnership owned by
Chartwell and Kirschner, and (iii) prior to January 30, 1997, the interests in
the Operating Partnership owned by the Fremont 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.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable. Accounts receivable are primarily due from national and regional
commercial trucking companies, and include accounts receivable purchased at a
discount from franchisees. The receivables are not collateralized. The risk,
however, is limited due to the large number of entities comprising the customer
base and their dispersion across geographic regions. At December 31, 1998, the
Company had no significant concentrations of credit risk.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments with
an original maturity of three months or less.
F-15
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(2) Summary of Significant Accounting Policies--(Continued)
Allowance for Uncollectible Accounts
Accounts receivable are reviewed on a regular basis and the allowance for
uncollectible accounts is established to reserve for specific accounts believed
to be uncollectible. In addition, the allowance provides a reserve for the
remaining accounts not specifically identified. At December 31, 1997 and 1998,
the allowance for uncollectible accounts totaled $330,000 and $627,000,
respectively.
Inventories
Inventories are stated at the lower of cost or market as determined by the
first-in, first-out method.
Land Held for Sale
In the fourth quarter of 1997, management committed to a plan to dispose of
certain real estate holdings. 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" requires that long-lived assets held for
sale be reported at the lower of carrying amount or fair value less cost to
sell. At December 31, 1997 and 1998, the Company reported land held for sale at
its net book value of $8,102,000 and $6,078,000, respectively. The land held
for sale consists of several parcels of undeveloped land considered by
management as excess and no longer necessary for the operations of the Company.
A portion of the 1997 balance is included in current assets and the remainder,
as well as all of the 1998 balance, is included in other assets in the
accompanying consolidated balance sheets.
Property and Equipment
Property and equipment are recorded at historical cost. Depreciation and
amortization are generally provided using the straight-line method over the
estimated useful lives of the respective assets. Repairs and maintenance are
charged to expense as incurred, and amounted to $2,785,000, $3,486,000 and
$4,469,000 for 1996, 1997 and 1998, respectively. Renewals and betterments are
capitalized. Gains or losses on disposal of property and equipment are credited
or charged to income.
Leased equipment meeting certain criteria is capitalized and the present
value of the related lease payments is recorded as a liability. Amortization of
capitalized leased assets are computed on the straight line method over the
term of the lease.
Facilities under development are recorded at cost, and include capitalized
interest costs associated with the development of a project. These costs are
classified as facilities under development until the project is completed, at
which time the costs are transferred to the appropriate property and equipment
accounts.
Debt Issuance Costs
Costs incurred in obtaining long-term financing are amortized over the life
of the related debt using a method that approximates the interest method. As of
December 31, 1997 and 1998, accumulated amortization of debt issuance costs
were $5,489,000 and $3,147,000, respectively.
Self Insurance
The Company is self-insured for employment practices, general liability,
workers' compensation, and group health benefit claims, up to stop-loss amounts
ranging from $50,000 to $250,000 on a per-occurrence
F-16
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(2) Summary of Significant Accounting Policies--(Continued)
basis. Provisions for these self-insurance programs are made for both estimated
losses on known claims and claims incurred but not reported, based on claims
history.
Advertising and Promotion
Costs incurred in connection with advertising and promotion are expensed as
incurred, net of reimbursements from franchisees. Net advertising and promotion
expenses of $2,156,000, $2,479,000 and $2,789,000 were incurred for 1996, 1997
and 1998, respectively, and are included in operating expenses in the
accompanying consolidated statements of operations. Advertising and promotion
reimbursements from franchisees totaled $292,000, $334,000 and $401,000 for
1996, 1997 and 1998, respectively.
Motor Fuel Taxes
Certain motor fuel taxes are collected from consumers and remitted to
governmental agencies by the Company. Such taxes were $175,873,000,
$192,650,000 and $203,274,000 for 1996, 1997 and 1998, respectively, and are
included in net revenues and cost of sales in the accompanying consolidated
statements of operations.
Environmental Liabilities and Expenditures
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Such liabilities are exclusive of claims against third
parties and are not discounted.
Franchise Revenues
The Company recognizes net revenue from individual franchises and initial
training fees when substantially all significant services to be provided by the
Company have been performed. Continuing franchise fees, which are based
generally upon a percentage of the franchisees' sales, are recognized monthly
as earned. Fees earned from franchises aggregated $3,397,000, $3,858,000 and
$4,497,000 during the years ended December 31, 1996, 1997 and 1998,
respectively.
Financial Instruments with Off-Balance Sheet Risk
The Company occasionally utilizes futures and options contracts with the
objective of minimizing fuel cost risk due to market fluctuations. Gains and
losses resulting from changes in the market value of these contracts are
recognized when the related inventory is sold. The Company also may
occasionally enter into futures and options contracts that are not specific
hedges and gains or losses resulting from changes in market value of these
types of futures contracts are recognized in income currently. At December 31,
1998, the Company was not a party to any futures or options contracts. Interest
rate swap agreements are utilized from time to time to manage interest rate
exposures. The amount to be paid or received on these agreements is accrued as
interest rates change and is recognized over the lives of the respective
agreements. At December 31, 1998, the Company was party to an interest rate
swap agreement with an aggregate notional principal amount of $30,000,000,
which effectively changes a portion of Holdings' interest rate exposure from a
floating rate to a fixed rate basis. The effect of the swap was to increase the
fixed rate of 6.15% by 0.4%, which resulted in additional interest expense of
approximately $153,000 during 1998.
F-17
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(2) Summary of Significant Accounting Policies--(Continued)
Income Taxes
The Company is not subject to federal or state income taxes. Results of
operations are allocated to the partners in accordance with the provisions of
Holdings' Partnership Agreement and reported by each partner on their
respective federal and state income tax returns. The taxable income or loss
allocated to the partners in any one year generally varies substantially from
income or loss for financial reporting purposes due to differences between the
periods in which such items are reported for financial reporting and income tax
purposes.
Change in Accounting Principles
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP 98-5"), "Reporting the Costs of Start-up
Activities". SOP 98-5 requires the costs of start-up activities (including,
among other things, pre-opening costs related to the development of new sites
and organization costs) be expensed as incurred and that previously
capitalizable costs expensed in the initial adoption be reported as a
cumulative effect of a change in accounting principle. The adoption of SOP 98-5
resulted in a charge to income of $3,250,000 and is presented as a cumulative
effect of a change in accounting principle, as required.
In the fourth quarter of 1997 the Financial Accounting Standards Board
issued, and the Company adopted, Emerging Issues Task Force Issue No. 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation" ("EITF No. 97-13"). EITF No. 97-13 required the immediate write
off, during the Company's fourth quarter, of cumulative costs related to
process reengineering activities that were previously allowed to be
capitalized. Prospective costs of a similar nature are also required to be
expensed as incurred. The adoption of EITF No. 97-13 resulted in a charge to
income of $1,579,000 and is presented as a cumulative effect of a change in
accounting principle, as required.
F-18
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(3) Inventories
The following is a summary of inventories at December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
------- -------
(in thousands)
<S> <C> <C>
Motor fuels and lubricants................................. $ 5,207 $ 3,704
Tires and tubes............................................ 3,387 4,141
Merchandise and accessories................................ 7,476 7,827
Restaurant and other....................................... 1,420 1,244
Less reserve for obsolescence.............................. (1,128) (457)
------- -------
Inventories, net......................................... $16,362 $16,459
======= =======
</TABLE>
(4) Property and Equipment
Property and equipment is summarized at December 31, 1997 and 1998 as
follows:
<TABLE>
<CAPTION>
Estimated
Useful
Lives
(years) 1997 1998
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Land and improvements........................ 10 $ 26,526 $ 28,370
Buildings and improvements................... 30 99,361 106,417
Furniture and equipment under capital lease.. 3-10 48,350 61,070
Leasehold improvements....................... 7-30 20,234 20,234
Facilities under development................. -- 148 --
-------- --------
194,619 216,091
Less accumulated depreciation and
amortization................................ (41,256) (53,817)
-------- --------
Property and equipment, net................. $153,363 $162,274
======== ========
</TABLE>
The Company currently has equipment under a Capital Lease. Facilities under
development includes costs associated with new facilities and major renovations
of existing facilities. There were no future construction commitments at
December 31, 1998 with the exception of the joint venture located in Southern
California being built pursuant to a joint venture agreement with Tejon
Development Corporation.
(5) Operating Leases
The Company has entered into various operating leases. The operating leases
are for the leases on two Stopping Center locations, an office building, truck
leases and various equipment leases. The leases contain renewal options varying
from automatic annual renewals to multiple five-year options.
F-19
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) Operating Leases--(Continued)
A summary of future minimum rental payments on operating leases which have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1998, is as follows:
<TABLE>
<CAPTION>
Related Third
Fiscal Year Ending Party Party Total
------------------ ------- ------- -------
(in thousands)
<S> <C> <C> <C>
1999................................................ $ 1,494 $ 896 $ 2,390
2000................................................ 1,482 896 2,378
2001................................................ 1,422 858 2,280
2002................................................ 1,422 858 2,280
2003................................................ 1,422 858 2,280
Later years......................................... 3,241 9,823 13,064
------- ------- -------
Total minimum lease payments........................ $10,483 $14,189 $24,672
======= ======= =======
</TABLE>
Rent expense under all operating leases was $2,201,000, $2,034,000 and
$2,639,000 for 1996, 1997 and 1998, respectively. Of these rentals, $1,487,000,
$1,481,000 and $2,330,000 were paid to related parties for 1996, 1997 and 1998,
respectively.
(6) Notes Payable
Notes payable at December 31, 1996, consisted of a five-year revolving
credit facility under which up to $35,000,000 was available. The balance
outstanding on the credit facility was $21,639,000 as of December 31, 1996 and
was paid-off as part of the Recapitalization in January 1997 and a new credit
facility was established.
At December 31, 1998, the Company has available a $25,000,000 five-year
revolving credit facility (the "Credit Facility") that may be used for working
capital and other corporate uses. The Credit Facility matures in January 2002
and interest on drawn funds is paid monthly at 1.5% above the bank's base rate
or 2.75% over the Eurodollar rate (the rate is determined at time of borrowing
at Holdings' option). Fees of 2.75% on drawn funds and commitment fees of .5%
on undrawn funds are paid quarterly. At December 31, 1998, the Company did not
have a balance outstanding on the Credit Facility.
The Company did have standby letters of credit outstanding under the
respective revolving credit facilities at December 31, 1997 and 1998. At
December 31, 1997 and 1998, the standby letters of credit principally related
to unfunded insurance claims were $3,150,000 and $1,986,000, respectively.
Various other standby letters of credit at December 31, 1997 and 1998 total
$777,000 and $427,000, respectively.
Also as part of the Recapitalization, subject to certain covenants, the
Company has available a $40,000,000 three-year Expansion Facility which may be
used to fund the acquisition and development of new Stopping Centers and stand-
alone Petro:Lubes. The Expansion Facility matures in January 2000 and interest
on drawn funds is paid monthly at 1.5% above the bank's base rate or 2.75% over
the Eurodollar rate (the rate is determined at time of borrowing at the
Company's option). Fees of 2.75% on drawn funds and commitment fees of .5% on
undrawn funds are paid quarterly. At December 31, 1998, the Company did not
have a balance outstanding on the Expansion Facility.
Any funds drawn on both the Credit Facility or Expansion Facility are
secured by substantially all of the Company's assets and the partnership
interests of Mobil and Chartwell and guaranteed by each of the Company's
subsidiaries, whose guarantees in turn are collateralized by substantially all
of such subsidiaries' assets.
F-20
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Long-Term Debt
Long-term debt at December 31, 1997 and 1998 is presented below.
<TABLE>
<CAPTION>
1997 1998
-------- --------
(in thousands)
<S> <C> <C>
Four-year term note to a bank in an original amount of
$20,000,000 maturing September 30, 2001. The note is
payable in 18 consecutive quarterly installments varying
from $625,000 to $3,500,000 commencing September 30, 1997.
In accordance with the debt agreements entered into as part
of the Recapitalization, proceeds not used to retire the 12
1/2% Senior Notes were to be used to paydown this term
note. Accordingly, the Company retired approximately
$6,000,000 of this note in addition to the quarterly
installments due during 1997. Interest at either the bank's
prime rate plus 1.5% or the Eurodollar rate plus 2.75% is
payable monthly. The rate was 7.75% at December 31, 1998.
The note is collateralized by substantially all of the
Company's assets. ......................................... $ 12,500 $ 9,973
Six-year term note to a bank in an original amount of
$30,000,000 maturing September 30, 2003. The note is
payable in 26 consecutive quarterly installments varying
from $125,000 to $3,500,000 commencing September 30, 1997.
Interest at either the bank's prime rate plus 2% or the
Eurodollar rate plus 3.25% is payable monthly. The
effective rate was 8.3125% at December 31, 1998, as a
result of an interest swap agreement (the "Swap") with the
lender as required under the loan agreement. The Swap
expires on February 12, 2000. The note is collateralized by
substantially all of the Company's assets. ................ 29,500 28,933
12 1/2% Senior Notes due 2002 (the "Notes") in an original
aggregate principal amount of $100,000,000, net of original
issue discount. As part of the Recapitalization,
approximately 94% of the Notes were retired during 1997.
Interest on the Notes is payable on June 1 and December 1
of each year beginning December 1, 1994. .................. 6,190 6,190
10 1/2% Senior Notes due 2007 (the "New Notes") in an
original aggregate principal amount of $135,000,000.
Interest on the New Notes is payable on February 1 and
August 1 of each year, beginning August 1, 1997. The New
Notes will be effectively subordinated to the loans
outstanding under the New Credit Agreement to the extent of
the value of the assets securing such loans. .............. 135,000 135,000
Total long-term debt........................................ 183,190 181,328
Less current portion........................................ 3,000 4,967
-------- --------
Long-term debt, excluding current portion................... $180,190 $176,361
======== ========
</TABLE>
Obligation under equipment capital lease.................... -- 1,232
-------- --------
The Indentures for the Long-Term Debt and the Credit Facility agreement each
contain certain covenants, including without limitation, covenants with respect
to the following matters: (i) limitation on indebtedness; (ii) limitation on
restricted payments; (iii) limitation on sales of restricted subsidiary stock;
(iv) limitation on transactions with affiliates; (v) limitation on liens; (vi)
limitation on disposition of proceeds of asset sales; (vii) limitation on
distributions and other payment restrictions affecting restricted subsidiaries;
(viii) restrictions on mergers and certain transfers of assets and (ix) in the
case of the Credit Facility financial covenants covering leverage, cash flows,
capital expenditures, EBITDA (as defined), interest coverage, and minimum net
worth. At December 31, 1997 and 1998, the Company was in compliance with all
debt covenants.
F-21
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Long-Term Debt--(Continued)
Estimated principal payment requirements on long-term debt and a capital
lease obligation are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ending (in thousands)
<S> <C>
1999............................................................. $ 4,967
2000............................................................. 6,001
2001............................................................. 1,737
2002............................................................. 19,690
2003............................................................. 13,933
Thereafter....................................................... 135,000
--------
Total........................................................ $181,328
========
</TABLE>
(8) Accrued Expenses and Other Liabilities
The following is a summary of accrued expenses and other liabilities at
December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
------- -------
(in thousands)
<S> <C> <C>
Accrued expenses:
Employee related expenses................................. $10,071 $ 9,794
Taxes payable-sales, fuel and property.................... 2,935 2,594
Other..................................................... 8,424 6,934
Due to franchisees........................................ 5,061 2,117
------- -------
Total................................................... $26,491 $21,439
======= =======
</TABLE>
(9) Related Party Transactions
Related party transactions are handled on an "arm's-length" basis. Amounts
due to and from affiliates as of December 31, 1997 and 1998, consist of the
following:
<TABLE>
<CAPTION>
1997 1998
------- -------
(in thousands)
<S> <C> <C>
Due from affiliates:
C&R Distributing, Inc..................................... $ 105 $ 39
Petro Truckstops, Inc..................................... 196 181
Highway Service Ventures, Inc............................. 114 39
J.A. Cardwell, Sr......................................... 412 412
Cardwell Group............................................ -- 235
Other..................................................... 153 257
------- -------
Total................................................... $ 980 $ 1,163
======= =======
Due to affiliates:
El Paso Amusement Company................................. $ 221 $ 189
Highway Service Ventures, Inc. ........................... 1,471 481
C&R Distributing, Inc..................................... 167 83
Mobil Diesel Supply Corp.................................. 13,792 13,177
Mobil Oil Corp............................................ 3,337 1,718
Cardwell Group............................................ -- 1,058
Other..................................................... -- 62
------- -------
Total................................................... $18,988 $16,768
======= =======
</TABLE>
F-22
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(9) Related Party Transactions--(Continued)
In connection with the Recapitalization, the Company has entered into 10-
year supply agreements with Mobil Oil Corp. ("Mobil") under which Mobil will
supply the Company-operated Stopping Centers' diesel fuel requirements as well
as a portion of their lubricant and gasoline requirements. The diesel fuel sold
at all Company-operated Stopping Centers is branded Mobil Diesel, and the
Company-operated Petro:Lubes feature Mobil Delvac lubricants. Under the diesel
fuel and gasoline supply agreement dated January 30, 1997 (the "Supply
Agreement"), the Company has agreed to purchase from Mobil specified
distribution terminals a minimum number of gallons of diesel fuel and gasoline
on both a monthly and annual basis, subject to product availability and
reductions by Mobil under certain described circumstances. As a result of the
Supply Agreement and in order to comply with the laws governing the branding of
diesel fuel, Mobil Diesel Supply Corp. ("MDS"), a wholly-owned subsidiary of
Mobil, was formed. MDS purchases diesel fuel from third party suppliers and
then sells it back to the Company at cost, given that Mobil cannot supply 100%
of the Company's diesel fuel demand because of product availability. The
Company's fuel purchase arrangement with MDS enables the Company to meet its
diesel fuel demand and to comply with branding laws, which require Mobil to
first take possession of the fuel before it can be branded as Mobil Diesel.
The Supply Agreement allows the Company to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by MDS. In such
cases, MDS purchases the diesel fuel from the third-party supplier and resells
the product to the Company. Any change in supply source, however, does not
affect the Company's requirement to purchase the annual minimum number of
gallons from Mobil. The Supply Agreement also places a monthly limit on the
maximum number of gallons of diesel fuel and gasoline that the Company may lift
from Mobil specified distribution terminals.
The Company purchases diesel fuel for each of its Company-operated Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1998, the Company purchased 100% of diesel fuel from
MDS.
The office building in which the Company's principal executive offices are
located is owned by J.A. Cardwell, Sr., the Chief Executive Officer and a
Director of the Company. The Company leases the entire building under a lease
expiring on December 31, 2005, paying monthly rent totaling $336,000 per year,
as well as taxes, maintenance and other operating expenses. For each of the
fiscal years ended December 31, 1996, December 31, 1997 and December 31, 1998,
the Company made annual rental payments of $336,000.
The Company entered into an agreement with Chartwell Investments, Inc.,
providing for the payment of fees and reimbursement of certain expenses to
Chartwell Investments, Inc. for acting as financial advisor with respect to the
1997 Recapitalization, including soliciting, structuring and arranging the
financing of the 1997 Recapitalization. The fees, totaling approximately
$3,000,000, equal to 1% of the total capitalization of the Company, plus .5% of
the Expansion Facility and the reimbursement of certain expenses, were paid at
the closing.
Fuel sales aggregating $4,567,000, $3,315,000 and $169,000 for 1996, 1997
and 1998, respectively, were made to C&R Distributing, Inc. ("C&R") at the
Company's cost. C&R sales of fuel and lubricants and truck hauling fees,
aggregating $11,432,000, $5,079,000 and $3,995,000 for 1996, 1997 and 1998,
respectively, were charged to the Company.
Highway Service Ventures, Inc. ("HSV"), a corporation in which J.A.
Cardwell, Sr. owns a 32.5% interest, operates four franchised Stopping Centers
located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina;
and Carnesville, Georgia pursuant to franchise agreements with Holdings. None
of these franchise agreements contain terms that are any more favorable to the
franchisee than the terms in any of the Company's other franchise agreements.
F-23
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(9) Related Party Transactions--(Continued)
In May 1992, the Company leased a facility in El Paso, Texas, from a trust
in which J.A. Cardwell, Sr. is a 50% beneficiary, to operate the Company's
retread plant, which produces retread tires for sale at Stopping Centers
(including franchisees) and to others. The Company made lease payments of
$72,000 for the fiscal years ended December 31, 1996, 1997 and 1998,
respectively. In addition, the Company sells retread tires to El Paso Tire
Center, Inc., a corporation in which J.A. Cardwell, Sr. owns 100%. Such sales
amounted to $153,000, $47,000 and $60,000 in 1996, 1997 and 1998, respectively.
In connection with the formation of the Operating Partnership in May 1992
under an Option and Right of First Refusal Agreement, J.A. Cardwell, Sr. and
James A. Cardwell, Jr., officers and Directors of the Company, granted to the
Company and Roadside, options which expire in December 2006, to purchase
certain properties owned by the Cardwells that are located near or adjacent to
certain of the Company's Stopping Centers, and a right of first refusal on
these properties. At the closing of the 1997 Recapitalization, Roadside
assigned all of its rights under the Option and Right of First Refusal
Agreement to Mobil Long Haul, Petro Holdings GP Corp. and Petro Holdings LP
Corp. The price at which an Option Property may be purchased will be equal to
the fair market value of the property when the option is exercised as
determined by an appraisal.
J.A. Cardwell, Sr., James A. Cardwell, Jr. and Mrs. J.A. Cardwell, Sr. own
60%, 30% and 10%, respectively, of the stock of PPR, Inc. ("C&PPR"). J.A.
Cardwell, Sr. is the sole shareholder of CYMA Development Corporation ("CYMA")
and James A. Cardwell, Jr. is the sole shareholder of Petro Truckstops, Inc.
("Petro Truckstops") and Petro Beverage, Inc. The Company entered into
agreements with CYMA, C&PPR, Petro Truckstops, Inc., and Petro Beverage, Inc.
to engage in retail sales of beer, wine or wine coolers at a limited number of
its facilities. The agreements continue in effect until terminated by either
party. Under the agreements with CYMA and C&PPR, the Company agreed to operate
the alcohol sales business at these locations in exchange for 10% of the gross
receipts generated from alcoholic beverage sales, plus reimbursement of all
operating expenses. Under a similar agreement with Petro Truckstops and Petro
Beverage, Inc., the Company receives 15% of gross receipts generated from
alcoholic beverage sales. In each of the agreements, the net payments to
Holdings are approximately equal to the gross profit received by the above
entities.
In connection with the formation of the Operating Partnership in May 1992,
Motor Media, Inc., a company owned 100% by James A. Cardwell, Jr. ("Motor
Media"), entered into a five-year agreement with the Company (the "Motor Media
Agreement"), under which Motor Media leases floor and wall space at all
Stopping Centers operated by the Company and sells space for in-store
advertising to third parties. Under the agreement, the Company and Motor Media
are entitled to 25% and 75%, respectively, of the gross revenues generated.
Motor Media received $214,000, $234,000 and $215,000, respectively, before its
selling, maintenance and administrative expenses for the fiscal years ended
December 31, 1996, December 31, 1997 and December 31, 1998, representing its
share of the gross receipts generated. Motor Media has entered into similar
floor and wall space leases with other truck stops nationwide. The Company and
Motor Media have extended the term of the Motor Media Agreement through April
2002.
Under an existing agreement (the "Amusement Agreement") between El Paso
Vending and Amusement Company ("EPAC"), of which J.A. Cardwell, Sr. and James
A. Cardwell, Jr. own 99% and 1%, respectively, and the Company, EPAC furnishes
video and other games to four of the Company's Stopping Centers and services
these games. Pursuant to the Amusement Agreement, which expires in May 2002 or
until earlier terminated by either party, The Company paid 60% of the revenues
generated by the games to EPAC and retained the remaining 40%. Beginning
November 1994, the arrangement was modified to pay 50% of the revenue generated
by the games to EPAC and 50% to the Company. The Company amended the Amusement
Agreement to cause EPAC to contract directly with the Company to furnish and
service video and other games
F-24
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(9) Related Party Transactions--(Continued)
at an additional 12 Stopping Centers. Subsequent thereto, EPAC began furnishing
and servicing games at an additional five Stopping Centers under the terms of
the Amusement Agreement of which one site agreement guarantees a minimum annual
revenue to Holdings of $180,000. Effective December 1, 1998, EPAC began
furnishing and servicing video and other games to an additional Stopping Center
under the terms of the Amusement Agreement, of which the Company pays 40% of
the revenues generated by the games to EPAC and retains the remaining 60%. EPAC
received $2,021,000, $2,421,000 and $2,634,000 in revenues, respectively,
generated from the furnishing and servicing games located at the Stopping
Centers for the fiscal years ended December 31, 1996, December 31, 1997 and
December 31, 1998.
Since June 1993, the two Stopping Centers located in Louisiana have featured
video poker games housed in a separate on-site facility and operated by a third
party, Petro Truckstops, Inc., an affiliate who, under terms of a contract,
turns over a specified portion of the revenue generated from the machines.
Petro Truckstops, Inc. pays 95% of revenue collected to the Company and retains
5% for operating expenses in accordance with a lease agreement. The Amusement
Agreement has been amended to extend its term through May 2002. Payments to the
Company under this arrangement aggregated $1,979,000 during 1996, $2,103,000
during 1997 and $2,231,000 during 1998. During 1996, the State of Louisiana
enacted a statute requiring the cessation of video poker operations unless the
parish in which the operations were conducted voted to allow the continued
operation of video poker machines. On November 5, 1996, the parish in which the
Shreveport facility is located voted to continue to allow video poker
operations, while the parish in which the Hammond facility is located voted to
disallow video poker operations. The video poker operations at the Hammond
facility are required to be phased out by the end of June 1999. During the year
ended December 31, 1998, the Hammond location generated approximately
$1,067,000 of revenue from video poker.
Management fees of $250,000 were earned by The Fremont Group for the year
ended December 31, 1996. Management fees of $300,000 were earned by Mobil Oil,
in accordance with the terms of the Operating Partnership's Partnership
Agreement for each of the years ended December 31, 1997 and 1998. Subsequent to
the Recapitalization discussed in Note 1, those fees were discontinued.
The Company entered into a management consulting agreement with Chartwell
Investments, commencing January 30, 1997, pursuant to which Chartwell
Investments provided the Company with certain management, advisory and
consulting services for a fee of $600,000 for each fiscal year of the Company
during the term of the agreement, with up to an additional $100,000 payable for
each fiscal year, provided that EBITDA is at least $45 million, plus
reimbursement of certain expenses. During 1997 and 1998, the Company paid
Chartwell Investments $600,000 and $714,000, respectively, under this
agreement. Subsequently to the Recapitalization discussed in Note 1, those fees
were discontinued.
Each of the affiliates, with the exception of Mobil Diesel Supply
Corporation, Mobil Oil Corporation and Chartwell, is owned or controlled to
some degree by a member or members of the Cardwell Group. Related party
transactions, other than those specifically discussed above, generally arise in
the ordinary course of business as a result of the Company's purchase of trade
accounts receivable or receipt of franchisee fees from certain related parties
who own properties which are part of the Company's network.
In order to comply with applicable Internal Revenue Service Code and
Treasury Regulation provisions dealing with recourse debt, certain Cardwell
entities and Arcadian Management Corporation each entered into an indemnity
agreement under which each has agreed to indemnify the Company, the general
partners and certain limited partners in the event that the indemnified party
is required to pay certain of the Company's indebtedness after a default,
acceleration by the creditor and exhaustion of any collateral securing the
credit facility. In May 1994, certain Cardwell entities and Arcadian Management
Corporation amended their original indemnity agreements in connection with the
May 1994 financing. No payments have been made under these agreements.
F-25
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(10) Partners' Capital (Deficit)
Ownership
As a result of the Recapitalization and purchase of Chartwell's and
Kirschner's interests, discussed in Note 1, Holdings is the owner of
approximately 99.0% of the common interests of the Operating Partnership. The
common limited partnership interests of Holdings are owned by the Cardwell
Group (approximately 51.6%), Volvo Trucks (approximately 28.7%), Mobil
(approximately 9.7%) and Warrant Holdings (approximately 10.0%) and the
mandatorily redeemable preferred partnership interests of Holdings are owned by
Mobil ($17,000,000) and the Cardwell Group ($7,600,000).
Under Holdings' Partnership Agreement ("the Agreement"), the partners
delegated management authority to a seven member Board of Directors. The
Cardwell Group, Volvo Trucks, and Mobil Long Haul have the right to appoint two
persons each to the Board of Directors. The seventh member is Mr. Larry Zine,
who served as the Company's executive vice president and chief financial
officer for December 1996 to July 1999, and also as its president from January
1999 to July 1999. Additionally, these three partners also have the right to
veto certain major partnership decisions.
Mandatorily Redeemable Preferred Partnership Interests
The Company's Partnership Agreement provides for a class of preferred
partnership interests. The Class A preferred partnership interests held by the
Cardwell Group will accrue cumulative preferred returns at a rate of 8% per
annum. The Class A preferred partnership interests held by Mobil will accrue
cumulative preferred returns at a rate of 9 1/2% per annum. The preferred
returns will accrue, but are not only payable in cash if permitted by the
Operating Partnership's then existing debt instruments. Accrued but unpaid
returns compound semiannually. The Class A preferred partnership interests will
be mandatorily redeemable by the Company on October 27, 2008. The Class A
preferred partnership interests will not be convertible into common partnership
interests. The Class A preferred partnership interests as well as the Class B
preferred partnership interests described below have liquidation preferences
equal all their accrued and unpaid preferred return plus all their unrecovered
capital
The Class B preferred partnership interests to be owned by Mobil will accrue
cumulative preferred returns at a rate of 12% per annum and will be convertible
into 3.9% of the common partnership interests in the Company at any time prior
to mandatory redemption on the tenth anniversary date of the closing of the
Recapitalization. Upon conversion into a common partnership interest (or as
soon thereafter as cash may be available) the accrued preferred return on the
Class B preferred partnership interest will be paid.
Distributions
Under the terms of the Agreement, Holdings is required to make distributions
to each of its partners in an amount sufficient to allow each partner to pay
federal, state and local taxes with respect to allocation of taxable income to
such partner by Holdings. Tax distributions to partners will be based on the
taxable income of Holdings. Distributions in 1996, 1997 and 1998 were $0, $0
and $823,000 respectively.
As of December 31, 1998, the historical net book value of assets and
liabilities was approximately $36,000,000 greater than the associated net tax
basis of those assets and liabilities.
(11) Employee Benefits
The Company sponsors a defined contribution retirement plan under Internal
Revenue Code Section 401(k) covering substantially all of its employees ("the
Plan"). Company contributions equal 50% of the participants' contributions up
to 4% of the participants' annual salary and aggregated approximately
F-26
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(11) Employee Benefits (Continued)
$138,000, $189,000 and $318,000 for 1996, 1997 and 1998, respectively. At
December 31, 1997 and 1998 there were no other post employment or retirement
plans.
The Plan failed to correctly perform the requirements under Section
401(k)(3)(ii) of the Internal Revenue Code of 1986, as amended (the "Code"),
Section 401(m) of the Code and the underlying Treasury Regulations (hereinafter
referred to as the ADP/ACP Test) for the Plan years 1990-1996. In addition, the
Plan failed to allocate forfeitures of employee contributions in accordance
with the terms of the Plan since its inception. Management of the Company
believes it has identified all operational defects of the Plan, and has taken
corrective actions to ensure future compliance. The Plan administrator
submitted a request for a compliance statement to the IRS on December 19, 1996,
under the IRS Voluntary Compliance Resolution Program (VCR). On August 20,
1998, the IRS notified the Plan that due to certain technical legal issues
under the Plan, the submission could not be accepted under the VCR Program, and
should be redirected to the Walk in Closing Agreement Program (Walk in CAP).
Under the Walk in CAP, it is anticipated the Plan will be permitted to take
corrective actions with respect to the operational defects and receive a
compliance statement from the IRS acknowledging such action. At December 31,
1998, management of the Company believes it has accrued amounts sufficient to
cover any corrective contribution required by the IRS.
During 1998, the Company established the "Petro Stopping Centers Deferred
Compensation Plan" (the "Comp Plan") for key employees. Under the Comp Plan,
the participants may defer base compensation and earn interest on their
deferred amounts. The program is not qualified under Section 401 of the
Internal Revenue Code. Participants may defer no more than 20% of their
compensation per year. The Company will credit matching deferrals for each
participant equal to 50% of the first 4% of the participant's compensation up
to $9,500 per year. Company matched deferrals will vest at 20% after one year
of service and an additional 20% for each year thereafter. The Plan Trustee
will invest each participant's account balance in a separate account. The
participants are general creditors of the Company with respect to these
benefits. The total of participant deferrals, which is reflected in accrued
expenses and other liabilities, was $160,000 at December 31, 1998. The
Company's matched deferral expenses for the year ended December 31, 1998 was
$9,900.
(12) Partnership Interests Option Plan
The Company has established an equity incentive plan to attract and retain
key personnel, including senior management, and to enhance their interest in
the Company's continued success. The Company applies Accounting Principles
Board Opinion No. 25 in accounting for its plan.
The plan has granted options to purchase between 0.03 to 0.90 percent
(expressed as a percentage of the Operating Partnership) of Class B Percentage
Interest at a price between $4,000 and $6,000 per each .01 (one hundredth)
percent. The exercise price for an option shall be equal to not less than 100%
of the fair market value of the Company as determined on the date the option
was granted. Accordingly, no compensation cost has been recognized in the
Consolidated Statement of Operations from options issued under the partnership
interest option plan.
Participants become fully vested upon the occurrence of a Change in Control
(as defined in the plan), upon a sale of substantially all of the assets of the
Company, upon the liquidation of the Company, or upon the Company's
consummation or adoption of a plan to make an Extraordinary Distribution or
Redemption (as defined in the plan). Options may be exercised at any time, to
the extent that such options are exercisable. All options expire on the earlier
to occur of (i) the tenth anniversary of the date the option was granted, (ii)
one year after the participant ceases to be an employee of the Company due to
retirement, death or disability, (iii) immediately, if the participant ceases
to be an employee of the Company for cause, or (iv) ninety days after the
occurrence of the termination of the participant's employment with the
Partnership, for any reason other than (ii) or (iii) above.
F-27
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(12) Partnership Interests Option Plan--(Continued)
The Company anticipates that the aggregate equity issued pursuant to such
plans and any future plans will be between 5% and 10% of the fully-diluted
equity of the Company. At December 31, 1998, options covering 6.76% of the
partnership interests in the Operating Partnership were outstanding. Vesting
occurs over four years at 25% per year. At December 31, 1998, approximately
2.3% of the partnership interests were vested. No options were exercised during
1998.
The Company has awarded options to purchase 2.75% of the common limited
partnership interests of the Operating Partnership at a price of $4,000 per
each 0.01 (one hundredth) percent granted pursuant to the terms of Mr. Zine's
employment agreement; 25% of the options become exercisable on each of December
31, 1997, 1998, 1999 and 2000. As a result of the purchase of Chartwell's
interests described in Note 1, these options became fully exercisable.
Effective upon the consummation of the Recapitalization, the Option Plan,
pursuant to its terms, became sponsored by Holdings, and all then outstanding
options granted under the Option Plan were converted on an equivalent economic
basis to options for equity interests in Holdings on the same terms and
conditions, including their vesting schedules.
(13) Commitments and Contingencies
The Company is involved in various litigation incidental to the business for
which estimates of losses have been accrued, when appropriate. In the opinion
of management, such proceedings will not have a material adverse effect on the
consolidated financial position or results of operations.
The Company has entered into a joint venture agreement with Tejon
Development Corporation ("Tejon") to build and operate a Petro branded location
in Southern California. Pursuant to the terms of the Limited Liability Company
Operating Agreement of Petro Travel Plaza LLC, dated as of December 5, 1997,
among the Company, Tejon and Tejon Ranch Company, as guarantor (the
"Agreement"), the Company made an initial capital contribution for working
capital and inventory. The joint venture financed construction of the location
with a non-recourse credit facility. Under the Agreement, the Company will
receive a management fee of $250,000 per annum and will receive 40% of the
location's operating earnings. At December 31, 1998, this Petro branded
location was under construction, and it began operations in June 1999.
(14) Financial Instruments
As of December 31, 1997 and 1998, the carrying amounts of certain financial
instruments employed by the Company, including cash and cash equivalents,
accounts receivable, trade accounts payable and amounts due from/to affiliates
are representative of fair value because of the short-term maturity of these
instruments. The carrying amounts of notes payable approximate fair value due
to the floating nature of the interest rate. The Company's principal market
risk as it relates to long term debt is exposed to changes in interest rates.
The fair value of both series of Senior Notes has been estimated based on
quoted market prices for the same or similar issues or by discounting the
future cash flows using rates currently available for debt of similar terms and
maturity. The fair value of all derivative financial instruments is the amount
at which they could be settled, based on quoted market prices or estimates
obtained from dealers.
F-28
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(14) Financial Instruments--(Continued)
The following table reflects the carrying amount and estimated fair value of
the Company's financial instruments, as of December 31,
<TABLE>
<CAPTION>
1997 1998
Carrying Fair Carrying Fair
Amount Value Amount value
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Balance sheet financial instruments
Long-term debt........................... $183,190 $191,088 $181,328 $188,416
Other financial instruments
Interest rate swap agreements............ -- (154) -- (153)
</TABLE>
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
derivatives to manage well-defined interest rate risks. At December 31, 1998,
the Company was party to an interest rate swap agreement with an aggregate
principal amount of $30,000,000. Under the agreement, the Company pays a fixed
rate of 6.15% and receives a floating rate based on LIBOR on the aggregate
principal amount as determined in three-month intervals. The transaction
effectively changes a portion of the Company's interest rate exposure from a
floating rate to a fixed rate basis. The effect of the swap was to increase the
rate by 0.4%, which resulted in additional interest expense of approximately
$153,000.
The primary risks associated with swaps are the exposure to movements in
interest rates and the ability of the counterparties to meet the terms of the
contracts. Based on review and assessment of counterparty risk, the Company
does not anticipate non-performance by the other party. The Company does not
obtain collateral or other security to support financial instruments subject to
credit risk, but monitors the credit standing of counterparties.
(15) Environmental Matters
The Company operations and property are subject to extensive federal and
state legislation and regulations relating to environmental matters. The
Company uses underground and above ground storage tanks (each a "UST") to store
petroleum products and waste oils. Statutory and regulatory requirements for
UST systems include requirements for tank construction, integrity testing, leak
detection and monitoring, overfill and spill control, and mandate corrective
action in case of a release from a UST into the environment. The Company is
also subject to regulation in certain locations relating to vapor recovery and
discharges into the water. Management believes that all of its USTs are
currently in compliance in all material respects with applicable environmental
laws, regulations and requirements. During 1998 the Company continued the
installation of cathodic protection and overfill equipment and devices in its
older USTs, as required by federal and state law, and all such work was
completed in December 1998, except in the Corning, California location, where
completion of the state required upgrades is ongoing pursuant to an agreement
between the State of California and the Company. The Corning, California work
is contemplated to be completed during the third quarter of 1999, and the
Company expects to expend $940,000 during 1999 in connection with such work.
Some site remediation may be required in Corning, California as a result of
completion of the 1998 upgrade work. During 1996, 1997, and 1998, the Company's
expenditures for environmental matters were $180,000, $154,000, and $385,000,
respectively. See Note 2 for a discussion of its accounting policies relating
to environmental matters.
In connection with its ownership of the properties and operation of its
business, the Company may be subject to liability under various federal, state,
and local environmental laws, ordinances and regulations relating to cleanup
and removal of hazardous substances (which may include petroleum and petroleum
products) on, under, or in such property. Certain laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Persons who
F-29
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(15) Environmental Matters--(Continued)
arrange, or are deemed to have arranged, for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment site, regardless of
whether such site is owned or operated by such person. The Company is currently
party to one proceeding with the United States Environmental Protection Agency
("EPA") regarding a waste oil storage and recycling plant located in Patterson,
Stanislaus County, California (the "Patterson Site"). In the ordinary course of
Company operations, waste oil products are generated which are required to be
transported to off-site facilities for treatment and disposal. Between June
1991 and February 1995 the Company arranged for the transportation of waste oil
products from the Corning location to the Patterson Site. Sometime in 1997 the
owners of the Patterson Site abandoned operation of the site, the condition of
the site began to deteriorate, and in October 1997 the EPA responded to a
request for assistance from the California Department of Toxic Substances
Control. Notwithstanding that the Company's activities with regards to use of
the Patterson Site were lawfully conducted and have not been challenged by the
EPA, by Order issued by the EPA on August 12, 1998 ("Order"), the Company and
55 other companies were identified by the EPA as "generators, transporters or
arrangers for disposal of hazardous substances" as those terms are defined
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C., Section 9601 to 9675, as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("CERCLA"), and thus are named in
the Order as potentially responsible parties, strictly liable under CERCLA for
removal activities associated with the Patterson Site. The Company and
approximately 20 of the other 55 companies identified by the EPA are working
together toward a resolution and plan of action for completion of the removal
activities required by the EPA pursuant to the Order. The Company does not
believe that its involvement in the Patterson Site will have a material adverse
effect on its consolidated financial condition or results of operations.
The Company has accrued for certain environmental remediation activities
consistent with the policy set forth in Note 2. At December 31, 1998 and 1997,
such accrual amounted to approximately $274,000 and $187,000, respectively, and
in management's opinion, was appropriate based on existing facts and
circumstances. Under the most adverse circumstances, however, this potential
liability could be significantly higher. In the event that future remediation
expenditures are in excess of amounts accrued, management does not anticipate
that they will have a material adverse effect on the consolidated financial
position or results of operations of the Company. At December 31, 1998 and
1997, the Company has recognized approximately $160,000 and $262,000,
respectively, in the consolidated balance sheet related to recoveries of
certain remediation costs from third parties.
(16) Segments
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"), which the Company has
adopted in the current year. The new rules establish revised standards for
public companies relating to the reporting of financial information about
operating segments. The adoption of SFAS No. 131 did not have a material effect
on either the Company's primary consolidated financial statements or segment
information disclosures.
SFAS No. 131 requires the Company to identify and report certain information
on its reportable operating segments. Holdings identified two reportable
operating segments in adopting SFAS No. 131. The two reportable, operating
segments identified are the Company's corporate operated truck stops and its
franchise truck stop operations.
The Company operates large, multi-service truck stops in the United States.
The Company's facilities, which are known as Petro Stopping Centers, offer a
broad range of products, services and amenities, including diesel fuel,
gasoline, home-style restaurants, truck preventive maintenance centers and
retail merchandise stores
F-30
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(16) Segments--(Continued)
to the highway motorist. The Company has aggregated its corporate truck stop
operations into one reportable operating segment based on the distribution of
products and services under one common site facility, classified as a multi-
service truck stop.
In addition to corporate operations, the Company is a franchisor to 21 Petro
Stopping Center locations. The Company collects royalties and fees in exchange
for the use of its name and for certain services provided to the franchisees.
During the years ended December 31, 1996, 1997 and 1998, the revenues generated
from the Company's franchise operations were $3,397,000, $3,954,000, and
$4,497,000, respectively. These revenues are included in non-fuel revenues
reported on the accompanying consolidated statements of operations. The Company
does not allocate any expenses or assets in measuring this segment's profit and
loss.
Historically, the Company's revenues at each of its full-sized Stopping
Centers were recorded through the following divisions: Diesel Fuel Island, Iron
Skillet Restaurant, Petro:Lube and Travel and Convenience Stores. Beginning
with the first quarter of 1997 and in connection with new management, the
presentation format for results of operations has been changed to reflect
revenues from fuel, non-fuel and restaurant. The Company derives its revenues
from the sale of fuels, diesel and gasoline, non-fuel items including the sale
of merchandise and offering of services including truck tire sales and
preventative maintenance, weighing scales, showers, laundry, video games and
other operations, and its restaurant operations which includes Iron Skillet and
certain fast-food operations. The presentation allows management to focus more
closely on the major sources of revenues of the business. The other operations
included in non-fuel revenues include franchise royalties and rental revenues
from video poker operations in Louisiana.
(17) Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allow a derivative's gain and loss to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133 was originally
effective for fiscal years beginning after June 15, 1999, but has been
postponed by Statement of Financial Accounting Standard No. 137, "An Amendment
of SFAS No. 133", for one year with a mandatory effective date for fiscal years
beginning after June 15, 2000. Additionally, SFAS 133 has been modified
regarding recognition in the balance sheet of an embedded derivative that is
required to be separated from the host contract. At the date of initial
application of SFAS 133, an entity may choose either to recognize such embedded
derivatives or to select either January 1, 1998 or January 1, 1999, as a
transition date for embedded derivatives. A company may also implement the
statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1999 and thereafter). A company may also
implement the statement as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1999 and thereafter).
SFAS No. 133 cannot be applied retroactively. Management has not yet quantified
the impact of adopting SFAS No. 133 on our financial statements and has not
determined the timing of, or method of, adoption. However, the implementation
of SFAS No. 133 could increase volatility in earnings.
F-31
<PAGE>
PETRO STOPPING CENTERS HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(18) Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
---- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Net revenues..................... $162,565 $160,759 $168,209 $194,196
Operating income................. 3,680 6,418 7,241 4,712
Net income (loss)................ (6,592)(a) 501 989 (757)(b)
<CAPTION>
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
---- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Net revenues..................... $162,932 $165,157 $167,288 $158,039
Operating income................. 5,219 6,938 7,831 5,732
Net income (loss)................ 88 912 1,300 (1,170)(c)
</TABLE>
- --------
(a) Approximately $12,745,000 of this net loss is due to the Company charging,
as an extraordinary item, debt restructuring costs in conjunction with the
1997 Recapitalization.
(b) Approximately $1,900,000 of this net loss is due to additional depreciation
expense recorded as a result of revising the service life of certain
computer equipment. Furthermore, a charge of $1,579,000 was recorded in the
fourth quarter as a result of the adoption of EITF No. 97-13, which
required the write-off of certain costs related to process reengineering
activities that were previously allowed to be capitalized. In accordance
with EITF No. 97-13, the charge was recorded as a cumulative effect of a
change in accounting principle.
(c) A charge of $3,250,000 was recorded in the fourth quarter as a result of
the adoption of SOP No. 98-5, which required the costs of start-up
activities and organization costs to be expensed as incurred rather than
capitalized and amortized. In accordance with SOP No. 98-5, the charge was
recorded as a cumulative effect of a change in accounting principle.
F-32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Partners
Petro Stopping Centers Holdings, L.P.
We have audited the accompanying consolidated balance sheets of Petro
Stopping Centers Holdings, L.P. (a Delaware limited partnership) and
subsidiaries as of December 31, 1997 and 1998, and the related consolidated
statements of operations, changes in partners' capital (deficit) and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Petro
Stopping Centers Holdings, L.P. and subsidiaries as of December 31, 1997 and
1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, effective
October 1, 1997, the Company changed its method of accounting for process
reengineering costs.
As discussed in Note 2 to the consolidated financial statements, effective
October 1, 1998, the Company changed its method of accounting for start-up
activities.
ARTHUR ANDERSEN LLP
Dallas, Texas,
September 10, 1999
F-33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any represen-
tations in connection with this offering other than those contained in this
Prospectus. If any person makes a statement that differs from what is in this
Prospectus, you should not rely on it. This Prospectus is not an offer to sell,
nor is it seeking an offer to buy, the New Notes in any state where such offer
or sale is not permitted. The information in this Prospectus is complete and
accurate as of its date, but the information may change after that date.
----------------
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors ............................................................ 11
Exchange Offer........................................................... 21
Use of Proceeds.......................................................... 29
Capitalization .......................................................... 30
Pro Forma Consolidated Financial Statements.............................. 31
Selected Historical Consolidated Financial Data ......................... 36
Management's Discussion and Analysis of Results of Operations and
Financial Condition .................................................... 39
Business ................................................................ 45
Management............................................................... 55
Security Ownership of Certain Beneficial Owners and Management........... 61
Certain Relationships and Related Transactions........................... 63
Description of Other Indebtedness........................................ 68
Description of the Notes................................................. 70
Certain U.S. Federal Income Tax Considerations........................... 107
Description of Holdings Partnership Agreement............................ 110
Description of Petro Warrant Holdings Corporation........................ 111
Book-Entry; Delivery and Form............................................ 112
Plan of Distribution..................................................... 114
Experts.................................................................. 114
Legal Matters ........................................................... 114
Index to Consolidated Financial
Statements ............................................................. F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
----------------
PROSPECTUS
----------------
Petro Stopping Centers Holdings, L.P.
Petro Holdings Financial Corporation
Offer For All Outstanding
15% Senior Discount Notes due 2008
In Exchange For 15% Series B Senior Discount Notes due 2008
. , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 17-108 of the Delaware Uniform Partnership Law (the "UPL") provides,
in substance, that Delaware limited partnerships shall have the power to
indemnify and hold harmless any partner or other person from and against any
and all claims and demands whatsoever, subject to such standards and
restrictions as are set forth in its partnership agreement.
Pursuant to Section 17-108 of the UPL, Article VII of the Partnership
Agreement (the "Partnership Agreement") (filed as Exhibit 3.2 to this
Registration Statement) of Petro Stopping Centers Holdings, L.P. ("Holdings")
provides that Holdings shall indemnify any current or former partner, member of
the board of directors or officer to the fullest extent permitted by law with
respect to any liability, damage, loss, injury, expense and cost to any person
for any act or omission performed or omitted: (a) in good faith on behalf of
Holdings; (b) in a manner reasonably believed by such partner, officer or
director to be within the scope of the authority granted to such partner,
officer or director by the Partnership Agreement or the board of directors; and
(c) in a manner not constituting willful misconduct, fraud, gross negligence,
or breach of such partner's, officer's or director's fiduciary duty of loyalty.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article Thirteen of the Certificate of Incorporation (the "Certificate
of Incorporation") (filed as Exhibit 3.3 to this Registration Statement) of
Petro Holdings Financial Corporation ("Financial Corporation") eliminates the
liability of Financial Corporation's directors to Financial Corporation or its
stockholders, except for liabilities related to breach of duty of loyalty,
actions not in good faith and certain other liabilities. Section 7 of Financial
Corporation's Bylaws (filed as Exhibit 3.4 to this Registration Statement)
provides that Financial Corporation shall indemnify to the fullest extent
permitted by the DGCL its current and former directors and officers and persons
serving as directors and officers of any corporation at the request of
Financial Corporation. Financial Corporation also maintains officers' and
directors' liability insurance which insures against liabilities that officers
and directors of Financial Corporation may incur in such capacities.
Section 145 of the DGCL gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such directors
or officers, subject to specified conditions and exclusions; gives a director
or officer who successfully defends an action the right to be so indemnified;
and permits a corporation to buy directors' and officers' liability insurance.
Such indemnification is not exclusive of any other rights to which those
indemnified may be entitled under any by-law, agreement, vote of stockholders
or otherwise.
As permitted by Section 145 of the DGCL, Section 7 of the Bylaws of
Financial Corporation and Article Twelve of the Certificate of Incorporation of
Financial Corporation provide for the indemnification by Financial Corporation
of its directors, officers, employees and agents against liabilities and
expenses incurred in connection with actions, suits or proceedings brought
against them by a third party or in the rights of the corporation, by reason of
the fact that they were or are such officers, employees or agents.
The Purchase Agreement by and among First Union Capital Markets Corp. and
CIBC World Markets Corp. (together, the "Initial Purchasers") and Holdings,
Holdings Financial, and Warrant Financial Corporation, dated as of July 19,
1999 (the "Purchase Agreement"), provides for indemnification of Holdings and
Holdings Financial and persons who control Holdings and Holdings Financial
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act") for certain liabilities,
including liabilities under the Securities Act.
II-1
<PAGE>
The Notes Registration Rights Agreement by and among Holdings, Holdings
Financial and the Initial Purchasers dated as of July 23, 1999 (the
"Registration Rights Agreement"), provides for indemnification of Holdings and
Holdings Financial, its directors and officers, and persons who control
Holdings and Holdings Financial within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act for certain liabilities,
including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Holdings and
Holdings Financial pursuant to the foregoing provisions, Holdings and Holdings
Financial have been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Purchase Agreement, dated as of July 19, 1999, by and among Petro
Stopping Centers Holdings, L.P., Petro Holdings Financial
Corporation, Petro Warrant Financial Corporation, First Union
Capital Markets Corp. and CIBC World Markets Corp.
3.1 Certificate of Limited Partnership of Petro Stopping Centers
Holdings, L.P.
3.2 Limited Partnership Agreement of Petro Stopping Centers Holdings,
L.P., dated July 23, 1999.
3.3 Certificate of Incorporation of Petro Holdings Financial
Corporation.
3.4 Bylaws of Petro Holdings Financial Corporation.
4.1 Indenture, dated as of July 23, 1999, by and among Petro Stopping
Centers Holdings, L.P., Petro Holdings Financial Corporation and
State Street Bank and Trust Company, as Trustee.
4.2 Form of 15% Senior Discount Note due 2008 (included in Exhibit
4.1).
4.3 Registration Rights Agreement, dated as of July 23, 1999, by and
among Petro Stopping Centers Holdings, L.P., Petro Holdings
Financial Corporation, First Union Capital Markets Corp. and
CIBC World Markets Corp.
4.4 Registration Rights and Partners' Agreement, dated as of July 23,
1999, by and among Petro Stopping Centers Holdings, L.P., Petro
Warrant Financial Corporation, Permitted Holders of Petro
Stopping Centers Holdings, L.P., Sixty Eighty, LLC, First Union
Capital Markets Corp. and CIBC World Markets Corp.
4.5 Warrant Agreement, dated as of July 23, 1999, by and among Petro
Stopping Centers Holdings, L.P., Petro Warrant Financial
Corporation, Sixty Eighty, LLC, First Union Capital Markets
Corp., CIBC World Markets Corp. and State Street Bank and Trust
Company.
5.1* Opinion of Gibson, Dunn & Crutcher LLP, including consent
8.1* Opinion of Gibson, Dunn & Crutcher LLP with regard to federal
income tax consequences of the Exchange Offer
10.1 (bb) Surety Drive lease agreement, dated April 30, 1992, between James
A. Cardwell and Petro Stopping Centers, L.P
10.2 (bb) Agreement relating to trademark license for Bordentown, New
Jersey, dated April 30, 1992, between Petro Stopping Centers,
L.P. and Petro, Inc.
10.3 (bb) Petro: Tread Lease Agreement, dated April 30, 1992, between James
Arthur Lyle and Petro Stopping Centers, L.P.
10.4 (bb) Lease Agreement relating to Texas convenience store liquor sales,
dated April 30, 1992, between Petro Stopping Centers, L.P. and C
and PPR, Inc.
10.5 (bb) Servicing Agreement relating to Texas Convenience store liquor
sales, dated April 30, 1992, between Petro Stopping Centers, L.P.
and C and PPR, Inc.
10.6 (bb) Lease relating to the Effingham, Illinois, Stopping Center, dated
May 23, 1990, between Truck Stop Property Owners, Inc. and Petro
Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.7 (bb) Lease with Option to purchase, dated September 9, 1983, among
Vaughn O. Seale, Francine S. Dodson, Hazel S. Darouse and Metro
Hammond, Inc.
10.8 (bb) Profit Participation Agreement, dated March 1, 1993, between
Pelican Gaming, Inc. and Petro Truckstops, Inc.
10.9 (aa) Distributor sales Agreement (Branded) Renewal Offer dated
November 1, 1996, between Exxon Company, U.S.A. and Petro
Stopping Centers, L.P.
10.10 (aa) Amended Split Dollar Life Insurance Agreement, dated as of May
1, 1995, among the Company, James A. Cardwell, Jr., Trustee of
the James A., and Evonne Cardwell Trust Number Two and James A.
Cardwell, Jr., Trustee of the James A. Cardwell Trust No. Three.
10.11 (cc) Lease and Services Agreement, dated February 10, 1995, between
Petro Stopping Centers, L.P. and Petro Beverage, Inc.
10.12 (aa) Memorandum of Understanding - Joint Project Development, dated
January 30, 1997, by and between Mobil Oil and Petro Stopping
Centers, L.P.
10.13 (aa) Product Services Agreement, dated January 30, 1997, by and
between C&R Distributing, Inc., a Texas corporation , and Petro
Stopping Centers, L.P.
10.14 (aa) Petro/El Paso Amusement Services Agreement, dated January 30,
1997, by and between El Paso Vending and Amusement Company and
Petro Stopping Centers, L.P.
10.15 (aa) Display Space Agreement, dated January 30, 1997, by and between
Motor Media, Inc. and Petro Stopping Centers, L.P.
10.16 (bb) Southwestern Bell Telephone Company Public Telephone License
Agreement, dated May 16, 1990, between Southwestern Bell
Telephone Company and Petro, Inc.
10.17 (dd) Limited Liability Company Operating Agreement of Petro Travel
Plaza, LLC, dated as of December 5, 1997, among the Company,
Tejon Ranch Company, as Guarantor.
10.18 (ee) Petro Stopping Centers Deferred Compensation Plan Agreement,
dated November 26, 1997.
10.19 (ff) Employment Agreement, dated February 10, 1999, by and between
James A. Cardwell, Sr. and Petro Stopping Centers, L.P.
10.20 (ff) Employment Agreement, dated February 10, 1999, by and between
James A. Cardwell, Jr. and Petro Stopping Centers, L.P.
10.21 (ff) Employment Agreement, dated March 1, 1999, by and between Evan
Brudahl and Petro Stopping Centers, L.P.
10.22 (gg) Fourth Amended and Restated Limited Partnership Agreement of the
Company, a Delaware Limited Partnership, dated July 23, 1999, by
and among Petro Inc., as a General Partner and Petro Stopping
Centers Holdings, L.P., Petro Holdings GP, L.L.C. and James A.
Cardwell, Jr., as Limited Partners.
10.23 (gg) Limited Partnership Agreement of Petro Stopping Centers
Holdings, L.P., a Delaware Limited Partnership, dated July 15,
1999, by and among Petro, Inc., as General Partner and James A.
Cardwell, Sr., James A. Cardwell, Jr., JAJCO II, Inc., Petro,
Inc., Mobil Long Haul Inc., Volvo Petro Holdings, LLC and Petro
Warrant Holdings Corporation, as Limited Partners.
10.24 (gg) Second Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of July 23, 1999, among Petro Stopping
Centers, L.P., Bankboston, N.A. (formerly known as The First
National Bank of Boston) and the other lending institutions
listed as Fleet Business Credit Corporation, Merrill Lynch Prime
Rate Portfolio, Merrill Lynch Senior Floating Rate Fund, Inc.,
Morgan Stanley Dean Witter Prime Income Trust, Natexis Banque,
KZH Crescent-3 LLC, KZH Crescent-2 LLC, KZH Crescent LLC, United
of Omaha Life Insurance Company, Sequils I, Ltd., Wells Fargo
Bank, N.A. and Bank of Boston), as Agent, Union Bank of
California, N.A., as Co- Agent, First Union National Bank, as
Documentation Agent and BancBoston Robertson Stephens Inc., as
Arranger.
10.25 (gg) Amended and Restated PMPA Motor Fuels Franchise Agreement, dated
July 23, 1999, by and between Mobil Oil Corporation and Petro
Stopping Centers, L.P.
10.26 (gg) Master Supply Contract for Resale or Oils and Greases, dated
July 23, 1999, by and between Mobil Oil Corporation and Petro
Stopping Centers, L.P.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.27 Pledge Agreement, dated as of July 29, 1999, entered into by Petro
Stopping Centers Holdings, Inc. in favor of BankBoston N.A.
10.28 Guaranty, dated as of July 29, 1999, entered into by Petro Stopping
Centers Holdings, Inc. in favor of BankBoston, N.A.
12.1 Statement of Computation of Ratios of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Gibson, Dunn & Crutcher LLP (to be included in Exhibit
5.1)
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included as part of the signature page of this
Registration Statement)
25.1 Form T-1 Statement of Eligibility of United States Trust Company of
New York to act as trustee under the Indenture
27.1 Financial Data Schedule
99.1* Form of Letter of Transmittal to be used in connection with the
exchange offer
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* To be filed by amendment.
(aa) Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
on Form 10-K for the year ended December 31, 1996.
(bb) Incorporated by reference to Petro Stopping Centers, L.P.'s Registration
Statement on Form S-1 (Registration No. 33-76154).
(cc) Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995.
(dd) Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.
(ee) Incorporated by reference to Petro Stopping Centers, L.P.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1998.
(ff) Incorporated by reference to Petro Stopping Centers, L.P.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999.
(gg) Incorporated by reference to Petro Stopping Centers, L.P.'s Current
Report on Form 8-K, filed on August 6, 1999.
Item 22. Undertakings.
The undersigned registrants hereby undertake with respect to the securities
offered by them:
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted as to directors, officers
and controlling persons of any Registrant pursuant to the provisions described
in Item 20 or otherwise, the Registrants have been advised that in the opinion
of the Commission such indemnification is against public policy as expressed
in the Act and is, therefore unenforceable. In the event a claim for
indemnification against such liabilities (other than the payment by any
Registrant of expenses incurred or paid by a director, officer or controlling
person of such 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, such Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
2. The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
II-4
<PAGE>
3. The undersigned Registrants hereby undertake 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
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of El Paso, State of Texas
on the 15th day of September, 1999.
PETRO STOPPING CENTERS HOLDINGS,
L.P.
/s/ J.A. Cardwell, Sr.
By: _________________________________
J. A. Cardwell, Sr.,
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints J.A.
Cardwell, Sr., James A. Cardwell, Jr. and Nancy C. Santana his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or her might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his or her
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ J.A. Cardwell, Sr. Director and President September 15, 1999
_____________________________ (Principal Executive Officer)
J. A. Cardwell, Sr.
/s/ David A. Appleby Vice President of Finance and September 15, 1999
_____________________________ Treasurer (Principal
David A. Appleby Financial and Accounting
Officer)
/s/ James A. Cardwell, Jr. Director September 15, 1999
_____________________________
James A. Cardwell, Jr.
/s/ Larry J. Zine Director September 15, 1999
_____________________________
Larry J. Zine
/s/ Nancy B. Carlson Director September 15, 1999
_____________________________
Nancy B. Carlson
/s/ Kevin T. Weir Director September 15, 1999
_____________________________
Kevin T. Weir
/s/ Robert Grussing IV Director September 15, 1999
_____________________________
Robert Grussing IV
/s/ Martha P. Boyd Director RSeptember 15, 1999
_____________________________
Martha P. Boyd
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of El Paso, State of Texas
on the 15th day of September, 1999.
PETRO HOLDINGS FINANCIAL CORPORATION
/s/ J.A. Cardwell, Sr.
By: __________________________________
J. A. Cardwell, Sr.,
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints J.A.
Cardwell, Sr., James A. Cardwell, Jr. and Nancy C. Santana his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or her might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his or her
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ J. A. Cardwell, Sr.
____________________________
J. A. Cardwell, Sr.
Director and President
(Principal Executive Officer)
September 15, 1999
/s/ David A. Appleby
____________________________
David A. Appleby
Vice President of Finance and
Treasurer (Principal
Financial and Accounting
Officer)
September 15, 1999
/s/ James A. Cardwell, Jr.
____________________________
James A. Cardwell, Jr.
Director
September 15, 1999
/s/ Larry J. Zine
____________________________
Larry J. Zine
Director
September 15, 1999
/s/ Nancy B. Carlson
____________________________
Nancy B. Carlson
Director
September 15, 1999
/s/ Kevin T. Weir
____________________________
Kevin T. Weir
Director
September 15, 1999
/s/ Robert Grussing IV
____________________________
Robert Grussing IV
Director
September 15, 1999
/s/ Martha P. Boyd
____________________________
Martha P. Boyd
Director
September 15, 1999
II-7
<PAGE>
EXHIBIT 1.1
EXECUTION COPY
PETRO STOPPING CENTERS HOLDINGS, L.P.
PETRO HOLDINGS FINANCIAL CORPORATION
PETRO WARRANT HOLDINGS CORPORATION
82,707 UNITS CONSISTING OF
$82,707,000 PRINCIPAL AMOUNT AT STATED MATURITY OF
15% SENIOR DISCOUNT NOTES DUE 2008
AND
82,707 WARRANTS TO PURCHASE 82,707 SHARES OF COMMON STOCK OF
PETRO WARRANT HOLDINGS CORPORATION
PURCHASE AGREEMENT
New York, New York
July 19, 1999
First Union Capital Markets Corp.
CIBC World Markets Corp.
C/o First Union Capital Markets Corp.
As Representative of the Initial Purchasers
301 South College Street, TW-5
Charlotte, NC 28288-0604
Ladies and Gentlemen:
Petro Stopping Centers Holdings, L.P., a Delaware limited partnership
(the "Partnership"), and Petro Holdings Financial Corporation, a Delaware
corporation (together with the Partnership, the "Issuers") propose to sell to
the parties named in Schedule I hereto (the "Initial Purchasers"), for whom you
are acting as representative (the "Representative"), 82,707 units (the "Units"),
consisting in the aggregate of $82,707,000 principal amount at stated maturity
of 15% Senior Discount Notes Due 2008 (the "Notes") issued by the Issuers and
82,707 warrants (the "Warrants") exchangeable for an aggregate of 82,707 shares
(the "Warrant Shares") of common stock (the "Common Stock ") of Petro Warrant
Holdings Corporation ("Warrant Holdings") issued by Warrant Holdings. Each Unit
will consist of $1,000 principal amount at stated maturity of the Notes and one
Warrant to purchase one share of Common Stock. The Notes are to be issued under
an indenture (the "Indenture") to be dated the Closing Date (as defined below)
among the Issuers and State Street Bank and Trust Company, as trustee (the
"Trustee"). The Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement") to be dated the Closing Date among Warrant Holdings, the
Partnership, Sixty
<PAGE>
Eighty, L.L.C., the Initial Purchasers and State Street Bank and Trust Company,
as warrant agent (the "Warrant Agent"). The Notes and the Warrants comprising
each Unit will be separable immediately. The Units, the Notes and the Warrants
are more fully described in the Final Memorandum referred to below.
This Agreement, the registration rights agreement, to be dated the
Closing Date, between the Initial Purchasers and the Issuers (the "Registration
Rights Agreement"), the Notes, the Indenture, the registration rights and
partners' agreement, to be dated the Closing Date, among the Initial Purchasers,
the Partnership, the partners of the Partnership, Sixty Eighty, L.L.C., and
Warrant Holdings (the "Registration Rights and Partners' Agreement"), the
Warrants and the Warrant Agreement are hereinafter collectively referred to as
the "Transaction Documents" and the transactions contemplated therein the
"Transactions."
The limited partnership agreement of Petro Stopping Centers Holdings,
L.P. among Petro, Inc., as general partner, and James A. Cardwell, Sr., James A.
Cardwell, Jr., JAJCO II, Inc., Mobil Long Haul, Inc. ("Mobil"), Volvo Petro
Holdings, LLC ("Volvo") and Warrant Holdings, as limited partners (the "Holdings
Partnership Agreement"), the fourth amended and restated limited partnership
agreement of Petro Stopping Centers, L.P. to be entered into among Petro, Inc.
and Petro Holdings GP, L.L.C., as general partners, and Petro Stopping Centers
Holdings, L.P. and James A. Cardwell, Jr., as limited partners (the "Operating
Partnership Agreement"), the supplemental indenture to the indenture governing
the 10 1/2% Senior Notes Due 2007 of Petro Stopping Centers, L.P., dated January
30, 1997, to be entered into between Petro Stopping Centers, L.P. and the
Trustee (the "First Supplemental Indenture"), the new senior credit agreement to
be entered into among Petro Stopping Centers, L.P., the Partnership and
BankBoston, N.A. (the "New Senior Credit Facility"), the partnership interest
subscription and purchase agreement to be entered into among Petro, Inc., Petro
Holdings GP Corp., Petro Holdings LP Corp., Mobil, James A. Cardwell, Sr., James
A. Cardwell, Jr., JAJCO II, Inc., Volvo, Warrant Holdings, and Petro Stopping
Centers, L.P. (the "Subscription and Purchase Agreement"), whereby Mobil and
Volvo will purchase partnership interests in the Partnership and the Partnership
will purchase the partnership interests in Petro Stopping Centers, L.P. owned by
Chartwell Investments Inc. and the purchase agreement to be entered into between
the Partnership and Kirschner Investments, whereby the Partnership will purchase
the partnership interests in Petro Stopping Centers, L.P. owned by Kirschner
Investments (the "Kirshner Purchase Agreement") are hereinafter collectively
referred to as the "Recapitalization Documents" and the transactions
contemplated therein the "Recapitalization."
The sale of the Units to the Initial Purchasers will be made without
registration of the Units, Notes or Warrants under the Securities Act of 1933,
as amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Issuers
that the Initial Purchasers will offer and sell the Units purchased by them
hereunder in accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Units, the Issuers and Warrant
Holdings have prepared a preliminary offering memorandum, dated June 25, 1999
(including any and all exhibits thereto, the "Preliminary Memorandum"), and a
final offering memorandum, dated July 19, 1999 (including any and all exhibits
thereto, the "Final Memorandum"). Each of the Preliminary Memorandum and the
Final Memorandum sets forth certain information concerning the Issuers, Warrant
Holdings and the Units (and the Notes and Warrants included therein). The
Issuers and Warrant Holdings hereby confirm that they have authorized the use of
the
2
<PAGE>
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Units by the Initial
Purchasers. Unless stated to the contrary, all references herein to the Final
Memorandum are to the Final Memorandum at the Execution Time (as defined below)
and are not meant to include any amendment or supplement subsequent to the
Execution Time.
As used herein, "Material Adverse Effect" means a material adverse
effect on the financial condition, earnings, business or properties of the
Partnership, its subsidiaries and Warrant Holdings, taken as a whole.
1. Representations and Warranties. The Issuers and Warrant Holdings
------------------------------
each jointly and severally, represent and warrant to the Initial Purchasers as
set forth below in this Section 1.
(a) Each of the Issuers, Warrant Holdings and Petro Stopping Centers,
L.P. has been duly organized or incorporated and is validly existing as a
limited partnership or corporation in good standing under the laws of the
jurisdiction in which it is organized or incorporated and is duly qualified
to do business as a foreign limited partnership or corporation and is in
good standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or conducts
material business, except in such jurisdictions in which the failure to so
qualify would not have a Material Adverse Effect.
(b) Each of the Issuers, Warrant Holdings and Petro Stopping Centers,
L.P. has full power (partnership or corporate) to own or lease its
properties and conduct its business as described in the Final Memorandum;
and each of the Issuers and Warrant Holdings has full power (partnership or
corporate) to enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it.
(c) All the limited partnership interests in the Partnership have
been duly authorized and validly issued and are fully paid and non-
assessable; all the outstanding capital stock of Petro Holdings Financial
Corporation and Warrant Holdings has been duly and validly authorized and
issued and is fully paid and nonassessable; on the Closing Date at least
99.0% of the outstanding capital interests in Petro Stopping Centers, L.P.
will be owned by the Partnership either directly or through wholly owned
subsidiaries free and clear of any security interest except such security
interests contained in the New Senior Credit Facility; and on the Closing
Date ten percent of the outstanding common limited partnership interests of
the Partnership will be owned by Warrant Holdings free and clear of any
security interest.
(d) On the Closing Date each of the Issuers and Petro Stopping
Centers, L.P. will have an authorized, issued and outstanding
capitalization as set forth in the Final Memorandum.
(e) This Agreement has been duly authorized, executed and delivered
by the Issuers and Warrant Holdings, and constitutes a legal, valid and
binding instrument enforceable against the Issuers and Warrant Holdings, in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization,
3
<PAGE>
insolvency, moratorium or other laws affecting creditors' rights generally
from time to time in effect and subject to general principles of equity).
(f) The Notes have been duly and validly authorized for issuance and
sale to the Initial Purchasers pursuant to this Agreement and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers pursuant
to this Agreement, will constitute the legal, valid and binding obligations
of the Issuers, enforceable against the Issuers in accordance with their
terms and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. The statements set forth under the heading
"Description of the Notes" in the Final Memorandum, insofar as such
statements purport to summarize certain provisions of the Notes and the
Indenture, provide a fair summary of such provisions.
(g) The execution and delivery of the Indenture have been duly
authorized by the Issuers, and when executed and delivered, the Indenture
will constitute a legal, valid and binding instrument enforceable against
the Issuers in accordance with its terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors' rights generally from time to time in
effect and subject to general principles of equity).
(h) The execution and delivery of the Registration Rights Agreement
have been duly authorized by the Issuers, and when executed and delivered,
the Registration Rights Agreement will constitute a legal, valid and
binding instrument enforceable against the Issuers in accordance with its
terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect and subject to
general principles of equity).
(i) The Warrants have been duly and validly authorized for issuance
and sale to the Partnership and their resale by the Partnership to the
Initial Purchasers pursuant to this Agreement has been duly and validly
authorized by the Partnership and, when issued and countersigned in
accordance with the provisions of the Warrant Agreement and delivered to
and paid for by the Initial Purchasers pursuant to this Agreement, will
constitute the legal, valid and binding obligations of Warrant Holdings,
enforceable against Warrant Holdings in accordance with their terms and
entitled to the benefits of the Warrant Agreement, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. The statements set forth under the heading
"Description of the Warrants" in the Final Memorandum, insofar as such
statements purport to summarize certain provisions of the Warrants and the
Warrant Agreement, provide a fair summary of such provisions.
(j) The execution and delivery of the Warrant Agreement have been
duly authorized by Warrant Holdings, and when executed and delivered, the
Warrant Agreement will constitute a legal, valid and binding instrument
enforceable against Warrant Holdings in accordance with its terms (subject,
as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws
4
<PAGE>
affecting creditors' rights generally from time to time in effect and
subject to general principles of equity).
(k) The execution and delivery of the Registration Rights and
Partners' Agreement have been duly authorized by the Partnership and
Warrant Holdings, and when executed and delivered, the Registration Rights
and Partners' Agreement will constitutes a legal, valid and binding
instrument enforceable against the Partnership and Warrant Holdings in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally from time to time in effect and
subject to general principles of equity).
(l) The Warrant Shares have been duly authorized and reserved for
issuance upon exchange of the Warrants in accordance with the terms of the
Warrant Agreement, are free of preemptive rights and, when issued upon
exchange of the Warrants in accordance with the terms of the Warrant
Agreement will be validly issued, fully paid and nonassessable.
(m) The financial statements and schedules of the Issuers and Petro
Stopping Centers, L.P. included in the Final Memorandum fairly present in
all material respects the financial position of the Issuers and Petro
Stopping Centers, L.P. and the results of operations and changes in
financial condition as of the dates and periods therein specified. Such
financial statements and schedules have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved (except as otherwise noted therein). The selected
financial data set forth under the caption "Selected Historical
Consolidated Financial Data" in the Final Memorandum fairly present in all
material respects, on the basis stated in the Final Memorandum, the
information included therein.
(n) Arthur Andersen LLP, who have certified certain financial
statements of the Issuers and Petro Stopping Centers, L.P. and delivered
their report with respect to the audited consolidated financial statements
and schedules included in the Final Memorandum, are independent public
accountants within the meaning of the Securities Act and the applicable
rules and regulations thereunder.
(o) No legal or governmental proceedings are pending to which the
Issuers, Warrant Holdings or Petro Stopping Centers, L.P. is a party or to
which the property of the Issuers, Warrant Holdings or Petro Stopping
Centers, L.P. is subject that are not described in the Final Memorandum,
and, to the knowledge of the Issuers, no such proceedings have been
threatened against the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. or with respect to any of their respective properties, except in each
case for such proceedings that, if the subject of an unfavorable decision,
ruling or finding, would not, singly or in the aggregate, result in a
Material Adverse Effect.
(p) The issuance of the Notes by the Issuers, the issuance of the
Warrants by Warrant Holdings, the sale of the Warrants by Warrant Holdings
to the Partnership, the offering and sale to the Initial Purchasers by the
Issuers of the Notes and Warrants pursuant to this Agreement and the
compliance by the Issuers and Warrant Holdings with the other provisions of
this Agreement and the other Transaction Documents do not
5
<PAGE>
(i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained and such as may be required under state securities or blue
sky laws or (ii) conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which
the Issuers, Warrant Holdings or Petro Stopping Centers, L.P. is a party or
by which the Issuers, Warrant Holdings or Petro Stopping Centers, L.P. or
any of their respective properties are bound, or the charter documents or
by-laws of the Issuers, Warrant Holdings or Petro Stopping Centers, L.P.,
or any statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator applicable to the
Issuers, Warrant Holdings or Petro Stopping Centers, L.P.
(q) The consummation of the Recapitalization and the compliance by
the parties thereto with the provisions of the Recapitalization Documents
do not (i) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained and such as may be required under state securities or blue
sky laws or (ii) conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease or other agreement or instrument to which
the Issuers, Warrant Holdings or Petro Stopping Centers, L.P. is a party or
by which the Issuers, Warrant Holdings or Petro Stopping Centers, L.P. or
any of their respective properties are bound, or the charter documents or
by-laws of the Issuers, Warrant Holdings or Petro Stopping Centers, L.P.,
or any statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator applicable to the
Issuers, Warrant Holdings or Petro Stopping Centers, L.P., except where
such conflict, breach or violation, singly or in the aggregate, would not
result in a Material Adverse Effect.
(r) None of the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. has (i) taken, directly or indirectly, any action designed to cause or
to result in, or that has constituted or which might reasonably be expected
to constitute, the stabilization or manipulation of the price of any
security of any of the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. to facilitate the sale or resale of the Units, Notes or Warrants or
(ii) paid or agreed to pay to any person any compensation for soliciting
another to purchase any securities of the Issuers, Warrant Holdings or
Petro Stopping Centers, L.P. (except for the sale of Units by the Initial
Purchasers under this Agreement).
(s) Subsequent to the respective dates as of which information is
given in the Final Memorandum, (i) none of the Issuers, Warrant Holdings or
Petro Stopping Centers, L.P. has incurred any material liability or
obligation, direct or contingent, nor entered into any material transaction
not in the ordinary course of business; (ii) none of the Issuers, Warrant
Holdings or Petro Stopping Centers, L.P. has purchased any of its
outstanding capital interests, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital interests; and (iii)
there has not been any material change in the capital interests, short-term
debt or long-term debt of the Issuers, Warrant Holdings or Petro Stopping
Centers, L.P., except in each case as described in or contemplated by the
Final Memorandum.
6
<PAGE>
(t) The Issuers, Warrant Holdings and Petro Stopping Centers, L.P.
have good and indefeasible title in fee simple to all items of real
property free and clear of any security interests, liens, encumbrances,
equities, claims and other defects, except as set forth in the New Senior
Credit Facility, and except such as do not materially and adversely affect
the value of such property and do not interfere with the use made or
proposed to be made of such property by the Issuers, Warrant Holdings or
Petro Stopping Centers, L.P., and any real property and buildings held
under lease by the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. are held under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made or
proposed to be made of such property and buildings by the Issuers, Warrant
Holdings or Petro Stopping Centers, L.P., in each case except as described
in or contemplated by the Final Memorandum.
(u) No labor dispute with the employees of the Issuers, Warrant
Holdings or Petro Stopping Centers, L.P. exists or is threatened or
imminent that could result in a Material Adverse Effect.
(v) The Issuers, Warrant Holdings and Petro Stopping Centers, L.P.
own or possess all material patents, patent applications, trademarks,
service marks, trade names, licenses, copyrights and proprietary or other
confidential information currently employed by them in connection with
their respective businesses, except where the absence of which, singly or
in the aggregate, would not have a Material Adverse Effect, and none of the
Issuers, Warrant Holdings or Petro Stopping Centers, L.P. has received any
notice of infringement of or conflict with asserted rights of any third
party with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect, except as described in or
contemplated by the Final Memorandum.
(w) The Issuers, Warrant Holdings and Petro Stopping Centers, L.P.
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are customary in the businesses in
which they are engaged .
(x) No subsidiary of the Partnership is currently prohibited,
directly or indirectly, from paying any dividends to the Partnership, from
repaying to the Partnership any loans or advances to such subsidiary from
the Partnership or from transferring any of such subsidiary's property or
assets to the Partnership or any other subsidiary of the Partnership,
except as described in or contemplated by the Final Memorandum and except
for the restrictions in the indenture, dated May 24, 1994, governing the 12
1/2% Senior Notes Due 2002 of Petro Stopping Centers, L.P., the 10 1/2%
Notes Indenture and the New Senior Credit Facility, restrictions under law
and, in the case of a transfer of property or assets, any restrictions on
transfer contained in purchase money indebtedness, capital leases and anti-
assignment clauses in contracts with respect to the property and assets
which are the subject thereof.
(y) Each of the Issuers, Warrant Holdings and Petro Stopping Centers,
L.P. possesses all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, except where the absence of which,
singly or in the aggregate, would not have a Material Adverse Effect, and
none of the Issuers, Warrant Holdings or Petro Stopping Centers,
7
<PAGE>
L.P. has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect, except as described in
or contemplated by the Final Memorandum.
(z) None of the Issuers or Petro Stopping Centers, L.P. is an
"investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act"), without taking account of
any exemption arising out of the number of holders of the securities of any
of the Issuers or Petro Stopping Centers, L.P. Each of the Issuers and
Petro Stopping Centers, L.P. will conduct its operations in a manner that
will not subject it to registration as an investment company under the
Investment Company Act.
(aa) Warrant Holdings is not and, after giving effect to the offering
and sale of the Units and the application of the net proceeds thereof as
described in the Final Memorandum under "Use of Proceeds," will not be,
required to register as an "investment company" under the Investment
Company Act, and Warrant Holdings is not "controlled" by an "investment
company" as defined in the Investment Company Act.
(bb) The Issuers, Warrant Holdings and Petro Stopping Centers, L.P.
have timely filed all foreign, federal, state and local tax or information
returns that are required to be filed or have requested extensions thereof,
which returns are true, correct and complete in all material respects,
except for such failure to file timely or to request an extension that,
singly or in the aggregate, would not have a Material Adverse Effect, and
have paid all taxes required to be paid by each of them and any other
assessment, fine or penalty levied against each of them, to the extent that
any of the foregoing is due and payable, except for any such assessment,
fine or penalty that is currently being contested in good faith and for
which adequate reserves have been provided, or any such assessment, fine or
penalty the nonpayment of which, singly or in the aggregate, would not have
a Material Adverse Effect, or as described in or contemplated by the Final
Memorandum.
(cc) None of the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. is in violation of any federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Issuers, Warrant
Holdings and Petro Stopping Centers, L.P. have received all permits,
licenses or other approvals required of them under applicable federal and
state occupational safety and health and environmental laws and regulations
to conduct their respective businesses, and the Issuers, Warrant Holdings
and Petro Stopping Centers, L.P. are in compliance with all terms and
conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals which would not, singly
or in the aggregate, result in a Material Adverse Effect and except as
described in or contemplated by the Final Memorandum.
(dd) The books, records and accounts of Petro Stopping Centers, L.P.
accurately and fairly reflect, in reasonable detail, in all material
respects the transactions in and dispositions of its assets and its results
of operations; Petro Stopping Centers, L.P.
8
<PAGE>
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that in all material respects (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(ee) No default exists, and no event has occurred which, with notice
or lapse of time or both, would constitute a default in the due performance
and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, lease or other material agreement or instrument to
which the Issuers, Warrant Holdings or Petro Stopping Centers, L.P. is a
party or by which the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. or any of their respective properties is bound or may be affected in
any material adverse respect with regard to the property, business or
operations of the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P., except where such default, singly or in the aggregate, would not have
a Material Adverse Effect.
(ff) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not, and at the Closing Date (as defined below) will not
(and any amendment or supplement thereto, at the date thereof and at the
Closing Date, will not), contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that the Issuers make no representation or
warranty as to the information contained in or omitted from the Preliminary
Memorandum or the Final Memorandum, or any amendment or supplement thereto,
in reliance upon and in conformity with information furnished in writing to
the Issuers by or on behalf of the Initial Purchasers specifically for
inclusion therein.
(gg) None of the Issuers, Warrant Holdings or any of their Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), or any person acting on their behalf has, directly or
indirectly, made offers or sales of any security, or solicited offers to
buy any security, under circumstances that would require the registration
under the Securities Act of the Units, Notes, Warrants or the notes
identical to the Notes concurrently being issued to Petro Holdings LP Corp.
pursuant to the Subscription and Purchase Agreement, provided that the
Issuers and Warrant Holdings are not making any representation with respect
to any actions of the Initial Purchasers.
(hh) None of the Issuers, Warrant Holdings or any of their Affiliates,
or any person acting on their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Units, Notes or Warrants in the
United States, provided that the Issuers and Warrant Holdings are not
making any representation with respect to any actions of the Initial
Purchasers.
9
<PAGE>
(ii) The Units, Notes and Warrants satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act.
(jj) The Issuers have been advised by the National Association of
Securities Dealers, Inc. PORTAL Market that the Notes have been designated
PORTAL eligible securities in accordance with the rules and regulations of
the National Association of Securities Dealers, Inc.
(kk) Neither the Issuers nor Warrant Holdings has paid or agreed to
pay to any person any compensation for soliciting another to purchase any
securities of the Issuers or Warrant Holdings (except as contemplated by
this Agreement).
(ll) None of the Issuers, Warrant Holdings or Petro Stopping Centers,
L.P. is party to any material contract other than those listed as a
material contract on Schedule II to this Agreement.
(mm) Set forth on Schedule III to this Agreement is a list of every
jurisdiction in which any of the Issuers, Warrant Holdings or Petro
Stopping Centers, L.P. owns or leases material properties or conducts
material business.
(nn) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Final Memorandum has been made or reaffirmed without a reasonable basis or
has been disclosed other than in good faith.
(oo) The information provided by the Issuers and Warrant Holdings
pursuant to Section 5(h) hereof will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Issuers
agree to sell to the Initial Purchasers, and the Initial Purchasers agree to
purchase from the Issuers, that number of Units set forth opposite its name on
Schedule I hereto. The purchase price for the Units shall be $466.71 per Unit.
3. Delivery and Payment. Delivery of and payment for the Units shall
--------------------
be made at 10:00 AM, New York City time, on July 23, 1999, or such later date as
the Representative shall designate, which date and time may be postponed by
agreement between the Representative and the Issuers (such date and time of
delivery and payment for the Units being herein called the "Closing Date").
Delivery of the Units shall be made to the Representative for the respective
accounts of the Initial Purchasers against payment by the Initial Purchasers
through the Representative of the purchase price thereof by wire transfer of
immediately available funds to an account specified by the Issuers or as the
Issuers may direct in writing. Certificates for the Notes and Warrants
comprising the Units shall be registered in such names and in such denominations
as the Representative may request not less than three full business days in
advance of the Closing Date.
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The Issuers agree to have the Notes and Warrants comprising the Units
available for inspection, checking and packaging by the Representative in New
York, New York, not later than 1:00 PM on the business day prior to the Closing
Date.
4. Offering. Each Initial Purchaser, severally and not jointly,
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represents and warrants to and agrees with the Issuers that:
(a) It has not offered or sold, and will not offer or sell, any Units
except to those it reasonably believes to be qualified institutional buyers
(as defined in Rule 144A under the Securities Act) ("Qualified
Institutional Buyers") that are also "qualified purchasers" (as defined in
Section 2(a)(51) of the Investment Company Act) and that, in connection
with each such sale, (i) it has taken or will take reasonable steps to
ensure that the purchaser of such Units is aware that such sale is being
made in reliance on Rule 144A and (ii) in order to enable Warrant Holdings
to rely on the exemption from registration under the Investment Company Act
provided in Section 3(c)(7) thereof, it has obtained, or will obtain, from
such purchaser the certificate required to be delivered pursuant to the
Warrant Agreement.
(b) It is a Qualified Institutional Buyer and an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act and a
qualified purchaser under the Investment Company Act.
(c) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Units in the United States by means of any form
of general solicitation or general advertising (within the meaning of
Regulation D) in the United States.
(d) It will deliver to each purchaser of the Units from such Initial
Purchaser, in connection with its original distribution of the Units, a
copy of the Final Memorandum, as amended and supplemented at the date of
such delivery, provided that the Issuers furnish to such Initial Purchaser
sufficient copies of the Final Memorandum to make such delivery.
(e) It represents and agrees that (i) it has not offered or sold, and
will not offer or sell, any Units in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or as agent) for the purposes of
their businesses or otherwise or in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"), (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with
respect to anything done by it in relation to the Units in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or
passed on and will only issue or pass on to any person in the United
Kingdom any document received by it in connection with the issue of the
Units if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the document may otherwise lawfully be issued
or passed on.
5. Agreements. The Issuers and Warrant Holdings agree with each
----------
Initial Purchaser that:
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(a) The Issuers will furnish to the Initial Purchasers and to Cleary,
Gottlieb, Steen & Hamilton ("Counsel for the Initial Purchasers"), without
charge, during the period referred to in paragraph (c) below, as many
copies of the Final Memorandum and any amendments and supplements thereto
as they may reasonably request. The Issuers will pay the expenses of
printing or other production of all documents relating to the offering.
(b) The Issuers will not amend or supplement the Final Memorandum
without the consent of the Representative, which consent shall not be
unreasonably withheld.
(c) If at any time prior to the completion of the sale of the Units
by the Initial Purchasers (as determined by the Representative), any event
occurs as a result of which the Final Memorandum, as then amended or
supplemented, would include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if it should be necessary to amend or supplement the Final Memorandum to
comply with applicable law, the Issuers will promptly notify the
Representative of the same and, subject to the requirements of paragraph
(b) of this Section 5, will prepare and provide to the Representative
pursuant to paragraph (a) of this Section 5 an amendment or supplement
which will correct such statement or omission or effect such compliance.
(d) The Issuers will arrange for the qualification of the Units for
sale by the Initial Purchasers under the laws of such jurisdictions as the
Initial Purchasers may designate and will maintain such qualifications in
effect so long as required for the sale of the Units, Notes or Warrants.
The Issuers will promptly advise the Representative of the receipt by the
Issuers or Warrant Holdings of any notification with respect to the
suspension of the qualification of the Units, Notes or Warrants for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(e) The Issuers and Warrant Holdings will not, and will not permit
any of their Affiliates to, resell any Units, Notes or Warrants that have
been acquired by any of them.
(f) None of the Issuers, Warrant Holdings or any of their Affiliates,
or any person acting on their behalf will, directly or indirectly, make
offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of any of the
Units, Notes or Warrants under the Securities Act.
(g) None of the Issuers, Warrant Holdings or any of their Affiliates,
or any person acting on their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Units, Notes or Warrants in the
United States.
(h) So long as any of the Units, Notes or Warrants are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act,
the Issuers and Warrant Holdings will, unless they become subject to and
comply with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), provide to each holder of such restricted
securities and to each prospective purchaser (as designated by such holder)
of such restricted securities, upon the request of such holder or
prospective
12
<PAGE>
purchaser, any information required to be provided by Rule 144A(d)(4) under
the Securities Act. This covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders, from
time to time of such restricted securities.
(i) The Issuers will cooperate with the Representative and use their
best efforts to permit the Notes to be eligible for clearance and
settlement through The Depository Trust Company.
(j) Except as disclosed in the Final Memorandum, the Issuers will
not, until 90 days following the Closing Date, without the prior written
consent of the Representative, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of,
any debt securities issued or guaranteed by either of the Issuers (other
than the Notes).
(k) The Issuers and Warrant Holdings will not voluntarily claim, and
will resist actively any attempts to claim, the benefit of any usury laws
against the holders of any Units, Notes or Warrants.
(l) The Issuers and Warrant Holdings will not, and will cause their
affiliates not to, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Units, Notes
or Warrants in a manner that would require the registration under the
Securities Act of the sale to the Initial Purchasers of the Units or to
take any other action that would result in their resale by the Initial
Purchasers not being exempt from registration under the Act.
6. Conditions to the Obligations of the Initial Purchasers. The
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obligations of the Initial Purchasers to purchase the Units shall be subject to
the accuracy of the representations and warranties on the part of the Issuers
and Warrant Holdings contained herein at the date and time that this Agreement
is executed and delivered by the parties hereto (the "Execution Time"), and the
Closing Date, to the accuracy of the statements of the Issuers and Warrant
Holdings made in any certificates pursuant to the provisions hereof, to the
performance by the Issuers and Warrant Holdings of their obligations hereunder
and to the following additional conditions:
(a) The Issuers shall have furnished to the Initial Purchasers the
opinion of Gibson, Dunn & Crutcher LLP, counsel for the Issuers and Warrant
Holdings, dated the Closing Date, to the effect that:
(i) each of the Issuers and Warrant Holdings has been duly
organized or incorporated and is validly existing as a limited
partnership or corporation in good standing under the laws of the
jurisdiction in which it is organized or incorporated, and is duly
qualified to do business as a foreign limited partnership or
corporation and is in good standing under the laws of each
jurisdiction listed on Schedule III hereto;
(ii) each of the Issuers and Warrant Holdings has full power
(partnership or corporate) to own or lease its properties and conduct
its business as described in the Final Memorandum; and each of the
Issuers and Warrant
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Holdings has full power (partnership or corporate) to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it;
(iii) all the limited partnership interests in the Partnership
have been duly authorized and validly issued and are fully paid and
non-assessable (except for capital call provisions provided in the
Holdings Partnership Agreement, but which do not apply to any limited
partnership interests owned by Warrant Holdings); all the outstanding
capital stock of Petro Holdings Financial Corporation and Warrant
Holdings has been duly and validly authorized and issued and is fully
paid and nonassessable; and ten percent of the outstanding common
limited partnership interests of the Partnership are owned of record
by Warrant Holdings, and, to the knowledge of such counsel, free and
clear of any security interest;
(iv) this Agreement has been duly authorized, executed and
delivered by the Issuers and Warrant Holdings, and constitutes a
legal, valid and binding instrument enforceable against the Issuers
and Warrant Holdings, in accordance with its terms;
(v) the Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers pursuant to this Agreement
and, when executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial
Purchasers pursuant to this Agreement, will constitute legal, valid
and binding obligations of the Issuers, enforceable against the
Issuers in accordance with their terms and entitled to the benefits of
the Indenture; and the statements set forth under the heading
"Description of the Notes" in the Final Memorandum, insofar as such
statements purport to summarize certain provisions of the Notes and
the Indenture, provide a fair summary of such provisions;
(vi) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Issuers in accordance with its terms;
(vii) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Issuers and constitutes a
legal, valid and binding instrument enforceable against the Issuers in
accordance with its terms;
(viii) the Warrants have been duly and validly authorized for
issuance and sale to the Partnership and their resale by the
Partnership to the Initial Purchasers pursuant to this Agreement has
been duly and validly authorized by the Partnership and, when issued
and countersigned in accordance with the provisions of the Warrant
Agreement and delivered to and paid for by the Initial Purchasers
pursuant to this Agreement, will constitute the legal, valid and
binding obligations of Warrant Holdings, enforceable against Warrant
Holdings in accordance with their terms and entitled to the benefits
of the Warrant Agreement; and the statements set forth under the
heading "Description of the Warrants" in the Final Memorandum, insofar
as such statements purport to summarize certain provisions of the
Warrants and the Warrant Agreement, provide a fair summary of such
provisions;
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(ix) the Warrant Agreement has been duly authorized, executed
and delivered by Warrant Holdings and constitutes a legal, valid and
binding instrument enforceable against Warrant Holdings in accordance
with its terms;
(x) the Registration Rights and Partners' Agreement has been
duly authorized, executed and delivered by the Partnership and Warrant
Holdings and constitutes a legal, valid and binding instrument
enforceable against the Partnership and Warrant Holdings in accordance
with its terms;
(xi) The Warrant Shares have been duly authorized and reserved
for issuance upon exchange of the Warrants in accordance with the
terms of the Warrant Agreement, are free of preemptive rights under
the charter of Warrant Holdings and, to such counsel's knowledge, any
other agreement and, when issued upon exchange of the Warrants in
accordance with the terms of the Warrant Agreement will be validly
issued, fully paid and nonassessable;
(xii) assuming the accuracy of the representations and
warranties and compliance with the agreements contained herein and
contained in the Subscription and Purchase Agreement and the
statements contained in the Final Memorandum under the sections
"Notice to Investors" and "Plan of Distribution," no registration
under the Securities Act of the Units, Notes, Warrants or the notes
identical to the Notes concurrently being issued to Petro Holdings LP
Corp. pursuant to the Subscription and Purchase Agreement, and no
qualification of an indenture under the Trust Indenture Act, are
required for the initial offer and sale by the Initial Purchasers of
the Units, Notes or Warrants in the manner contemplated by this
Agreement provided that, no opinion is expressed with respect to any
subsequent resale of the Units, Notes or Warrants;
(xiii) to the best knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency
or body is required for the issuance of the Notes by the Issuers, the
issuance of the Warrants by Warrant Holdings, the sale of the Warrants
by Warrant Holdings to the Partnership, the offering and sale to the
Initial Purchasers by the Issuers of the Notes and Warrants pursuant
to this Agreement and the compliance by the Issuers and Warrant
Holdings with the other provisions of this Agreement and the other
Transaction Documents, except such as may be required under the blue
sky or securities laws of any jurisdiction in connection with the
purchase and sale of the Notes and Warrants by the Initial Purchasers
and such other approvals (specified in such opinion) as have been
obtained;
(xiv) to the best knowledge of such counsel, no consent,
approval, authorization or order of any court or governmental agency
or body is required for the consummation of the Recapitalization and
the compliance by the Issuers and Warrant Holdings with the provisions
of the Recapitalization Documents, except such approvals (specified in
such opinion) as have been obtained, and except where the absence of
which, singly or in the aggregate, would not have a Material Adverse
Effect;
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(xv) neither the issue of the Notes by the Issuers, the
issuance of the Warrants by Warrant Holdings, the sale of the Warrants
by Warrant Holdings to the Partnership, the offering and sale to the
Initial Purchasers by the Issuers of the Notes and Warrants and the
compliance by the Issuers and Warrant Holdings with the provisions of
this Agreement and the other Transaction Documents, nor the
fulfillment of the terms hereof or thereof will conflict with, result
in a breach or violation of, or constitute a default under the
partnership governance agreement, charter or by-laws of the Issuers or
Warrant Holdings or the terms of any indenture or other agreement or
instrument listed as a material contract on Schedule II to this
Agreement and to which the Issuers or Warrant Holdings is a party or
bound or any law, judgment, order or decree known to such counsel to
be applicable to the Issuers or Warrant Holdings of any court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Issuers or Warrant Holdings;
(xvi) neither the consummation of the Recapitalization and the
compliance by the parties thereto with the provisions of the
Recapitalization Documents nor the fulfillment of the terms hereof or
thereof will conflict with, result in a breach or violation of, or
constitute a default under the partnership governance agreement,
charter or by-laws of the Issuers or Warrant Holdings or the terms of
any indenture or other agreement or instrument listed as a material
contract on Schedule II to this Agreement and to which the Issuers or
Warrant Holdings is a party or bound or any law, judgment, order or
decree known to such counsel to be applicable to the Issuers or
Warrant Holdings of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Issuers
or Warrant Holdings, except such conflict, breach, violation or
default which, singly or in the aggregate, would not have a Material
Adverse Effect;
(xvii) neither the consummation of the transactions contemplated
by this Agreement nor the sale, issuance, execution or delivery of the
Notes and Warrants comprising the Units will violate Regulation T, U
or X of the Federal Reserve Board.
The foregoing opinions will be subject to the following assumptions,
qualifications, limitations and exceptions:
A. With respect to the opinions stated in paragraphs (xiii)
and (xv), such counsel expresses no opinion as to violations of state
securities or blue sky laws, or consents, approvals, authorizations,
or orders of, or filings or registrations with, state securities
regulatory authorities (or federal securities authorities, which are
specifically addressed in paragraph (xii)) and any such consents,
approvals, authorizations, or order of, or filings or registrations
with, the Securities and Exchange Commission and any state securities
regulatory authorities as may be required in the future to be obtained
or made pursuant to the Registration Rights Agreement or the
Registration Rights and Partners' Agreement.
B. With respect to the opinions stated in paragraphs (iv),
(v), (vi), (vii), (viii), (ix) and (x) such counsel's opinions are
subject to (i) the effect of any
16
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applicable bankruptcy, insolvency, reorganization, moratorium,
arrangement or other similar laws affecting enforcement of creditors'
rights generally, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances or transfers,
preferential transfers, and of laws affecting distributions by
corporations to stockholders, and (ii) general principles of equity,
regardless of whether a matter is considered in a proceeding in
equity, at law or in arbitration, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing.
C. Such counsel expresses no opinion as to the legality,
validity, binding nature or enforceability of any provision in the
Transaction Documents relating to indemnification or contribution or
the ability to obtain specific performance, injunctive relief or other
equitable relief as a remedy for noncompliance with any of the
Transaction Documents or any of the Recapitalization Documents.
D. In rendering such counsel's opinions expressed in
paragraphs (xv) and (xvi) insofar as they require interpretation of
contracts, indentures, mortgages, deeds of trust, loan or credit
agreements or instruments ("Material Contracts"), such counsel
expresses no opinion with respect to any financial calculations or
data in respect of financial covenants included in any Material
Contract. Furthermore, with respect to paragraphs (xv) and (xvi) while
such counsel advises that (subject to the other assumptions,
exceptions, qualifications and limitations herein), the Transaction
Documents and Recapitalization Documents may be performed in a manner
that does not result in a conflict, violation, breach or default
described therein, such counsel expresses no opinion as to whether the
actual performance of the terms and provisions of the Transaction
Documents and Recapitalization Documents after the date hereof will
not conflict, violate, breach or constitute a default under any
Material Contract, or violate any statute, regulation, judgment,
decree or order applicable to any of the Issuers or Warrant Holdings.
Such counsel shall also state that such counsel has participated
in conferences with officers and other representatives of the Issuers and
Petro Stopping Centers, L.P., representatives of the independent public
accountants for the Issuers and Petro Stopping Centers, L.P.,
representatives of the Initial Purchasers and Counsel for the Initial
Purchasers, at which conferences the contents of the Final Memorandum and
related matters were discussed. Because the purpose of such counsel's
professional engagement was not to establish or confirm factual matters and
because the scope of such counsel's examination of the affairs of the
Issuers and Warrant Holdings is not designed to verify the accuracy,
completeness or fairness of the statements set forth in the Final
Memorandum, such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (except to the extent in the
final clause of paragraph (v) and the final clause of paragraph (viii)
above). On the basis of the foregoing, no facts have come to such
counsel's attention which lead such counsel to believe that the Final
Memorandum, on the date thereof or the date hereof, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the
17
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statements therein in light of the circumstances in which they were made,
not misleading (it being understood that such counsel expresses no view
with respect to the financial statements and the notes thereto and the
other financial data and accounting data included in the Final Memorandum.)
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than
the State of New York, the State of Texas, the State of Delaware or the
United States, to the extent they deem proper and specified in such
opinion, upon the opinion of other counsel and who are satisfactory to
Counsel for the Initial Purchasers and (B) as to matters of fact, to the
extent they deem proper, on certificates of responsible officers of the
Issuers and Warrant Holdings and public officials.
All references in this Section 6(a) to the Final Memorandum shall
be deemed to include any amendment or supplement thereto at the Closing
Date.
(b) The Issuers shall have furnished to the Initial Purchasers the
opinion of Kemp, Smith, Duncan & Hammond, P.C., counsel for Petro Stopping
Centers, L.P., dated the Closing Date, to the effect that:
(i) Petro Stopping Centers, L.P. has been duly organized and is
validly existing as a limited partnership in good standing under the
laws of the State of Delaware, with full partnership power and
authority to own its properties and conduct its business as described
in the Final Memorandum, and is duly qualified to do business as a
foreign limited partnership and is in good standing under the laws of
each jurisdiction listed on Schedule III hereto;
(ii) all the limited partnership interests in Petro Stopping
Centers, L.P. have been duly authorized and validly issued and are
fully paid and non-assessable (except for capital call provisions
provided in the Operating Partnership Agreement); at least 99.0% of
the outstanding capital interests in Petro Stopping Centers, L.P. are
owned by the Partnership either directly or through wholly owned
subsidiaries, free and clear of any perfected security interest,
except such security interests contained in the New Senior Credit
Facility and, to the knowledge of such counsel, any other security
interest;
(iii) the statements set forth under the headings "Description
of Holdings Partnership Agreement" and "Description of Limited
Partnership Interest" in the Final Memorandum, insofar as such
statements purport to summarize certain provisions of the Holdings
Partnership Agreement, provide a fair summary of such provisions;
(iv) neither the issue of the Notes by the Issuers, the issuance
of the Warrants by Warrant Holdings, the sale of the Warrants by
Warrant Holdings to the Partnership, the offering and sale to the
Initial Purchasers by the Issuers of the Notes and Warrants, nor the
fulfillment of the terms hereof or thereof will conflict with, result
in a breach or violation of, or constitute a default under the
partnership governance agreement, charter or by-laws of Petro Stopping
Centers, L.P. or any of its subsidiaries or the terms of any indenture
or other agreement or
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instrument listed as a material contract on Schedule II to this
Agreement and to which Petro Stopping Centers, L.P. or any of its
subsidiaries is a party or bound or any law, judgment, order or decree
known to such counsel to be applicable to Petro Stopping Centers, L.P.
or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over Petro Stopping Centers, L.P. or any of its
subsidiaries;
(v) neither the consummation of the Recapitalization and the
compliance by the parties thereto with the provisions of the
Recapitalization Documents nor the fulfillment of the terms hereof or
thereof will conflict with, result in a breach or violation of, or
constitute a default under the partnership governance agreement,
charter or by-laws of Petro Stopping Centers, L.P. or any of its
subsidiaries or the terms of any indenture or other agreement or
instrument listed as a material contract on Schedule II to this
Agreement and to which Petro Stopping Centers, L.P. or any of its
subsidiaries is a party or bound or any law, judgment, order or decree
known to such counsel to be applicable to Petro Stopping Centers, L.P.
or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over Petro Stopping Centers, L.P. or any of its
subsidiaries, except such conflict, breach, violation or default
which, singly or in the aggregate, would not have a Material Adverse
Effect.
The foregoing opinions will be subject to the following assumptions,
qualifications, limitations and exceptions:
A. With respect to the opinions stated in paragraph (iv), such
counsel expresses no opinion as to violations of state securities or
blue sky laws, or consents, approvals, authorizations, or orders of,
or filings or registrations with, state securities regulatory
authorities and any such consents, approvals, authorizations, or order
of, or filings or registrations with, the Securities and Exchange
Commission and any state securities regulatory authorities as may be
required in the future to be obtained or made pursuant to the
Registration Rights Agreement.
B. In rendering such counsel's opinions expressed in paragraphs
(iv) and (v) insofar as they require interpretation of contracts,
indentures, mortgages, deeds of trust, loan or credit agreements or
instruments ("Material Contracts"), such counsel expresses no opinion
with respect to any financial calculations or data in respect of
financial covenants included in any Material Contract. Furthermore,
with respect to paragraphs (iv) and (v) while such counsel advises
that (subject to the other assumptions, exceptions, qualifications and
limitations herein), the Transaction Documents and Recapitalization
Documents may be performed in a manner that does not result in a
conflict, violation, breach or default described therein, such counsel
expresses no opinion as to whether the actual performance of the terms
and provisions of the Transaction Documents and Recapitalization
Documents after the date hereof will not conflict, violate, breach or
constitute a default under any Material Contract, or violate any
statute, regulation, judgment, decree or order applicable to any of
the Issuers, Warrant Holdings or Petro Stopping Centers, L.P.
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(c) The Issuers shall have furnished to the Initial Purchasers the opinion
of Nancy Santana, Esq., Vice President and General Counsel and Secretary of the
Partnership, dated the Closing Date, to the effect that:
(i) the information contained in the Final Memorandum under the
heading "Governmental Regulation" fairly summarizes in all material
respects the matters described therein.
All references in this Section 6(c) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the Closing Date.
(d) The Issuers shall have furnished to the Initial Purchasers the opinion
of Sullivan and Worcester LLP, counsel for the Issuers and Warrant Holdings,
dated the Closing Date, to the effect that:
(i) neither of the Issuers is an investment company that is, or is
required to be (or after giving effect to the offering and sale of the
Units and the application of the net proceeds thereof as described in the
Final Memorandum under "Use of Proceeds" will be required to be) registered
under the Investment Company Act without considering the possible
application of the exemption from registration set out in Section 3(c)(1)
of the Investment Company Act;
(ii) assuming the accuracy of the representations and warranties and
compliance with the agreements contained herein, Warrant Holdings is not
and, after giving effect to the offering and sale of the Units and the
application of the net proceeds thereof as described in the Final
Memorandum under "Use of Proceeds" will not be, required to register as an
"investment company" under the Investment Company Act, and is not
"controlled" by an "investment company" as defined in the Investment
Company Act.
All references in this Section 6(d) to the Final Memorandum shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(e) The Initial Purchasers shall have received from Counsel for the
Initial Purchasers such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes and Warrants comprising the Units,
the Final Memorandum (as amended or supplemented at the Closing Date) and other
related matters as the Initial Purchasers may reasonably require, and the
Issuers shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(f) The Issuers shall have furnished to the Initial Purchasers
certificates of each of the Issuers and Warrant Holdings, dated the Closing
Date, signed by the Chairman of the Board or the President and the principal
financial or accounting officer of each thereof to the effect that the signers
of such certificates have carefully examined the Final Memorandum, any amendment
or supplement to the Final Memorandum and this Agreement and that:
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(i) the representations and warranties of the Issuers and Warrant
Holdings in this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as if made on the Closing
Date, and each of the Issuers and Warrant Holdings have complied with all
the agreements and satisfied all the conditions on each of their parts to
be performed or satisfied hereunder at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements included
in the Final Memorandum, there has been no material adverse change in the
financial condition, earnings, business or properties of any of the
Issuers, Warrant Holdings or Petro Stopping Centers, L.P., whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated by the Final Memorandum (exclusive of any
amendment or supplement thereto).
(g) The Representative shall have received from Arthur Andersen LLP a
letter or letters dated, respectively, the Execution Date and the Closing Date,
in form and substance satisfactory to the Representative, to the effect that:
(i) they are independent certified public accountants with respect
to the Partnership under Rule 101 of the AICPA's Code of Professional
Conduct and its interpretations and rulings;
(ii) in their opinion, the audited consolidated financial statements
and schedules examined by them and included in the Final Memorandum comply
in form in all material respects with the applicable accounting
requirements of the Securities Act and the related published rules and
regulations;
(iii) on the basis of carrying out certain specified procedures (which
do not constitute an examination made in accordance with generally accepted
auditing standards) that would not necessarily reveal matters of
significance with respect to the comments set forth in this paragraph
(iii), a reading of the minute books and consents in lieu of special
meetings of the board of directors of the Partnership and of Petro Stopping
Centers, L.P., and inquiries of certain officials of the Partnership who
have responsibility for financial and accounting matters, nothing came to
their attention that caused them to believe that, at a specific date not
more than five business days prior to the date of such letter, except as
described in the Final Memorandum, there were any changes in the total
partners' capital or total debt of the Partnership or any decreases in
working capital of the Partnership, in each case compared with amounts
shown on the March 31, 1998 unaudited balance sheet of Petro Stopping
Centers, L.P. included in the Final Memorandum, or, for the period from
March 31, 1999 to such specified date, there were any decreases in total
net revenues, EBITDA or total amount of net income of the Partnership, in
each case compared with amounts from the corresponding period of the prior
year of Petro Stopping Centers, L.P., except in all instances for changes,
decreases or increases set forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Partnership and its
21
<PAGE>
consolidated subsidiaries and are included in the Final Memorandum and have
compared such amounts, percentages and financial information with such
records of the Partnership and its consolidated subsidiaries and with
information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma
consolidated financial statements included in the Final Memorandum,
carrying out certain specified procedures that would not necessarily reveal
matters of significance with respect to the comments set forth in this
paragraph (v), inquiries of certain officials of the Partnership who have
responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the unaudited pro forma consolidated financial
statements, nothing came to their attention that caused them to believe
that the pro forma adjustments had not been properly applied to the
historical amounts in the compilation of those statements.
In the event that the letter referred to above sets forth any such changes,
decreases or increases, it shall be a further condition to the obligations of
the Initial Purchasers that (A) such letters shall be accompanied by a written
explanation from the Partnership as to the significance thereof, unless the
Representative deems such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representative, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Notes and Warrants comprising the Units as contemplated by this Agreement and
the Final Memorandum, as amended as of the date hereof.
All references in this Section 6(g) to the Final Memorandum shall be deemed
to include any amendment or supplement thereto at the date of the letter.
(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have
been (i) any change or decrease specified in the letter or letters referred
to in paragraph (g) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business or
properties of the Issuers and its subsidiaries or Warrant Holdings the
effect of which, in any case referred to in clause (i) or (ii) above, is,
in the judgment of the Initial Purchasers, so material and adverse as to
make it impractical or inadvisable to market the Units as contemplated by
the Final Memorandum.
(i) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the debt securities of either of the
Issuers or Petro Stopping Centers, L.P. by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g)
under the Securities Act) or any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change.
(j) Each of the Transaction Documents (including any amendments
thereto) shall have been duly authorized, executed and delivered by each of
the parties thereto, and the Representative shall have received copies of
each such Transaction Document (including any amendments thereto) as so
executed and delivered in the form provided to
22
<PAGE>
the Representative on or before the date hereof except for changes approved
by the Representative or changes which do not materially adversely affect
the holders of the Notes and the Warrants.
(k) Each of the Recapitalization Documents (including any amendments
thereto) shall have been duly authorized, executed and delivered by each of
the parties thereto, and the Representative shall have received copies of
each such Recapitalization Document (including any amendments thereto) as
so executed and delivered in the form provided to the Representative on or
before the date hereof except for changes approved by the Representative or
changes which do not materially adversely affect the Issuers, Warrant
Holdings or Petro Stopping Centers, L.P.
(l) Prior to the Closing Date, the Issuers shall have furnished to
the Representative such further information, certificates and documents as
the Representative may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representative and Counsel for the Initial Purchasers, this
Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at, or at any time prior to, the Closing Date by the Representative.
Notice of such cancellation shall be given to the Issuers in writing or by
telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the offices of Gibson, Dunn & Crutcher, 200 Park Avenue, New York,
New York on the Closing Date.
7. Reimbursement of Expenses; Fees. The Issuers will, whether or
-------------------------------
not the sale of the Units provided for herein is consummated, (i) pay all
expenses incident to the performance of their obligations under the offering
documents, including the fees and disbursements of its accountants and counsel,
the cost of printing or other production and delivery of the Preliminary
Memorandum, the Final Memorandum, all amendments thereof and supplements thereto
and all other documents relating to the offering of the Units, the cost of
preparing, printing, packaging and delivering the Notes and Warrants comprising
the Units, the fees and disbursements, including fees of counsel incurred in
compliance with Section 5(d), the fees and disbursements of the Trustee and the
fees of any agency that rates the Notes, the fees and expenses, if any, incurred
in connection with the admission of the Notes for trading in the PORTAL Market
and (ii) reimburse the Initial Purchasers as requested for all reasonable
out-of-pocket expenses (including reasonable legal fees and expenses) incurred
by the Initial Purchasers in connection with the proposed purchase and resale of
the Units.
8. Indemnification and Contribution. (a) The Issuers jointly agree
--------------------------------
to indemnify and hold harmless each Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchasers and each person who controls any
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or
23
<PAGE>
otherwise, insofar as such losses, claims, damages or liabilities (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 Preliminary Memorandum, the
Final Memorandum or any information provided by the Issuers to any holder or
prospective purchaser of Units, Notes or Warrants pursuant to Section 5(h), 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, and agree to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that the Issuers will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with written
information furnished to the Issuers by or on behalf of any Initial Purchaser
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Issuers may otherwise have. However, with respect to
any untrue statement or omission of material fact made in any Preliminary
Memorandum or Final Memorandum or any amendment or supplement thereto, the
indemnity agreement contained in this Section 8(a) shall not inure to the
benefit of any Initial Purchaser from whom the person asserting any such loss,
claim, damage or liability purchased the securities concerned, to the extent
that any such loss, claim, damage or liability of such Initial Purchaser results
from the fact that (x) the Issuers had previously furnished copies of the Final
Memorandum as then amended or supplemented to the Representative in accordance
with this Agreement, (y) the untrue statement or omission of a material fact
contained in the Preliminary Memorandum (or Final Memorandum) was corrected in
the Final Memorandum (as then amended or supplemented) and (z) there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the Final Memorandum (as then
amended or supplemented).
(b) Each Initial Purchaser severally agrees to indemnify and hold
harmless the Issuers, their directors, their officers, and each person who
controls the Issuers within the meaning of either the Securities Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Issuers to
each Initial Purchaser, but only with reference to written information relating
to such Initial Purchaser furnished to the Issuers by or on behalf of such
Initial Purchaser through the Representative specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum (or in any amendment or
supplement thereto). This indemnity agreement will be in addition to any
liability which the Initial Purchasers may otherwise have. The Issuers
acknowledge that the statements set forth in the third and fourth paragraphs
under the heading "Plan of Distribution" in the Preliminary Memorandum and the
Final Memorandum constitute the only information furnished in writing by or on
behalf of the Initial Purchasers for inclusion in the Preliminary Memorandum or
the Final Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless
24
<PAGE>
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
- -------- -------
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Issuers, on the one hand, and the Initial
Purchasers, on the other hand, agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which the Issuers, on the one hand, and one or both of the Initial
Purchasers, on the other hand, may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Issuers, on the one
hand, and by the Initial Purchasers, on the other hand, from the offering of the
Units; provided, however, that in no case shall any Initial Purchaser (except as
-------- -------
may be provided in any agreement between the Initial Purchasers relating to the
offering of the Units) be responsible for any amount in excess of the purchase
discount or commission applicable to the Units purchased by such Initial
Purchaser hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Issuers, on the one hand, and the
Initial Purchasers, on the other hand, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Issuers, on the one hand, and of the Initial Purchasers, on the
other hand, in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Issuers shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and benefits received by the
Initial
25
<PAGE>
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions received by the Initial Purchasers from the Issuers in connection
with the purchase of the Units hereunder. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Issuers or the Initial Purchasers. The Issuers and
the Initial Purchasers agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person who controls an Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee and
agent of an Initial Purchaser shall have the same rights to contribution as such
Initial Purchaser, and each person who controls the Issuers within the meaning
of either the Securities Act or the Exchange Act and each officer and director
of the Issuers shall have the same rights to contribution as the Issuers,
subject in each case to the applicable terms and conditions of this paragraph
(d).
9. Default by an Initial Purchaser. If either of the Initial
-------------------------------
Purchasers shall fail to purchase and pay for any of the Units agreed to be
purchased by it hereunder and such failure to purchase shall constitute a
default in the performance of its obligations under this Agreement, the
remaining Initial Purchaser shall be obligated severally to take up and pay for
the Units which the defaulting Initial Purchaser agreed but failed to purchase;
provided, however, that in the event that the aggregate number of Units which
- -------- -------
the defaulting Initial Purchaser agreed but failed to purchase shall exceed 10%
of the aggregate number of Units set forth in Schedule I hereto, the remaining
Initial Purchaser shall have the right to purchase all, but shall not be under
any obligation to purchase any, of the Units, and if such non-defaulting Initial
Purchaser does not purchase all the Units, this Agreement will terminate without
liability to the non-defaulting Initial Purchaser or the Issuers. In the event
of a default by either Initial Purchaser as set forth in this Section 9, the
Closing Date shall be postponed for such period, not exceeding seven days, as
the Representative shall determine in order that the required changes in the
Final Memorandum or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve a defaulting Initial Purchaser
of its liability, if any, to the Issuers or the non-defaulting Initial Purchaser
for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
-----------
the absolute discretion of the Representative, by notice given to the Issuers
prior to delivery of and payment for the Notes and Warrants comprising the
Units, if prior to such time (i) trading in securities generally on the New York
Stock Exchange shall have been suspended or limited or minimum prices shall have
been established on such Exchange, (ii) a banking moratorium shall have been
declared either by Federal or New York State authorities or (iii) there shall
have occurred any outbreak or escalation of hostilities, declaration by the
United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the judgment of
the Initial Purchasers, impracticable or inadvisable to proceed with the
offering or delivery of the Notes and Warrants comprising the Units as
contemplated by the Final Memorandum.
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Issuers and Warrant Holdings or any of their officers and of the Initial
Purchasers set forth in or made pursuant to this
26
<PAGE>
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Initial Purchasers or the Issuers, Warrant Holdings
or any of the officers, directors or controlling persons referred to in Section
8 hereof, and will survive delivery of and payment for the Notes and Warrants
comprising the Units. The provisions of Sections 7 and 8 hereof shall survive
the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Representative, will be mailed,
delivered or telegraphed and confirmed to First Union Capital Markets Corp., 301
South College Street, TW-5, Charlotte, NC 28288-0604, attention: Kevin Smith;
or, if sent to the Issuers, will be mailed, delivered or telegraphed and
confirmed to them at 6080 Surety Drive, El Paso, TX 79905, attention: General
Counsel.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and,
except as expressly set forth in Section 5(h) hereof, no other person will have
any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the laws of the State of New York.
15. Business Day. For purposes of this Agreement, Business Day means
------------
any day excluding Saturday, Sunday or any other day which is a legal holiday
under the laws of Charlotte, North Carolina or New York, New York or is a day on
which banking institutions therein located are authorized or required by law or
other governmental action to close.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement among the
Issuers, Warrant Holdings and the Initial Purchasers.
Very truly yours,
Petro Stopping Centers Holdings, L.P.
By___________________________________
Name:
Title:
Petro Holdings Financial Corporation
By___________________________________
Name:
Title:
Petro Warrant Holdings Corporation
By___________________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
First Union Capital Markets Corp.
CIBC World Markets Corp.
By First Union Capital Markets Corp.
By__________________________________
Name:
Title:
For themselves and the other Initial Purchaser
named in Schedule I to the foregoing Agreement
<PAGE>
EXECUTION COPY
SCHEDULE I
Number of Units
Initial Purchasers to be Purchased
__________________ _______________
First Union Capital Markets Corp. 74,437
CIBC World Markets Corp. 8,270
_______________
Total 82,707
<PAGE>
SCHEDULE II
Material Contacts
-----------------
1. All agreements to be entered into as of July 23, 1998 and defined as
Transaction Documents in the Purchase Agreement to which this Schedule is
attached.
2. All agreements to be entered into as of July 23, 1998 and defined as
Recapitalization Documents in the Purchase Agreement to which this
Schedule is attached.
3. Indenture, dated as of May 24, 1994, among Petro Stopping Centers, L.P.,
Petro Financial Corporation and First Trust National Association, as
trustee, for $100,000,000 principal amount 12 1/2% Senior Notes due 2002.
4. Indenture dated as of January 30, 1997, among Petro Stopping Centers,
L.P., Petro Financial Corporation and State Street Bank and Trust
Company, as trustee, relating to $135,000,000 principal amount 10 1/2%
Senior Notes due 2007.
5. Second Amended and Restated Revolving Credit and Term Loan Agreement, to
be dated as of July 23, 1999, among Petro Stopping Centers, L.P., the
Lenders party thereto, and The First National Bank of Boston, as Agent.
6. Employment Agreement, dated February 10, 1999, by and between James A.
Cardwell, Sr. and the Company.
7. Employment Agreement, dated February 10, 1999, by and between James A.
Cardwell, Jr. and the Company.
8. Employment Agreement dated March 1999, by and between Evan Brudahl and
the Company.
9. PMPA Motor Fuels Franchise Agreement, to be dated July 23, 1999, by and
between Mobil Oil and Petro Stopping Centers, L.P.
10. Master Supply Contract for Resale of Oils and Greases, to be dated July
23, 1999 by and between Mobil Oil and Petro Stopping Centers, L.P.
11. Joint Operating and Supply Agreement to be dated as of July 23, 1999,
between Petro Stopping Centers, L.P. and Volvo Trucks North America.
12. Second Amended and Restated Indemnity and Hold Harmless Agreement, to be
dated July 23, 1999, by James A. Cardwell, Sr. for the benefit of Petro
Holdings GP Corp., Petro, Inc., Petro Stopping Centers, L.P. and Petro
Financial Corporation.
13. Second Amended and Restated Indemnity and Hold Harmless Agreement, to be
dated July 23, 1999, by James A. Cardwell, Jr. and for the benefit of
Petro Holdings GP Corp., Petro, Inc., Petro Stopping Centers, L.P. and
Petro Financial Corporation.
<PAGE>
14. Second Amended and Restated Indemnity and Hold Harmless Agreement, to be
dated July 23, 1999, by JAJCO II for the benefit of Petro Holdings GP
Corp., Petro, Inc., Petro Stopping Centers, L.P. and Petro Financial
Corporation.
15. Indemnity and Hold Harmless Agreement, to be dated July 23, 1999, by
Petro, Inc. for the benefit of Petro Holdings GP Corp., Petro, Inc.,
Petro Stopping Centers, L.P. and Petro Financial Corporation.
16. Limited Liability Company Operating Agreement of Petro Travel Plaza, LLC,
dated as of December 5, 1997, among Petro Stopping Centers, L.P., Tejon
Development Corporation, and Tejon Ranch Company, as Guarantor.
17. Franchise Agreements between Petro Stopping Centers, L.P. and Highway
Service Ventures Inc., dated September 30, 1985, March 14, 1988, February
11, 1991 and January 16, 1995.
18. Franchise Agreements between Petro Stopping Centers, L.P. and Welsh,
Inc., dated March 8, 1996, October 15, 1987, July 1, 1989 and April 8,
1999.
19. Franchise Agreements between Petro Stopping Centers, L.P. and All
American Plazas, Inc. dated March 19, 1998 and February 19, 1998.
<PAGE>
SCHEDULE III
Material Property and Lease Jurisdictions
-----------------------------------------
Petro Stopping Centers, L.P.
----------------------------
Alabama
Arizona
Arkansas
California
Delaware
Florida
Georgia
Idaho
Indiana
Illinois
Kansas
Kentucky
Louisiana
Maryland
Michigan
Mississippi
Missouri
Nebraska
New Jersey
New Mexico
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Wisconsin
Wyoming
Petro Stopping Centers Holdings, L.P.
-------------------------------------
Texas
Petro Holdings Financial Corporation
------------------------------------
Texas
Petro Warrant Holdings Corporation
----------------------------------
Texas
<PAGE>
EXHIBIT 3.1
STATE OF DELAWARE
CERTIFICATE OF LIMITED PARTNERSHIP
OF
PETRO STOPPING CENTERS HOLDINGS, L.P.
The undersigned, desiring to form a limited partnership pursuant to the Delaware
Revised Uniform Limited Partnership Act, Delaware Code Annotated, Title 6,
Chapter 17, does hereby certify as follows:
FIRST: The name of the limited partnership is Petro Stopping Centers Holdings,
L.P.
SECOND: The registered office is 9 East Loockerman Street, Dover, Kent County,
Delaware 19901, and the name and address of its initial registered agent
is National Registered Agents, Inc., 9 East Loockerman Street, Dover,
Kent County, Delaware 19901.
THIRD: The name and mailing address of the general partner is as follows:
Petro, Inc. a Texas corporation
6080 Surety Drive
El Paso, Texas 79905
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited
Partnership of Petro Stopping Centers Holdings, L.P. as of this 6th day of July,
1999.
PETRO, INC., a Texas corporation, as General
Partner
By: /s/ James A. Cardwell, Sr., President
<PAGE>
================================================================================
EXHIBIT 3.2
LIMITED PARTNERSHIP AGREEMENT
OF
PETRO STOPPING CENTERS HOLDINGS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
BY AND AMONG
PETRO, INC.
As General Partner
AND
JAMES A. CARDWELL, SR.
JAMES A. CARDWELL, JR.
JAJCO II, INC.
PETRO, INC.
MOBIL LONG HAUL INC.
VOLVO PETRO HOLDINGS, LLC
================================================================================
PETRO WARRANT HOLDINGS CORPORATION
As Limited Partners
July 15, 1999
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I DEFINITIONS............................................................. 3
1.1 Definitions................................................................ 3
1.2 Interpretation............................................................. 13
ARTICLE II GENERAL PROVISIONS...................................................... 13
2.1 Formation.................................................................. 13
2.2 Partnership Name........................................................... 13
2.3 Purpose.................................................................... 13
2.4 Principal Place of Business................................................ 13
2.5 Term....................................................................... 13
2.6 Filings.................................................................... 14
2.6.1 Status.............................................................. 14
2.6.2 Dissolution......................................................... 14
2.7 Limited Partner Powers..................................................... 14
ARTICLE III CAPITALIZATION.......................................................... 14
3.1 Capital Contributions...................................................... 14
3.1.1 General............................................................. 14
3.1.2 Capital Calls....................................................... 15
3.2 Conversion of Class B Preferred Partnership Interest....................... 15
3.3 Priority of Expenditures................................................... 16
3.3.1 First Priority...................................................... 16
3.3.2 Second Priority..................................................... 16
3.3.3 Third Priority...................................................... 16
3.3.4 Fourth Priority..................................................... 16
3.3.5 Fifth Priority...................................................... 16
3.4 Other Matters.............................................................. 16
3.4.1 No Return of Capital................................................ 16
3.4.2 No General Partner Liability........................................ 16
3.4.3 No Limited Partner Liability........................................ 16
ARTICLE IV ALLOCATIONS............................................................. 16
4.1 Gross Income Allocation.................................................... 16
4.2 Profits.................................................................... 16
4.2.1 To Losses........................................................... 16
4.2.2 To Common........................................................... 17
4.3 Losses..................................................................... 17
4.3.1 To Common........................................................... 17
4.3.2 To Common Unrecovered Capital....................................... 17
4.3.3 To Preferred Unrecovered Capital.................................... 17
4.3.4 Residual............................................................ 17
4.3.5 Limit............................................................... 17
4.4 Special Allocations........................................................ 17
4.4.1 Minimum Gain Chargeback............................................. 17
</TABLE>
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4.4.2 Partner Nonrecourse Debt Minimum Gain Chargeback.......................... 18
4.4.3 Qualified Income Offset................................................... 18
4.4.4 Basis Adjustments......................................................... 18
4.4.5 Nonrecourse Deductions.................................................... 19
4.4.6 Partner Nonrecourse Deductions............................................ 19
4.4.7 Allocation of Self-Charged Interest....................................... 19
4.4.8 Sharing of Excess Nonrecourse Liabilities................................. 19
4.4.9 Curative Allocations...................................................... 19
4.5 Other Allocation Rules........................................................... 19
4.5.1 Positive Basis Partners................................................... 19
4.5.2 Timing.................................................................... 19
4.5.3 Method.................................................................... 19
4.6 Tax Allocations: Code Section 704(c)............................................ 20
4.6.1 Section 704 (c)........................................................... 20
4.6.2 Election.................................................................. 20
4.7 Tax Matters Partner.............................................................. 20
4.7.1 Appointment............................................................... 20
4.7.2 Elections................................................................. 20
4.7.3 Miscellaneous............................................................. 21
4.7.4 Reimbursement............................................................. 21
ARTICLE V DISTRIBUTIONS................................................................... 21
5.1 Distributions.................................................................... 21
5.1.1 Authority................................................................. 21
5.1.2 Priority of Cash Distributions............................................ 21
5.2 Minimum Tax Distributions........................................................ 22
5.3 Distribution to Limited Partners................................................. 22
5.4 Redemption of Preferred Partnership Interests.................................... 22
5.4.1 Class A Preferred Partnership Interests................................... 22
5.4.2 Class B Preferred Partnership Interests................................... 23
5.4.3 Early Redemption.......................................................... 23
5.4.4 Failure to Redeem......................................................... 23
5.5 Limitation of Distributions...................................................... 23
ARTICLE VI MANAGEMENT...................................................................... 24
6.1 Board of Directors............................................................... 24
6.1.1 Authority................................................................. 24
6.1.2 Limitations on Authority.................................................. 25
6.1.3 Duties and Obligations.................................................... 26
6.1.4 Composition............................................................... 26
6.1.5 Term; Vacancies........................................................... 26
6.1.6 Voting.................................................................... 26
6.2 Executive Committee.............................................................. 27
6.2.1 Authority................................................................. 27
6.2.2 Composition............................................................... 27
6.2.3 Voting.................................................................... 28
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6.3 Officers......................................................................... 28
6.3.1 Chairman.................................................................. 28
6.3.2 Chief Executive Officer................................................... 28
6.3.3 President................................................................. 28
6.3.4 Chief Financial Officer................................................... 28
6.3.5 Secretary................................................................. 28
6.3.6 Limitation................................................................ 29
6.3.7 Authority Generally....................................................... 29
6.4 Major Decisions.................................................................. 29
6.4.1 In General................................................................ 29
6.4.2 Partner Veto Rights....................................................... 29
6.4.3 Additional Limitations on Actions of the Partnership...................... 29
6.4.4 Voting.................................................................... 30
6.5 Right to Rely on Chairman or Secretary........................................... 30
6.6 Meetings and Approval Requirements of Board of Directors and Committees.......... 30
6.6.1 Regular Meetings.......................................................... 30
6.6.2 Special Meetings.......................................................... 30
6.6.3 Telephonic Meetings....................................................... 30
6.6.4 Notices................................................................... 30
6.6.5 Quorum.................................................................... 31
6.6.6 Approval Requirements..................................................... 31
6.6.7 Written Consents.......................................................... 31
ARTICLE VII INDEMNIFICATION............................................................... 31
7.1 General.......................................................................... 31
7.2 Indemnification Procedures....................................................... 32
7.2.1 Notice.................................................................... 32
7.2.2 Reimbursement............................................................. 32
7.2.3 Defense by Partnership.................................................... 32
7.2.4 Defense by Indemnified Person............................................. 32
7.2.5 Fees and Expenses......................................................... 33
7.2.6 Periodic Payments......................................................... 33
7.2.7 Insurance................................................................. 34
7.3 No Personal Liability for Indemnification........................................ 34
ARTICLE VIII AMENDMENTS.................................................................... 34
8.1 Amendments....................................................................... 34
ARTICLE IX ADMISSIONS, EXITS AND TRANSFERS............................................... 35
9.1 Restriction on Transfers by Partners............................................. 35
9.2 Transfers in Contravention....................................................... 35
9.3 Transfers to Affiliates.......................................................... 35
9.4 Admission of Limited Partners.................................................... 36
9.4.1 An Affiliate.............................................................. 36
9.4.2 Other Admissions.......................................................... 36
9.5 General Right of First Refusal................................................... 36
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9.5.1 Warrant Holdings.......................................................... 36
9.5.2 Proposed Transfer......................................................... 36
9.5.3 Partnership Option Period................................................. 37
9.5.4 Partner Option Period..................................................... 37
9.5.5 Closing................................................................... 37
9.5.6 Applicability of Restrictions............................................. 37
9.6 Cardwell Buy-Sell................................................................ 37
9.6.1 Notice of Cardwell Buy-Sell............................................... 37
9.6.2 Response.................................................................. 38
9.6.3. Buy Option................................................................ 39
9.6.4 Sell Option............................................................... 39
9.6.5 Purchase Price............................................................ 39
9.6.6 Closing; Payment.......................................................... 39
9.6.7 Failure to Perform........................................................ 40
9.7 Sale, Merger, Consolidation...................................................... 40
9.7.1 Notice of Global Offer.................................................... 41
9.7.2 Acceptance of Global Offer................................................ 41
9.7.3 Closing; Payment.......................................................... 41
9.8 Rights Upon Transfer............................................................. 42
9.9 Change of Control Restriction.................................................... 42
9.10 Pledge of Partnership Interests.................................................. 43
9.11 Rights of Unadmitted Assignees................................................... 43
Distributions and Allocations in Respect to Transferred Interests..................... 43
9.13 Termination of the Partnership................................................... 43
ARTICLE X DISSOLUTION AND WINDING UP..................................................... 43
10.1 No Termination................................................................... 43
10.2 Events of Dissolution............................................................ 44
10.2.1 Expiration............................................................... 44
10.2.2 Executive Committee...................................................... 44
10.2.3 Impossibility............................................................ 44
10.2.4 General Partner Withdrawal............................................... 44
10.2.5 Consent.................................................................. 44
10.2.6 Judicial Dissolution..................................................... 44
10.3 Winding Up....................................................................... 44
10.3.1 To Creditors............................................................. 44
10.3.2 To Partners.............................................................. 44
ARTICLE XI NON-COMPETITION AGREEMENT...................................................... 45
11.1 Covenant Not to Compete.......................................................... 45
11.1.1 Cardwell................................................................. 45
11.1.2 Mobil and Volvo.......................................................... 46
11.1.3 No Solicitation.......................................................... 46
11.1.4 Reformation.............................................................. 46
11.2 Ownership in Publicly Traded Corporation......................................... 46
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ARTICLE XII INITIAL PUBLIC OFFERING................................................. 47
12.1 Cardwell Partners Demand.................................................. 47
12.1.1 Opinion........................................................... 47
12.1.2 Plan.............................................................. 47
12.2 Rights of Mobil and Volvo................................................. 47
12.2.1 Response.......................................................... 47
12.2.2 Failure to Respond................................................ 48
12.3 Purchase.................................................................. 48
12.4 Assistance................................................................ 49
12.5 Minimum Cardwell Purchase Price........................................... 49
ARTICLE XIII MISCELLANEOUS........................................................... 49
13.1 Amended and Restated Credit Agreement..................................... 49
13.2 Confidential Information.................................................. 49
13.3 Financial Reports......................................................... 49
13.4 Binding Effect............................................................ 49
13.5 Severability.............................................................. 49
13.6 Governing Law............................................................. 50
13.7 Not for Benefit of Creditors.............................................. 50
13.8 Counterpart Execution..................................................... 50
13.9 Sole and Absolute Discretion.............................................. 50
13.10 Certificates.............................................................. 50
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SCHEDULES AND EXHIBITS
Schedule A - Capital Contributions and Sharing Percentages of the Partners
Exhibit 4.6.1 - Section 704(c) Allocation Methods
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LIMITED PARTNERSHIP AGREEMENT
OF
PETRO STOPPING CENTERS HOLDINGS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
------------------------------
THIS LIMITED PARTNERSHIP AGREEMENT OF PETRO STOPPING CENTERS HOLDINGS, L.P.
(the "Partnership") is entered into as of the 15th day of July 1999 by and among
Petro, Inc., a Texas corporation, ("Petro") as the General Partner and as a
Limited Partner, James A. Cardwell, Sr. ("Cardwell Sr."), James A. Cardwell, Jr.
("Cardwell Jr."), JAJCO II, Inc., a Delaware corporation ("JAJCO II," and,
together with Petro, Cardwell Sr., and Cardwell Jr., the "Cardwell Partners"),
Mobil Long Haul Inc., a Delaware corporation ("Mobil"), Volvo Petro Holdings,
LLC, a Delaware limited liability company ("Volvo"), and Petro Warrant Holdings
Corporation, a Delaware corporation ("Warrant Holdings") as Limited Partners,
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership
Act, with reference to the following recitals and on the terms and conditions
set forth in this Agreement. The Certificate of Limited partnership of the
Partnership was filed in the Office of the Secretary of State of the State of
Delaware on July 6, 1999.
RECITALS
A. As of the date of this Agreement, the Cardwell Partners, Mobil, Petro
Holdings LP Corp., a Delaware corporation ("Holdings LP"), Petro Holdings GP
Corp., a Delaware corporation ("Holdings GP", together with Holdings LP, the
"Chartwell Partners"), and Kirschner Investments, a Pennsylvania general
partnership ("Kirschner") are general or limited partners in Petro Stopping
Centers, L.P., a Delaware limited partnership ("Petro Operating").
B. Pursuant to that certain Partnership Interest Subscription and
Purchase Agreement to be dated as of July 23, 1999, among Petro, the Chartwell
Partners, Mobil, the Cardwell Partners, Volvo, Warrant Holdings, and Petro
Operating and to that certain Purchase Agreement to be dated July 19, 1999,
among the Partnership, Warrant Holdings, Petro Holdings Financial Corporation, a
Delaware corporation, First Union Capital Markets Corp. and CIBC World Markets
Corp., and to certain other related agreements and transactions:
(1) Petro will exchange a portion of its general partnership interest
in Petro Operating for an additional limited partnership interest
in Petro Operating and will retain a one-quarter of one percent
(0.25%) general partnership interest in Petro Operating;
(2) Immediately thereafter, certain of the partners in Petro
Operating will exchange their partnership interests in Petro
Operating for partnership interests in the Partnership as
follows:
(a) Petro will exchange a portion of its common limited
partnership interest in Petro Operating for a general
partnership interest in the Partnership;
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(b) Cardwell Jr. will exchange a portion of his common limited
partnership in Petro Operating for a common limited
partnership interest in the Partnership and will retain a
one-quarter of one percent (0.25%) common limited
partnership interest in Petro Operating;
(c) Cardwell Sr., JAJCO and Mobil will exchange all of their
common limited partnership interests in Petro Operating for
common limited partnership interests in the Partnership, and
Petro will exchange its remaining common limited partnership
interests in Petro Operating for common limited partnership
interests in the Partnership;
(d) The Cardwell Partners and Mobil will exchange their
preferred limited partnership interests in Petro Operating
for preferred limited partnership interests (designated
"Class A Preferred Partnership Interests") in the
Partnership;
(3) Immediately following the above-described transactions:
(a) Mobil will make a cash investment in the Partnership in
exchange for a convertible preferred limited partnership
interest (designated "Class B Preferred Partnership
Interest") in the Partnership;
(b) Volvo will make a cash investment in the Partnership in
exchange for a common limited partnership interest in the
Partnership;
(c) Warrant Holdings will sell certain Warrants (the "Warrants")
to the Partnership and will use the proceeds of such sale to
purchase a ten percent (10%) common limited partnership
interest in the Partnership;
(d) The Partnership will issue ____% Senior Discount Notes due
2008 (the "Senior Discount Notes") along with the Warrants
purchased from Warrant Holdings; and
(e) The Partnership (using the proceeds of the Volvo and Mobil
cash investments in the Partnership and of the sale of the
Senior Discount Notes and Warrants) will purchase (i) the
common limited partnership interests in Petro Operating
owned by Holdings LP and by Kirschner and (ii) all of the
membership interests in Petro Holdings GP, L.L.C. ("Holdings
GP, L.L.C.@), a Delaware limited liability company organized
by Holdings LP and the surviving entity in a merger with
Holdings GP, whereupon the general partnership interest
owned by Holdings GP, L.L.C. will be immediately converted
into a limited partnership interest in Petro Operating.
C. Upon closing of the above-described transactions: (i) Petro will be
the sole general partner of the Partnership; (ii) the Cardwell Partners, Mobil,
Volvo, and Warrant Holdings will be
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the limited partners of the Partnership; (iii) Petro, which will own a one-half
of one percent (0.5%) general partnership interest, will be the sole general
partner of Petro Operating; and (iv) the Partnership, Cardwell Jr., and Holdings
GP, L.L.C. will be the limited partners of Petro Operating. The initial
preferred and common limited partnership capital contributions contemplated by
the foregoing transactions will be reflected, when made, on Schedule A, which
will be attached hereto and made a part hereof as more particularly described in
Section 3.1.1 below.
AGREEMENT
---------
FOR AND IN CONSIDERATION of the mutual covenants, rights, and obligations
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which each Partner acknowledges and confesses, the
parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
I.1 Definitions. In addition to the terms defined elsewhere in this
-----------
Agreement, the following terms used in this Agreement shall have the following
meanings:
I.1.1 "Act" means the Delaware Revised Uniform Limited Partnership
---
Act, as set forth in Title 6, Chapter 17 of the Delaware Code, as amended from
time to time (or any corresponding provisions of succeeding law).
I.1.2 "Adjusted Capital Account Balance" means, with respect to any
--------------------------------
Partner, the balance in such Partner's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this Agreement or
is deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Balance is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
I.1.3 "Adjusted Capital Account Deficit" shall mean, with respect
--------------------------------
to any Partner, a deficit (if any) in such Partner's Adjusted Capital Account
Balance.
I.1.4 "Affiliate" means, when used with reference to a specified
---------
Person,
(a) any Person that directly or indirectly controls, is
controlled by, or is under common control with, the specified Person, or
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(b) any Person that is a responsible employee of, an officer
or manager of, a general partner in or a trustee of, or serves in a similar
capacity with respect to, the specified Person or any Person specified in clause
(a) or of which the specified Person or any Person described in clause (a) is a
responsible employee, officer, manager, general partner or trustee, or with
respect to which the specified Person or any Person described in clause (a)
serves in a similar capacity. In the case of a Person who is an individual,
Affiliate shall include (x) any member of the Immediate Family of such Person,
including the spouse and lineal descendants and their spouses, of such Immediate
Family Member, (y) any trust whose principal beneficiary is such Person or one
or more members of such Immediate Family, and (z) any Person controlled by such
individual's Immediate Family or any such trust.
(c) For the purposes of the definition of "Affiliate," the
term "control," when used with respect to any specified Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
I.1.5 "Aggregate Distribution Shortfall" means a Partner's total
--------------------------------
Distribution Shortfalls, if any, since the Effective Date.
I.1.6 "Agreement" or "Partnership Agreement" means this Limited
------------------------------------
Partnership Agreement as it may be amended from time to time.
I.1.7 "Amended and Restated Credit Agreement" means the Second
-------------------------------------
Amended and Restated Revolving Credit and Term Loan Agreement to be dated as of
July 23, 1999, among the Partnership, Petro Operating, BankBoston, N.A., as
agent and a lender, and the lenders signatory thereto.
I.1.8 "Applicable Tax Rate" means a tax rate used for computing
-------------------
Minimum Tax Distributions consisting of the sum of (i) either the individual or
corporate maximum marginal income tax rate for federal income tax purposes based
on whether the Partner for which a Minimum Tax Distribution is being computed is
for federal income tax purposes (x) a corporation (other than an S corporation
under Section 1361 of the Code), in which case the maximum corporate federal tax
rate applies, (y) an individual, in which case the maximum individual federal
tax rate applies, or (z) a flow-through or disregarded entity, in which case the
maximum federal tax rate which applies shall be determined by the federal income
tax characterization of the taxpayer to which the flow-through tax attributes
are ultimately allocated, plus (ii) a reasonable overall state and local income
tax rate established from time to time by the Executive Committee.
I.1.9 "Article" means an Article of this Agreement.
-------
I.1.10 "Available Cash" means, for a Fiscal Year or quarter, all
--------------
cash receipts of the Partnership during such period from all sources (including
amounts received as a result of any sale, exchange or other disposition, of all
or part of any Partnership asset; cash on hand at the beginning of such period
to the extent not held in reserves; proceeds of a financing or refinancing
giving rise to distributable net proceeds, recovery of a damage award or
insurance proceeds and any net
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reduction in the amount of reserves) less: amounts used to pay or establish
reserves for all Partnership expenses and fees; Minimum Tax Distributions; debt
payments including principal, premium and interest, fees and expenses; and in
the case of each such deduction, to the extent not funded by Capital
Contributions.
I.1.11 "Board of Directors" has the meaning set forth in Section
------------------
6.1.
I.1.12 "Book Depreciation" means for each Fiscal Year or part
-----------------
thereof, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable for federal income tax purposes with respect to an
asset for such year or other period, except that if the Gross Asset Value of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year, Book Depreciation shall be an amount which bears the
same ratio to such Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such year bears to such
adjusted basis.
I.1.13 "Book Value" shall mean the Gross Asset Value computed for
----------
purposes of maintaining Capital Accounts hereunder. References to "Book
----
Purposes" shall be similarly interpreted.
- --------
I.1.14 "Business Day" means any day other than a Saturday, Sunday or
------------
a day on which national banking associations in the State of New York are
closed.
I.1.15 "Capital Account" means, with respect to any Partner, the
---------------
Capital Account maintained for such Partner in accordance with the following
provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of Profits
and any items in the nature of income or gain which are specially allocated
pursuant to Article IV, and the amount of any Partnership liabilities assumed by
such Partner or which are secured by any property distributed to such Partner,
or as to which such Partner is otherwise subjected to personal liability;
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 4.4 or Section 4.5 hereof, and the
amount of any liabilities of such Partner assumed by the Partnership or which
are secured by any property contributed by such Partner to the Partnership;
(c) In the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest in accordance with Section 9.12 hereof; and
(d) In determining the amount of any liability for purposes of
subparagraph (a) and (b) of this definition, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
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(e) Upon the occurrence of any event which causes the termination and
dissolution of the Partnership, all Profits and Losses shall be computed and
allocated to the Capital Accounts of the Partners as of such date of
termination.
The Capital Accounts of the Partners as of the Effective Date shall be
equal to the Capital Contributions of a Partner as of the Effective Date (i.e.,
the Capital Accounts with respect to the Gross Asset Value of property
contributed shall be such property's fair market value). The foregoing
provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Sections
1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner
consistent with such Regulations. In the event that the Executive Committee
determines (after consulting with, and upon the advice of, the independent
auditors then employed by the Partnership) that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto, are
computed in order to comply with such Regulations, the Executive Committee may
make such modification, provided that such modification is not likely to have a
material effect on the amounts distributed to any Partner upon the dissolution
of the Partnership. The Executive Committee also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the General Partners and the Limited Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv) ,
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Sections
1.704-1(b) and 1.704-2.
I.1.16 "Capital Contributions" means, with respect to any General Partner
---------------------
or Limited Partner, the amount of money and the Gross Asset Value of any
property (other than money) contributed or deemed contributed to the Partnership
with respect to the interest in the Partnership held by such Partner pursuant to
Article III. The Capital Contributions of the Partners as of the Effective Date
are set forth on the initial Schedule A hereto and shall be designated as
"Preferred Capital Contributions" or "Common Capital Contributions" as set forth
therein. Although not credited to a Partner's Capital Account or to the
Unrecovered Capital attributable to a Class A Preferred Partnership Interest,
Schedule A shall include a notation which reflects the amount of the accrued and
unpaid preferred returns attributable to the preferred limited partnership
interests held by Mobil and the Cardwell Partners in Petro Operating through the
Effective Date (the "Contributed Preferred Return").
I.1.17 "Class A Preferred Partnership Interest" means the Preferred
--------------------------------------
Partnership Interests held by the Cardwell Partners and Mobil as set forth on
Schedule A, which Class A Preferred Partnership Interests (i) have the Preferred
Return set forth in Section 1.1.19, and (ii) are redeemable by the Partnership
on October 27, 2008, pursuant to the provisions of Section 5.4.1.
I.1.18 "Class B Preferred Partnership Interest" means the Preferred
--------------------------------------
Partnership Interest held by Mobil and which is convertible into a Common
Partnership Interest pursuant to Section 3.2 at any time prior to redemption,
and if not so converted, is redeemable on the tenth anniversary of the Effective
Date pursuant to the provisions of Section 5.4.2. The Class B Preferred
Partnership Interest shall have a Preferred Return as set forth in Section
1.1.20.
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I.1.19 "Class A Preferred Return" means an amount, either paid in cash or
------------------------
accrued (at the sole discretion of the Executive Committee), which is equal to:
in the case of Mobil, nine and one-half percent (9.5%), and in the case of the
Cardwell Partners, eight percent (8%), in each case per annum, on an amount
equal to the sum of (i) such Partner's Unrecovered Capital on such Class A
Preferred Partnership Interest, (ii) the Contributed Preferred Return, and (iii)
any accrued Class A Preferred Return in excess of the cumulative amounts
distributed pursuant to Section 5.1.2(b), for the actual number of days for
which the Class A Preferred Return is being determined, cumulative and
compounded semi-annually and based on the actual dates of adjustments to
Unrecovered Capital and Preferred Capital Contributions to, and Section 5.1.2(b)
distributions from, the Partnership. The amount of any accrued but unpaid Class
A Preferred Return shall continue to accrue at the Class A Preferred Return rate
until paid in cash. Accordingly, the Class A Preferred Return shall be
calculated beginning on the Effective Date on the sum of the Unrecovered Capital
attributable to the Class A Preferred Partnership Interests plus the Contributed
Preferred Return.
I.1.20 "Class B Preferred Return" means an amount equal to twelve percent
------------------------
(12%) per annum on an amount equal to the sum of Mobil's Unrecovered Capital on
the Class B Preferred Interests and the accrued Class B Preferred Return for the
actual number of days for which the Class B Preferred Return is being
determined, cumulative and compounded semi-annually. The Class B Preferred
Return will not be payable in cash until the earlier of the Class B Conversion
Date or the Class B Redemption Date, at which time the accrued but unpaid Class
B Preferred Return shall be paid in cash subject only to the Partnership's
Available Cash and to the restrictions set forth in Section 5.5. The amount of
any accrued but unpaid Class B Preferred Return shall continue to accrue at the
Class B Preferred Return rate until paid in cash.
I.1.21 "Code" means the United States Internal Revenue Code of 1986, as
----
amended from time to time (or any corresponding provisions of succeeding law).
I.1.22 "Common Partnership Interests" shall mean the Partnership
----------------------------
Interests owned by the Partners listed on Schedule A in respect of their Common
Capital Contributions.
I.1.23 "Contributed Preferred Return" shall have the meaning set forth in
----------------------------
Section 1.1.16.
I.1.24 "Cumulative Minimum Tax Distributions" means the total Minimum Tax
------------------------------------
Distributions made to a Partner since the Effective Date and shall exclude the
Minimum Tax Distribution for the current period which is being calculated to be
distributed pursuant to Section 5.2, hereof.
I.1.25 "Current U.S. Taxes Due" means with respect to any Fiscal Year, or
----------------------
part thereof, of the Partnership after the Effective Date, the estimated Income
Tax which each Partner would be required to pay if the Applicable Tax Rate were
applied to the sum of, (i) Profits (excluding the adjustments set forth in
subparagraphs (a) through (f) of Section 1.1.59) and (ii) Section 704(c)
Allocations allocated to a Partner for the Fiscal Year, or part thereof, for
which Current U.S. Taxes Due are being computed hereunder; provided however, in
the case of a Partner which, for federal tax purposes, is a corporation (other
than an S corporation under Section 1361 of the Code) or which is a flow-through
or disregarded entity in which the flow-through tax attributes are ultimately
allocated
7
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to a corporation (other than an S corporation under Section 1361 of
the Code), "Current U.S. Taxes Due" shall have the same meaning as "U.S. Taxes
Due."
I.1.26 "Distribution Shortfall" means, as to each Partner for a Fiscal
----------------------
Year, the positive difference, if any, between (i) the product of (A) the Tax
Distribution Ratio for the applicable Maximum Tax Partner for such Fiscal Year,
multiplied by (B) the amount of the Net Profits Allocation allocated for such
Fiscal Year (excluding any 704(c) Allocations) to the Partner for which the
Distribution Shortfall is being computed, less (ii) the Minimum Tax
Distributions made to such Partner for such Fiscal Year. Distribution
Shortfalls for the Partners shall be computed once all Minimum Tax Distributions
for a Fiscal Year have been made to the Partners and shall apply only with
respect to Minimum Tax Distributions made after the Effective Date.
I.1.27 "Effective Date" means July 24, 1999.
--------------
I.1.28 "Executive Committee" has the meaning set forth in Section 6.2.
-------------------
I.1.29 "Fair Market Value" means the enterprise value of the Partnership
-----------------
and Petro Operating , as agreed upon by all members of the Executive Committee,
failing which, the enterprise value of the Partnership and Petro Operating as
determined by an investment banking firm of national reputation selected by all
members of the Executive Committee; and with respect to a Partnership or Petro
Operating asset, the gross value of such asset as agreed upon by the Board of
Directors.
I.1.30 "Fiscal Year" means (i) the period commencing on the Effective
-----------
Date and ending on the Friday closest to December 31 of the same calendar year,
and (ii) any subsequent twelve (12) month period commencing on the next day
following the last day of the previous Fiscal Year and ending on the Friday
closest to December 31 of the same calendar year.
I.1.31 "GAAP" means generally accepted accounting principles and
----
practices in effect in the United States of America from time to time.
I.1.32 "General Partner" means Petro, as general partner of the
---------------
Partnership, and/or any Person who, at the time of reference thereto, has been
admitted to the Partnership, as a general partner of the Partnership, and
continues to act as a successor to the duties or interests of such Persons, or
as a replacement or additional general partner as provided herein.
I.1.33 "Gross Asset Value" means, with respect to any Partnership
-----------------
property, such property's adjusted basis for U.S. Federal income tax purposes,
except as follows: that (i) the Gross Asset Value of Partnership property shall
be adjusted to its Fair Market Value as of the Effective Date; (ii) whenever
such adjustment is required in order for allocations under this Agreement to
have "economic effect" within the meaning of Regulation Section 1. 704-
1(b)(2)(ii); (iii) if the Board of Directors considers appropriate, whenever
such Adjustment to Fair Market Value is permitted under Regulation Section
1.704-1(b)(2)(ii); (iv) the Gross Asset Value of the Partnership property shall
be adjusted to its Fair Market Value as of the effective date of any conversion
of the Class B Preferred Partnership Interest to a Common Partnership Interest
pursuant to Section 3.2, hereof, as permitted under Regulation Section 1.704-
1(b)(2)(ii); and (v) the Gross Asset Value of an item of Partnership
8
<PAGE>
property shall be adjusted to its Fair Market Value whenever it is distributed
to a Partner, as permitted under Regulation Section 1.704-1(b)(2)(ii). Gross
Asset Value shall be adjusted by Book Depreciation taken into account with
respect to such asset for purposes of computing Profits or Losses, and other
items allocated pursuant to Section 4.3.
I.1.34 "Gross Income" means the total revenues of the Partnership
------------
computed in accordance with the principles of Section 61 of the Code, and which
shall be determined on a consolidated basis with the Partnership's subsidiaries.
I.1.35 "Immediate Family Member" means natural or adoptive parent,
-----------------------
sibling, child or grandchild of a Person (or a trust or other entity for the
benefit of any of the foregoing provided such Person retains voting control of
such entity).
I.1.36 "Income Taxes" means all (i) net income and franchise taxes and
------------
withholding in respect thereof (including, without limitation, United States
federal income taxes), and any interest thereon and any penalties, additions to
tax or additional amounts applicable thereto, (ii) any amounts payable under the
Code or ERISA in respect of any Plan and any interest, penalties or excise taxes
thereon, (iii) any liability for the payment of any consolidated or combined
federal, foreign, state or local income taxes, and any interest thereon and any
penalties, additions to tax or additional amounts applicable thereto, that is
payable as a result of being a member of, and which may be imposed upon, any
affiliated group (as defined in Section 1504(a) of the Code or other applicable
law) of which any Petro Partner is a member (including in all cases any amount
payable as a result of any tax sharing agreement, policies or arrangements); and
(iv) any liability for alternative minimum tax under Section 55 of the Code.
I.1.37 "Indemnified Person" means those Persons identified in either
------------------
Section 7.1 or Section 7.2 as being entitled to receive the benefit of the
indemnity provided therein, and shall include the shareholders, subsidiaries,
Affiliates, officers, directors, members, managers, employees and
representatives of an Indemnified Person, and the shareholders, subsidiaries,
officers, directors, members, managers, employees and representatives of such
shareholders, subsidiaries and Affiliates.
I.1.38 "Indemnifying Party" means the Partnership.
------------------
I.1.39 "Limited Partner" means each of Cardwell Sr., Cardwell Jr., JAJCO
---------------
II, Petro, Mobil, Volvo, Warrant Holdings and any other Person who becomes a
Limited Partner pursuant to the terms of this Agreement.
I.1.40 "Maximum Tax Partner" means, for each Fiscal Year, the Partner who
-------------------
has the greatest Tax Distribution Ratio for such Fiscal Year.
I.1.41 "Minimum Tax Distribution" means the distribution provided for in
------------------------
Section 5.2.
I.1.42 "Net Income" for any period with respect to the Partnership means
----------
the net income (or loss) of the Partnership for such period, determined in
accordance with GAAP, excluding the net income (or loss) of any company acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition.
9
<PAGE>
I.1.43 "Net Profits Allocation" shall mean an allocation of Profits that
----------------------
causes, for any applicable periods beginning after the Effective Date, the
cumulative amount of Profits allocated to such Partner to exceed the cumulative
amount of Losses allocated to such Partner. For this purpose, Profits and
Losses shall be computed without the adjustments set forth in subparagraphs (a)
through (f) of Section 1.1.59 relative to the determination of "Profits and
Losses" and shall include all Section 704 (c) Allocations reportable by a
Partner for federal income tax purposes.
I.1.44 "Non-Compete Period" shall mean two (2) years after a Partner
------------------
(other than Warrant Holdings) and its Affiliates cease to be Partners.
I.1.45 "Nonrecourse Deductions" has the meaning set forth in Regulations
----------------------
Section 1.704 - 2(b)(1) and shall be determined according to the provisions of
Regulations Section 1.704-2(c).
I.1.46 "Nonrecourse Liability" has the meaning set forth in Regulations
---------------------
Section 1.752-1(a)(2).
I.1.47 "Partner Nonrecourse Debt" has the meaning set forth in
------------------------
Regulations Section 1.704-2(b)(4).
I.1.48 "Partner Nonrecourse Debt Minimum Gain" has the meaning set forth
-------------------------------------
in Regulations Section 1. 704 -2 (i) (2) and shall be determined in accordance
with Regulations Section 1.704-2(i)(3).
I.1.49 "Partner Nonrecourse Deductions" has the meaning set forth in
------------------------------
Regulations Section 1.704-2(i) (1) and shall be determined in accordance with
Regulations Section 1.704-2(i)(2).
I.1.50 "Partners" means all General Partners and all Limited Partners,
--------
where no distinction is required by the context in which the term is used
herein. A Partner may be both a General Partner and a Limited Partner.
I.1.51 "Partnership" means Petro Stopping Centers Holdings, L.P., a
-----------
Delaware limited partnership.
I.1.52 "Partnership Interest" shall mean the partnership interests in the
--------------------
Partnership owned by the General and Limited Partners.
I.1.53 "Partnership Minimum Gain" has the meaning set forth in
------------------------
Regulations Section 1.704-2(b) (2) and shall be determined in accordance with
Regulations Section 1.704-2(d).
I.1.54 "Person" means (i) any individual, (ii) any domestic partnership,
------
corporation, limited liability company, association, business, or trust, (iii)
any government or political subdivision thereof, or (iv) any governmental agency
or other entity. For purposes of this definition, "domestic" shall mean an
entity created or organized in the United States or under the law of the United
States or of any State, as defined in Code Section 7701(a)(4).
10
<PAGE>
I.1.55 "Petro Operating" means Petro Stopping Centers, L.P., a Delaware
---------------
limited partnership owned by the Partnership.
I.1.56 "Positive Basis" shall mean, with respect to any Preferred
--------------
Partnership Interest and as of any time of calculation, the excess of the amount
to which such Partner is entitled to upon withdrawal from or liquidation of the
Partnership over such Partner's "adjusted tax basis" in its Preferred
Partnership Interest at such time (determined without regard to any adjustments
made to such adjusted tax basis by reason of any transfer or assignment of such
interest, including by reason of death) ; and "Positive Basis Partner" shall
mean any Partner whose Preferred Partnership Interest is redeemed by the
Partnership and who has Positive Basis as of the effective date of such
withdrawal.
I.1.57 "Preferred Partnership Interests" shall mean the two classes of
-------------------------------
preferred limited partnership interests (designated Class A and Class B) owned
by the Cardwell Partners and Mobil as listed on Schedule A and relating to those
Partners' Preferred Capital Contributions.
I.1.58 "Preferred Return" shall mean the annual return on a Partner's
----------------
Class A or Class B Preferred Partnership Interest (as the case may be) as set
forth in Sections 1.1.19 and 1.1.20, respectively.
I.1.59 "Profits" and "Losses" means, for each Fiscal Year, an amount
------- ------
equal to the Partnership's taxable income or loss for such Fiscal Year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703 (a) (1) shall be included in taxable income or loss) , with the
following adjustments:
(a) Any income of the Partnership that is exempt from U.S.
federal income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this Section shall be added to such taxable income or loss;
(b) Any expenditure of the Partnership that is nondeductible for
U.S. federal income tax purposes (including any expense described in Code
Section 705(a)(2)(B)) and is not otherwise taken into account in computing
Profits or Losses pursuant to this Section shall be subtracted from such taxable
income or loss;
(c) In the event the Gross Asset Value of the Property is
adjusted, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of the Property for purposes of computing Profits or
Losses;
(d) Gain or loss resulting from the disposition of the
Partnership property shall be computed by reference to the Gross Asset Value of
the property, notwithstanding that the adjusted tax basis of the property
differs from its Gross Asset Value;
(e) Notwithstanding any other provision of this Article, any
items which are specially allocated pursuant to Section 4.4 shall not be taken
into account in computing Profits or Losses; and
11
<PAGE>
(f) Any difference between the Partnership's tax depreciation or
amortization deductions and Book Depreciation shall be taken into account in
computing Profits or Losses.
I.1.60 "Regulations" or "Treasury Regulations" means the Income Tax
----------- --------------------
Regulations, including Temporary Regulations, promulgated under the Code, as
such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
I.1.61 "Section" means a Section of this Agreement.
-------
I.1.62 "Sharing Percentage" shall mean (i) with respect to any Preferred
------------------
Partnership Interest held by a Partner, the Preferred Sharing Percentage listed
on Schedule A, and (ii) with respect to any Common Partnership Interest held by
a Partner, the Common Sharing Percentage listed on Schedule A.
I.1.63 "Tax Distribution Ratio" means, for each Partner for an applicable
----------------------
Fiscal Year, the percentage yielded by dividing (i) the Minimum Tax
Distributions made to such Partner for the Fiscal Year, by (ii) the amount of
the Net Profits Allocation allocated to such Partner for the Fiscal Year.
I.1.64 "Unrecovered Capital" shall mean: with respect to any Preferred
-------------------
Partnership Interest, an amount equal to (X) the Preferred Capital Contributions
plus Gross Income allocated under Section 4.1 in respect of such Interest less
(Y) the sum of (i) the aggregate amount of Losses allocated to such Preferred
Partnership Interest under Sections 4.3.3 and (ii) cash distributions to such
Partner in respect of such Preferred Partnership Interest pursuant to Sections
5.1.2(b) and 5.1.2(d); and, with respect to any Common Partnership Interest, an
amount equal to (X) the amount of Common Capital Contributions plus Section 4.2
Profits allocations in respect of such Common Partnership Interest less (Y) the
sum of (i) distributions to such Partner in respect of such Common Partnership
Interest pursuant to Section 5.1.2, and (ii) the cumulative amount of Losses
allocated to such Common Partnership Interest pursuant to Sections 4.3.2 and
4.3.4. A Partner's Unrecovered Capital with respect to its Common Partnership
Interest shall reflect any changes in the Gross Asset Values of Partnership
property which occur in accordance with the provisions of Section 1.1.33
relating to the definition of "Gross Asset Value" and any changes in the Gross
Asset Value of Partnership property shall be allocated among Partners in
accordance with their respective Common Sharing Percentages in effect
immediately prior to the event or circumstance which gives rise to an adjustment
of Gross Asset Value in accordance with Section 1.1.33.
I.1.65 "U.S. Taxes Due" means with respect to any Fiscal Year or part
--------------
thereof of the Partnership after the Effective Date, the estimated Income Tax
which each Partner would be required to pay if the Applicable Tax Rate (being
utilized for such Fiscal Year) were applied to the Net Profits Allocations
allocated to such Partner as of the date through which U.S. Taxes Due are being
computed hereunder; and in the event a Partner is a corporation (other than an S
corporation under Section 1361 of the Code) and has no U.S. Taxes Due pursuant
to the preceding definition for the applicable period, but is otherwise subject
to alternative minimum tax under Section 55 of the Code as to Net Profits
Allocations (as adjusted for alternative minimum tax purposes) through such
date, "U.S. Taxes Due" shall mean the amount, if any, of the resulting
alternative minimum tax under Section 55 of the Code for the applicable period
as to such Net Profits Allocation.
12
<PAGE>
I.2 Interpretation. Words such as "herein," "hereinafter, "hereof" and
--------------
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires. "Includes" or
"including" shall mean "including without limitation." Unless otherwise defined,
all accounting terms used herein shall have the meaning thereof specified by
GAAP.
ARTICLE II
GENERAL PROVISIONS
------------------
II.1 Formation. Effective as of July 6, 1999, the date upon which the
---------
Certificate of Limited Partnership referred to in Section 2.5 was filed with the
Office of the Secretary of State of the State of Delaware, the Persons executing
this Agreement formed a limited partnership for the purposes set forth in this
Agreement. Capital Contributions by the Partners will be made as described in
the Recitals to this Agreement and, when made, will be reflected on Schedule A
attached hereto and made a part hereof for all purposes.
II.2 Partnership Name. The name of the Partnership shall be Petro
----------------
Stopping Centers Holdings, L.P., and all business of the Partnership shall be
conducted in such name, or under such other name as the Board of Directors deems
appropriate.
II.3 Purpose. The Purpose of the Partnership is (i) to own and manage
-------
the membership interests of Holdings GP, L.L.C., (ii) to own essentially all of
the limited partnership interests in Petro Operating, which operates, manages,
develops, franchises and/or owns truck stops and lubrication centers and certain
businesses in connection therewith, including but not limited to the ownership
of interests in other Persons and the sale of petroleum products, sundry
products, and services, and the operation of restaurants, (iii) to engage in
financing transactions and any and all lawful business related to the ownership
and operation of Petro Operating, and (iv) to transact any and all lawful
business for which a limited partnership may be organized incident to the Act
that is incident, necessary, and appropriate to the foregoing.
II.4 Principal Place of Business. The Partnership's principal place of
---------------------------
business shall be 6080 Surety Drive, El Paso, Texas 79905. The Partnership's
principal place of business may be changed from time to time, and other offices
may be established from time to time, by the Board of Directors. The registered
agent for service of process on the Partnership in the State of Delaware or any
other jurisdiction shall be such Person as the Board of Directors of the
Partnership may designate from time to time.
II.5 Term. The term of the Partnership shall commence on July 6, 1999,
----
the date upon which the Certificate of Limited Partnership of the Partnership
was filed in the Office of the Secretary of State of the State of Delaware in
accordance with the Act and shall continue until December 31, 2025, unless the
Partnership is earlier dissolved by operation of law or in accordance with the
provisions of Article X.
II.6 Filings.
-------
13
<PAGE>
II.6.1 Status. The Board of Directors shall cause to be executed, filed
------
and published all such certificates, notices, statements and other instruments
and amendments thereto, and shall take any and all other actions, under the laws
of the State of Delaware and other applicable jurisdictions as it may deem
necessary or advisable to perfect and maintain the status of the Partnership as
a limited partnership under the laws of Delaware and any other jurisdictions in
which the Partnership engages in business. The General Partner shall execute
and file such certificates, notices, statements and other instruments and
amendments thereto, and take any and all such other actions, as the Board of
Directors may direct in connection with perfecting and maintaining the status of
the Partnership in accordance with this Section 2.6.1.
II.6.2 Dissolution. Upon the dissolution and completion of winding up of
-----------
the Partnership, the Board of Directors shall promptly cause to be executed and
filed certificates of cancellation in accordance with the Act and the laws of
any other states or jurisdictions in which the Partnership has filed
certificates. The General Partner shall execute and file such certificates of
cancellation as the Board of Directors may direct in connection with actions
contemplated by this Section 2.6.2.
II.7 Limited Partner Powers. Each Limited Partner, any Affiliate
----------------------
thereof and any officer, director, shareholder, partner, employee, member,
manager, agent or representative of such Limited Partner or Affiliate may lend
money to, borrow money from, act as a surety, guarantor or endorser for,
guarantee or assume one or more specific obligations of, provide collateral for,
and transact other business with the Partnership, Petro Operating and others
and, subject to other applicable law and subject to the terms of this Agreement,
has the same rights and obligations with respect thereto as a Person who is not
a Partner. The existence of these relationships and acting in such capacities
shall not result in a Limited Partner being deemed to be participating in the
control of the business of the Partnership or otherwise affect the limited
liability of the Limited Partner. If a Limited Partner or any Affiliate thereof
is a lender, in exercising its rights as a lender, including making its decision
on whether to foreclose on property of the Partnership, such lender will have no
duty to consider (i) its status as a Partner or an Affiliate of a Partner, (ii)
the interests of the Partnership or of Petro Operating, or (iii) any duty it may
have to any Partner, to the Partnership, or to Petro Operating.
ARTICLE III
CAPITALIZATION
--------------
III.1 Capital Contributions.
---------------------
III.1.1 General. Schedule A, which will be attached hereto, will reflect
-------
the capital contributions of the Partners as of the Effective Date and will set
forth the initial Preferred and Common Capital Contributions of the Partners as
of such date, the Contributed Preferred Return, and the relative Preferred and
Common Sharing Percentages of the Partners. Schedule A shall be updated and
amended from time to time to reflect additional Capital Contributions and any
changes to Sharing Percentages.
III.1.2 Capital Calls. Subject to Partner Veto Rights, the Board of
-------------
Directors may, by written notice, request the holders of Common Partnership
Interests (other than Warrant Holdings) to make such additional Capital
Contributions as the Board of Directors, in its sole discretion, considers
14
<PAGE>
necessary or appropriate to fulfill the purposes of this Agreement. Such
additional Capital Contributions may, at the option of each Partner holding a
Common Partnership Interest, be made within thirty (30) days after receipt of
written request from the Board of Directors and shall be contributed by the
Partners electing to contribute in proportion to their respective Common
Partnership Interests. The provisions of this Section 3.1.2 are intended solely
to benefit the Partners and, to the fullest extent permitted by applicable law,
shall not confer any benefit upon any creditor of the Partnership (and no such
creditor shall be a third party beneficiary of this Agreement), and no Partner
shall have any duty or obligation to any creditor of the Partnership to make any
additional Capital Contributions or to cause the Board of Directors to request
additional Capital Contributions. Similarly, the Board of Directors shall have
no duty to request additional Capital Contributions to benefit any creditor of
the Partnership. If any Partner does not exercise its right to maintain its
proportionate percentage of the Common Sharing Percentages by making an
additional Capital Contribution pursuant to this Section 3.1.2, the Common
Sharing Percentages shall be adjusted based upon, and assuming the Interests are
sold based upon, Fair Market Value.
III.2 Conversion of Class B Preferred Partnership Interest.
----------------------------------------------------
(a) At any time prior to redemption of the Class B Preferred
Partnership Interests and upon sixty (60) days prior written notice to the
Partnership (the "Class B Conversion Notice"), the holder of the Class B
Preferred Partnership Interest may convert the full amount of the Unrecovered
Capital of such Preferred Partnership Interest into a Common Partnership
Interest, which shall represent a 3.9% Common Partnership Interest (subject,
however, to subsequent dilution by, for example, the exercise, by certain
employees of the Partnership, of options to acquire Common Partnership Interests
in the Partnership). The conversion of the Class B Preferred Partnership
Interest shall be effective (the "Class B Conversion Date") as of the last day
of the fiscal quarter in which the Class B Conversion Notice is given to the
Partnership, provided, however, that the holder of the Class B Preferred
Partnership Interest shall have the right to convert to the above-described
Common Partnership Interest prior to a sale, merger or consolidation of the
Partnership pursuant to the provisions of Section 9.6 or 9.7, or prior to an IPO
Incorporation pursuant to the provisions of Article XII. The delivery of a Class
B Conversion Notice in accordance with this Section 3.2 shall terminate the
right but not the obligation of the Partnership to redeem any Class B Preferred
Partnership Interests with respect to which such Class B Conversion Notice has
been given.
(b) At the Class B Conversion Date (or as soon thereafter as is
practicable), the amount of the accrued but unpaid Class B Preferred Return
shall be paid in cash to the holder thereof, subject only to the Partnership's
Available Cash and to the restrictions in Section 5.5. The accrued but unpaid
Class B Preferred Return shall continue to accrue at the Class B Preferred
Return rate until paid in cash.
III.3 Priority of Expenditures. Expenditures of the Partnership shall
------------------------
be paid in the following order of priority:
III.3.1 First Priority. To pay all administrative and operating expenses;
--------------
III.3.2 Second Priority. To pay the Partnership's debt service;
---------------
15
<PAGE>
III.3.3 Third Priority. To make Minimum Tax Distributions;
--------------
III.3.4 Fourth Priority. To make cash distributions in respect of the
---------------
Class A Preferred Partnership Interests and/or the Class B Preferred Partnership
Interests as contemplated by this Agreement; and
III.3.5 Fifth Priority. To make any other distributions to Partners.
--------------
III.4 Other Matters.
-------------
III.4.1 No Return of Capital. Except as provided in Section 5.4
--------------------
or Article IX, no Partner shall demand or receive a return of its Capital
Contributions or withdraw from the Partnership.
III.4.2 No General Partner Liability. No General Partner shall
----------------------------
have any personal liability for the repayment of any Capital Contributions of
any Limited Partner.
III.4.3 No Limited Partner Liability. The Limited Partners shall
----------------------------
not be personally liable for the debts, liabilities, contracts or other
obligations of the Partnership.
ARTICLE IV
ALLOCATIONS
-----------
Allocations of Profits, Losses, and other tax attributes set forth below
shall apply to the Partners' Capital Accounts and to the Partners as follows:
IV.1 Gross Income Allocation. In any Fiscal Year, Gross Income shall be
-----------------------
allocated among the Partners holding Preferred Partnership Interests in
accordance with their Preferred Sharing Percentages, until the cumulative amount
of Gross Income allocated pursuant to this Section 4.1 is equal to the
cumulative amount of cash distributed in payment of unpaid Preferred Return
(including Contributed Preferred Return) to the Partners holding Preferred
Partnership Interests, including, without limitation, payments of unpaid
Preferred Return upon dissolution of the Partnership.
IV.2 Profits. After giving effect to the special allocations set forth
-------
in Sections 4.1 and 4.4, Profits for any Fiscal Year shall be allocated:
IV.2.1 To Losses. First, to those Partners to which Losses have
---------
previously been allocated, in reverse order of the allocations listed in
Section 4.3 and to the extent of such Losses;
IV.2.2 To Common. Thereafter, to the Partners in proportion to
---------
their Common Sharing Percentages.
IV.3 Losses. After giving effect to the special allocations set forth
------
in Sections 4.1 and 4.4, Losses for any Fiscal Year shall be allocated:
16
<PAGE>
IV.3.1 To Common. First, among the Partners in accordance with
---------
their Common Sharing Percentages, until the cumulative amount of Losses
allocated pursuant to this Section 4.3.1 is equal to the cumulative amount of
Profits allocated pursuant to Section 4.2.2;
IV.3.2 To Common Unrecovered Capital. Next, among the Partners
-----------------------------
holding Common Partnership Interests in accordance with their Common Sharing
Percentages, to the extent of their Unrecovered Capital; and
IV.3.3 To Preferred Unrecovered Capital. Next, among the
--------------------------------
Partners holding Preferred Partnership Interests in accordance with their
Preferred Sharing Percentages, to the extent of their Unrecovered Capital; and
IV.3.4 Residual. Thereafter, among the Partners holding Common
--------
Partnership Interests in accordance with their Common Sharing Percentages; and
IV.3.5 Limit. The Losses allocated pursuant to this Section 4.3
-----
shall not exceed the maximum amount of Losses that can be so allocated without
causing or increasing an Adjusted Capital Account Deficit of any Limited Partner
at the end of any Fiscal Year. All Losses in excess of the limitations set forth
in this Section 4.3.5 shall be allocated to the General Partners in proportion
to their Common Sharing Percentages.
IV.4 Special Allocations. The following special allocations shall be
-------------------
made;
IV.4.1 Minimum Gain Chargeback. Notwithstanding anything to the
-----------------------
contrary in this Article IV, if there is a net decrease in Partnership Minimum
Gain (within the meaning of Regulations Section 1.704-2(d)) for a fiscal year,
then there shall be allocated to each Partner items of income and gain for that
year equal to that Partner's share of the net decrease in Partnership Minimum
Gain (within the meaning of Regulations Section 1.704-2(g)(2)), subject to the
exceptions set forth in Regulations Section 1.704-2(f)(2),(3), and (5);
provided, however, that if the Partnership has any discretion as to an exception
set forth in Regulations Section 1.704-2(f)(5), the Executive Committee may
exercise such discretion on behalf of the Partnership. The Executive Committee
may, if the application of this Partnership Minimum Gain chargeback requirement
would cause a distortion in the economic arrangement among the Partners, request
the Commissioner of Internal Revenue to waive the minimum gain chargeback
requirement pursuant to Regulations Section 1.704-2(f)(4). The items to be so
allocated shall be determined in accordance with Sections 1.704-2(f)(6) and
1.704-2(j)(2) of the Regulations. The foregoing is intended to be a "minimum
gain chargeback" provision as described in Regulations Section 1.704-2(f)(1) and
shall be interpreted and applied in all respects in accordance with that
Regulation.
IV.4.2 Partner Nonrecourse Debt Minimum Gain Chargeback.
------------------------------------------------
Notwithstanding anything to the contrary in this Article IV (other than Section
4.4.1 above), if during a fiscal year there is a net decrease in Partner
Nonrecourse Debt Minimum Gain (as determined in accordance with Regulations
Section 1.704-2 (i)(3)), then, in addition to the amounts, if any, allocated,
pursuant to Section 4.4.1, any Partner with a share of that Partner Nonrecourse
Debt Minimum Gain (determined in accordance with Regulations Section 1.704-2(i)
(5)) as of the beginning of the Fiscal Year shall, subject to the exceptions
set forth in Regulations Section 1.704-2(i)(4), be allocated
17
<PAGE>
items of income and gain for that year (and, if necessary, for succeeding Fiscal
Years) equal to that Partner's share of the net decrease in the Partner
Nonrecourse Debt Minimum Gain. The Executive Committee may, if the application
of this Partner Nonrecourse Debt Minimum Gain chargeback requirement would cause
a distortion in the economic arrangement among the Partners, request the
Commissioner of the Internal Revenue to waive the minimum gain chargeback
requirement pursuant to Regulations Sections 1.704-2(f)(4) and 1.704-2(i)(4).
The foregoing is intended to be the "chargeback of partner nonrecourse debt
minimum gain" required by Regulations Section 1.704-2(i)(4) and shall be
interpreted and applied in all respects in accordance with that Regulation.
IV.4.3 Qualified Income Offset. If any Partner unexpectedly receives
-----------------------
any adjustment, allocation or distribution described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4),(5) or (6), items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for such year) shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent required
by the Regulations, the Adjusted Capital Account Deficit of such Partner as
quickly as possible. An allocation pursuant to the foregoing sentence shall be
made only if and to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for in Article IV have been
tentatively made. This allocation is intended to constitute a "qualified income
offset" within the meaning of Regulations Sections 1.704-1(b)(2)(ii)(d)(3) and
shall be construed in accordance with the requirements thereof. An item of loss,
deduction or Section 705(a)(2)(B) expenditure shall not be allocated to a
Partner to the extent that, as of the end of any taxable year, such allocation
would create or increase an Adjusted Capital Account Deficit for such Partner.
Any amount that cannot be allocated to a Partner by reason of the foregoing
sentence shall be allocated to other Partners (except to the extent that such
allocation to any other Partner would also be limited under the foregoing
sentence). If allocations to all Partners would be so limited, such amount shall
be allocated to the General Partners.
IV.4.4 Basis Adjustments. To the extent an adjustment to the adjusted
-----------------
tax basis of any Partnership asset pursuant to Code Section 734(b) or Code
Section 743(b) is required under Regulation Section 1.704-1(b)(2)(iv)(m) to
be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment. increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Regulations;
provided, however, in the event that an adjustment to the Book Value of
Partnership property is made as a result of an adjustment pursuant to Section
734 (b) of the Code, items of income, gain, loss or deduction, as computed for
book and tax purposes, shall be specially allocated among the Partners so that
the effect of any such adjustment shall benefit (or be borne by) the Partner(s)
receiving the distribution which caused such adjustment.
IV.4.5 Nonrecourse Deductions. Nonrecourse Deductions for any
----------------------
Partnership Fiscal Year or other period shall be allocated among the Partners in
accordance with their Common Sharing Percentages.
IV.4.6 Partner Nonrecourse Deductions. Partner Nonrecourse
------------------------------
Deductions for any Partnership Fiscal Year or other period shall be specially
allocated to the Partner who bears the
18
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economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
IV.4.7 Allocation of Self-Charged Interest. If a Partner makes a loan
-----------------------------------
to the Partnership, to the extent permitted under Regulations Section 1.469-7,
the Partnership shall allocate to such Partner any interest deduction
specifically incurred by the Partnership as a result of such loan; provided,
however, that this Section 4.4.7 shall not affect the amount of income or loss
otherwise allocable to such Partner.
IV.4.8 Sharing of Excess Nonrecourse Liabilities. Excess nonrecourse
-----------------------------------------
liabilities, as defined in Regulations Section 1.752-3(a)(3), shall be shared by
the Partners holding Common Partnership Interests in accordance with their
respective Common Sharing Percentages.
IV.4.9 Curative Allocations. The allocations set forth in Sections
--------------------
4.4.1 through 4.4.3 (the "Regulatory Allocations") are intended to comply with
certain requirements of the Treasury Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations or
other items of Partnership income, gain, loss or deduction pursuant to this
Section 4.4.9. Therefore, notwithstanding any other provisions of this Article
IV (other than the Regulatory Allocations), the Partnership shall make such
offsetting special allocations of Partnership income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal of the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of this Agreement and all Partnership
items were allocated pursuant to Sections 4.1, 4.2, and 4.3 hereof.
IV.5 Other Allocation Rules.
----------------------
IV.5.1 Positive Basis Partners. Allocations of items of Gross
-----------------------
Income shall be made to Positive Basis Partners to the extent of any such
Partners' Positive Basis as of the date of withdrawal from the Partnership or
liquidation of such Partnership Interest.
IV.5.2 Timing. For purposes of determining the Profits, Losses or
------
any other items allocable to any period, Profits, Losses and any such other
items shall be determined on a daily, monthly or other basis, as determined by
the tax matters partner and approved by the Executive Committee using any
permissible method under Code Section 706 and the Regulations thereunder.
IV.5.3 Method. Except as otherwise provided in this Agreement, all
------
items of Partnership taxable income, gain, loss, deduction and credit shall be
allocated in the manner provided for Book Purposes and any allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Profits or Losses, as the case may be. However,
notwithstanding any other provisions of this Agreement, the General Partner
shall be allocated not less than its share of each item of Partnership income,
gain, loss, deduction or credit, except to the extent such an allocation would
be contrary to the provisions of Section 704 (b) or (c) of the Regulations.
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IV.6 Tax Allocations: Code Section 704(c).
-------------------------------------
IV.6.1 Section 704 (c). Except as otherwise provided in this
--------------
Agreement, all items of Partnership taxable income, gain, loss, deduction and
credit shall be allocated in the manner as provided for Book Purposes. For
purposes of Code Section 704(c), income, gain, loss and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take into account any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its Gross Asset Value. With respect to (i)
property contributed by a Partner, and (ii) any "reverse Code section 704(c)
allocations" resulting from the revaluation of Partnership property pursuant to
Regulations Section 1.704-1(b)(2)(iv)(f) and any post-Effective Date Section
704(c) Allocations (collectively the "Section 704(c) Allocations"), the various
allocation methods set forth in Exhibit 4.6.1 attached hereto shall apply with
respect to any such Section 704(c) Allocations. Allocations pursuant to this
Section 4.6.1 are solely for purposes of federal, state and local taxes, and,
except as provided in Exhibit 4.6.1, shall not affect, or in any way be taken
into account in computing, any Partner's Capital Account or share of Profits,
Losses, other items, or distributions (other than Minimum Tax Distributions and
Net Profits Allocations) pursuant to any provision of this Agreement.
IV.6.2 Election. The Partnership shall make the election described
--------
in Code Section 754 for its taxable year including the Effective Date. Any other
elections or other decisions relating to allocations shall be made by the
Executive Committee in any manner that reasonably reflects the purpose and
intention of this Agreement.
IV.7 Tax Matters Partner.
-------------------
IV.7.1 Appointment. By executing this Agreement, each Partner
-----------
appoints and designates Petro as the "tax matters partner" of the Partnership,
as such term is defined under the Code. Any action taken by the tax matters
partner that could adversely affect the taxes of the Partnership or any Partner,
including any extension of the statute of limitations, shall be subject to the
unanimous approval by the Executive Committee which approval shall not be
unreasonably withheld or inconsistent with prevailing authority. Any such
action, to the extent permitted by law, shall be binding upon the Partners. To
the extent permitted by law, each Partner further agrees that such Partner will
not treat any Partnership item inconsistently on such Partner's income tax
return with the treatment of the item on the Partnership's tax return and that
such Partner will not independently act with respect to tax audits or tax
litigation affecting the Partnership, unless previously authorized to do so in
writing by the Executive Committee, which authorization may be withheld in the
reasonable discretion of the Executive Committee.
IV.7.2 Elections. At the direction of the Executive Committee, the
---------
tax matters partner shall cause the Partnership to make all elections required
or permitted to be made by the Partnership under the Code and not otherwise
expressly provided for in this Agreement, in the manner that the Executive
Committee determines will be most advantageous to all Partners.
IV.7.3 Miscellaneous. The tax matters partner shall be (i) the
-------------
"designated organizer" of the Partnership for the purpose of registering it as a
tax shelter pursuant to Section 6111 of the
20
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Code and Temporary Treasury Regulation (S) 301.6111-1T and (ii) the "designated
person" for the purpose of maintaining lists of investors in the Partnership
pursuant to Section 6111 of the Code and Temporary Treasury Regulation (S)
301.6112-1T. The tax matters partner shall timely cause the Partnership to be
registered as a tax shelter if required under Section 6111 of the Code and shall
take all actions required by Section 6112 of the Code to maintain a list of the
names of the Limited Partners, their addresses, and their taxpayer
identification numbers, to the extent such information is provided to the tax
matters partner.
IV.7.4 Reimbursement. For purposes of fulfilling and diligently
-------------
carrying out its duties as the tax matters partner, the tax matters partner
shall be entitled to reimbursement from the Partnership of all reasonable
expenses incurred by it and shall be entitled to utilize Partnership personnel
and employ, at Partnership expense, accountants, attorneys and any other
professional advisors. Any reimbursement hereunder in excess of $20,000 per
year shall be subject to the approval of the Executive Committee.
ARTICLE V
DISTRIBUTIONS
-------------
V.1 Distributions.
-------------
V.1.1 Authority. The Executive Committee may make such
---------
distributions at such times and in such amounts as it considers appropriate in
its absolute discretion; provided that any Minimum Tax Distributions pursuant to
Section 5.1.2(a) shall be made on not less than a quarterly basis, and in each
such case, on a day which is no less than five (5) days prior to the estimated
tax payment dates of January 15, April 15, June 15 and September 15 of each
calendar year.
V.1.2 Priority of Cash Distributions. Available Cash, plus an
------------------------------
amount equal to the Minimum Tax Distributions ("Distributable Cash"), shall be
distributed to the Partners as follows:
(a) First, to each Partner in an amount equal to its Minimum
Tax Distribution as determined in accordance with Section 5.2;
(b) Next, among the Partners in proportion to their Class A
Preferred Partnership Interests until each such Partner has received an amount
equal to the amount of its current Class A Preferred Return and any unpaid
accrued Class A Preferred Return (including the Contributed Preferred Return);
provided, however, if the Class B Preferred Partnership Interest has been
converted pursuant to Section 3.2, then the priority of distributions in this
Section 5.1.2(b) shall be first to the accrued but unpaid Class B Preferred
Return and then in respect of the Class A Preferred Partnership Interests, as
set forth above, provided, further, that the priority of distributions under
this Section 5.1.2(b) shall in all respects be subject to the provisions of
Section 5.4.4;
(c) Next, pro rata to those Partners who have Aggregate
Distribution Shortfalls until each Partner has received an amount equal to the
Partner's Aggregate Distribution Shortfall;
21
<PAGE>
(d) Next, to the Partners in proportion to their Preferred
Sharing Percentages to the extent of any Unrecovered Capital therefor;
(e) Next, to the Partners in proportion to their Common
Sharing Percentages to the extent of any Unrecovered Capital therefor; and
(f) Thereafter, to the Partners in accordance with their
positive Capital Account balances after adjusting such Capital Account balances
to take into account the distributions under Sections 5.1.2(a) through (e)
above.
V.2 Minimum Tax Distributions. Pursuant to this Section 5.2, a
-------------------------
distribution for the payment of federal, state and local Income Taxes for a
Partner (a "Minimum Tax Distribution") for each applicable period shall be made
to a Partner holding a Common Partnership Interest in an amount equal to the
U.S. Taxes Due for such Partner, less Cumulative Minimum Tax Distributions. In
addition, any Minimum Tax Distributions for a current Fiscal Year shall be
reduced by any other distributions made to a Partner with respect to its Common
Partnership Interest but shall not be reduced for distributions, if any, made
with respect to a Partner's Preferred Partnership Interest.
Notwithstanding the reductions required under this Section 5.2, in no event
will a Partner receive a distribution with respect to Minimum Tax Distributions
in an amount less than needed to pay such Partner's Current U.S. Taxes Due.
Minimum Tax Distributions shall be determined with regard to the allocation
related to the basis adjustments pursuant to Code Section 743(b). Minimum Tax
Distributions hereunder shall be made by the Partnership pursuant to Section
5.1.2(a) only with respect to Net Profits Allocations on or after January 1,
1999. Minimum Tax Distributions and all factors relevant to the determination
thereof shall be determined on a consolidated basis with the Partnership's
subsidiaries.
V.3 Distribution to Limited Partners. It is the intent of the parties
--------------------------------
hereto that no distribution to any Limited Partner shall be deemed a return of
money or other such property in violation of the Act. This provision shall be
deemed to be a compromise within the meaning of Section 17-502(b) of the Act,
and the Limited Partner receiving any such money or property shall not be
required to return any such money or property to the Partnership, any creditor
of the Partnership or any other Person. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, any
Limited Partner is obligated to return such money or property, such obligation
shall be the obligation of such Limited Partner and not of the General Partners.
V.4 Redemption of Preferred Partnership Interests.
---------------------------------------------
V.4.1 Class A Preferred Partnership Interests. On October 27, 2008
---------------------------------------
(the "Class A Redemption Date"), the Partnership shall redeem the Class A
Preferred Partnership Interests by distributing to the Partners holding such
interests amounts equal to the Unrecovered Capital with respect thereto and any
unpaid and accrued Class A Preferred Return (including the Contributed Preferred
Return) with respect thereto through the date of redemption. Upon redemption of
any
22
<PAGE>
Class A Preferred Partnership interest in accordance with this Section 5.4.1
such Class A Preferred Partnership Interest shall be deemed canceled.
V.4.2 Class B Preferred Partnership Interests. On the tenth
---------------------------------------
anniversary of the Effective Date (the "Class B Redemption Date"), if the Class
A Preferred Partnership Interests have been fully redeemed pursuant to the
provisions of Section 5.4.1 and if the Class B Preferred Interests have not been
previously converted pursuant to the provisions of Section 3.2, the Partnership
shall redeem the Class B Preferred Partnership Interests by distributing to the
Partners holding such interests amounts equal to the Unrecovered Capital with
respect thereto and any unpaid and accrued Preferred Return with respect thereto
through the date of redemption. Upon redemption of any Class B Preferred
Partnership Interest in accordance with this Section 5.4.2, such Class B
Preferred Partnership Interest shall be deemed canceled.
V.4.3 Early Redemption. In the event that the Partnership offers
----------------
to redeem any Preferred Partnership Interests prior to the respective Redemption
Dates referred to above, such offer shall be made (i) first to the Partners
holding the Class B Preferred Partnership Interests, then (ii) to the Partners
holding the Class A Preferred Partnership Interests on a pro rata basis
according to their ownership of such Class A Preferred Interests
V.4.4 Failure to Redeem.
-----------------
(a) If the Partnership fails to redeem in full the Class A
Preferred Partnership Interests on or prior to the Class A Redemption Date, then
in that event no cash distributions in respect of the Class B Preferred
Partnership Interests shall be made until the Class A Preferred Partnership
Interests have been fully redeemed.
(b) If the Partnership fails to redeem the unconverted Class B
Preferred Partnership Interests on or prior to the Class B Redemption Date and
if the Class A Preferred Partnership Interests have been fully redeemed, then in
that event, no cash distributions other than Minimum Tax Distributions, shall be
made to Partners until the Class B Preferred Partnership Interests have been
fully redeemed.
(c) If the Partnership fails to redeem both the Class A and
the unconverted Class B Preferred Partnership Interests on or prior to their
respective Redemption Dates, then in that event, any distribution in redemption
thereof shall be made to the Partners holding all unredeemed Preferred
Partnership Interests, pro rata based upon each Partner's Unrecovered Capital
plus the accrued but unpaid Preferred Return with respect thereto.
V.5 Limitation of Distributions. Notwithstanding any provision to the
---------------------------
contrary contained in this Agreement, the Partnership, and the Executive
Committee on behalf of the Partnership, shall not make a distribution to any
Partner on account of its interest in the Partnership if such distribution would
violate Section 17-607 of the Act or other applicable law, or any bank credit
agreements or indenture debt instruments to which the Partnership is a party.
23
<PAGE>
ARTICLE VI
MANAGEMENT
----------
VI.1 Board of Directors.
------------------
VI.1.1 Authority. The Partners hereby agree that pursuant to Section
---------
17-403 of the Act, the Partnership shall be managed by a committee of the
Partners' representatives elected, designated or otherwise chosen as herein
provided (the "Board of Directors"). The Board of Directors shall constitute a
"committee" for purposes of Section 17-303(b)(7) of the Act. The Board of
Directors shall exercise all of the rights, powers and authority otherwise
vested in a general partner of a Delaware limited partnership formed under the
Act to manage and control the overall business and affairs of the Partnership
and to do on behalf of the Partnership all things that are necessary, proper or
desirable to accomplish the purpose of the Partnership with respect to the
policy and direction of the Partnership. The Board of Directors may authorize
and direct the officers of the Partnership to engage in any kind of activity and
to execute, perform and carry out agreements of any kind necessary to, or in
connection with or convenient or incidental to, the accomplishment of the
purpose of the Partnership, so long as such activities and agreements may be
lawfully carried on or performed by a limited partnership under the laws of the
State of Delaware. To the fullest extent permitted under the Act, the General
Partner shall have none of the rights and powers of a general partner of a
limited partnership formed under the Act and shall have no right or
responsibility with respect to the management or control of the business or
affairs of the Partnership; provided, however, that if under the Act any right
or power must be exercised by the General Partner in its capacity as a general
partner of the Partnership, or any action must be taken by the General Partner
in such capacity, then the General Partner agrees to exercise such right or
power or to take such action at the direction of the Board of Directors and in
conformity with such direction. The Partners further agree that the rights and
powers vested in the Board of Directors pursuant to this Section 6.1.1 are
vested in the Board of Directors pursuant to paragraph (a) of Section 17-403 of
the Act; provided, however, that to the extent such rights and powers, or any of
them, cannot be vested in the Board of Directors pursuant to paragraph (a) of
Section 17-403 of the Act, then the Partners agree that such rights and powers
have been delegated by the General Partner to the Board of Directors pursuant to
paragraph (c) of Section 17-403 of the Act and, to the fullest extent provided
by law, such delegation shall be irrevocable; provided further that in the
event, notwithstanding the agreement of the Partners to the contrary, the
delegation of any right or power provided herein may be revoked by the General
Partner, the Partners agree that any such revocation will only be effective, if
at all, upon 90 days prior written notice by the General Partner to each other
Partner. The Limited Partners shall have no part in the management or control of
the Partnership, shall have no authority or right to act on behalf of the
Partnership in connection with any matter and, except as expressly provided
herein or as required by the Act, shall have no right to consent to or approve
any action by the Board of Directors. Without limiting the generality of the
duties and obligations of the Board of Directors hereunder, except as expressly
provided to the contrary herein, the following powers are reserved exclusively
to the Board of Directors unless specifically delegated by the Board of
Directors to the Executive Committee or to any Person:
(a) to employ, retain, and terminate a Chairman of the Board
of Directors ("Chairman"), who shall have the authority set forth in Section
6.3.1 and, subject to the authority of
24
<PAGE>
the Chairman, to employ and retain Persons and to prescribe the powers and
duties of such Persons, as may be necessary or appropriate for the conduct of
the Partnership's business.
(b) to elect the Board of Directors of Petro Operating, which
shall be identical to the Board of Directors of the Partnership.
(c) subject to the final review and approval of the Executive
Committee under Section 6.2.1(e), to amend or cancel any agreement (subject to
the provisions of such agreement), between the Partnership and a Partner or
Affiliate of a Partner, or enter into a new agreement between the Partnership
and a Partner or Affiliate of a Partner, provided that the terms of such
agreement are no less favorable than available from unrelated third parties.
(d) acquire, terminate operations of, and/or dispose of any
real property that is intended to serve, or has been serving, as a truck stop in
the business of the Partnership;
(e) as a franchisor, enter into a franchise agreement with any
Person; or
(f) to adopt the annual budget of the Partnership and to
approve any annual variance from the amount budgeted for capital expenditures;
(g) subject to existing employment agreements and to the
provisions of Section 6.3, to establish the limits of the Partnership's
officers' authority;
(h) to select auditors for the Partnership and to manage the
conduct and settlement of the Partnership's legal proceedings;
(i) subject to Section 6.4, to sell Partnership Interests to
third parties, or to receive additional capital contributions from Partners;
(j) to make distributions to Partners pursuant to Section 5.2;
(k) to disburse other payments as provided for in this
Agreement;
(l) to communicate with the general public, if necessary,
regarding Partnership matters;
(m) to issue to any Partner, in such form and on such terms as
the Board of Directors may consider appropriate, an instrument certifying that
such Partner is the owner of a Partnership Interest; and
(n) generally to provide all other executive and
administrative undertakings for and on behalf of the Partnership.
VI.1.2 Limitations on Authority. The Board of Directors shall have
------------------------
no authority to:
(a) do any act in contravention of this Agreement;
25
<PAGE>
(b) do any act that would make it impossible to carry on the
ordinary business of the Partnership; and
(c) take any action that has been vetoed by a Partner having
a Partner Veto Right as described in Section 6.4.
VI.1.3 Duties and Obligations. The Board of Directors shall cause
----------------------
the Partnership to conduct its dealings with third parties in its own name and
as a separate and independent entity. The Board of Directors shall take or
cause to be taken all actions that may be necessary or appropriate for the
continuation of the Partnership's valid existence as a limited partnership under
the laws of the State of Delaware.
VI.1.4 Composition. Subject to paragraph (e) of this Section 6.1.4,
-----------
the Board of Directors shall initially consist of seven (7) persons who shall be
appointed in accordance with the provisions of this Article as follows:
(a) So long as any of the Cardwell Partners own any
Partnership Interests, the Cardwell Partners collectively shall have the right
to appoint two persons to the Board of Directors. The Cardwell Partners hereby
appoint Cardwell Sr. and Cardwell Jr. as initial members of the Board of
Directors.
(b) So long as Mobil or its Affiliates own any Partnership
Interests, Mobil shall have the right to appoint two persons to the Board of
Directors. Mobil hereby appoints K. T. Weir and N. B. Carlson as initial
members of the Board of Directors.
(c) So long as Volvo or its Affiliates own any Partnership
Interests, Volvo shall have the right to appoint two persons to the Board of
Directors. Volvo hereby appoints Robert Grussing IV and Martha P. Boyd as
initial members of the Board of Directors.
(d) The Cardwell Partners, Mobil and Volvo hereby agree that
the seventh member of the Board of Directors shall be Larry J. Zine ("Zine"),
and he is hereby appointed to the Board of Directors. Should Zine resign or be
removed as a member of the Board of Directors, his replacement, if any, shall be
elected by unanimous vote of the Cardwell Partners, Mobil and Volvo.
(e) If a Partner is no longer entitled to appoint members of
the Board of Directors, any members of the Board of Directors that it appointed
shall be automatically removed from the Board of Directors as of the date such
Partner ceased to be entitled to appoint members to be the Board of Directors.
VI.1.5 Term; Vacancies. Each member of the Board of Directors
---------------
shall hold office until death, resignation or removal. If a vacancy occurs on
the Board of Directors, the Partner or Partners that appointed such vacating
member shall appoint such member's successor.
VI.1.6 Voting. Each member of the Board of Directors shall be
------
entitled to one vote on all matters submitted to a vote of the Board of
Directors.
26
<PAGE>
VI.2 Executive Committee.
-------------------
VI.2.1 Authority. The Partnership shall have an executive
---------
committee (the "Executive Committee") of the Board of Directors (which committee
shall also be the Environmental Compliance Committee of the Board of Directors),
and the Board of Directors hereby delegates to the Executive Committee the
authority to take the following actions and to delegate such authority to any
Person:
(a) during the period between meetings of the Board of
Directors, to take action with respect to matters as to which the Board of
Directors has authority to act.
(b) to terminate the employment of the Chairman and Chief
Executive Officer.
(c) to change or adopt any incentive compensation plans for
officers, employees and agents of the Partnership and to determine amounts
payable under such plans.
(d) to approve the initial compensation of the officers of the
Partnership, and to approve any base compensation payable to an employee or
agent of the Partnership that exceeds $100,000 annually for such person.
(e0 to approve any transaction (provided that such transaction
is material in the context of the Partnership's overall business) entered into
subsequent to the Effective Date, between the Partnership and a Partner or a
Partner's Affiliate.
(f) acting as the Environmental Compliance Committee, to
document, formulate, implement and oversee the environmental compliance policy
of the Partnership, which activity and responsibility shall be conducted by
unanimous vote of the members of such committee.
(g) to take such other actions as are specifically provided
for in this Agreement.
VI.2.2 Composition. The Executive Committee shall consist of three
-----------
persons, appointed as follows:
(a) The Cardwell Partners collectively shall have the right to
appoint one person to the Executive Committee, and they hereby appoint Cardwell
Sr. as their initial representative to that committee.
(b) Mobil shall have the right to appoint one person to the
Executive Committee and Mobil hereby appoints K. T. Weir as its initial
representative to that committee.
(c) Volvo shall have the right to appoint one person to the
Executive Committee, and Volvo hereby appoints Robert Grussing IV as its initial
representative to that committee.
27
<PAGE>
(d) A Partner shall no longer be entitled to representation on
the Executive Committee if it no longer is entitled to appoint any members of
the Board of Directors or have representatives thereon.
(e) The membership of the Executive Committee and of the
Executive Committee of Petro Operating shall be identical.
VI.2.3 Voting. Each member of the Executive Committee shall be
------
entitled to one (1) vote on all matters submitted to the Executive Committee for
consideration.
VI.3 Officers. The Partnership and Petro Operating shall have the officers
--------
set forth in this Section 6.3 and such additional officers as the respective
Boards of Directors may designate. The officers of the Partnership and of Petro
Operating shall be identical and shall manage the day-to-day affairs of the
Partnership and Petro Operating at the direction of their respective Boards of
Directors or Executive Committees.
VI.3.1 Chairman. The Partnership shall have a Chairman of the
--------
Board of Directors (the "Chairman") . The Chairman shall preside at all meetings
of the Partners and all meetings of the Board of Directors. The Partners hereby
appoint Cardwell Sr. as the initial Chairman, Chief Executive Officer and
President of the Partnership. After consultation with the Board of Directors
and/or the Executive Committee, the Chairman, so long as the Chairman is
Cardwell Sr., shall have the authority to hire, and to terminate the employment
of, any other officer or employee of the Partnership. If Cardwell Sr. is no
longer Chairman, the foregoing authority shall revert to the Board of Directors.
VI.3.2 Chief Executive Officer. The Partnership shall have a
-----------------------
Chief Executive Officer who, subject to the authority of the Board of Directors
and the Executive Committee, shall manage the business and affairs of the
Partnership. In the absence of the Chairman, the Chief Executive Officer shall
preside at all meetings of the Partners and all meetings of the Board of
Directors. The Chief Executive Officer shall carry out the directives of the
Board of Directors.
VI.3.3 President. The Partnership shall have a President who,
---------
subject to the authority of the Board of Directors and the Executive Committee,
shall serve under the direction of the Chief Executive Officer. In case of the
incapacity or inability of the Chief Executive Officer to act, the President
shall assume the authority, and shall perform the duties, of the Chief Executive
Officer until such time as the Board of Directors shall determine otherwise
VI.3.4 Chief Financial Officer. The Partnership shall have a
-----------------------
Chief Financial Officer who shall serve under the direction of the Chief
Executive Officer.
VI.3.5 Secretary. The Secretary shall attend all meetings of the
---------
Board of Directors and all meetings of the Partners and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for any committees of the Board of Directors, if requested
by such committee. He shall give, or cause to be given, notice of all meetings
of Partners and special meetings of the Board of Directors, and shall perform
such other duties as
28
<PAGE>
may from time to time be prescribed by the Board of Directors or the Chairman.
He shall have custody of the seal of the Partnership, if any, and he, or an
Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary.
VI.3.6 Limitation. A Limited Partner, any Affiliate thereof, or an
----------
employee, stockholder, partner, member, manager, agent, director, officer or
representative of a Limited Partner or any Affiliate thereof, may also be an
employee, agent, stockholder, partner, member, manager, director, officer or
representative of the Partnership or a General Partner. The existence of these
relationships and acting in such capacities will not result in the Limited
Partner being deemed to be participating in the control of the business of the
Partnership or otherwise affect the limited liability of the Limited Partner.
VI.3.7 Authority Generally. Unless specifically reserved to the
-------------------
Board of Directors under this Agreement, the officers of the Partnership shall
have such authority as is necessary and appropriate to carry out the functions
of such officer. Each officer of the Partnership shall have such additional
authority, including authority to execute documents, instruments and agreements
on behalf of the Partnership, as is expressly delegated to such officer by the
Board of Directors. One Person may hold one or more offices simultaneously.
VI.4 Major Decisions.
---------------
VI.4.1 In General. The Partnership shall not take any of the
----------
following actions ("Major Decisions") without the consent of all Partners having
Partner Veto Rights:
(a) Permit the tax matters partner to take any position or
make any decision that could materially adversely affect the Partnership or any
Partner;
(b) In accordance with Section 8.1, amend this Agreement;
(c) Amend, or consent to the amendment of, the Limited
Partnership Agreement of Petro Operating;
(d) In accordance with, and subject to, Section 9.4, admit any
new Limited Partner to the Partnership; and
(e) Request the holders of Common Partnership Interests to
make additional Capital Contributions, or to sell additional Partnership
Interests to third parties.
VI.4.2 Partner Veto Rights. So long as they are Partners, the
-------------------
Cardwell Partners, Mobil, and Volvo shall have the right to veto ( "Partner Veto
Rights") any of the Major Decisions set forth in Section 6.4.1.
VI.4.3 Additional Limitations on Actions of the Partnership.
----------------------------------------------------
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(a) So long as Mobil (or its Affiliates) is a Partner, the
Partnership shall take no action related to Petro Operating's motor fuels,
lubricants and convenience store marketing strategy that is (in Mobil's
reasonable opinion) a material adverse change to Mobil or its Affiliates,
provided, however, that the provisions hereof shall not prevent the Partnership
from acquiring one or more truck stops, if such acquired truck stops will not be
branded "Petro" or "Mobil" until they meet Partnership and Petro Operating's
standards.
(b) So long as Volvo (or its Affiliates) is a Partner, the
Partnership shall take no action related to Petro Operating's retail marketing
strategy that would (in Volvo's reasonable opinion) have a material adverse
effect on Volvo's brand image or on its truck sales and service operations.
VI.4.4 Voting. Except as specifically set forth in Section 17-216
------
of the Act, no Partner shall have any right to vote on any matter relating to
the Partnership except as expressly provided in this Agreement. No class of
Partners shall have any right to vote as a class on any matter relating to the
Partnership except as expressly provided in this Agreement.
VI.5 Right to Rely on Chairman or Secretary. Any Person dealing with
--------------------------------------
the Partnership may rely (without duty of further inquiry) upon a certificate
signed by the Chairman or Secretary as to the identity of any Partner, the
Persons who are authorized to execute and deliver any instrument or document of
the Partnership and any act or failure to act by the Partnership or any other
matter whatsoever involving the Partnership or any Partner.
VI.6 Meetings and Approval Requirements of Board of Directors and
------------------------------------------------------------
Committees.
- ----------
VI.6.1 Regular Meetings. The Board of Directors and its committees
----------------
shall hold regular meetings at such times and places as are established by the
consent of the Board of Directors or such committees.
VI.6.2 Special Meetings. A special meeting of the Board of
----------------
Directors or any committee thereof shall be held at the written request of any
member of the Board of Directors or such committee.
VI.6.3 Telephonic Meetings. Any meeting of the Board of Directors
-------------------
or any committee thereof may be held by conference telephone call or through
similar communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in a telephonic meeting held
pursuant to this Section shall constitute presence in person at such meeting.
VI.6.4 Notices. Notices of regular meetings of the Board of
-------
Directors or its committees are not required. Notices of special meetings of the
Board of Directors or its committees shall state the date and hour of the
meeting and the purpose or purposes for which the meeting is called. Special
meetings shall be held at the address of the Partnership or at such other place
as shall be agreed to by the members of the Board of Directors or such
committee. The notice of a special meeting shall be given to each member of the
Board of Directors or its committees in writing not less than one (1) or more
than ten (10) days prior to the date of the meeting. Members of the Board of
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Directors or its committees may waive in writing the notice requirements
hereunder before, at or after the relevant special meeting. Notices shall be
delivered personally, by telecopy or recognized overnight delivery service to
the last known business address of each member of the Board.
VI.6.5 Quorum. At each meeting of the Board of Directors or its
------
committees, the presence in person or by telephone of a majority of the votes of
the members of the Board of Directors or such committee, provided that at least
one nominee of each of the Cardwell Partners, Mobil and Volvo (so long as each
shall be entitled to membership thereon) shall be present, shall be necessary to
constitute a quorum for the transaction of business.
VI.6.6 Approval Requirements. Subject to Section 6.4.1 (relating
---------------------
to Major Decisions), consent or approval of the Board of Directors or its
committees shall mean the affirmative vote of a majority of the votes of the
members of the Board of Directors or such committees present in person or by
telephone, as applicable, and voting at a duly held meeting of the Board of
Directors or its committees.
VI.6.7 Written Consents. Any action required or permitted to be
----------------
taken at a meeting of the Board of Directors or its committees may be taken
without a meeting if all of the members of the Board of Directors or such
committee consent thereto in writing. Such consents shall be filed with the
minutes of the proceedings of the Board of Directors or such committee.
ARTICLE VII
INDEMNIFICATION
---------------
VII.1 General.
-------
(a) No current or former Partner of the Partnership or of Petro
Operating, nor any of the shareholders, partners, officers, directors, members,
managers, employees and/or agents of such Partner and/or of such Partner's
Affiliates, including the tax matters partner, each member of the Board of
Directors of the Partnership and of Petro Operating and each committee thereof,
the officers of the Partnership and of Petro Operating, and the shareholders,
officers, and directors of Warrant Holdings which serve in any of those
positions at the request of the Partners or of the Board of Directors of the
Partnership or of Petro Operating (individually, an "Exculpated Party"), shall
be liable, responsible or accountable in damages or otherwise (i) to the
Partnership, (ii) to any Partner (including Warrant Holdings, its officers,
directors, and/or security holders), or (iii) to any Affiliate of a Partner and
shall be indemnified and held harmless by the Partnership, to the fullest extent
permitted by law, with respect to any liability, damage, loss, injury, expense
and cost (including reasonable attorney's fees) ("Indemnified Loss") to any
Person for any act or omission performed or omitted: (a) in good faith on behalf
of the Partnership; (b) in a manner reasonably believed by such Exculpated Party
to be within the scope of the authority granted to such Exculpated Party by this
Agreement, the Board of Directors, or otherwise; and (c) in a manner not
constituting willful misconduct, fraud, breach of such Exculpated Party's
fiduciary duty of loyalty, or gross negligence.
(b) The Partnership shall indemnify, defend and hold harmless
each Exculpated Party, to the fullest extent permitted by law, for any such acts
or omissions, and for any
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acts or omissions not meeting such requirements to the extent that a court
determines that in view of all the circumstances of the case, such Exculpated
Party is fairly and reasonably entitled to indemnification for those expenses
that the court deems proper. If approved by the Board of Directors, expenses
(including reasonable attorney's fees and costs) incurred by an Exculpated Party
in defending any civil, criminal, administrative or investigative action, suit
or proceeding shall be paid by the Partnership in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Exculpated Party to repay such amount if it shall
ultimately be determined that such Exculpated Party is not entitled to be
indemnified by the Partnership.
(c) With respect to the foregoing, the Partners hereby
specifically agree that any Partner or Affiliate of any Partner who may serve as
an officer, director, and/or shareholder of Warrant Holdings is doing so at the
request of, and as an accommodation to, the Partnership and to the Partners and
their Affiliates and in furtherance of Partnership business. Accordingly, any
such Person serving as an officer, director, and/or shareholder of Warrant
Holdings shall be deemed to be an Exculpated Party entitled to the full
protections afforded an Exculpated Party or Indemnified Person under the
provisions of this Article VII.
VII.2 Indemnification Procedures. The provisions of this Section 7.2
--------------------------
shall apply to any indemnification by the Partnership, including any
indemnification of an Exculpated Party.
VII.2.1 Notice. Promptly after the determination of an Indemnified
------
Loss or the assertion of any claim or the commencement of any action by any
third party in respect of which a Person is entitled to be indemnified or held
harmless under this Agreement (an "Indemnified Person"), the Indemnified Person
shall notify the Partnership in writing of the Indemnified Loss or the assertion
of claim or commencement of action.
VII.2.2 Reimbursement. In the case of an Indemnified Loss not
-------------
involving an assertion of claim or commencement of action by any third party,
the Partnership shall promptly reimburse the Indemnified Person for all damages,
loss, injury, expense and costs, including reasonable attorneys, fees and costs
which the Indemnified Person has suffered or may thereafter suffer as a result
thereof.
VII.2.3 Defense by Partnership. Promptly after the assertion of
----------------------
any claim or the commencement of any action by any third party in respect of
which an Indemnified Person is entitled to be indemnified or held harmless under
this Agreement, the Indemnified Person shall notify the Partnership in writing
of such assertion or commencement. Subject to Section 7.2.4 below, the
Partnership shall, at its expense, assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Person, in which event the
Partnership shall have full control of the defense, including any compromise or
settlement; provided, however, that any settlement requiring material
nonmonetary consideration from the Indemnified Person must be approved in
advance by the Indemnified Person, which approval shall not be unreasonably
withheld.
VII.2.4 Defense by Indemnified Person. If the Partnership fails
-----------------------------
to diligently promptly defend or settle the claim or action after notice, which
failure continues for more than thirty (30) days after such notice, then in that
event the Indemnified Person shall have the right to defend,
32
<PAGE>
at the sole cost and expense of the Partnership, the claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Person to a final conclusion or settled. In such event, the
Indemnified Person shall have full control of such defense and proceedings,
provided, however, that without the Partnership's consent, which shall not be
unreasonably withheld, the Indemnified Person may not enter into any compromise
or settlement of such claim; and provided, further, however, that if the
Indemnified Person receives a bona fide offer of monetary settlement (without
the requirement for material nonmonetary settlement terms that the Indemnified
Person in its sole discretion determines to be contrary to the Indemnified
Person's best interests) for any such claim with respect to which the
Partnership is obligated to indemnify such Indemnified Person, the Indemnified
Person shall inform the Partnership of the proposed settlement terms and if the
Partnership is willing and able to pay such settlement upon its terms but the
Indemnified Person is not willing to settle on such terms, the maximum
indemnification that the Partnership must provide to the Indemnified Person with
respect to such claim shall be the amount of such bona fide offer of settlement
the Partnership was willing and able to pay (plus expenses and costs, including
reasonable attorneys' fees, incurred to the date such settlement offer is
rejected by the Indemnified Person). If requested by the Indemnified Person, the
Partnership shall, at its sole cost and expense, cooperate with the Indemnified
Person and its counsel in contesting any claim related to the Indemnified Loss
that the Indemnified Person is contesting, or, if appropriate and related to the
claim in question, in making any compulsory counterclaim against the Person
asserting the claim or any cross-complaint against any Person.
VII.2.5 Fees and Expenses. The Indemnified Person shall have the
-----------------
right to employ separate counsel in any action and to participate therein, but
the fees and expenses of such counsel shall be at the expense of the Indemnified
Person unless (i) the employment thereof has been specifically authorized by the
Partnership in writing, (ii) Section 7.2.4 above shall be applicable, or (iii)
the named parties to such action (including any impleaded parties) include both
the Partnership and the Indemnified Person, and the Indemnified Person shall
have been advised by counsel that there are likely to be one or more meritorious
legal defenses available to it which are different from or in addition to those
available to the Partnership. In the event any of the conditions set forth in
this Section 7.2.5 are met, the Partnership shall not have the right to assume
the defense of such action on behalf of the Indemnified Person but shall
indemnify the Indemnified Person against all litigation expenses (including
reasonable fees and expenses of counsel) in connection with such defense. In the
event the conditions set forth in this Section 7.2.5 are met, the Indemnified
Person shall have the right to select such Person's counsel, which counsel must
be reasonably satisfactory to the Partnership.
VII.2.6 Periodic Payments. Indemnification hereunder shall be made
-----------------
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or loss, damage,
liability, cost or expense is incurred; provided, however, that no settlement or
compromise of any claim asserted or action commenced in respect of which the
Partnership will be liable in accordance with its indemnity under this Agreement
shall give rise to liability of the Partnership unless the Partnership shall
have been notified in writing of the proposed settlement or compromise and shall
have consented in writing thereto, which consent shall not be unreasonably
withheld. Promptly after the discovery of any facts or circumstances giving
rise to any claim for indemnification under this Agreement, the Indemnified
Person shall notify the other parties of the existence of such claim and the
basis therefor, provided, however, that the failure of any
33
<PAGE>
Indemnified Person to give such notice promptly shall not relieve the
Partnership of the indemnity obligations except to the extent that such failure
shall adversely affect the ability to defend against third party claims or
actions to which the indemnity obligation applies.
VII.2.7 Insurance. The liability of the Partnership hereunder shall
---------
be reduced by the amount of insurance, including title insurance and liability
insurance, and any other amounts that may be recovered by the Indemnified Person
from any third party, provided, however, that the Indemnified Person shall have
no obligation to exhaust available remedies against any insurer or other third
party, and it shall be the obligation of, and at the sole expense of, the
Partnership to pursue any remedies that may be available from any third party to
reduce the amount otherwise payable by the Partnership and the Indemnified
Person shall use reasonable efforts to assist and cooperate with the Partnership
(at the expense of the Partnership) in pursuing such remedies. So long as the
Partnership shall be diligently pursuing remedies against any such third party,
which remedies counsel for the Partnership (who shall be reasonably acceptable
to the Indemnified Person) shall have informed the Indemnified Person to be
reasonably meritorious in the opinion of such counsel, and so long as the
Partnership shall have posted such bonds and otherwise entered into arrangements
satisfactory to the Indemnified Person (in such Person's sole but reasonable
discretion) to assure the Indemnified Person that it will not be adversely
affected by delay in payment (including the loss of interest or the cost of
funds, as applicable) by the Partnership, the Partnership may defer payment of
amounts which they would otherwise be obligated to pay hereunder to the extent
that such third party may be liable therefor. If in the opinion of the
Indemnified Person, the Indemnified Person has remedies available to it against
third parties and the Partnership does not have such remedies available to it
against the same third parties, then at the option of the Partnership, the
Indemnified Person shall, at the sole cost of the Partnership, exhaust available
remedies against any such third party; provided, however, that the Partnership
shall use all reasonable efforts to assist and cooperate with the Indemnified
Person (at the expense of the Partnership) in pursuing such remedies; and
provided further, however, that the Partnership shall have posted such bonds and
otherwise entered into arrangements satisfactory to the Indemnified Person (in
such Person's sole but reasonable discretion) to assure the Indemnified Person
that it will not be adversely affected by delay in payment (including loss of
interest or cost of funds, as applicable) by the Partnership.
VII.3 No Personal Liability for Indemnification. Notwithstanding
-----------------------------------------
anything to the contrary in this Agreement, in no event will any indemnification
obligation set forth in this Article VII or otherwise subject any Partner to
personal liability.
ARTICLE VIII
AMENDMENTS
----------
VIII.1 Amendments. This Agreement may be amended if such amendment is
----------
approved by the Partners having Partner Veto Rights; provided, however, that no
provision of this Agreement may be amended in a manner which would alter or
change the powers, preferences or special rights of the Partnership Interests of
a Partner so as to adversely affect the rights of the holder of such Partnership
Interests or such Partner without the consent of such Partner. Amendments to
this Agreement may be made only by an instrument in writing signed by the
Partners whose consent is required. Without the consent of any other Person, the
Board of Directors shall amend and revise
34
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Schedule A to this Agreement to properly reflect any changes required to be
reflected thereon by this Agreement.
ARTICLE IX
ADMISSIONS, EXITS AND TRANSFERS
-------------------------------
IX.1 Restriction on Transfers by Partners.
------------------------------------
IX.1.1 Generally. No Partner shall sell, assign or otherwise dispose
---------
of or transfer ("Transfer") all or any portion of its Partnership Interest
except in accordance with the provisions of this Agreement.
IX.1.2 Warrant Holdings. In addition to the general restriction on
----------------
the Transfer of Partnership Interests set forth in Section 9.1.1, it is
specifically understood and agreed among the Partners, including Warrant
Holdings, that under no circumstances whatever shall the owners of securities
issued by Warrant Holdings (including, without limitation, warrants and common
stock) become Partners or have any other direct ownership interest in a
Partnership Interest as a result of being a security holder in Warrant Holdings.
In addition:
(a) Warrant Holdings shall have no rights to Transfer all or
any portion of its Common Partnership Interest except pursuant to the provisions
of Sections 9.5, 9.6, 9.7 and 12.2(a)(ii), as such limited transfer rights are
more particularly set forth in that certain Registration Rights and Partners'
Agreement to be dated as of July 23, 1999 (the "Transfer Rights Agreement")
among the Partnership, the Partners (including Warrant Holdings), Sixty Eighty,
LLC, a Delaware limited liability company ("Sixty Eighty") and the sole initial
shareholder of Warrant Holdings, First Union Capital Markets Corp. ("First
Union") and CIBC World Markets Corp. ("CIBC"). In addition, Warrant Holdings may
be required to Transfer all or a portion of its Common Partnership Interests
pursuant to Sections 9.5, 9.6, 9.7 and/or Section 12.2(a)(i) and as more
particularly set forth in the Transfer Rights Agreement. In the event of a
conflict between the terms of this Agreement and the terms of the Transfer
Rights Agreement, the terms of the Transfer Rights Agreement shall control.
(b) The Partnership is a party to that certain Warrant
Agreement to be dated July 23, 1999, among the Partnership, Warrant Holdings,
Sixty Eighty, First Union and CIBC (the "Warrant Agreement") pursuant to which
the Partnership may be required to purchase warrants issued by Warrant Holdings.
The Partners acknowledge and agree that the Warrant Agreement is a valid and
binding agreement of the Partnership, and in the event of a conflict between the
terms ot this Agreement and the terms of the Warrant Agreement, the terms of the
Warrant Agreement shall control.
IX.2 Transfers in Contravention. Any Transfer (or purported Transfer) of
--------------------------
any Partnership Interests in contravention of any of the provisions of this
Agreement shall be null and void and shall not bind, or be recognized by, the
Partnership. To the fullest extent permitted by law, any Partner attempting to
Transfer a Partnership Interest in contravention of any of the provisions of
this Agreement hereby agrees to indemnify and hold harmless the Partnership and
the other Partners against any and all loss, damage and expense (including,
without limitation, tax liabilities or loss of
35
<PAGE>
tax benefits) arising directly orindirectly from any Transfer or purported
Transfer in violation of this Agreement.
IX.3 Transfers to Affiliates. Any of the Cardwell Partners, Mobil, and
-----------------------
Volvo (the "Transferring Partner") shall have the absolute right to Transfer all
or part of its Partnership Interests to a majority beneficially owned Affiliate,
to an Affiliate which owns a majority of such Transferring Partner, or to an
Immediate Family Member of such Transferring Partner, provided, however, that
the voting rights of such Partners shall not be transferred upon Transfer of
such Partnership Interest to an Immediate Family Member and shall be retained by
the Transferring Partner unless such Immediate Family Member is admitted to the
Partnership in accordance with Section 9.4.
IX.4 Admission of Limited Partners. New Limited Partners may be admitted
-----------------------------
to the Partnership only upon the unanimous consent of the Partners having
Partner Veto Rights.
IX.4.1 An Affiliate. The Partners having Partner Veto Rights agree
------------
that they will admit as a new Limited Partner any Affiliate of a Partner who
receives a Partnership Interest from a Partner pursuant to the provisions of
Section 9.3.1 and who agrees to be bound by the terms of this Agreement, if such
Affiliate is not engaged in the business of selling or servicing trucks in
competition with Volvo or in the business of marketing fuel or lubricants in
competition with Mobil or its Affiliates.
IX.4.2 Other Admissions. Upon the consent of Partners having
----------------
Partner Veto Rights, which consent shall not be unreasonably withheld, such
Partners will admit as a new Limited Partner any Person who shall (i) purchase
newly issued Partnership Interests, or Partnership Interests owned by (y) a
Selling Partner pursuant to the provisions of Section 9.5 or (z) by the Cardwell
Partners pursuant to Section 9.7.2, and (ii) agree to be bound by all of the
terms of this Agreement. For purposes of this Section 9.4.2, the withholding of
consent by the Partners having Partner Veto Rights shall not be unreasonable if
such withholding of consent is based upon the reasonable opinion of either Mobil
or Volvo that the admission of a new Limited Partner would have a material
adverse effect on either of Mobil's (or an Affiliate of Mobil's) or Volvo's
retail brand image, upon Mobil's (or an Affiliate of Mobil's) marketing,
refining, production or distribution of motor fuels or lubricants, upon Volvo's
competitive truck sales and service, or upon the reasonable likelihood that such
new Limited Partner would have a detrimental effect on the business of the
Partnership or of Petro Operating.
IX.5 General Right of First Refusal.
------------------------------
IX.5.1 Warrant Holdings. Warrant Holdings does not have the right
----------------
under the terms of this Agreement or under the terms of the Transfer Rights
Agreement to initiate the sale, assignment, or other transfer of all or a
portion of its Common Partnership Interest or to purchase all or any portion of
a Partnership Interest. The right and/or obligation (if any) of Warrant
Holdings to participate in the sale of its Common Partnership Interest under
this Section 9.5 is governed by the terms and provisions of the Transfer Rights
Agreement.
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IX.5.2 Proposed Transfer. Subject to the terms of this Agreement
-----------------
(and excepting a Transfer pursuant to Sections 9.3, 9.6, and 9.7), any of the
Cardwell Partners, Mobil, or Volvo desiring to Transfer all or any portion of
the Partnership Interests owned by such Partner must follow the procedures set
forth in this Section 9.5 and in the Transfer Rights Agreement. If any such
Partner (the "Selling Partner@) desires to Transfer all or any part of the
Partnership Interests owned by such Partner, the Selling Partner first shall
deliver a written notice (the "Transfer Notice") to the Partnership and to the
other Partners (including to the Board of Directors of Warrant Holdings), which
Transfer Notice shall include all agreements, schedules and documents relating
to the proposed Transfer. The Transfer Notice shall name the proposed
transferee, the amount of the Partnership Interest to be transferred, the
purchase price and all other terms and conditions of the Transfer. In the event
the Transfer is to be made without consideration, the purchase price shall be
deemed to be the Fair Market Value of the Partnership Interest on the date of
the Transfer Notice. If the proposed purchase price includes property and assets
other than cash, the cash value of such property shall be the Fair Market Value
of such property.
IX.5.3 Partnership Option Period. For ninety (90) Business Days
-------------------------
following receipt of the Transfer Notice (the "Partnership Option Period"), the
Partnership shall have the option to purchase all or a portion of the
Partnership Interest specified in the Transfer Notice at the price and upon the
terms set forth in the Transfer Notice by delivering a written notice to the
Selling Partner specifying the portion of the available Partnership Interests
the Partnership desires to purchase.
IX.5.4 Partner Option Period. In the event the Partnership does
---------------------
not elect to acquire all of the Partnership Interests specified in the Transfer
Notice, the Cardwell Partners, Mobil, and Volvo (but not Warrant Holdings) shall
have the option of purchasing some or all of such available Partnership
Interests during the thirty (30) Business Day period immediately following the
Partnership Option Period (the "Partner Option Period") at the price and upon
the terms set forth in the Transfer Notice. A Partner electing to purchase such
Partnership Interests (the "Buying Partner" or "Buying Partners") shall, within
the Partner Option Period, deliver a written notice to the Partnership and the
Selling Partner specifying the portion of the available Partnership Interests
such Buying Partner desires to purchase. In the event the available Partnership
Interests are oversubscribed, the available Partnership Interests shall be
allocated among the Buying Partners on a pro rata basis in accordance with the
percentage which each Buying Partner's Partnership Interest bears to the
Partnership Interests of all of the Buying Partners.
IX.5.5 Closing. In the event the Partnership and/or the Partners
-------
elect to purchase all of the Partnership Interests as specified in the Transfer
Notice, settlement for such Partnership Interests shall be consummated within
sixty (60) days after the date of such election, provided, however, that if the
terms and conditions contained in the Transfer Notice specify consideration
other than cash, the Partnership and/or Partners shall pay the cash value of
such consideration as determined in accordance with Section 9.5.2. Any
Partnership Interests acquired by the Partnership in accordance with this
Section 9.5 shall be deemed to have been redeemed and canceled and Schedule A
shall be amended accordingly.
IX.5.6 Applicability of Restrictions. In the event the Partnership
-----------------------------
and/or the other Partners do not elect to purchase all of the Partnership
Interests specified in the Transfer Notice, the Selling Partner may within the
180-day period following the expiration of the Partner Option Period,
37
<PAGE>
sell such uncommitted Partnership Interests to a third party at a price equal to
or greater than the price and on terms not materially more favorable to the
buyer than those contained in the Transfer Notice. If the sale is not
consummated within such time period, the provisions of this Section 9.5 shall
again apply to such Partnership Interests.
IX.6 Cardwell Buy-Sell.
-----------------
IX.6.1 Notice of Cardwell Buy-Sell.
---------------------------
(a) Subject to the provisions of Sections 9.6.1(b) and
9.6.1.(d) below, the Cardwell Partners may, at any time, give written notice
(the "Cardwell Buy-Sell Notice") to each of the members of the Board of
Directors appointed by Mobil and Volvo and to the Board of Directors of Warrant
Holdings stating that the Cardwell Partners desire to exercise their rights
under this Section 9.6 to sell to, or to purchase from, each of Mobil and Volvo,
all the Partnership Interests owned by such Partners, their Affiliates, and
Passive Investors (such interests collectively, the "Entire Interests"). Any
Cardwell Buy-Sell Notice given by any of the Cardwell Partners shall be deemed
to be given by such party and all of the Cardwell Partners.
(b) For purposes of determining a purchase price for the
Partnership Interests under this Section 9.6, the Cardwell Buy-Sell Notice shall
specify an amount that the Cardwell Partners designate to be the gross fair
market value of all of the combined assets of the Partnership and Petro
Operating as a going concern, and the purchase price shall be determined
pursuant to Section 9.6.5.
(c) In any proposed sale of Partnership Interests under this
Section 9.6, Warrant Holdings shall have the option to sell its Common
Partnership Interests pursuant to the terms of the Transfer Rights Agreement
(together with the Cardwell Partners pursuant to Section 9.6.3 or along with
Mobil and Volvo pursuant to Section 9.6.4) at the same pro rata Purchase Price,
in which event (and for purposes of this Section 9.6), the Warrant Holdings
Common Partnership Interests shall be deemed a part of the Selling Partners'
Entire Interests. In addition, any employee of the Partnership or of Petro
Operating who owns Partnership Interests ("Employee Interests") shall have the
option to sell those Partnership Interests at the same pro rata Purchase Price
and on the same terms as set forth above, in which event the Employee Interests
will be deemed to be a part of the Selling Partner's Entire Interest.
(d) In the event of the death of Cardwell Sr., the Cardwell
Partners will not be able to exercise the Cardwell Buy-Sell procedures under
this Section 9.6 until the later of (i) three years from the date of this
Agreement or (ii) one year from the date of Cardwell Sr.'s death.
IX.6.2 Response.
--------
(a) Should Cardwell Sr. be terminated as Chairman or Chief
Executive Officer of the Partnership, and thereafter give the Cardwell Buy-Sell
Notice, then in that event, each of Mobil and Volvo shall have thirty (30) days
after receipt of the Cardwell Buy-Sell Notice to elect by written notice to the
Cardwell Partners (i) to buy the Cardwell Partners' Entire Interests (the "Buy
Option") or (ii) to sell to the Cardwell Partners the Entire Interests of Mobil
or Volvo, as applicable (the "Sell Option"). Each of Mobil and Volvo shall
notify the Cardwell Partners and each other of
38
<PAGE>
its election within the thirty (30) day period. If either Mobil or Volvo fails
to respond to the Cardwell Buy-Sell Notice within the thirty (30) day period,
the party which failed to respond shall be deemed to have elected the Sell
Option.
(b) In all other circumstances where the Cardwell Partners
initiate the Cardwell Buy-Sell Notice, Mobil and Volvo shall each have sixty
(60) days after receipt of the Cardwell Buy-Sell Notice to respond as set forth
above, and if no response is received by the Cardwell Partners from Mobil or
Volvo within the specified sixty (60) day period, such failure to respond shall
be deemed to be an election by Mobil and Volvo, as appropriate, of the Sell
Option.
(c) If (i) the Buy Option is properly exercised by either
Mobil or Volvo for the Entire Interests of the Cardwell Partners, (ii) the Sell
Option is properly exercised by both Mobil and Volvo with respect to the Entire
Interests of Mobil and Volvo, or (iii) the Sell Option with respect to the
Entire Interests of Mobil and Volvo is deemed to be exercised as provided above,
then the Partners shall buy and sell their respective Entire Interests in
accordance with the provisions of this Section 9.6.
IX.6.3 Buy Option.
----------
(a) If only one of Mobil and Volvo elects the Buy Option (and
thereby becomes a "Buying Partner") then such Buying Partner shall be obligated
to purchase the Entire Interests of the Cardwell Partners in accordance with
this Section 9.6, but shall have no obligation to purchase any Interests of the
Partner that has elected, or has been deemed to have elected, the Sell Option,
and such Sell Option shall be deemed canceled and of no force and effect.
(b) If both Mobil and Volvo elect the Buy Option, then in
that event, each of Mobil and Volvo shall, in the absence of a contrary
agreement between them, be obligated to purchase that proportion of the Cardwell
Partners' Entire Interests as such Buying Partner's Partnership Interest bears
to the Partnership Interests of all of the Buying Partners.
IX.6.4 Sell Option. If both Mobil and Volvo elect the Sell Option
-----------
(or are deemed to have selected the Sell Option and thereby became "Selling
Partners"), each Cardwell Partner shall, in the absence of a contrary agreement
between them, be entitled and obligated to purchase that proportion of the
Selling Partners' Entire Interests as such Cardwell Partner's Partnership
Interest bears to the Partnership Interests of all of the Cardwell Partners. As
to the Selling Partners, each Cardwell Partner shall be jointly and severally
obligated with respect to the purchase price for the Entire Interests, except
that Cardwell Jr. and JAJCO II shall be jointly and severally obligated to the
Selling Partners only for that percentage of the purchase price which is equal
to the percentage that their collective Partnership Interests bear to the
Partnership Interest of all of the Cardwell Partners.
IX.6.5 Purchase Price. The purchase price of a Selling Partner's
--------------
Entire Interests shall equal the net amount which the Selling Partners would
receive if the combined assets of the Partnership and Petro Operating were sold
for their gross fair market value specified in the Cardwell Buy-Sell Notice with
the liabilities of the Partnership and Petro Operating liquidated and paid, and
the net proceeds distributed to the Partners in accordance with Section 10.3.2.
For purposes of applying this Section 9.6, a taxable sale of Partnership assets
shall be deemed to have occurred,
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Profits, Losses and other items arising from such deemed sale will be allocated
pursuant to Article IV, taking into account any adjustments to Sharing
Percentages which occur by the end of the period during which the parties not
originally giving the Cardwell Buy-Sell Notice must respond to such notice, and
the Partners' Capital Accounts adjusted accordingly. The Executive Committee
shall make the calculations necessary to determine the purchase price.
IX.6.6 Closing; Payment.
----------------
(a) The closing shall be held at the principal office of the
Partnership on a business day selected by the Buying Partner or Partners, which
day shall not be less than thirty (30) or more than one hundred twenty (120)
days after the applicable option is properly exercised or the Sell Option is
deemed to be exercised.
(b) The terms of the purchase and sale shall be
unconditional, except that each Selling Partner shall be deemed to represent and
warrant that as of the closing they shall have good and marketable title to
their Entire Interests being sold and that such Entire Interests shall be
transferred free of claims, liens, encumbrances, options, warrants or rights of
third parties.
(c) At the closing, each Selling Partner shall deliver an
instrument confirming such representation' and warranties. In addition, at the
closing, the following events shall occur: (i) each Buying Partner shall deliver
an amount equal to the purchase price determined under Section 9.6.5 in
immediately available funds, to the Selling Partners; (ii) each Selling Partner
shall deliver to the Buying Partners assignments of their Entire Interests being
sold without any warranty other than as set forth above; and (iii) each Buying
Partner shall, in addition to the purchase price determined under Section 9.6.5,
pay, or cause the Partnership to pay, to the respective Selling Partners, in
immediately available funds, an amount equal to the principal balance of, and
any accrued and unpaid interest on, any loans of such Selling Partners to the
Partnership, which payment shall be deemed a payment to such Selling Partners
with respect to such loan to the extent of the amounts so paid.
IX.6.7 Failure to Perform.
------------------
(a) If a Selling Partner defaults in its obligation to
deliver an assignment of its Entire Interest, the defaulting Partner shall cease
to be a Partner and shall have no further right or interest under this
Agreement, or in and to the Partnership, other than to receive its share of the
purchase price, net of damages and expenses resulting from such default.
(b) Notwithstanding any other provision of this Section 9.6,
if a Buying Partner wrongfully fails to close the purchase and sale, the Selling
Partners shall have the right, by written notice to the defaulting Partner given
within sixty (60) days after the last date for the closing, to treat the failure
to perform as an exercise by such Buying Partner of the Sell Option at 95% of
the purchase price that the purchasing Partner would have received for such
Partner's Entire Interests pursuant to Section 9.6.5 as a Selling Partner, made
as of the date of such default, and the Selling Partners shall then have all of
the rights pursuant to an election of the Buy Option.
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(c) If the Selling Partners elect to pursue the Buy Option
under Section 9.6.7(b), then, in that event, the purchase pursuant thereto shall
be such Selling Partner's sole and exclusive remedy for such failure. If the
Selling Partners do not elect to pursue the Buy Option, then, in that event,
they may pursue any other rights they may have in equity or at law.
IX.7 Sale, Merger, Consolidation. Upon written notice to the Board of
---------------------------
Directors, and subject to the provisions of Section 9.7.2, Cardwell Sr. may
solicit the sale of all of the Partnership Interests or all of the assets or
combined business of the Partnership and Petro Operating as a going concern, or
the merger, consolidation, combination, exchange or other transaction involving
all of the Partnership Interests or all of the combined business and assets of
the Partnership and Petro Operating (a "Global Transaction"). No other Partner
shall solicit an offer for a Global Transaction without the prior written
consent of the Board of Directors.
IX.7.1 Notice of Global Offer. Upon receipt by any of the Partners
----------------------
or of the Partnership of a definitive written, bona fide offer from an unrelated
third party involving a Global Transaction (a "Global Offer"), such Global Offer
shall be presented to all of the Partners.
IX.7.2 Acceptance of Global Offer. The provisions of this Section
--------------------------
9.7 shall be effective on January 1, 2002, or, in the event Cardwell Sr. is
terminated as Chairman or Chief Executive Officer of the Partnership for any
reason other than "cause" (as that term is defined in the Employment Agreement
----- ----
between Cardwell Sr. and Petro Operating and dated February 10, 1999), then upon
such earlier date. The specific rights and obligations of Warrant Holdings to
participate in the sale of its Common Partnership Interest under this Section
9.7 are governed by the terms and provisions of the Transfer Rights Agreement.
(a) If the Cardwell Partners desire to accept a Global Offer,
they shall notify the Partnership and the other Partners (including the Board of
Directors of Warrant Holdings) in writing to that effect (the "Cardwell
Acceptance Notice"), in which case each of Mobil and Volvo shall have sixty (60)
days after receipt of the Cardwell Acceptance Notice to elect by written notice
to the Cardwell Partners (i) to participate with the Cardwell Partners (in which
event Warrant Holdings may be obligated to sell its Common Partnership Interest
as set forth in the Transfer Rights Agreement) in the Global Offer on a pro rata
basis according to their Partnership Interests and upon the terms and conditions
specified in the Global Offer, (ii) to sell their Partnership Interests to the
Cardwell Partners (in which event Warrant Holdings may be obligated to sell its
Common Partnership Interest as set forth in the Transfer Rights Agreement) upon
the same terms specified in the Global Offer, provided, however, that the sale
of the Mobil and Volvo Partnership interests pursuant to the provisions of this
Section 9.7.2 shall close on the same day, but immediately prior to the closing
of the Global Transaction, or (iii) to buy all of the Partnership Interests
owned by the Cardwell Partners, plus any Employee Interests (as described in
Section 9.6.1(c)) and the Warrant Holdings Common Partnership Interest (if
Warrant Holdings is required or chooses to sell to Mobil and Volvo as set forth
in the Transfer Rights Agreement) (the "Cardwell Entire Interest") on the same
terms and conditions as set forth in the Global Offer (the "Buy Option").
(b) If either of Mobil or Volvo elects the Buy Option or
should either of Mobil or Volvo fail to make an election as required hereunder,
then in either event each of Mobil and Volvo (the "Buying Partners") shall, in
absence of a contrary agreement between them, be
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obligated to purchase that proportion of the Cardwell's Partners' Entire
Interest (the "Selling Partners") as each of Mobil's and Volvo's Partnership
Interest bears to the total of Mobil and Volvo's Partnership Interests.
IX.7.3 Closing; Payment.
----------------
(a) The closing of a sale of the Cardwell Partners' Entire
Interest to Mobil and Volvo shall be held at the principal office of the
Partnership on a business day selected by the Buying Partner or Partners, which
day shall not be less than thirty (30) or more than one hundred twenty (120)
days after the Buy Option is properly exercised or the Buy Option is deemed to
be exercised.
(b) The terms of the purchase and sale shall be
unconditional, except that each Selling Partner shall be deemed to represent and
warrant that as of the closing they shall have good and marketable title to
their Entire Interests being sold and that such Entire Interests shall be
transferred free of claims, liens, encumbrances, options, warrants or rights of
third parties.
(c) At the closing, each Selling Partner shall deliver an
instrument confirming such representations and warranties. In addition, at the
closing, the following events shall occur: (i) each Buying Partner shall deliver
an amount equal its share of the purchase price determined under Section 9.7.2
in immediately available funds, to the Selling Partners; (ii) each Selling
Partner shall deliver to the Buying Partners assignments of their Entire
Interests being sold without any warranty other than as set forth above; and
(iii) each Buying Partner shall, in addition to the purchase price determined
under Section 9.7.2, pay, or cause the Partnership to pay, to the respective
Selling Partners, in immediately available funds, an amount equal to the
principal balance of, and any accrued and unpaid interest on, any loans of such
Selling Partners to the Partnership, which payment shall be deemed a payment to
such Selling Partners with respect to such loan to the extent of the amounts so
paid.
IX.8 Rights Upon Transfer. Any Partner that has Transferred all or any
--------------------
portion of its Partnership Interest in accordance with this Agreement shall
execute, deliver and perform all such other agreements, documents, instruments
and other writings as are customary in such transactions or are contemplated by
the Transfer, including, without limitation, powers of attorney, credit
agreements, liens, mortgages, pledge agreements and financing statements (the
"Transfer Documents"). Transfer Documents may include such rights and remedies
as are agreed to among the parties to the Transfer and consented to by the Board
of Directors, including, without limitation, information rights, restrictions on
assumption of indebtedness, rights to distributions of the Partnership to the
transferor, foreclosure rights and restrictions on voting and other rights. The
Partners agree that the party in whose favor the rights and remedies are granted
is authorized to exercise those rights and remedies.
IX.9 Change of Control Restriction. The Partners acknowledge that the
-----------------------------
Indentures relating to Petro Operating's 122% Senior Notes due 2002 and 102%
Senior Notes due 2007, the Partnership's 1/2% Senior Discount Notes due 2008,
and the Amended and Restated Credit Agreement contain so-called "Change of
Control" provisions which, if triggered, would create an event of default under
those documents. The Partners therefore agree that, notwithstanding any
provision of
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this Agreement to the contrary, except in the event of a transaction pursuant to
Section 9.13 or Article XII of this Agreement, no Partner shall be permitted,
without the prior express written consent of the Executive Committee, to receive
distributions in kind (other than payments in kind on Preferred Partnership
Interests), or directly or indirectly transfer Partnership Interests, in the
aggregate equal to or in excess of that amount of equity of the Partnership or
its successor that, together with an assumed similar simultaneous distribution
in kind to all other Partners and all other direct and indirect Partners in the
Partnership in amounts based upon hypothetical liquidations of the Partnership
and such other direct and indirect Partners, would result in a "Change of
Control" occurring under any of the then existing debt documents or instruments
of the Partnership or its successor.
IX.10 Pledge of Partnership Interests. Any Partner (other than Warrant
-------------------------------
Holdings) may pledge its Partnership Interests, provided, however, that the
pledgee of such Partnership Interest shall in all respects be bound by all of
the provisions of this Agreement.
IX.11 Rights of Unadmitted Assignees. Subject to Sections 9.3 and 9.4,
------------------------------
an assignee of a Partnership Interest (including, without limitation, anyone who
becomes an assignee through the enforcement of a remedy by a holder of a
security interest in a Partnership Interest): (i) shall not be admitted as a
substituted Limited Partner, (ii) shall be entitled only to allocations and
distributions with respect to such Partnership Interest in accordance with this
Agreement, (iii) shall have no right to any information or, to the fullest
extent permitted by law, to an accounting of the affairs of the Partnership,
(iv) shall not be entitled to inspect the books or records of the Partnership,
and (v) shall not have any of the rights of a Partner under the Act or this
Agreement, including any voting rights granted under this Agreement. An assignee
of a Partnership Interest shall execute an instrument in form and substance
satisfactory to the Board of Directors agreeing to be bound by, and to acquire
the Partnership Interest subject to, the provisions of this Agreement.
IX.12 Distributions and Allocations in Respect to Transferred Interests.
-----------------------------------------------------------------
If any Partnership Interest is Transferred (which, for purposes of this Section
9.12, shall not include a pledge, encumbrance or grant of a security interest)
during any Fiscal Year in compliance with the provisions of this Article IX, all
items of Profit and Loss attributable to the Transferred Partnership Interest
for such Fiscal Year shall be divided and allocated between the transferor and
the transferee by taking into account their varying Partnership Interests during
such Fiscal Year in accordance with Code Section 706(d), using any conventions
permitted by law and selected by the Executive Committee. All distributions on
or before the date of such Transfer shall be made to the transferor, and all
distributions thereafter shall be made to the transferee. Any Partnership
Interest that is transferred to a transferee pursuant to this Agreement whereby
the transferee is admitted as a substitute partner to the Partnership shall be
subject to the same terms and provisions under this Agreement in the hands of
the transferee as in the hands of the transferor.
IX.13 Termination of the Partnership. Except for Transfers of
------------------------------
Partnership Interests specifically permitted under Sections 9.6 and 9.7 or
pursuant to an IPO Incorporation pursuant to the provisions of Article XII, no
Transfers of Partnership Interests shall be made if the effect of the Transfer
will be to terminate the Partnership pursuant to Section 708(b) of the Code or
any similar successor provision of the Code, or otherwise materially adversely
affect the Partnership or any other Partner under the Code.
43
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ARTICLE X
DISSOLUTION AND WINDING UP
--------------------------
X.1 No Termination. Except as expressly provided in this Agreement, to
--------------
the fullest extent permitted by law, no Partner shall have the right, and each
Partner hereby agrees not, to dissolve, terminate or liquidate the Partnership.
No Partner shall have the right, and each Partner hereby agrees not, to petition
a court for the dissolution, termination or liquidation of the Partnership
except as such rights are provided in this Agreement or are available under
applicable law notwithstanding any agreement herein to the contrary.
X.2 Events of Dissolution. The Partnership shall dissolve and commence
---------------------
winding up and liquidating upon the first to occur of any of the following
("Liquidating Events"):
X.2.1 Expiration. Expiration of the term of Partnership set forth
----------
in Section 2.5;
X.2.2 Executive Committee. The unanimous approval of the Executive
-------------------
Committee to dissolve the Partnership, but only on the effective date of
dissolution specified by the Executive Committee at the time of such approval;
X.2.3 Impossibility. The happening of any event that makes it
-------------
unlawful, impossible or impractical to carry on the business of the Partnership;
X.2.4 General Partner Withdrawal. The withdrawal, removal or
--------------------------
bankruptcy of a General Partner, the assignment by a General Partner of its
entire interest in the Partnership or any other event that causes a General
Partner to cease to be a general partner under the Act; provided, however, that
the Partnership shall not be dissolved and required to be wound up in connection
with any such events if (i) there is at least one remaining General Partner of
the Partnership or (ii) within 90 days after the occurrence of such event, a
majority in interest of the remaining Partners holding Common Partnership
Interests (or such greater percentage as is required by the Act) agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of such event of one or more additional General
Partners of the Partnership;
X.2.5 Consent. The written agreement of all Partners of the
-------
Partnership; and
X.2.6 Judicial Dissolution. The entry of a decree of judicial
--------------------
dissolution under Section 17-802 of the Act.
X.3 Winding Up. Upon the dissolution of the Partnership, the
----------
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. To the extent not inconsistent with the foregoing, all
covenants and obligations in this Agreement shall continue in full force and
effect until such time as the Partnership assets have been distributed pursuant
to this Section 10.3 and the Certificate of Limited Partnership has been
canceled in accordance with the Act. The Board of Directors shall be
responsible for overseeing the winding up and dissolution of the Partnership,
shall take full account of the Partnership's liabilities and assets, shall cause
the Partnership property to be liquidated as
44
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promptly as is consistent with obtaining the fair value thereof, and shall cause
the proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed in the following order:
X.3.1 To Creditors. First, to creditors of the Partnership,
------------
including Partners who are creditors, to the extent otherwise permitted by law,
in satisfaction of the liabilities of the Partnership (whether by payment or the
making or reasonable provision, including reserves, for payment thereof); and
X.3.2 To Partners. The balance, if any, to the General Partners
-----------
and the Limited Partners as follows:
(a) first, pro rata with respect to any accrued and unpaid
Class A Preferred Return and Class B Preferred Return;
(b) next, pro rata with respect to the Partners' Unrecovered
Capital attributable to the Class A Partnership Interests and Class B
Partnership Interests;
(c) next, pro rata with respect to the Partners' Aggregate
Distribution Shortfalls;
(d) next, pro rata with respect to the Partners' Unrecovered
Capital attributable to the Common Partnership Interests; and
(e) lastly, pro rata in accordance with the Partners'
positive Capital Account balances.
Any liquidating distributions to be made under this Section 10.3.2 may (in
the discretion of the Executive Committee) be made in cash or in Partnership
property on the basis of the Fair Market Value of such Partnership property.
ARTICLE XI
NON-COMPETITION AGREEMENT
-------------------------
XI.1 Covenant Not to Compete. The provisions of this Section 11.1 are
-----------------------
separately bargained for commitments among the Partners.
XI.1.1 Cardwell. For so long as any of the Cardwell Partners or
--------
any of their Affiliates continues as a Partner, or as a shareholder, partner or
Affiliate of any Partner in the Partnership, or holds directly or indirectly any
Partnership Interest, or is an officer or employee of the Partnership, and for
the Non-Compete Period after termination of any direct or indirect ownership
interest in the Partnership, each of the Cardwell Partners shall take such
action as shall be required to ensure that neither they nor their Affiliates
shall (unless acting as an agent, representative, consultant, contractor or
employee of the Partnership), directly or indirectly (i) own, manage, operate,
finance, join, control or participate in the ownership, management, operation,
financing or control of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant, contractor, or otherwise
(with or without compensation) with, or use or permit his or its name to be used
in connection with, any competitive truck stop or travel center
45
<PAGE>
within one hundred (100) miles in either direction on the same (primary)
interstate highway of any truck stopping center or business location in which
the Partnership or Petro Operating conducted business during such Partner's
association with the Partnership, in competition with the development and
operation of truck stopping centers by the Partnership or by Petro Operating, or
(ii) solicit any customer, employee, vendor, supplier or business contact of the
Partnership or Petro Operating regarding matters relating to the truck stop or
travel center business of the Partnership or Petro Operating, or (iii) solicit
any officer or employee of the Partnership or Petro Operating unless such
officer or employee has been terminated by the Partnership or Petro Operating
unilaterally and without cause. Notwithstanding the foregoing: Cardwell Sr.
and/or an entity directly or indirectly owned by him, may own, manage, operate
and finance the El Paso Truck Terminal, C&R Distributing, Inc. and retain his
interest in the franchisee which currently owns and operates four Petro Stopping
Center franchises.
XI.1.2 Mobil and Volvo. For so long as Mobil and Volvo or any of
---------------
their Affiliates owns any Partnership Interests and thereafter during the Non-
Compete Period, neither such Partner, nor any of its Affiliates, shall directly
purchase or own any Truck Stop Chain (for purposes of this Article XI, defined
as ten or more truck stops in three or more states); provided, however, that no
such Partner, nor any of its Affiliates, shall be precluded from, directly or
indirectly, investing or otherwise participating in a Truck Stop Chain as a
consequence of a merger, acquisition, or joint venture with or of another
entity, provided that (i) the principal business (i.e., based on gross revenue)
of the other entity is not a Truck Stop Chain and, (ii) adequate measures are
put in place to protect the confidentiality and non-use of non-public Petro
information (which measures shall include but shall not be limited to (a)
internal corporate "Chinese Walls" such that employees of the applicable Partner
and its Affiliates directly involved in the management, strategic direction and
operation of the competing Truck Stop Chain would not have access to the
Partnership's confidential information and would not be involved in the
Partnership's business; and (b) Partnership Board of Directors and Executive
Committee representatives of such Partner would not, if so requested by the
other members of the Board of Directors or Executive Committee, participate in
any strategic decision concerning Partnership business to the extent the
competing Truck Stop Chain's business is competitive with the Partnership
business).
XI.1.3 No Solicitation. No Partner, nor any Affiliate of such Partner
---------------
shall, for so long as such Partner owns any Partnership Interests and for two
years thereafter, solicit any employee of the Partnership or of Petro Operating
unless such employee has been terminated by the Partnership unilaterally and
without cause.
XI.1.4 Reformation. In connection with the restrictive covenants
-----------
contained herein, the parties hereto agree that (a) the terms and conditions of
the restrictive covenants have been agreed by the parties hereto to be
reasonable, (b) the restrictive covenants were negotiated in good faith by the
parties hereto and would not achieve their intended purpose if they were on
different terms or for periods of time shorter than the periods of time provided
for herein or were applied in more restrictive geographical areas than are
provided for herein, (c) the business of the Partnership is highly competitive
and the restrictive covenants are material to the parties' willingness to enter
into this Agreement, and (d) the restrictive covenants are not more restrictive
than is necessary to protect the legitimate interests of the Partnership and the
parties hereto. In the event the provisions of this Section should ever be
deemed to exceed the time or geographic limitations or any other limitations
46
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permitted by applicable law in any jurisdiction, they shall be deemed reformed
in that jurisdiction to the maximum extent permitted by applicable law.
XI.2 Ownership in Publicly Traded Corporation. The foregoing covenant
----------------------------------------
shall not prohibit any Partner, or any Affiliate of any Partner, from owning
less than a five percent (5%) ownership interest in any competitor which is a
publicly held corporation.
ARTICLE XII
INITIAL PUBLIC OFFERING
-----------------------
XII.1 Cardwell Partners Demand. The Cardwell Partners may at any time,
------------------------
and solely for the purpose of effecting an initial public offering ("IPO") of
the Corporation's stock to be registered under the Securities Act (the "IPO
Incorporation"), file a request in writing (the "IPO Request") with the Board of
Directors that the Partnership be incorporated under the laws of the State of
Delaware, or such other state as the Board of Directors may agree (the
"Corporation").
XII.1.1 Opinion. The IPO Request shall be accompanied by a letter
-------
from a nationally recognized investment banking firm selected by the Cardwell
Partners and experienced in effecting initial public offerings stating (a) that
in the opinion of such investment banking firm such a public offering will be
reasonably likely to be successfully completed, (b) the suggested capital
structure for the Corporation, (e.g., the number of shares of common stock and
preferred stock, if any, into which the Partnership Interests should be
converted), (c) the probable size of the offering in terms of number of shares
to be offered, the allocation of the offering among the Corporation and its
shareholders, and the likely price range per share in the offering (the
"Offering Amount"), and (d) that such firm is prepared to act as the managing
underwriter in a "firm commitment" underwriting of the shares, if completed.
Such letter will not be a binding commitment of the underwriter, it being
understood by the parties that any underwriter's commitment will be by way of a
firm underwriting agreement in customary form executed at the time and in the
manner as is customary in initial public offerings.
XII.1.2 Plan. The IPO Request shall also be accompanied by a
----
proposed Plan of Reorganization ("Plan") which shall contain such terms as the
Cardwell Partners shall reasonably determine to be appropriate, including (a)
the basis upon which the Common Partnership Interests of each Partner (assuming
conversion of the Class B Preferred Partnership Interest) will be converted into
shares of common stock of the Corporation ("Common Stock"), without regard to
voting and other differences in rights among classes of Common Partnership
Interests, and (b) the basis upon which the Preferred Partnership Interests will
be converted into (i) shares of Common Stock or (ii) one or more classes of
preferred shares of the Corporation ("Preferred Stock," together with the Common
Stock, the "Shares") having a liquidation value equal to the Unrecovered Capital
with respect thereto and any unpaid and accrued Preferred Return with respect
thereto, and generally with the same economic terms as to priority, dividends
and mandatory redemption as the Preferred Partnership Interests. To the extent
shares of Common Stock may be sold other than for the account of the
Corporation, the holders of Common Stock to be issued pursuant to the Plan shall
have the
47
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right, but not the obligation, to participate in the public offering pro rata to
the number of shares of Common Stock to be received by them pursuant to the
Plan, provided that such holders agree to participate in the underwriting on the
same basis as other selling shareholders, including but not limited to execution
of the underwriting agreement.
XII.2 Rights of Mobil and Volvo.
-------------------------
XII.2.1 Response. Upon receipt of the IPO Request, (i) Mobil and
--------
Volvo together may agree to the proposed IPO as set forth in Section 12.1, in
which case Warrant Holdings (or its shareholders or warrant holders) will
participate in the proposed IPO on a pro rata basis with the other Partners and
in accordance with the terms and provisions of the Transfer Rights Agreement, or
(ii) either or both of Mobil and Volvo shall elect to buy all of the Partnership
Interests of the Cardwell Partners, their Affiliates, and Passive Investors,
and, at the election of the Employees and of Warrant Holdings (pursuant to the
terms of the Transfer Rights Agreement) their respective Partnership Interests
(together the "Entire Cardwell Interests"). Within sixty (60) days of receiving
the IPO Request, Mobil and Volvo shall give written notice (the "Section 12.2
Notice") to the Cardwell Partners specifying either (i) that Mobil and Volvo
have agreed to the Plan, or (ii) that Mobil and/or Volvo will purchase the
Entire Cardwell Interests pursuant to the provisions of Section 12.3.
XII.2.2 Failure to Respond. An intentional failure or refusal by
------------------
Mobil or Volvo to respond to the IPO Request shall be deemed to be an election
by the refusing or non-responding party (or parties) to purchase the Entire
Cardwell Interests at the middle of the price range set forth in Section
12.1.1(c) as such price shall be applied to the Entire Cardwell Interests.
XII.3 Purchase.
--------
(a) The purchase of the Entire Cardwell Interests by Mobil
and/or Volvo shall close within one hundred eighty (180) days after the date of
the Section 12.2 Notice. The purchase price for the Entire Cardwell Interests
(the "Cardwell Purchase Price") shall be paid by Mobil and/or Volvo in cash at
closing against delivery of such documents of transfer as Mobil and/or Volvo may
reasonably request to transfer the Entire Cardwell Interests free and clear of
all liens, claims, encumbrances and rights of third parties. If Mobil and Volvo
are both purchasing a portion of the Entire Cardwell Interests, then each of
Mobil and Volvo shall, in the absence of a contrary agreement between them, be
obligated to purchase that proportion of the Entire Cardwell Interests as that
Partner's Partnership Interest bears to the combined Partnership Interests of
Mobil and Volvo.
(b) In the event of a purchase of the Entire Cardwell
Interests required under Section 12.2.2, the Cardwell Purchase Price shall be as
set forth in that Section.
(c) In the event of a purchase of the Entire Cardwell
Interests under Section 12.2.1, the Cardwell Purchase Price shall be (i) as
mutually agreed upon among the Cardwell Partners, and the Partner or Partners
which are purchasing the Entire Cardwell Interests, or (ii) if no such
agreement, the Cardwell Purchase Price shall be the average of three prices
submitted by three separate, nationally recognized and reputable investment
banking firms retained by each of the Cardwell Partners, Mobil and Volvo to
value the Entire Cardwell Interests. Each such investment
48
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banking firm will determine a Cardwell Purchase Price following the protocols
set forth in Section 9.6.5 and 12.1.1 and accompanied by a written opinion to
that effect by such investment banker, providing, however, that such Cardwell
Purchase Price will not be less than the minimum Cardwell Purchase Price set
forth in Section 12.3.2.
(d) The failure of either Mobil or Volvo to retain an
investment banking firm to value the Entire Cardwell Interests hereunder, shall
obligate the Partner to purchase the Entire Cardwell Interests at the Cardwell
Purchase Price determined by the investment banker retained by the Cardwell
Partners.
(e) All expenses reasonably incurred by any of the Partners
in respect of the Plan and the other matters described in this Section 12.3
shall be paid or reimbursed by the Partnership. The Partnership shall pay all
direct and indirect transfer taxes associated with the purchase and sale.
XII.4 Assistance. The Partnership shall provide the Partners, their
----------
employees, attorneys, accountants, agents and investment bankers ("Agents") all
reasonable assistance as may be reasonably requested in connection with the
development of any proposal for the IPO and related Plan, including but not
limited to providing full access to the properties, employees and books and
records of the Partnership; provided, however, that the Partnership shall have
the right to require any such Partner and its Agents to execute such
confidentiality agreements as may be reasonably requested by the Partnership.
XII.5 Minimum Cardwell Purchase Price. The Cardwell Purchase Price shall
-------------------------------
not be less than the net amount which the Cardwell Partners would receive for
the Entire Cardwell Interests if the combined assets of the Partnership and
Petro Operating were sold for their gross fair market values as of the date of
the proposed Public Offering, the liabilities of the Partnership paid, and the
net proceeds distributed in accordance with Section 10.3.2.
ARTICLE XIII
MISCELLANEOUS
-------------
XIII.1 Amended and Restated Credit Agreement. The Partners acknowledge
-------------------------------------
and agree that the Partnership will guarantee the debt of Petro Operating
incurred pursuant to the Amended and Restated Credit Agreement and, pursuant
thereto, the Partnership will pledge to BankBoston, N.A. all of the limited
partnership interests owned by the Partnership in Petro Operating.
XIII.2 Confidential Information. Notwithstanding anything in the Act
------------------------
(including Section 17-305(b) of the Act) or this Agreement to the contrary, to
the fullest extent permitted by law, no General Partner shall have the right to
keep confidential from Limited Partners any confidential information concerning
the Partnership; provided that the Limited Partners maintain the confidentiality
thereof.
XIII.3 Financial Reports. As soon as practicable after the end of each
-----------------
Fiscal Year, and after the end of each fiscal quarter, the Board of Directors
shall cause to be furnished to each Partner a financial report regarding the
Partnership's financial position, which shall include a balance sheet,
49
<PAGE>
income statement and cash flow statement and such other or further data deemed
appropriate by the Board of Directors. Such report as of the end of each Fiscal
Year shall be audited.
XIII.4 Binding Effect. Except as otherwise provided in this Agreement,
--------------
every covenant, term and provision of this Agreement shall be binding upon and
inure to the benefit of the Partners and their respective heirs, legatees, legal
representatives, successors, transferees, and assigns.
XIII.5 Severability. Every provision of this Agreement is intended to be
------------
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
XIII.6 Governing Law. The laws of the State of Delaware (without regard
-------------
to conflict of law principles) shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the Partners.
XIII.7 Not for Benefit of Creditors. The provisions of this Agreement
----------------------------
are intended only for the regulation of relations among Partners and between
Partners and former or prospective Partners and the Partnership. This Agreement
is not intended for the benefit of non-Partner creditors and no rights are
granted to non-Partner creditors under this Agreement.
XIII.8 Counterpart Execution. This Agreement may be executed in any
---------------------
number of counterparts with the same effect as if all of the Partners had signed
the same document. All counterparts shall be construed together and shall
constitute one agreement.
XIII.9 Sole and Absolute Discretion. Whenever in this Agreement an
----------------------------
Indemnified Person is permitted or required to make a decision (i) in its "sole
discretion" or "discretion", or under a similar grant of authority or latitude,
the Indemnified Person 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 Limited Partners, or (ii) in its good faith or under
another express standard, the indemnified Person shall 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.
XIII.10 Certificates. Partnership Interests. may, at the discretion of
------------
the Board of Directors, be evidenced by certificates or other written
instruments evidencing the same.
IN WITNESS WHEREOF, the parties hereto have caused this Limited Partnership
Agreement to be duly executed as of the date first above written.
PETRO, INC.
By:__________________________________________
Authorized Officer
GENERAL PARTNER
50
<PAGE>
_____________________________________________
James A. Cardwell, Sr.
_____________________________________________
James A. Cardwell, Jr.
JAJCO II, INC.
By:__________________________________________
Authorized Officer
PETRO, INC.
By:__________________________________________
Authorized Officer
MOBIL LONG HAUL INC.
By:__________________________________________
Authorized Officer
VOLVO PETRO HOLDINGS, LLC
By: Volvo Trucks North America, Inc.
its managing member
By:__________________________________________
Authorized Officer
PETRO WARRANT HOLDINGS CORPORATION
By:__________________________________________
Authorized Officer
LIMITED PARTNERS
51
<PAGE>
SCHEDULE A
to
LIMITED PARTNERSHIP AGREEMENT OF
PETRO STOPPING CENTERS HOLDINGS, L.P.
July 24, 1999
CAPITAL CONTRIBUTIONS AND SHARING PERCENTAGES
OF THE PARTNERS
<TABLE>
<CAPTION>
Common
Common General Partner Capital Contribution Sharing Percentage
- ---------------------- -------------------- -------------------
<S> <C> <C> <C>
Petro, Inc. $ 1,082,320 1.116%
Common Limited Partners
- -----------------------
James A. Cardwell, Sr. 33,277,560 34.299
Petro, Inc. 11,064,910 11.405
James A. Cardwell, Jr. 1,346,220 1.388
JAJCO II, Inc. 3,358,460 3.462
Mobil Long Haul Inc. 9,367,190 9.655
Volvo Petro Holdings, LLC 27,823,340 28.677
Petro Holdings Warrant Corporation 9,702,220 10.000
------------ ----------
Total Common: $ 97,022,220 100.0000%
------------ ----------
Preferred
Preferred Limited Partners Capital Contribution Sharing Percentage
- -------------------------- -------------------- ------------------
Mobil Long Haul Inc. Class A 12,000,000 (a) 48.7805%
Mobil Long Haul Inc. Class B 5,000,000 20.3252
James A. Cardwell, Sr. Class A 4,958,089 (b) 20.1548
Petro, Inc. Class A 1,875,397 (c) 7.6236
James A. Cardwell, Jr. Class A 266,132 (d) 1.0818
JAJCO II, Inc. Class A 500,383 (e) 2.0341
------------ ----------
Total Preferred: $ 24,600,000 100.0000%
------------ ----------
Total Common and Preferred: $121,622,220 100.0000%
============ ==========
</TABLE>
____________________________
Note: Does not include accrued and unpaid preferred return on preferred
limited partnership interests in Petro Stopping Centers, L.P., which
through 6/30/99 was follows:
(a) $3,019,543
(b) $1,035,516
(c) $ 391,684
(d) $ 55,583
(e) $ 104,507
<PAGE>
RECAP OF PARTNERSHIP SHARING PERCENTAGES
<TABLE>
<CAPTION>
Partner Without Preferred With Preferred
- ------- ------------------ ---------------
<S> <C> <C>
Mobil Long Haul Inc. 9.6547% 21.6796%
James A. Cardwell, Sr. 34.2989 31.4380%
Petro, Inc.(*) 12.5200 11.5297%
James A. Cardwell, Jr. 1.3875 1.3257%
JAJCO II, Inc. 3.4615 3.1728%
Volvo Petro Holdings, LLC 28.6773 22.8769%
Petro Holdings Warrant Corporation 10.0000 7.9773%
-------- --------
Total 100.0000% 100.0000%
-------- --------
</TABLE>
__________________________
* Combined general partner and limited partner interests
Dated as of July 24, 1999 Petro, Inc.
By:_____________________________________
Authorized Officer
GENERAL PARTNER
_________________________________ ________________________________________
James A. Cardwell, Sr. James A. Cardwell, Jr.
Petro, Inc. Mobil Long Haul Inc.
By:______________________________ By:_____________________________________
Authorized Officer Authorized Officer
JAJCO II, Inc. Volvo Petro Holdings, LLC
By: Volvo Trucks North America, Inc.
By:______________________________ By:_____________________________________
Authorized Officer Authorized Officer
Petro Warrant Holdings Corporation
By:______________________________
Authorized Officer LIMITED PARTNERS
<PAGE>
EXHIBIT 4.6.1-HOLDINGS
Section 704(c) Allocation Methods
For purposes of the Limited Partnership Agreement (the "Agreement") to
which this Exhibit 4.6.1 is attached, the methodology and procedures set forth
in this Exhibit 4.6.1 shall govern with respect to the various allocation
methods to be used by the Partnership under Section 704(c) of the Code for
purposes of Section 4.6.1 of the Agreement.
Section 1. Definitions. The various defined terms set forth in the
-----------
Agreement shall govern hereunder. In addition, the following definitions are
utilized for purposes of this Exhibit 4.6.1:
1.1 "Ceiling/Curative Difference" shall mean the total amount of
additional amortization, depletion, depreciation or other cost recovery, as
compared to what would apply if the Ceiling Method was adopted and utilized
in determining Section 704(c) Allocations as of the Effective Date, that
would be allocated to Volvo on an estimated annualized basis as a Partner
in the Partnership if the Curative Method was adopted and utilized in
determining Section 704(c) Allocations as of the Effective Date, with
respect to all Partners of the Partnership.
1.2 "Ceiling Method" shall mean the traditional method subject to
the ceiling rule as set forth in Treasury Regulation (S) 1.704-3(b).
1.3 "Curative Method" shall mean the traditional method subject to
curative allocations of depreciation deductions (as illustrated in Example
2 of Treasury Regulation (S) 1.704-3(c)(4)) as set forth in Treasury
Regulation (S) 1.704-3(c).
1.4 "Operating Partnership" shall mean Petro Stopping Centers,
L.P., a Delaware partnership, subject to the terms and conditions of the
Fourth Amended and Restated Limited Partnership Agreement of even date with
the Agreement.
1.5 "Remedial Method" shall mean the remedial method as set forth
in Treasury Regulation (S) 1.704-3(d).
1.6 "Revaluation Event" shall mean any contribution of money or
property to the capital of the Partnership by a new or existing Partner
which, pursuant to Section 704(c) of the Code and Treasury Regulation (S)
1.704-3, results in the requirement to make 704(c) Allocations.
1.7 "Section 704(c) Layer" shall mean the various assets to which
it is necessary to make Section 704(c) Allocations between various Partners
of either the Partnership or Operating Partnership, it being understood
that for each time there is a Revaluation Event, this creates a Section
704(c) Layer.
1.8 "Section 704(c) Operating Rules" shall mean the administrative
and regulatory operating rules which govern the application and adoption of
the various permitted Section 704(c) allocation methods as set forth under
Treasury Regulation (S) 1.704-3.
1.9 "704(c) Report" is defined in Section 4, hereof.
<PAGE>
1.10 "Target Difference" is defined in Section 3, hereof.
Section 2. Occurrence of Revaluation Events. The cash contribution by
--------------------------------
Volvo to the Partnership will result in a Revaluation Event as of the Effective
Date for purposes of Section 704(c) of the Code. For this purpose, the various
Section 704(c) methods, and the methodology and procedures related to their use,
as set forth in Section 3, below, shall apply with respect to the cash
contribution by Volvo. For any subsequent Revaluation Event, however, unless
the Partners unanimously agree in writing otherwise, the Ceiling Method shall
apply.
Section 3. Section 704(c) Methods Which Apply. For purposes of the
----------------------------------
Revaluation Event resulting from the cash contribution to be made by Volvo to
the Partnership and for any new partnership formed as a result of the
termination of the Operating Partnership pursuant to Section 708(b)(1)(B) of the
Code, and consistent with the Section 704(c) Operating Rules, the Partnership
shall adopt a combination of the Ceiling Method, the Curative Method and the
Remedial Method as to the various assets of the Partnership such that the
combined effect of the adoption of these methods, in conjunction with the
Section 704(c) elections made by the Operating Partnership, will be that Volvo
receives an additional allocation of amortization, depletion, depreciation or
other cost recovery which is equal to fifty percent (50%) of the
Ceiling/Curative Difference as of the Effective Date(the "Target Difference").
In the event the Partnership and the Operating Partnership are unable to adopt a
combination of the Ceiling Method, Curative Method and Remedial Method to obtain
an amount of additional amortization, depletion, depreciation or other cost
recovery to Volvo which is equal to the Target Difference, the Partnership and
the Operating Partnership shall adopt a combination of the Ceiling Method,
Curative Method and Remedial Method as arrives as close to the Target Difference
as possible; provided, however, if there are two or more alternative approaches
which exceed and/or fall short of the Target Difference, no approach which
exceeds the Target Difference shall be utilized if it exceeds the Target
Difference by an amount which is four percent (4%) of the Target Difference (in
other words, a total amount which is 52.0% of the Ceiling/Curative Difference)
and, in a case where an alternative approach would exceed the Target Difference
by more than four percent (4%) of the Target Difference, another alternative
approach shall be utilized even if the use of such approach results in
allocations to Volvo which are less than the Target Difference. Notwithstanding
the preceding provisions, the Remedial Method shall be utilized only as a method
of last resort and only if the use of a combination of the Ceiling Method and
Curative Method is unable to achieve a result which is within ninety-six percent
(96%) of the Target Difference (in other words, a total amount which is 48.0% of
the Ceiling/Curative Difference) and, if the Remedial Method is utilized, it
shall be subject to the limitations of the preceding sentence.
Section 4. Procedures for Determining Methods to Elect. As soon as
-------------------------------------------
practicable after the date of the Agreement, the accounting firm for the
Partnership shall determine the various Section 704(c) Layers which apply with
respect to the Partnership, the Operating Partnership and any other subsidiary
partnerships and shall, utilizing its reasonable and good faith discretion and
subject to Section 3, determine the combination of the Ceiling Method, Curative
Method and Remedial Method which is estimated to result in Volvo receiving an
allocation of amortization, depletion, depreciation and other cost recovery as
near to the Target Difference as is possible under the circumstances. Within
thirty (30) days of making such calculations and determinations, such accounting
firm for the Partnership shall issue a written report (the "704(c) Report") to
each Partner recommending the various combinations of the Ceiling Method,
Curative Method and Remedial Method to apply to the various Section 704(c)
Layers within the Partnership, the Operating Partnership and each other
subsidiary partnership for each Partner's review and comment. The 704(c) Report
shall provide such assumptions, explanations, numeric projections and other
information so as to enable the Partners to understand the 704(c) Report and
make an informed
<PAGE>
decision as to the accuracy of the information contained in 704(c) Report and
the validity of the recommendations contained therein. Prior to its final
adoption, the 704(c) Report may be amended and supplemented by the accounting
firm for the Partnership from time to time. After receiving the 704(c) Report,
the Partners may engage in such discussions and propose any alternatives to the
approaches recommended in the 704(c) Report and the 704(c) Report may be amended
as the Partners agree. The Partnership and the Partners shall agree on the final
version of the 704(c) Report by no later than forty-five (45) days prior to the
final due date (with extensions) of the Partnership tax return for the 1999
Fiscal Year, and if the Partners are unable to agree on a final version of the
704(c) Report by such date, then the 704(c) Report as issued and supplemented by
the accounting firm for the Partnership shall control. Notwithstanding anything
herein to the contrary, in no event shall the various Section 704(c) allocation
methods to apply for the Partnership be elected at a time which is later than
that allowed under the Section 704(c) Operating Rules.
Section 5. Binding Effect of Estimates. The Partners understand and agree
---------------------------
that the procedures under Section 4 as well as the 704(c) Report finally adopted
will utilize good faith estimates by the Partnership's accountants and the
Partners agree that, once the various Section 704(c) methods are elected in
accordance with the 704(c) Report as finally adopted, the actual results of
these elections may differ from the estimates and/or projections agreed upon by
the Partners and set forth in the final 704(c) Report which is adopted.
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
PETRO HOLDINGS FINANCIAL CORPORATION
The undersigned natural person, of the age of eighteen years or more, a
citizen of the State of Delaware, acting as an incorporator of a corporation
under the General Corporation Law of the State of Delaware, does hereby adopt
the following Certificate of Incorporation for such corporation:
First: The name of the Corporation is Petro Holdings Financial
Corporation.
Second: The street address of the Corporation's initial registered office
is 9 East Loockerman Street, Dover, Kent County, Delaware 19901, and the name
and address of its initial registered agent is National Registered Agents, Inc.,
9 East Loockerman Street, Dover, Kent County, Delaware 19901.
Third: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
Fourth: The aggregate number of shares of capital stock that the
Corporation will have authority to issue is 1,000, all of which will be shares
of Common Stock, having a par value of $.01 per share.
Fifth: No shareholder of the Corporation will, solely by reason of his
holding shares, have any preemptive or preferential right to purchase or
subscribe for any shares of the Corporation, now or hereafter to be authorized,
or any notes, debentures, bonds or other securities convertible into or carrying
warrants, rights or options to purchase shares, 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 dividend,
voting or any other rights of such shareholder. The Board of Directors may
authorize the issuance of, and the Corporation may issue, shares of the
Corporation, or any notes, debentures, bonds or other securities convertible
into or carrying warrants, rights or options to purchase any such shares,
without offering any shares to the existing holders of stock of the Corporation.
Sixth: In addition to any other manner of calling a special meeting of
shareholders that may be set forth in the Bylaws of the Corporation, a special
meeting of shareholders may be called at the request of the holders of at least
50% of all shares issued, outstanding and entitled to vote.
Seventh: With respect to any matter, a quorum will be present at a meeting
of shareholders if the holders of one-third of the shares entitled to vote on
that matter are represented at the meeting in person or by proxy.
Eighth: Shareholders of the Corporation will not have the right of
cumulative voting for the election of directors or for any other purpose.
<PAGE>
Ninth: Any action required or permitted by law, these Certificate of
Incorporation or the Bylaws of the Corporation to be taken at a meeting of the
shareholders of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall have been signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to take
such action at a meeting at which the holders of all shares entitled to vote on
the action were present and voted.
Tenth: Any action that under the provisions of the General Corporation Law
of the State of Delaware would, but for this Article Ten, be required to be
authorized by the affirmative vote of the holders of any specified portion of
the shares of the Corporation will require the approval of the holders of a
majority of the shares of the Corporation entitled to vote on that matter.
Eleventh: The Board of Directors is expressly authorized to alter, amend
or repeal the Bylaws of the Corporation or to adopt new Bylaws.
Twelfth: (a) The Corporation will, to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended, indemnify any and all persons who it has power to
indemnify under such Act from and against any and all of the expenses,
liabilities or other matters referred to in or covered by such Act. Such
indemnification may be provided pursuant to any Bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
director or officer capacity and as to action in another capacity while holding
such office, will continue as to a person who has ceased to be a director,
officer, employee or agent, and inure to the benefit of the heirs, executors and
administrators of such a person.
(b) If a claim under paragraph (a) of this Article is not paid in full by
the Corporation within 30 days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant will be entitled to be paid also the expense of
prosecuting such claim. It will be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct that make it permissible under the laws of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense will be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the laws of the State of Delaware nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its shareholders) that the claimant has not met such
applicable standard of conduct, will be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Certificate of Incorporation of Petro Holdings Financial Corporation - Page 2
- --------------------------------------------------------------------
<PAGE>
Thirteenth: To the fullest extent permitted by the laws of the State of
Delaware as the same exist or may hereafter be amended, a director of the
Corporation will not be liable to the Corporation or its shareholders for
monetary damages for an act or omission in the director's capacity as a
director. Any repeal or modification of this Article Thirteen will not increase
the personal liability of any director of the Corporation for any act or
occurrence taking place before such repeal or modification, or adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification. The provisions of this Article Thirteen shall not
be deemed to limit or preclude indemnification of a director by the Corporation
for any liability of a director that has not been eliminated by the provisions
of this Article Thirteen.
Fourteenth: The number of directors constituting the initial Board of
Directors of the Corporation is seven (7) and the names and mailing addresses of
such persons, who are to serve as directors until the first annual meeting of
the shareholders or until his successors are elected and qualified, are:
Name Address
---- -------
James A. Cardwell, Sr. 6080 Surety Drive
El Paso, Texas 79905
James A. Cardwell, Jr. 6080 Surety Drive
El Paso, Texas 79905
Kevin T. Weir 6080 Surety Drive
El Paso, Texas 79905
Nancy B. Carlson 6080 Surety Drive
El Paso, Texas 79905
Robert Grussing IV 6080 Surety Drive
El Paso, Texas 79905
Martha P. Boyd 6080 Surety Drive
El Paso, Texas 79905
Larry J. Zine 6080 Surety Drive
El Paso, Texas 79905
Hereafter, the number of directors will be determined in accordance with
the Bylaws of the Corporation.
Fifteenth: The name and address of the incorporator are:
Name Address
---- -------
Certificate of Incorporation of Petro Holdings Financial Corporation - Page 3
- --------------------------------------------------------------------
<PAGE>
Susanne Stephenson 6080 Surety Drive
El Paso, Texas 79905
EXECUTED as of the 6th day of July, 1999.
/s/ Susanne Stephenson, Incorporator
Certificate of Incorporation of Petro Holdings Financial Corporation - Page 4
- --------------------------------------------------------------------
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
PETRO HOLDINGS FINANCIAL CORPORATION
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office: Principal Office. The registered office of
-----------------------------------
the Corporation shall be located at 9 East Loockerman Street, Dover, Kent
County, State of Delaware 19901. The principal office of the Corporation shall
be located at 6080 Surety Drive, El Paso, El Paso County, State of Texas 79905.
The Board of Directors is granted full power and authority to change said
registered office from one location to another in said county.
Section 2. Other Offices. Other offices may at any time be established by
-------------
the Board of Directors at any place or places, within or without the
jurisdiction of incorporation.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. All annual meetings of the stockholders
-----------------
shall be held at such place as may be designated by the Directors in advance of
the annual meeting, and in the absence of any such designation by the Directors,
the annual meeting of the stockholders shall be held at the principal office of
the Corporation described in Section 1 hereof. All other meetings of the
stockholders may be held at such place as shall be stated in the notice of the
meeting.
Section 2. Annual Meetings. The annual meetings of stockholders, at which
---------------
the Directors shall be elected, shall be held in March of each year at such time
as may be provided in the notice of meeting, or at such other time during the
year as the Board of Directors may from time to time determine. At each annual
meeting the stockholders shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of stockholders, for any
----------------
purpose or purposes whatsoever, may be called at any time by the President, or
by the Board of Directors, or by any one or more members thereof, or by one or
more stockholders holding not less than one-fifth (1/5) of the voting power of
the Corporation.
Section 4. Notice of Meetings. Except in special cases where other
------------------
express provision is made by statute, notice of such annual and special meetings
shall be given to each stockholder entitled to vote, either personally or by
sending a copy of the notice through the mail, postage prepaid, or by telegraph,
charges prepaid, to his address appearing on the books of the Corporation or
supplied by him to the Corporation for the purpose of notice. Such notice shall
be in writing and signed by the President or a Vice President or the Secretary
or an Assistant
<PAGE>
Secretary or by such other person or persons as the Directors shall designate.
If a stockholder supplies no address, notice shall be deemed to have been given
him if mailed to the place where the registered office of the Corporation is
situated, or published at least once in a newspaper of general circulation in
the county of said registered office. All such notices shall be sent to each
stockholder entitled thereto not less than ten (10) days nor more than sixty
(60) days before each such meeting, whether annual or special, and shall specify
the place, the day and the hour of such meeting, and, in the case of a special
meeting, the purpose or purposes of the meeting.
Section 5. Adjourned Meetings and Notice Thereof. Any stockholders'
-------------------------------------
meeting, whether annual or special, and whether or not a quorum is present, may
be adjourned from time to time by the vote of a majority of the shares
represented at the meeting in person or by proxy, but in the absence of a quorum
no other business may be transacted at any such meeting.
When any stockholders' meeting, either annual or special, is adjourned for
thirty (30) days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which said
adjournment is taken.
Section 6. Voting. At all meetings of stockholders, every holder of stock
------
entitled to vote shall have the right to one vote for each share of such stock
standing in his name on the stock records of the Corporation. Such vote may be
viva voce or by ballot.
Section 7. Quorum. The presence in person or by proxy of the holders of a
------
majority of the shares entitled to vote at any meeting shall constitute a quorum
for the transaction of business. The stockholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 8. Consent of Absentees. The transactions of any meeting of
--------------------
stockholders, either annual or special, however called and noticed, shall be as
valid as though had at a meeting duly held after a regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the stockholders entitled to vote, not present in person or
by proxy, sign a written waiver of notice, or a consent to the holding of such
meeting, or an approval of the minutes thereof; all such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 9. Action Without Meeting. Any action, which under the
----------------------
corporation law of the jurisdiction of incorporation may be taken at a meeting
of the stockholders, may be taken without a meeting if authorized by the written
consent of such number of stockholders as is required by the jurisdiction of
incorporation. Such consents shall be filed with the Secretary of the
Corporation.
Section 10. Proxies. Every person entitled to vote or execute consents
-------
shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the Corporation;
<PAGE>
provided that no such proxy shall be valid after the expiration of six (6)
months from the date of its execution, unless the stockholder executing it
specifies therein a longer period of time for which such proxy is to continue in
force, which is in no case to exceed eleven (11) months from the date of its
execution.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. Powers. Subject to limitations of the Certificate of
------
Incorporation, of the Bylaws, and of the corporation law of the jurisdiction of
incorporation as to action to be authorized or approved by the stockholders, and
subject to the duties of Directors as prescribed by the Bylaws, all corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the Corporation shall be controlled by, the Board of Directors.
Without prejudice to such general powers, but subject to the same limitations,
it is hereby expressly declared that the following powers are reserved
exclusively to the Board of Directors:
(a) To select and remove the officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Certificate of Incorporation or the Bylaws,
fix their compensation, and require from them security for faithful
service.
(b) To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not
inconsistent with law, with the Certificate of Incorporation or the Bylaws,
as they may deem best.
(c) To fix and locate from time to time one or more subsidiary offices of
the Corporation within or without the jurisdiction of incorporation, as
provided in Article I, Sections 1 and 2 hereof; to designate any place
within or without the jurisdiction of incorporation for the holding of any
stockholders' or Directors' meeting or meetings; and to adopt, make and use
a corporate seal, and to prescribe the forms of certificates of stock, and
to alter the form of such seal and of such certificates from time to time,
as in their judgment they may deem best, provided such seal and such
certificates shall at all times comply with the provisions of law.
(d) To authorize the issue of shares of stock of the Corporation from time
to time, upon such terms as may be lawful in the jurisdiction of
incorporation.
(e) To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and
securities therefor.
(f) To appoint an executive committee and other committees, and to
delegate to the executive committee any of the powers and authority of the
Board in the management of the business and affairs of the Corporation,
except the power to
<PAGE>
adopt, amend or repeal Bylaws. The executive committee shall be composed of
two or more Directors.
Section 2. Number and Qualification of Directors. The number of Directors
-------------------------------------
of the Corporation will be at least one and not more than fifteen. The number
of Directors authorized will be fixed as the Board of Directors may from time to
time designate, or if no such designation has been made, the number of Directors
will be the same as the number of members of the initial Board of Directors as
set forth in the Certificate of Incorporation.
Section 3. Election and Term of Office. Subject to the provisions of the
---------------------------
Certificate of Incorporation, the Directors shall be elected at each annual
meeting of stockholders, but if any such annual meeting is not held, or the
Directors are not elected thereat, the Directors may be elected at any special
meeting of stockholders held for that purpose and all Directors shall hold
office until their respective successors are elected and qualify.
Section 4. Vacancies. Subject to the provisions of the Certificate of
---------
Incorporation, vacancies in the Board of Directors may be filled by a majority
of the remaining Directors, though less than a quorum, or by a sole remaining
Director, and each Director so elected shall hold office until his successor is
elected at an annual or a special meeting of the stockholders.
A vacancy or vacancies shall be deemed to exist in case of the death,
resignation or removal of any Director, or if the authorized number of Directors
shall be increased by amendment of Section 2 of this Article Ill of these
Bylaws, or in case the stockholders fail at any time to elect the full number of
authorized Directors.
Stockholders entitled to vote for the election of Directors in accordance
with the provisions of the Certificate of Incorporation may at any time elect
Directors to fill any vacancy not filled by the Directors.
If any Director tenders his resignation to the Board of Directors, a
successor may be elected to take office at such time as the resignation shall
become effective. No reduction of the number of Directors shall have the effect
of removing any Director prior to the expiration of his term of office.
Section 5. Place of Meeting. All meetings of the Board of Directors shall
----------------
be held at the principal office of the Corporation or at any other place within
or without the jurisdiction of incorporation designated at any time by
resolution of the Board or by written consent of all members of the Board or by
written notice of such meeting given in accordance with the provisions of these
Bylaws.
Section 6. Organization Meeting. Immediately following each annual
--------------------
meeting of stockholders the Board of Directors shall hold, without further
notice than this bylaw, a regular meeting for the purpose of organization,
election of officers, and the transaction of other business.
<PAGE>
Section 7. Other Regular Meetings. Other regular meetings of the Board of
----------------------
Directors shall be held without call and without further notice than this bylaw
at such times as shall from time to time be determined by the Board of
Directors.
Section 8. Special Meetings. Special meetings of the Board of Directors
----------------
for any purpose or purposes shall be called at any time by the President.
Written notice of the time and place of special meetings shall be delivered
personally to the Directors or sent to each Director by letter or telegram,
charges prepaid, addressed to him at his address as it is shown upon the records
of the Corporation or, if it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of the Directors are regularly
held. In case such notice is mailed or telegraphed, it shall be deposited in
the United States mail or delivered to the telegraph company at least ten (10)
days prior to the time of the holding of the meeting. In case such notice is
delivered personally as above provided, it shall be so delivered at least ten
(10) days prior to the time of the holding of the meeting. Such mailing,
telegraphing or delivery, as above provided, shall be due, legal and personal
notice to such Director.
Section 9. Notice of Adjournment. Notice of the time and place of holding
---------------------
an adjourned meeting of a Directors' meeting, either regular or special, need
not be given to absent Directors if the time and place are fixed at the meeting
adjourned.
Section 10. Waiver of Notice. The transactions of any meeting of the
----------------
Board of Directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present, and if, either before or after the time stated therein, each
of the Directors not present signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 11. Quorum: Consent for Actions Taken Without Meeting:
--------------------------------------------------
Participation by Conference Telephone or Similar Method. At all meetings of the
- -------------------------------------------------------
Board, a majority of the authorized number of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, except to
fill vacancies in the Board of Directors as hereinbefore provided, and except to
adjourn as hereinafter provided. At all meetings of any committee of the Board
of Directors, a majority of the authorized number of committee members shall be
necessary and sufficient to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made
by a majority of the Directors or committee members present at a meeting duly
held at which a quorum is present shall be regarded as the act or decision of
the Board of Directors or such committee, as the case may be.
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if a written consent thereto is signed
by all the members of the Board. Any such unanimous written consent shall be
filed with the minutes of proceedings of the Board or committee.
<PAGE>
Members of the Board of Directors may participate in a meeting of such
Board by means of a telephone network or a similar communications method by
which all persons participating in the meeting can hear each other.
Participation in a meeting by such means constitutes presence in person at the
meeting. Each person participating in a meeting in which one or more members
participate by means of such a telecommunications method shall sign the minutes
of the meeting. Such minutes may be signed in counterparts.
Section 12. Adjournment. A quorum of the Directors may adjourn any
-----------
Directors' meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum, a majority of the Directors present at any
Directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
Section 13. Fees and Compensation. Directors shall receive such
---------------------
compensation for their services as Directors as shall be determined from time to
time by resolution of the Board. Any Director may serve the Corporation in any
other capacity as an officer, agent, employee or otherwise and receive
compensation therefor.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Officers. The officers of the Corporation shall be the
--------
President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may, at the discretion of the Board of Directors, designate one or
more of its Vice Presidents as "Executive Vice Presidents" and as "Senior Vice
Presidents", and may also have, at the discretion of the Board of Directors, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. Officers other than the President need not be Directors. Any
person may hold two or more offices.
Section 2. Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 3 of
this Article, or Section 5 hereof, shall be chosen annually by the Board of
Directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be elected
and qualified.
Section 3. Additional Officers. The Board of Directors may appoint such
-------------------
other officers as the business of the Corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from time to time
determine.
Section 4. Removal and Resignation. Any officer may be removed, either
-----------------------
without or with cause, by a majority of the Directors at the time in office, in
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board of Directors, by any officers upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the President or to the Secretary of the Corporation. Any such
resignation shall take effect at the
<PAGE>
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary or requisite to make it effective.
Section 5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause, shall be filled by
the Directors at any regular or special meeting of the Board.
Section 6. President. Subject to the control of the Board of Directors,
---------
the President shall have general supervision, direction and control of the
business and officers of the Corporation. He shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors. He shall have
the general powers and duties of management usually vested in the office of the
Chief Executive Officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 7. Vice President. In the absence or disability of the President,
--------------
the Vice Presidents in order of their rank, or if not ranked, the Vice President
designated by the Board of Directors shall perform all the duties of the
President, and when so acting shall have all the powers of and be subject to all
restrictions upon the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them by the Board of Directors or the Bylaws.
Section 8. Secretary. The Secretary shall keep, or cause to be kept, a
---------
book of minutes at the registered office or such other place as the Board of
Directors may order, of all meetings of Directors and stockholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at Directors'
meetings, the number of shares present or represented at stockholders' meetings
and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the registered office or
at the office of the Corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the stockholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given. The Secretary shall keep the seal of the Corporation in safe
custody, and he shall have the power and authority to affix the corporate seal
to and attest the execution of any document on behalf of the Corporation, and he
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or the Bylaws.
Each Assistant Secretary shall also have the power and authority to affix
the corporate seal to and attest the execution of any document on behalf of the
Corporation. The President may direct any Assistant Secretary to assume and
perform the duties of the Secretary in the absence or
<PAGE>
disability of the Secretary, and each Assistant Secretary shall perform such
other duties and have such other powers as the Board of Directors or the
President may designate from time to time.
Section 9. Treasurer. The Treasurer shall keep and maintain, or cause to
---------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all times
be open to inspection by any Director. The Treasurer shall have the day-to-day
responsibility for the deposit of all moneys and other valuables in the name and
to the credit of the Corporation and shall disburse the funds of the Corporation
as may be ordered by the Board of Directors. The Treasurer shall deposit all
moneys and other valuables in the name and to the credit of the Corporation with
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the President and Directors, whenever they request
it, an account of all of his transactions as Treasurer and of the financial
condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or the Bylaws.
ARTICLE V
---------
MISCELLANEOUS
-------------
Section 1. Closing of Transfer Books. The Board of Directors shall have
---------- --------------
power to close the stock transfer books of the Corporation for a period not less
than ten (10) days preceding and not exceeding forty (40) days preceding the
date of any meeting of stockholders, and not exceeding sixty (60) days preceding
the date for payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go
into effect, or for a period not exceeding sixty (60) days preceding a date in
connection with obtaining the consent of stockholders for any purpose; provided,
however, that in lieu of closing the stock transfer books as aforesaid the Board
of Directors may fix in advance a date not less than ten (10) days preceding and
not exceeding forty (40) days preceding the date of any meeting of stockholders
and not exceeding sixty (60) days preceding the date for the payment of any
dividend, or the date of the allotment of rights, or the day when any change or
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting, and
any adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such consent,
and in such cases such stockholders and only such stockholders as shall be
stockholders of record on the date so fixed, shall be entitled to such notice
of, and to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
<PAGE>
Section 2. Checks, Drafts, Evidences of Indebtedness. All checks, drafts
-----------------------------------------
or other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the Corporation, shall be signed or endorsed
by such person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 3. Contracts, How Executed. The Board of Directors, except as in
-----------------------
the Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name and on
behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board of Directors, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount.
Section 4. Certificates of Stock. A certificate or certificates for
---------------------
shares of the capital stock of the Corporation shall be issued to each
stockholder when any such shares are fully paid up. All such certificates shall
be signed by the President and the Secretary or an Assistant Secretary, or be
authenticated by facsimiles of the signatures of said officers. Every
certificate authenticated by a facsimile of a signature must be countersigned by
a transfer agent or transfer clerk, and be registered by an incorporated bank or
trust company, either domestic or foreign, as registrar of transfers, before
issuance.
Section 5. Representation of Shares Held by Other Corporations. Shares of
---------------------------------------------------
the Corporation standing in the name of another corporation may be voted or
represented, and all rights incident thereto may be exercised on behalf of such
other corporation, by any officer thereof authorized so to do by resolution of
its Board of Directors, or by its executive committee, or by its Bylaws, or by
any person authorized so to do by proxy or power of attorney duly executed by
the Chairman or any Vice Chairman or the President or Vice President and
Secretary or Assistant Secretary of such other corporation, or by authority of
the Board of Directors thereof.
Section 6. Inspection of Corporate Records. The share register or
-------------------------------
duplicate share register, the Certificate of Incorporation, as amended, the
Bylaws, as amended, the books of account, the minutes of proceedings of the
stockholders and the Board of Directors shall be open to inspection upon the
written demand of any stockholder or the holder of a voting trust certificate,
at any reasonable time, and for a purpose reasonably related to his interests as
a stockholder in accordance with the law of the jurisdiction of incorporation,
and shall be exhibited at any time when required by the demand of ten percent
(10%) of the shares represented at any stockholders' meeting. Such inspection
may be made in person or by any agent or attorney, and shall include the right
to make extracts.
Demand of inspection other than at a stockholders' meeting shall be made in
writing upon the President, Secretary or Assistant Secretary of the Corporation.
Every such demand, unless granted, shall be referred by such officer to the
Board of Directors.
<PAGE>
Section 7. Indemnification.
---------------
(a) The Corporation shall indemnify, subject to the requirements of
subsection (c) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the Corporation),
by reason of the fact that he is or was a Director, officer, employee, or
agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee, fiduciary, or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise, against expenses (including attorneys' fees),
judgments, fines, penalties, taxes, and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit, or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner that
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify, subject to the requirements of
subsection (c) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a Director, officer,
employee, or agent of the Corporation, or is or was serving at the request
of the Corporation as a Director, officer, employee, fiduciary, or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. Notwithstanding the
foregoing, no indemnification shall be made (1) for any claim, issue, or
matter as to which such person shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the Corporation or (2) for amounts paid in settlement to the
Corporation, unless and only to the extent that the court in which such
action or suit was brought, or other court of competent jurisdiction,
determines upon application that in view of all the circumstances of the
case, such person is fairly and reasonably entitled to such indemnity.
(c) Any indemnification under subsections (a) and (b) of this Section,
unless ordered by a court or advanced pursuant to subsection (d) or (e) of
this Section, shall be made by the Corporation only as authorized in the
specific case upon a
<PAGE>
determination that indemnification is proper in the circumstances. Such
determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such
action, suit, or proceeding, or (2) if a quorum consisting of Directors who
were not parties to such action, suit, or proceeding cannot be obtained, or
if a majority vote of such a quorum so orders, by independent legal counsel
in a written opinion, or (3) by the stockholders.
(d) Expenses incurred by a person who is or was a Director or officer of
the Corporation in defending any action, suit, or proceeding referred to in
subsections (a) and (b) of this Section, or in defense of any claim, issue,
or matter therein, shall be paid by the Corporation as such expenses are
incurred and in advance of the final disposition of such action, suit, or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
Corporation.
(e) Expenses incurred by a person who is or was an employee or agent of
the Corporation or who is or was serving at the request of the Corporation
as a Director, officer, employee, fiduciary, or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise, in defending any action, suit, or proceeding referred to
in subsections (a) and (b) of this Section, or in defense of any claim,
issue, or matter therein, may be paid by the Corporation as such expenses
are incurred and in advance of the final disposition of such action, suit,
or proceeding, as authorized by the Board of Directors in the specific
case, upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
Corporation.
(f) The indemnification and advancement of expenses provided by or granted
pursuant to the other subsections of this Section shall not limit the
Corporation from providing any other indemnification permitted by law nor
shall they be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested Directors, or otherwise,
for either an action in his official capacity or an action in another
capacity while holding such office, except that indemnification, unless
ordered by a court pursuant to subsection (b) of this Section or for the
advancement of expenses made pursuant to subsection (d) or (e), may not be
made to or on behalf of any person if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud, or a knowing
violation of the law and was material to the cause of action. The
indemnification and advancement of expenses provided by, or granted
pursuant to, this Section shall continue as to a person who has ceased to
be a Director, officer, employee, fiduciary, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
<PAGE>
(g) The Corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a Director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee, fiduciary, or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status
as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Section.
(h) Any other financial arrangements made by the Corporation pursuant to
subsection (g) of this Section may include any one or more of the
following: (1) the creation of a trust fund, (2) the establishment of a
program of self-insurance, (3) the securing of the Corporation's obligation
of indemnification by granting a security interest or other lien on any
assets of the Corporation, and (4) the securing of the Corporation's
obligation of indemnification by granting a security interest or other lien
on any assets of the Corporation. However, no financial arrangement made
pursuant to this subsection may provide protection for any person adjudged
by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for intentional misconduct, fraud, or a knowing
violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
(i) For the purposes of this Section, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger that, if its separate existence had continued,
would have had power and authority to indemnify its Directors, officers,
employees, or agents, so that any person who is or was a Director, officer,
employee, or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a Director, officer,
employee, fiduciary, or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, shall stand in
the same position under the provisions of this Section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(j) Any repeal or amendment of this Section by the stockholders or Board
of Directors of the Corporation shall be prospective only, and shall not
adversely affect any herein granted rights of any person with respect to
any act or omission occurring prior to the time of such repeal or
amendment.
Section 8. Annual Reports. The Board of Directors may, but is not
--------------
required to cause an annual report to be sent to the shareholders, and any such
requirement is expressly waived.
ARTICLE VI
----------
<PAGE>
AMENDMENTS
----------
Section 1. Adoption, Amendment, or Repeal of Bylaws. Subject to the
----------------------------------------
provisions of the Certificate of Incorporation, Bylaws may be made, adopted,
amended, altered or repealed by the vote or written consent of stockholders
entitled to exercise a majority of the voting power of the Corporation. Subject
to the right of the stockholders to make, adopt, amend, alter or repeal Bylaws,
any and all Bylaws may be made, adopted, amended or repealed by the Board of
Directors.
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
PETRO STOPPING CENTERS HOLDINGS, L.P.
PETRO HOLDINGS FINANCIAL CORPORATION
as Issuers,
and
STATE STREET BANK AND TRUST COMPANY
as Trustee
____________________
INDENTURE
Dated as of July 23, 1999
____________________
15% Senior Discount Notes due 2008
_________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------------
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.................................................. 1
Section 1.1. Definitions.............................................................................. 1
Section 1.2. Other Definitions........................................................................ 30
Section 1.3. Incorporation by Reference of Trust Indenture Act........................................ 30
Section 1.4. Rules of Construction.................................................................... 30
ARTICLE II. THE NOTES.................................................................................. 31
Section 2.1. Form and Dating.......................................................................... 31
Section 2.2. Execution and Authentication............................................................. 32
Section 2.3. Registrar and Paying Agent............................................................... 33
Section 2.4. Paying Agent to Hold Money in Trust...................................................... 34
Section 2.5. Holder Lists............................................................................. 34
Section 2.6. Global Note Provisions................................................................... 34
Section 2.7 Legends.................................................................................. 35
Section 2.8. Transfer and Exchange.................................................................... 35
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes............................................... 43
Section 2.10. Temporary Notes.......................................................................... 44
Section 2.11. Cancellation............................................................................. 44
Section 2.12. Defaulted Interest....................................................................... 44
Section 2.13. Add-On Notes............................................................................. 45
Section 2.14. Additional Amounts Under Registration Rights Agreements.................................. 46
ARTICLE III. REDEMPTION................................................................................. 46
Section 3.1. Notices to Trustee....................................................................... 46
Section 3.2. Selection by Trustee of Notes to Be Redeemed............................................. 46
</TABLE>
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Section 3.3. Notice of Redemption...................................................................... 46
Section 3.4. Effect of Notice of Redemption............................................................ 47
Section 3.5. Deposit of Redemption Price............................................................... 48
Section 3.6. Notes Redeemed in Part.................................................................... 48
Section 3.7. Optional Redemption....................................................................... 48
ARTICLE IV. COVENANTS................................................................................... 49
Section 4.1. Payment of Notes.......................................................................... 49
Section 4.2. SEC Reports............................................................................... 49
Section 4.3. Waiver of Stay, Extension or Usury Laws................................................... 50
Section 4.4. Compliance Certificate.................................................................... 50
Section 4.5. Taxes..................................................................................... 51
Section 4.6. Limitation on Debt........................................................................ 51
Section 4.7. Limitation on Issuance and Sale of Capital Interests in Restricted Subsidiaries........... 52
Section 4.8. Limitation on Restricted Payments......................................................... 52
Section 4.9. Limitation on Asset Sales................................................................. 55
Section 4.10. Limitation on Transactions with Affiliates................................................ 57
Section 4.11. Limitations on Liens...................................................................... 58
Section 4.12. [INTENTIONALLY OMITTED]................................................................... 58
Section 4.13. Limitation on Creation of Unrestricted Subsidiaries....................................... 58
Section 4.14. [INTENTIONALLY OMITTED]................................................................... 59
Section 4.15. Limitation on Sale and Leaseback Transactions............................................. 59
Section 4.16. Payments for Consent...................................................................... 60
Section 4.17. Limitation on Conduct of Business of PFC.................................................. 60
Section 4.18. Change of Control......................................................................... 60
Section 4.19. Maintenance of Office or Agency........................................................... 61
</TABLE>
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Section 4.20. Maintenance of Properties and Insurance................................................... 62
ARTICLE V. SUCCESSOR CORPORATION........................................................................ 62
Section 5.1. Limitation on Merger, Conveyance, Transfer and Lease...................................... 62
Section 5.2. Successor Person Substituted.............................................................. 64
ARTICLE VI. DEFAULTS AND REMEDIES....................................................................... 65
Section 6.1. Events of Default......................................................................... 65
Section 6.2. Acceleration.............................................................................. 67
Section 6.3. Other Remedies............................................................................ 67
Section 6.4. Waiver of Past Defaults and Events of Default............................................. 68
Section 6.5. Control by Majority....................................................................... 68
Section 6.6. Limitation on Suits....................................................................... 68
Section 6.7. Rights of Holders To Receive Payment...................................................... 68
Section 6.8. Collection Suit by Trustee................................................................ 69
Section 6.9. Trustee May File Proofs of Claim.......................................................... 69
Section 6.10. Priorities................................................................................ 69
Section 6.11. Undertaking for Costs..................................................................... 70
Section 6.12. Restoration of Rights and Remedies........................................................ 70
ARTICLE VII. TRUSTEE..................................................................................... 70
Section 7.1. Duties of Trustee......................................................................... 70
Section 7.2. Rights of Trustee......................................................................... 71
Section 7.3. Individual Rights of Trustee.............................................................. 72
Section 7.4. Trustee's Disclaimer...................................................................... 72
Section 7.5. Notice of Defaults........................................................................ 72
Section 7.6. Reports by Trustee to Holders............................................................. 73
Section 7.7. Compensation and Indemnity................................................................ 73
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Section 7.8. Replacement of Trustee.................................................................... 74
Section 7.9. Successor Trustee by Consolidation, Merger or Conversion.................................. 74
Section 7.10. Eligibility; Disqualification............................................................. 75
Section 7.11. Preferential Collection of Claims Against Issuers......................................... 75
Section 7.12. Paying Agents............................................................................. 75
ARTICLE VIII. AMENDMENT, SUPPLEMENT AND WAIVER........................................................ 75
Section 8.1. Without Consent of Holders................................................................ 75
Section 8.2. With Consent of Holders................................................................... 76
Section 8.3. Compliance with Trust Indenture Act....................................................... 77
Section 8.4. Revocation and Effect of Consents......................................................... 77
Section 8.5. Notation on or Exchange of Notes.......................................................... 78
Section 8.6. Trustee To Sign Amendments, etc........................................................... 78
ARTICLE IX. DISCHARGE OF INDENTURE; DEFEASANCE...................................................... 78
Section 9.1. Discharge of Indenture.................................................................... 78
Section 9.2. Legal Defeasance.......................................................................... 79
Section 9.3. Covenant Defeasance....................................................................... 79
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance..................................... 80
Section 9.5. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other
Miscellaneous Provisions.................................................................. 81
Section 9.6. Reinstatement............................................................................. 82
Section 9.7. Moneys Held by Paying Agent............................................................... 82
Section 9.8. Moneys Held by Trustee.................................................................... 82
ARTICLE X. MISCELLANEOUS........................................................................... 83
Section 10.1. Trust Indenture Act Controls.............................................................. 83
Section 10.2. Notices................................................................................... 83
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Section 10.3. Communications by Holders with Other Holders............................................. 84
Section 10.4. Certificate and Opinion as to Conditions Precedent....................................... 84
Section 10.5. Statements Required in Certificate and Opinion........................................... 84
Section 10.6. When Treasury Notes Disregarded.......................................................... 85
Section 10.7. Rules by Trustee and Agents.............................................................. 85
Section 10.8. Business Days; Legal Holidays............................................................ 86
Section 10.9. Governing Law............................................................................ 86
Section 10.10. No Adverse Interpretation of Other Agreements............................................ 86
Section 10.11. No Recourse Against Others............................................................... 86
Section 10.12. Successors............................................................................... 87
Section 10.13. Multiple Counterparts.................................................................... 87
Section 10.14. Table of Contents, Headings, etc......................................................... 87
Section 10.15. Separability............................................................................. 87
</TABLE>
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SCHEDULE 1 - PERMITTED AFFILIATE AGREEMENTS
EXHIBIT A FORM OF NOTE
EXHIBIT B-1 FORM OF TRANSFER CERTIFICATE TO BENEFICIAL OWNER OR TO THE
COMPANY
EXHIBIT B-2 FORM OF TRANSFER CERTIFICATE TO BENEFICIAL OWNER OR TO THE
COMPANY
EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QIB
EXHIBIT D-1 FORM OF TRANSFER CERTIFICATE IN CONNECTION WITH TRANSFERS TO
INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT D-2 FORM OF TRANSFER CERTIFICATE IN CONNECTION WITH TRANSFERS TO
ACCREDITED INVESTORS
EXHIBIT E FORM OF CERTIFICATE IN CONNECTION WITH TRANSFERS PURSUANT TO
REGULATION S
EXHIBIT F FORM OF RULE 144 CERTIFICATION
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CROSS-REFERENCE TABLE
TIA Section Indenture Section
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.8; 7.10
(b)(1) 7.10
(b)(9) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
(c) N.A.
312 (a) 2.5
(b) 10.3
(c) 10.3
313 (a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6; 10.2
(d) 7.6
314 (a) 4.2; 4.4; 10.2
(b) N.A.
(c)(1) 10.4; 10.5
(c)(2) 10.4; 10.5
(c)(3) N.A.
(d) N.A.
(e) 10.5
(f) N.A.
315 (a) 7.1; 7.2
(b) 7.5; 10.2
(c) 7.1
(d) 6.5; 7.1; 7.2
(e) 6.11
316 (a)(last sentence) 10.6
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
(c) 8.4
317 (a)(1) 6.8
(a)(2) 6.9
(b) 7.12
318 (a) 10.1
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N.A. means Not Applicable
_____
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
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INDENTURE, dated as of July 23, 1999, between PETRO STOPPING CENTERS
HOLDINGS, L.P., a Delaware limited partnership (the "Company") and PETRO
HOLDINGS FINANCIAL CORPORATION, a Delaware corporation and wholly-owned
subsidiary of the Company ("PFC" and, together with the Company, the "Issuers"),
as Issuers, and State Street Bank and Trust Company, a Massachusetts trust
company, as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuers' 15% Senior
Discount Notes due 2008 (the "Notes").
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
Section 1.1. Definitions.
-----------
"10 1/2% Notes" means the 10 1/2% Senior Notes Due 2007 issued by the
Operating Partnership and PFC pursuant to the 10 1/2% Notes Indenture.
"10 1/2% Notes Indenture" means the indenture among the Operating
Partnership, PFC and the Trustee, dated January 30, 1997, as amended as of the
date of the Recapitalization.
"12 1/2% Notes" means the 12 1/2% Notes issued in 1994 by Petro PSC
Properties, L.P., a Delaware limited partnership (the predecessor of the
Operating Partnership) and Petro Financial Corporation.
"Accredited Investor" means an accredited investor as defined in Rule
501(a)(4), (5), (6) or (8) under the Securities Act.
"Accreted Value" means, as of any date prior to August 1, 2004, an
amount per $1,000 principal amount at Stated Maturity of Notes that is equal to
the sum of (a) $483.64 and (b) the portion of the excess of the principal amount
at Stated Maturity of each Note over $483.64 which shall have been amortized on
a daily basis and compounded semi-annually on each February 1 and August 1 at
the rate of 15% per annum from the Issue Date through the date of determination
computed on the basis of a 360-day year of twelve 30-day months; and, as of any
date on or after August 1, 2004, the Accreted Value of each Note shall mean the
aggregate principal amount at Stated Maturity of such Note; provided, however,
that the Issue Date for any Add-On Notes shall be deemed to be the original
Issue Date of the Notes.
"Acquired Debt" means Debt of a Person (including an Unrestricted
Subsidiary) existing at the time such Person becomes a Restricted Subsidiary or
assumed in connection with the acquisition of assets from such Person.
"Add-On Note Board Resolutions" means resolutions duly adopted by the
Board of Directors of the Company and delivered to the Trustee in an Officers'
Certificate providing for the issuance of Add-On Notes.
<PAGE>
"Add-On Note Supplemental Indenture" means a supplement to this
Indenture duly executed and delivered by the Company and the Trustee pursuant to
Article IX hereof providing for the issuance of Add-On Notes.
- ----------
"Add-On Notes" means additional 15% Senior Discount Notes due 2008 of
the Issuers' issued after the Issue Date pursuant to Section 2.13, including
------------
replacement Notes and, if applicable, any Exchange Notes as specified in the
relevant Add-On Note Board Resolutions or Add-On Note Supplemental Indenture,
issued therefor in accordance with this Indenture.
"Adjusted Interest Expense" means, for any period, without
duplication, an amount equal to the sum of:
(i) the aggregate amount of interest charges (excluding fees and
expenses incurred at or prior to Closing in connection with the Transactions and
any expenses or charges related to Warrant Holdings, the Warrants or the
obligation or right of the Company to purchase the Warrants), whether expensed
or capitalized, incurred or accrued by the Company and its Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP for
such period (including non-cash interest payments); plus
(ii) to the extent not included in clause (i) above, an amount equal
to the sum of:
(A) net costs associated with Interest Swap Obligations and
Currency Hedge Obligations (including any amortization of discounts); plus
(B) all commissions, discounts and other fees and charges owed
with respect to letters of credit, bankers' acceptances or similar
facilities paid or accrued, or scheduled to be paid or accrued, during such
period; plus
(C) dividends on Preferred Interests and Redeemable Capital
Interests (if paid to a Person other than the Company or one of its
Restricted Subsidiaries) declared and payable in cash; plus
(D) the portion of any Attributable Debt in respect of any Sale
and Leaseback Transaction that is allocable to interest expenses
(determined as if such Sale and Leaseback Transaction were treated as a
Capital Lease Obligation); plus
(E) to the extent any Debt of any other Person is Guaranteed or
secured by the Company or a Restricted Subsidiary in the manner described
in clause (ix) of the definition of "Debt", the aggregate amount of
interest expense of such other Person during such period attributable to
any such Debt determined in accordance with GAAP; minus
(F) amortization or write-off of deferred financing costs during
such period and any charge related to any premium or penalty paid in
connection with redeeming or retiring any Debt of the Company and its
Restricted Subsidiaries prior to the Stated Maturity thereof.
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<PAGE>
For purposes of calculating Adjusted Interest Expense on a pro forma basis, the
interest on Debt bearing a floating rate of interest shall be the interest rate
in effect at the time of determination (taking into account on a pro forma basis
any Interest Swap Obligation applicable to such Debt if such Interest Swap
Obligation has a remaining term at the date of determination in excess of 12
months).
"Adjusted Net Income" means, for any period, the consolidated net
income (or net loss) of the Company and its Restricted Subsidiaries determined
in accordance with GAAP for such period minus (to the extent made or reserved)
Permitted Tax Distributions, plus any Permitted Tax Distributions repaid to the
Company; provided that there shall be excluded therefrom, without duplication:
(i) all items classified as extraordinary, unusual or nonrecurring
(including fees and expenses incurred at or prior to Closing and write-offs, in
each case in connection with the Transactions);
(ii) any net loss or net income of any Person that is not a
Restricted Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Company or its Restricted Subsidiaries by
such other Person during such period;
(iii) the net income of any Person acquired by the Company or a
Restricted Subsidiary thereof in a pooling-of-interests transaction for any
period prior to the date of such acquisition;
(iv) any gain or loss, net of taxes, realized on the termination of
any employee pension benefit plan;
(v) gains (but not losses) in respect of Asset Sales by the Company
or its Restricted Subsidiaries;
(vi) with regard to any Restricted Subsidiary all of the Capital
Interests which are not owned by the Company or another Restricted Subsidiary,
any aggregate net income (or loss) in excess of the Company's or such other
Restricted Subsidiary's pro rata share of such Restricted Subsidiary's net
income (or loss); and
(vii) any expenses or charges related to Warrant Holdings, the
Warrants or the obligation or right of the Company to purchase the Warrants.
In computing Adjusted Net Income under clause (c) under Section 4.8, the
Company:
(i) shall use audited financial statements for the portion of the
relevant period for which such statements are available on the date of
determination and unaudited financial statements and other current financial
data based on the books and records of the Company for the remaining portion of
such period; and
(ii) shall be permitted to rely in good faith for the balance of the
relevant period for which audited financial statements are not available on the
financial statements and
3
<PAGE>
other financial data derived from the books and records of the Company that are
available on the date of determination.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings that correspond to the foregoing. For purposes of
this Indenture, the term "Affiliate," as it relates to the Company, shall
include Mobil Oil for so long as Mobil Oil is entitled to designate at least one
member of the Board of Directors of the Company and Volvo Trucks for so long as
Volvo Trucks is entitled to designate at least one member of the Board of
Directors of the Company, and shall not include Warrant Holdings or any holder
(other than the Company or any partner of the Company) of Warrants or Warrant
Shares.
"Agent" means any Registrar, Paying Agent, co-registrar or agent for
service of notices and demands.
"Asset Sale" means any transfer, conveyance, sale, lease or other
disposition (including, without limitation, dispositions pursuant to any
consolidation or merger) by the Company or any of its Restricted Subsidiaries to
any Person (other than to the Company or one or more of its Restricted
Subsidiaries) in any single transaction or series of transactions of:
(i) Capital Interests in another Person (other than directors'
qualifying shares);
(ii) any other property or assets (other than in the ordinary course
of business, including any sale or other disposition of obsolete or permanently
retired equipment);
provided, however, that the term "Asset Sale" shall exclude:
(A) any asset disposition permitted by the provisions described
under Section 5.1 that constitutes a disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole;
(B) any transfer, conveyance, sale, lease or other disposition
of property or assets, the gross proceeds of which (exclusive of
indemnities) do not exceed $500,000;
(C) sales of Eligible Cash Equivalents;
(D) the Incurrence of any Lien, to the extent not prohibited by
the terms of this Indenture;
(E) sales of Unrestricted Subsidiaries; and
(F) any of the Transactions.
4
<PAGE>
For purposes of this definition, any series of related transactions
that, if effected as a single transaction, would constitute an Asset Sale, shall
be deemed to be a single Asset Sale effected when the last such transaction
which is a part thereof is effected.
"Asset Swap" means any exchange of property or assets of the Company
or any Restricted Subsidiary of the Company for property or assets of a third
party which consist of property or assets described in clause (d) of the
definition of "Permitted Investments."
"Attributable Debt" under this Indenture in respect of a Sale and
Leaseback Transaction means, as at the time of determination, the greater of:
(i) the fair value of the property subject to such arrangement (as
determined in good faith by the Board of Directors); and
(ii) the present value (discounted at the rate of interest implicit
in such transaction) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of any date of determination, with respect to
any Debt, the quotient obtained by dividing:
(i) the sum of the products of:
(x) the number of years from the date of determination to the
dates of each successive scheduled principal payment (including any sinking
fund or mandatory redemption payment requirements) of such Debt multiplied
by
(y) the amount of such principal payment by
(ii) the sum of all such principal payments.
"Board of Directors" means (i) with respect to the Company or any
other Restricted Subsidiary, its Board of Directors; (ii) with respect to a
corporation, the board of directors of such corporation or any duly authorized
committee thereof; and (iii) with respect to any other entity, the board of
directors or similar body of the general partner or managers of such entity or
any duly authorized committee thereof.
"Board Resolution" means, as to any Person, a copy of a resolution
certified pursuant to an Officers' Certificate to have been duly adopted by the
Board of Directors of such Person, and to be in full force and effect, and, if
required hereunder, delivered to the Trustee.
"Capital Interests" in any Person means any and all shares, interests
(including Preferred Interests), participations or other equivalents in the
equity interest (however designated) in such Person and any rights (other than
Debt securities convertible into an equity interest), warrants or options to
acquire an equity interest in such Person.
5
<PAGE>
"Capital Lease Obligation" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Debt arrangement
conveying the right to use) real or personal property of such Person, to the
extent such obligations are required to be classified and accounted for as a
capital lease or a liability on the face of a balance sheet of such Person in
accordance with GAAP. The Stated Maturity of any Capital Lease Obligation shall
be the date of the last payment of rent or any other amount due under such lease
(or other Debt arrangement) prior to the first date upon which such lease (or
other Debt arrangement) may be terminated by the user of such real or personal
property without payment of a penalty, and the amount of any Capital Lease
Obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Cardwell Group" means J. A. Cardwell, Sr., James A. Cardwell, Jr.,
and their respective spouses, lineal descendents, estates and Affiliates,
including Petro Inc. (a corporation wholly owned by J. A. Cardwell, Sr.) and
JAJCO II, Inc. (a company wholly owned by James A. Cardwell, Jr.).
"Certificated Note" means any Note issued in fully-registered
certificated form (other than a Global Note), which shall be substantially in
the form of Exhibit A hereto, with appropriate legends as specified in Section
2.7 and Exhibit A.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to a Public Equity Offering, either:
(A) the Permitted Holders cease to be the "beneficial owner" (as
such term is used in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, in the aggregate of a majority of the Common
Interests in the Company, whether as a result of issuance of securities of
the Company or any parent company of the Company, any merger,
consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities by the Company or otherwise; or
(B) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, has the power or right to designate a majority of the members of
the Company's Board of Directors;
(ii) after the consummation of a Public Equity Offering;
(A) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the "beneficial owner" (as such term is used in
Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of
this clause (ii) such person or group shall be deemed to have "beneficial
ownership" of all shares that any such person or group has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 30% of the Common
Interests in the Company; and
6
<PAGE>
(B) the Permitted Holders "beneficially own" (as defined in
this clause (ii)), directly or indirectly, in the aggregate a lesser
percentage of the total Common Interests of the Company than such other
person or group;
(iii) the Company ceases to own directly or indirectly at least 99%
of the total voting power and economic benefit of the Capital Interests of the
Operating Partnership;
(iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by the Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute 66 2/3% of the Company' Board of Directors then in office; or
(v) the Company sells, conveys, transfers or leases (either in one
transaction or a series of related transactions) all or substantially all of its
assets to a Person other than a Restricted Subsidiary of the Company or a
Successor Entity in which a majority or more of the voting power of the Voting
Interests is held by the Permitted Holders.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Chartwell Interests" means Capital Interests in the Operating
Partnership held by Chartwell.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Interests" of any Person means Capital Interests in such
Person that do not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to Capital Interests of any other
class in such Person.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor(s) replaces such party pursuant to Article V of this
Indenture and, thereafter, means the successor.
"Company Request" means any written request signed in the name of the
Company and PFC by an Officer of each of the Company and PFC.
"Consolidated Net Worth" of the Company means, as of any date, the
aggregate of capital, surplus and retained earnings of the Company and its
Restricted Subsidiaries as would be shown on a consolidated balance sheet of the
Company and its Restricted Subsidiaries prepared as of such date in accordance
with GAAP, less all amounts, if any, attributable to Redeemable Capital
Interests in such Person.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the
7
<PAGE>
date of execution of this Indenture is located at 2 Avenue de Lafayette,
Corporate Trust, Boston, Massachusetts 02111-1724.
"Credit Agreement" means one or more secured or unsecured credit
agreements providing, inter alia, for revolving credit loans, term loans and/or
letters of credit between the Company or any Subsidiary and one or more lenders,
together with all related notes, letters of credit, collateral documents,
guarantees, and any other related agreements and instruments executed and
delivered in connection therewith, in each case as amended, modified,
supplemented, refinanced, refunded or replaced in whole or in part from time to
time.
"Currency Hedge Obligations" means the obligations of a Person
Incurred pursuant to any foreign currency exchange agreement, option or futures
contract or other similar agreement or arrangement designed to protect against
or manage such Person's exposure to fluctuations in foreign currency exchange
rates on Debt permitted under this Indenture.
"Damage Amount" means an amount to be paid as liquidated damages by
the Issuers to each Holder of Notes under certain circumstances in accordance
with the terms of the Registration Rights Agreement.
"Debt" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person, or
non-recourse, and whether or not contingent, the following:
(i) all indebtedness of such Person for money borrowed, excluding
any trade payables, other current liabilities incurred in the ordinary course of
business and any liability for federal, state or local income taxes or other
taxes owed by such Person;
(ii) all obligations (other than interest, premium and additional
payments, if any) of such Person evidenced by bonds, debentures, notes, or other
similar instruments;
(iii) all obligations of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person;
(iv) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property or assets acquired
by such Person (even if the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property or assets);
(v) all Capital Lease Obligations of such Person;
(vi) the maximum fixed redemption or repurchase price of Redeemable
Capital Interests in such Person at the time of determination;
(vii) any Interest Swap Obligations and Currency Hedge Obligations of
such Person at the time of determination;
(viii) Attributable Debt with respect to any Sale and Leaseback
Transaction to which such Person is a party; and
8
<PAGE>
(ix) all obligations of the types referred to in clauses (i) through
(viii) of this definition of another Person and all dividends and other
distributions of another Person, the payment of which, in either case:
(A) such Person has Guaranteed; or
(B) is secured by (or the holder of such Debt or the recipient
of such dividends or other distributions has an existing right, whether
contingent or otherwise, to be secured by) any Lien upon the property or
other assets of such Person, even though such Person has not assumed or
become liable for the payment of such Debt, dividends or other
distributions.
For purposes of the foregoing:
(a) the maximum fixed repurchase price of any Redeemable Capital
Interests that do not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Capital Interests as if such
Redeemable Capital Interests were repurchased on any date on which Debt shall be
required to be determined pursuant to this Indenture; provided, however, that,
if such Redeemable Capital Interests are not then permitted to be repurchased,
the repurchase price shall be the book value of such Redeemable Capital
Interests;
(b) the amount outstanding at any time of any Debt issued with
original issue discount is the principal amount of such Debt less the remaining
unamortized portion of the original issue discount of such Debt at such time as
determined in conformity with GAAP, but such Debt shall be deemed Incurred only
as of the date of original issuance thereof;
(c) the amount of any Debt described in clause (ix)(A) above shall be
the maximum liability under any such Guarantee; and
(d) the amount of any Debt described in clause (ix)(B) above shall be
the lesser of:
(I) the maximum amount of the obligations so secured; and
(II) the Fair Market Value of such property or other assets.
Notwithstanding the foregoing, neither the Warrants nor any obligation
to purchase the Warrants that may arise under the warrant agreement shall be
Debt.
"Default" means any event that is, or after notice or passage of time,
or both, would be, any Event of Default.
"Depository" means The Depository Trust Company, its nominees and
their respective successors and assigns, or such other depositary institution
hereinafter appointed by the Company that is a clearing agency registered under
the Exchange Act.
"Disinterested Director" means, with respect to any proposed
transaction between:
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(i) the Company or a Restricted Subsidiary, as applicable; and
(ii) an Affiliate thereof (other than the Company or a Restricted
Subsidiary), a member of the Board of Directors of the Company or such
Restricted Subsidiary, as applicable, who would not be a party to, or have a
financial interest in, such transaction and is not an officer, director or
employee of, and does not have a financial interest in, such Affiliate.
For purposes of this definition, no person would be deemed not to be a
Disinterested Director solely because such person holds Capital Interests in the
Company.
"EBITDA" means, with respect to the Company and its Restricted
Subsidiaries, for any period, the sum of Adjusted Net Income plus, to the extent
reflected in Adjusted Net Income for such period for which Adjusted Net Income
is determined, without duplication,
(i) Adjusted Interest Expense;
(ii) income tax expense (or Permitted Tax Distributions in lieu
thereof);
(iii) depreciation expense;
(iv) amortization expense;
(v) any charge related to any premium or penalty paid in connection
with redeeming or retiring any Debt prior to its Stated Maturity; and
(vi) any other non-cash items reducing Adjusted Net Income; minus
any non-cash items increasing Adjusted Net Income.
"Eligible Bank" means a bank or trust company that:
(i) is organized and existing under the laws of the United States
of America or Canada, or any state, territory, province or possession thereof;
and
(ii) as of the time of the making or acquisition of an Investment in
such bank or trust company, has combined capital and surplus in excess of
$500,000,000, the senior Debt of which is rated at least "A-2" by Moody's or at
least "A" by Standard & Poor's.
"Eligible Cash Equivalents" means any of the following Investments:
(i) securities issued or directly and fully guaranteed or insured
by the United States or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof)
maturing not more than one year after the date of acquisition;
(ii) time deposits in and certificates of deposit of any Eligible
Bank, provided that such Investments have a maturity date not more than two
years after date of acquisition and that the Average Life of all such
Investments is one year or less from the respective dates of acquisition;
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(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with any Eligible Bank;
(iv) direct obligations issued by any state of the United States or
any political subdivision or public instrumentality thereof, provided that such
Investments mature, or are subject to tender at the option of the holder
thereof, within 90 days after the date of acquisition and, at the time of
acquisition, have a rating of at least A from Standard & Poor's or A-2 from
Moody's (or an equivalent rating by any other nationally recognized rating
agency);
(v) commercial paper of any Person other than an Affiliate of the
Company, provided that such Investments have one of the two highest ratings
obtainable from either Standard & Poor's or Moody's and mature within 90 days
after the date of acquisition;
(vi) overnight and demand deposits in and bankers' acceptances of
any Eligible Bank and demand deposits in any bank or trust company to the extent
insured by the Federal Deposit Insurance Corporation against the Bank Insurance
Fund; and
(vii) money market funds substantially all of the assets of which
comprise Investments of the types described in clauses (i) through (vi).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means Notes issued in a Registered Exchange Offer in
exchange for a like principal amount of Notes originally issued pursuant to an
exemption from registration under the Securities Act, and replacement Notes
issued therefor in accordance with this Indenture.
"Expiration Date" has the meaning set forth in the definition of
"Offer to Purchase."
"Fair Market Value" means, with respect to the consideration received
or paid in any transaction or series of transactions, the fair market value
thereof as determined in good faith by the Board of Directors.
"Franchisee Receivables" means fuel, lube, repair and other
receivables purchased by the Company or any Restricted Subsidiary from any of
their franchisees, licensees or third party contractors operating a Stopping
Center affiliated with the Operating Partnership's network of Stopping Centers.
"Fuel Hedging Obligations" means the obligations of a Person pursuant
to fuel price swap, fuel price cap, fuel price collar and fuel price floor and
similar agreements and hedging obligations and arrangements, in the ordinary
course of business, designed to protect against or manage such Person's exposure
to fluctuations in fuel prices.
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"GAAP" means generally accepted accounting principles in the United
States, consistently applied, as set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, that are applicable to the circumstances as of the date of
determination.
"Global Notes" means any Note issued in fully-registered certificated
form to the Depository (or its nominee), as depositary for the beneficial owners
thereof, which shall be substantially in the form of Exhibit A hereto, with
---------
appropriate legends as specified in Section 2.7 and Exhibit A.
----------- ---------
"Guarantee" means, as applied to any Debt of another Person,
(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 such Debt,
(ii) any direct or indirect obligation, contingent or otherwise, of
a Person guaranteeing or having the effect of guaranteeing the Debt of any other
Person in any manner and
(iii) an agreement of a Person, 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 such Debt of another Person (and "Guaranteed", "Guaranteeing" and
"Guarantor" shall have meanings that correspond to the foregoing).
"Holder" means a Person in whose name a Note is registered in the
security register.
"IAI" means an institutional "accredited investor," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, other than a QIB.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
other obligation on the balance sheet of such Person; provided, however, that a
change in GAAP that results in an obligation of such Person that exists at such
time becoming Debt shall not be deemed an Incurrence of such Debt. Debt
otherwise Incurred by a Person before it becomes a Subsidiary of the Company
shall be deemed to be Incurred at the time at which such Person becomes a
Subsidiary of the Company. With respect to Debt the proceeds of which are to be
used solely to develop one or more Stopping Centers and to be borrowed pursuant
to a binding commitment previously entered into in good faith with a lending
institution, the Company or any Restricted Subsidiary shall, at its election, be
deemed to have Incurred Debt in a designated amount of up to the completion cost
of the project, based on the good faith estimate of management in accordance
with past practices and certified and so
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designated to the Trustee in an officers' certificate, including a resolution of
the Board of Directors, at the time of such designation, but only to the extent
such proceeds are actually borrowed within 365 days after such delivery date, in
which case the excess of the committed amount over the amount actually borrowed
shall not be deemed Incurred for the purposes of this definition. "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings that correspond to
the foregoing. A Guarantee by the Company or a Restricted Subsidiary of Debt
incurred by the Company or a Restricted Subsidiary, as applicable, shall not be
a separate incurrence of Debt.
"Indenture" means this Indenture as amended, restated or supplemented
from time to time.
"Interest Coverage Ratio" means, at any date of determination, the
ratio of:
(i) EBITDA, as defined, to
(ii) Adjusted Interest Expense, in both cases for the Specified
Period.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Interest Swap Obligations" means the obligations of a Person pursuant
to any interest rate swap agreement, interest rate cap, collar or floor
agreement or other similar agreement or arrangement designed to protect against
or manage such Person's exposure to fluctuations in interest rates on Debt
permitted under this Indenture.
"Investment" by any Person means any direct or indirect loan, advance
(or other extension of credit) or capital contribution to (by means of any
transfer of cash or other property or assets to another Person or any other
payments for property or services for the account or use of another Person),
including without limitation the following:
(i) the purchase or acquisition of any Capital Interest or other
evidence of beneficial ownership in another Person;
(ii) the purchase, acquisition or Guarantee of the Debt of another
Person or the issuance of a "keep well" with respect thereto; and
(iii) the purchase or acquisition of the business or assets of
another Person;
but shall exclude:
(a) accounts receivable and other extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices;
(b) the acquisition of property and assets from suppliers and other
vendors in the ordinary course of business;
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(c) prepaid expenses and workers' compensation, utility, lease and
similar deposits, in the ordinary course of business; and
(d) the purchase or exchange of the Warrants.
"Issue Date" means July 23, 1999.
"Issue Date Notes" means (i) the $113,370,000 aggregate principal
amount of the Issuers' Notes originally issued on the Issue Date, and
replacement Notes and the Exchange Notes issued therefor in accordance with this
Indenture.
"Issuers" means the Company and PFC.
"Kirschner" means Kirschner Investments and its Affiliates.
"Kirschner Interests" means Capital Interests in the Operating
Partnership held by Kirschner.
"Lien" means, with respect to any property or other asset any mortgage
or deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien (statutory or otherwise), charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or other asset
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Make-Whole Premium" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the Accreted Value of such Note and (ii) the
excess of (A) the present value at such time of the redemption price of such
Note at August 1, 2004 (such redemption price being set forth in the table in
Section 3.7 below) computed using a discount rate equal to the Treasury Rate
plus 0.50% per annum, over (B) the Accreted Value of such Note on such
Redemption Date.
"Maturity Date" means August 1, 2008.
"Mobil Oil" means Mobil Oil Corporation and its Affiliates.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to Asset Sales of any Person,
cash and Eligible Cash Equivalents received net of:
(i) all reasonable out-of-pocket expenses of such Person incurred in
connection with such a sale, including, without limitation, all legal, title and
recording tax expenses, commissions and other fees and expenses incurred and all
federal, state, foreign and local taxes arising in connection with such an Asset
Sale that are paid or required to be accrued as a liability under GAAP by such
Person, and Permitted Tax Distributions attributable thereto;
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(ii) all payments made by such Person on any Debt that is secured by
such Properties or other assets in accordance with the terms of any Lien upon or
with respect to such Properties or other assets or that must, by the terms of
such Lien or such Debt, or in order to obtain a necessary consent to such
transaction or by applicable law, be repaid to any other Person (other than the
Company or a Restricted Subsidiary thereof) in connection with such Asset Sale;
and
(iii) all contractually required distributions and other payments
made to minority interest holders in Restricted Subsidiaries of such Person as a
result of such transaction;
provided, however, that:
(a) in the event that any consideration for an Asset Sale (which
would otherwise constitute Net Cash Proceeds) is required by
(I) contract to be held in escrow pending determination of
whether a purchase price adjustment will be made or
(II) GAAP to be reserved against other liabilities in
connection with such Asset Sale,
such consideration (or any portion thereof) shall become Net Cash Proceeds only
at such time as it is released to such Person from escrow or otherwise; and
(b) any non-cash consideration received in connection with any
transaction, which is subsequently converted to cash, shall become Net Cash
Proceeds only at such time as it is so converted.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Notes" means any of the Issuers' 15% Senior Discount Notes Due 2008
that are issued under this Indenture, as amended or supplemented from time to
time pursuant to this Indenture.
"Note Custodian" means the custodian with respect to any Global Note
appointed by the Depository, or any successor Person thereto, and shall
initially be the Trustee.
"Obligations" means, with respect to any Debt, any principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
expenses payable under the documentation governing such Debt.
"Offer" has the meaning set forth in the definition of "Offer to
Purchase".
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his address
appearing in the security register on the date of the Offer offering to purchase
up to the aggregate:
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(i) Accreted Value of Notes, if the Purchase Date is on or prior to
August 1, 2004, or
(ii) principal amount of Notes at Stated Maturity, if the Purchase
Date is after August 1, 2004,
set forth in such Offer at the purchase price set forth in such Offer (as
determined pursuant to this Indenture). Unless otherwise required by applicable
law, the Offer shall specify an expiration date (the "Expiration Date") of the
Offer to Purchase which shall be, subject to any contrary requirements of
applicable law, not less than 30 days or more than 60 days after the date of
mailing of such Offer and a settlement date (the "Purchase Date") for purchase
of Notes within five business days after the Expiration Date. The Company shall
notify the Trustee at least 15 days (or such shorter period as is acceptable to
the Trustee) prior to the mailing of the Offer of the Company' obligation to
make an Offer to Purchase, and the Offer shall be mailed by the Company or, at
the Company' request, by the Trustee in the name and at the expense of the
Company. The Offer shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Offer to Purchase. The Offer
shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount at Stated Maturity of the
outstanding Notes offered to be purchased pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to Indenture covenants requiring the Offer to Purchase) (the
"Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
principal amount of Notes at Stated Maturity accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note tendered
must be tendered in an integral multiple of $1,000 principal amount at Stated
Maturity;
(6) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that, unless the Company defaults in making such purchase, any
Note accepted for purchase pursuant to the Offer to Purchase will, after the
Purchase Date, cease
(x) to accrete value, if the Purchase Date is on or prior to
August 1, 2004, or
(y) to accrue interest, if the Purchase Date is after August 1,
2004,
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but that any Note not tendered or tendered but not purchased by the Company
pursuant to the Offer to Purchase will continue to accrete value or to accrue
interest at the same rate, as the case may be;
(8) that, on the Purchase Date, the Purchase Price will become due
and payable upon each Note accepted for payment pursuant to the Offer to
Purchase;
(9) that each Holder electing to tender a Note pursuant to the Offer
to Purchase will be required to surrender such note at the place or places set
forth in the Offer prior to the close of business on the Expiration Date (such
Note being, if the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its paying agent) receives, not later than the
close of business on the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the aggregate
principal amount of the Notes the Holder tendered, the certificate number of the
Note the Holder tendered and a statement that such Holder is withdrawing all or
a portion of his tender;
(11) that:
(a) if Notes having an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase all such Notes and
(b) if Notes having an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Notes having an aggregate principal
amount equal to the Purchase Amount on a pro rata basis (with such
adjustments as may be deemed appropriate so that only Notes in
denominations of $1,000 principal amount or integral multiples thereof
shall be purchased); and
(12) that, in the case of any Holder whose Note is purchased only in
part, the Issuers shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in the aggregate principal
amount equal to and in exchange for the unpurchased portion of the aggregate
principal amount of the Notes so tendered.
Any Offer to Purchase shall be governed by and effected in accordance
with the Offer for such Offer to Purchase.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated July 19,
1999, pursuant to which the Notes were offered.
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"Officer" means, with respect to any Person, the Chairman, the
President, the Chief Executive Officer, the Chief Operating Officer, any Vice
President, the Chief Financial Officer, the Controller, the Chief Accounting
Officer, the Treasurer or the Secretary of such Person (or, in the case of a
Person that is a partnership, a general partner of such Person in such
capacity), and in the case of the Trustee, shall mean a Trust Officer, as
defined below.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman, the President, the Chief Executive Officer,
the Chief Operating Officer or any Vice President and the Chief Financial
Officer, the Controller, the Chief Accounting Officer or any Treasurer of such
Person that shall comply with applicable provisions of this Indenture, and in
the case of the Trustee, shall mean a certificate signed by a Trust Officer, as
defined below.
"Operating Partnership" means Petro Stopping Centers, L.P.
"Opinion of Counsel" means a written opinion from legal counsel, who
may be an employee of the Company, which counsel is reasonably acceptable to the
Trustee.
"Option Plan" means the 1997 Class B Common Limited Partnership
Interests Option Plan.
"Permitted Affiliate Agreements" means the agreements between and
among the Company or any Restricted Subsidiary and each of the Cardwell Group,
Mobil Oil and Volvo Trucks North America, listed in this Indenture in effect
immediately after the initial issuance of the Notes and as the same may be
amended from time to time subject to the provisions of Section 4.10; provided
that, notwithstanding Section 4.10, such agreements may be extended from time to
time or otherwise amended, to the extent the Board of Directors of the Company
has determined in good faith that no material adverse effect on the
creditworthiness of the Company and its Restricted Subsidiaries, taken as a
whole, shall result as a consequence thereby.
"Permitted Debt" means:
(i) Debt Incurred pursuant to Credit Agreements (other than
pursuant to the first paragraph of the Limitation on Debt covenant) in an
aggregate principal amount not to exceed $45,000,000 at any one time
outstanding, less the aggregate amount of all Net Cash Proceeds from any Asset
Sale that have been applied to permanently reduce the outstanding amount of Debt
under such Credit Agreement borrowed under this clause (i); provided, that the
sum of the aggregate principal amount of Debt under this clause (i) plus the
aggregate principal amount of Debt under clauses (xi), (xii) and (xiii) shall
not exceed $45,000,000.
(ii) Debt outstanding under the Notes and contribution,
indemnification and reimbursement obligations owed by any Issuer to any of the
other of them in respect of amounts paid or payable on such Notes;
(iii) Debt of the Company or any Restricted Subsidiary outstanding at
the time of the initial issuance of the Notes;
(iv) Debt owed to and held by the Company or a Wholly-Owned
Restricted Subsidiary;
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(v) Guarantees Incurred by the Company or any Restricted Subsidiary
in the ordinary course of business;
(vi) Guarantees by the Company or any Restricted Subsidiary of Debt
of the Company or any Restricted Subsidiary, including Guarantees by the Company
or any Restricted Subsidiary of Debt under a Credit Agreement, provided that
such Debt (other than Debt Incurred under clauses (i) and (ii) of this
definition) is Incurred in accordance with the "Limitation on Debt" covenant;
(vii) Debt in respect of performance, surety or appeal bonds provided
in the ordinary course of business;
(viii) Debt under Interest Swap Obligations and Currency Hedge
Obligations;
(ix) Debt owed by the Company to any Restricted Subsidiary, provided
that if for any reason such Debt ceases to be held by a Restricted Subsidiary,
such Debt shall cease to be Permitted Debt and shall be deemed Incurred as Debt
of the Company for purposes of this Indenture;
(x) Debt Incurred to pay for any Notes, any 12 1/2% Notes and any
10 1/2% Notes tendered pursuant to an Offer to Purchase in connection with a
Change of Control, provided that:
(a) the principal amount of such Debt does not exceed the
principal of the notes purchased (plus the amount of reasonable expenses
incurred in connection therewith, including the applicable purchase
premium, but excluding accrued interest, if any) and
(b) such Debt:
(1) has an Average Life to Stated Maturity at least equal
to or greater than the remaining Average Life to Stated Maturity of
the notes and
(2) does not mature prior to the Stated Maturity of the
notes;
(xi) Debt of a Person:
(a) existing at the time such Person becomes a Restricted
Subsidiary or
(b) assumed in connection with the acquisition of assets from
such Person, other than Debt Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, as the case may be, provided that the sum of the aggregate
principal amount of Debt under this clause (xi) plus the aggregate
principal amount of Debt under clauses (i), (xii) and (xiii) shall not
exceed $45,000,000;
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(xii) Debt of the Company or any Restricted Subsidiary pursuant to
Capital Lease Obligations and Purchase Money Debt Incurred in the ordinary
course of business, provided that the aggregate principal amount of such Debt
outstanding at any time may not exceed $5,000,000 in the aggregate; provided,
further that the sum of the aggregate principal amount of Debt under this clause
(xii) plus the aggregate principal amount of Debt under clauses (i), (xi) and
(xiii) shall not exceed $45,000,000.
(xiii) Debt of the Company or any Restricted Subsidiary not otherwise
permitted pursuant to this definition, in an aggregate principal amount not to
exceed $15,000,000 at any time outstanding; provided, that the sum of the
aggregate principal amount of Debt under this clause (xiii) plus the aggregate
principal amount of Debt under clauses (i), (xi) and (xii) shall not exceed
$45,000,000;
(xiv) Refinancing Debt; and
(xv) Debt of Holdings or any restricted Subsidiary, the proceeds of
which are used to purchase Warrants or that is issued in exchange for Warrants.
"Permitted Holders" means (1) the Cardwell Group, (2) Mobil Oil and
(3) Volvo Trucks.
"Permitted Investments" means:
(a) Investments in existence on the date of initial issuance of
the Notes;
(b) Investments required pursuant to any agreement or
obligation of the Company or a Restricted Subsidiary, in effect on the
Issue Date, to make such Investments;
(c) Eligible Cash Equivalents;
(d) Investments in property and other assets, including
Stopping Centers and Franchisee Receivables, owned or used by the Company
or any Restricted Subsidiary in the ordinary course of business;
(e) Investments by the Company or any of its Restricted
Subsidiaries in the Company or any Restricted Subsidiaries;
(f) Investments by the Company or any Restricted Subsidiary in
a Person, if as a result of such Investment:
(A) such Person becomes a Restricted Subsidiary or
(B) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated or wound-up into, the Company or a Restricted Subsidiary;
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(g) loans and advances to employees made in the ordinary course
of business in an amount not to exceed $750,000 in the aggregate at any
time outstanding;
(h) Interest Swap Obligations and Currency Hedge Obligations;
(i) non-cash consideration received in conjunction with an
Asset Sale that is otherwise permitted under Section 4.9;
(j) Fuel Hedging Obligations Incurred in the ordinary course of
business;
(k) Investments received in settlement of obligations owed to
the Company or any Restricted Subsidiary and as a result of bankruptcy or
insolvency proceedings or upon the foreclosure or enforcement of any Lien
in favor of the Company or any Restricted Subsidiary; and
(l) Investments by the Company or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to
exceed $10,000,000 at any one time outstanding.
"Permitted Liens" means:
(a) Liens existing at the time of the initial issuance of the
Notes;
(b) Liens to secure Debt under a Credit Agreement or Debt
Incurred under clause (xiii) of the definition of "Permitted Debt," in the
aggregate, of up to $170,000,000 aggregate principal amount;
(c) Liens on property or assets of the Company securing Debt
Incurred in compliance with clause (xii) of the definition of "Permitted
Debt";
(d) any Lien for taxes or assessments or other governmental
charges or levies not then due and payable (or which, if due and payable,
are being contested in good faith and for which adequate reserves are being
maintained, to the extent required by GAAP);
(e) any statutory warehousemen's, materialmen's, landlord's or
other similar Liens for sums not then due and payable (or which, if due and
payable, are being contested in good faith and with respect to which
adequate reserves are being maintained, to the extent required by GAAP);
(f) any title exception, easement, right-of-way, lease, sub-
lease or other similar Lien that does not materially impair the use or
value of the property subject thereto in its use in the business of the
Company or a Restricted Subsidiary thereof;
(g) Liens on property or other assets:
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(i) in connection with workers' compensation, unemployment
insurance and other types of statutory obligations or the requirements
of any official body, or
(ii) to secure the performance of tenders, bids, surety or
performance bonds, leases, purchase, construction, sales or servicing
contracts and other similar obligations Incurred in the ordinary
course of business consistent with industry practice; or
(iii) to obtain or secure obligations with respect to
letters of credit, Guarantees, bonds or other sureties or assurances
given in connection with the activities described in clauses (i) and
(ii) above, in each case not Incurred or made in connection with the
borrowing of money, the obtaining of advances or credit or the payment
of the deferred purchase price of property or services or imposed by
ERISA or the Internal Revenue Code in connection with a "plan" (as
defined in ERISA) (other than any Lien imposed in connection with the
Company' 401(k) Plan) or
(iv) arising in connection with any attachment or judgment
unless such Liens shall not be satisfied or discharged or stayed
pending appeal within 60 days after the entry thereof or the
expiration of any such stay;
(h) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the Company (and not
Incurred in anticipation of such transaction), provided that such Liens are
not extended to the property and assets of the Company other than the
property or assets acquired;
(i) other Liens incidental to the conduct of the business of the
Company or the ownership of its assets that do not materially impair the
use or value of the property subject thereto in its use in the business of
the Company;
(j) Liens securing obligations under Interest Swap Obligations,
Currency Hedge Obligations and Fuel Hedging Obligations Incurred in
connection with managing interest or currency risk resulting from or
related to a Credit Agreement; and
(k) Liens to secure any permitted extension, renewal,
refinancing or refunding (or successive extensions, renewals, refinancings
or refundings), in whole or in part, of any Debt secured by Liens referred
to in the foregoing clauses (a) through (j); provided that such Liens do
not extend to any other property or assets and the principal amount of the
Debt secured by such Liens is not increased.
"Permitted Tax Distribution" means for any fiscal year or portion
thereof (the "Tax Year") of any Person in which period such Person is a
partnership or other substantially similar pass-through entity for federal
income tax purposes, distributions to enable the partners or members of such
Person to make payments of federal, state and local income taxes (including
estimates thereof) in respect of the Taxable Income of such partner or member
with respect to each such Tax Year in an aggregate amount equal to the product
of:
(i) the excess of:
22
<PAGE>
(A) the sum of the highest marginal federal income tax rate
applicable during such Tax Year to either corporations or individuals and
the State Income Tax Rate over
(B) the product of such federal rate and the State Income Tax
Rate; and
(ii) such partner's or member's Taxable Income for such Tax Year.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PFC" means the party named as such in the first paragraph of this
Indenture until a successor(s) replaces such party pursuant to Article V of this
Indenture and, thereafter, means the successor.
"Phantom Option Plan" means the incentive plan to be adopted by the
Company substantially as described in the Offering Memorandum.
"Preferred Interests," as applied to the Capital Interests in any
Person, means Capital Interests in such Person of any class or classes (however
designated) that rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Common Interests in such
Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means any underwritten public offering of
Capital Interests of the Company or a Successor Entity pursuant to an effective
registration statement (other than a registration statement on Form S-4 or Form
S-8 or any successor or similar form) under the Securities Act.
"Purchase Amount" has the meaning set forth in the definition of
"Offer to Purchase."
"Purchase Date" has the meaning set forth in the definition of "Offer
to Purchase."
"Purchase Money Debt" means Debt:
(i) Incurred to finance the purchase or construction of any assets of
such Person or any Restricted Subsidiary; and
(ii) that is secured by a Lien on such assets where the lender's sole
security is to the assets so purchased or constructed, in either case that does
not exceed 100% of the cost and to the extent the purchase or construction
prices for such assets are or should be included in "addition to property, plant
or equipment" in accordance with GAAP.
23
<PAGE>
"Purchase Price" has the meaning set forth in the definition of "Offer
to Purchase."
"Qualified Capital Interests" in any Person means a class of Capital
Interests other than Redeemable Capital Interests.
"Qualified Institutional Buyer" or "QIB" have the meaning set forth in
Rule 144A.
"Redeemable Capital Interests" in any Person means any equity security
of such Person that by its terms (or by terms of any security into which it is
convertible or for which it is exchangeable), or otherwise (including the
passage of time or the happening of an event), is required to be redeemed, is
redeemable at the option of the holder thereof in whole or in part (including by
operation of a sinking fund), or is convertible or exchangeable for Debt of such
Person at the option of the holder thereof, in whole or in part, at any time
prior to the Stated Maturity of the Notes; provided, however, that Preferred
Interests of the Company or any Restricted Subsidiary thereof that are issued
with the benefit of provisions requiring a change of control offer to be made
for such Preferred Interests in the event of a change of control of the Company
or any Restricted Subsidiary, which provisions have substantially the same
effect as the provisions of this Indenture described under Section 4.18, shall
not be deemed to be Redeemable Capital Interests solely by virtue of such
provisions; provided, further, that none of the Warrants, the partnership
interest held by Warrant Holdings, or the obligation to purchase the Warrants
shall be Redeemable Capital Interests.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date on which it is to be redeemed pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Refinancing Debt" means Debt that refunds, refinances, renews,
replaces or extends any Debt permitted to be incurred by the Company or any
Restricted Subsidiary pursuant to the terms of this Indenture, whether involving
the same or any other lender or creditor or group of lenders or creditors, but
only to the extent that:
(i) the Refinancing Debt is subordinated to the Notes to at least
the same extent as the Debt being refunded, refinanced or extended, if at all,
(ii) the Refinancing Debt is scheduled to mature either:
(a) no earlier than the Debt being refunded, refinanced or
extended, or
(b) at least 91 days after the maturity date of the Notes,
(iii) the Refinancing Debt has a weighted average life to maturity at
the time such Refinancing Debt is incurred that is equal to or greater than the
weighted average life to maturity of the Debt being refunded, refinanced,
renewed, replaced or extended,
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<PAGE>
(iv) such Refinancing Debt is in an aggregate principal amount that is
less than or equal to the sum of:
(a) the aggregate principal or accreted amount (in the case of
any Debt issued with original issue discount, as such) then outstanding
under the Debt being refunded, refinanced, renewed, replaced or extended,
(b) the amount of accrued and unpaid interest, if any, and
premiums owed, if any, not in excess of preexisting prepayment provisions
on such Debt being refunded, refinanced or extended and
(c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Debt, and
(v) such Refinancing Debt is incurred by the same Person (or its
successor) that initially incurred the Debt being refunded, refinanced, renewed,
replaced or extended, except that the Company may incur Refinancing Debt to
refund, refinance, renew, replace or extend Debt of any Wholly-Owned Restricted
Subsidiary of the Company.
"Registered Exchange Offer" means an exchange offer by the Company
registered under the Securities Act pursuant to which Notes originally issued
pursuant to an exemption from registration under the Securities Act are
exchanged for Notes of like principal amount not bearing the Private Placement
Legend.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated July 23, 1999, among the Issuers, Petro Holdings LP Corp.,
First Union Capital Markets Corp. and CIBC World Markets Corp.
"Registration Statement" means an effective shelf registration
statement under the Securities Act that registers the resale by Holders (or
beneficial owners) of Notes (or beneficial interests therein) originally issued
pursuant to an exemption from registration under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act
(including any successor regulation thereto), as it may be amended from time to
time.
"Replacement Asset" means, with respect to any Asset Sale, a property
or asset that consists of a Stopping Center or that, as determined by the Board
of Directors as evidenced by a board resolution, is used or will be used in the
Stopping Center business of the Company or a Restricted Subsidiary or a business
reasonably related thereto.
"Resale Restriction Termination Date" means for any Restricted Note
(or beneficial interest therein), two years (or such other period specified in
Rule 144(k)) from the Issue Date or, if any Add-On Notes that are Restricted
Notes have been issued before the Resale Restriction Termination Date for any
Restricted Notes, from the latest such original issue date of such Add-On Notes.
25
<PAGE>
"Restricted Note" means any Issue Date Note (or beneficial interest
therein) or any Add-On Note (or beneficial interest therein) not originally
issued and sold pursuant to an effective registration statement under the
Securities Act other than, in each case, any Exchange Note, until such time as:
(i) such Issue Date Note (or beneficial interest therein) or Add-On
Note (or beneficial interest therein) has been transferred pursuant to a
Registration Statement;
(ii) the Resale Restriction Termination Date therefor has passed; or
(iii) the Private Placement Legend therefor has otherwise been removed
pursuant to Section 2.8(e) or, in the case of a beneficial interest in a
Global Note, such beneficial interest has been exchanged for an interest in
a Global Note not bearing a Private Placement Legend.
"Restricted Payment" is defined to mean any of the following:
(a) any dividend or other distribution declared and paid on the
Capital Interests in the Company or on the Capital Interests in any Restricted
Subsidiary of the Company that are held by, or declared and paid to, any Person
other than the Company or a Wholly-Owned Restricted Subsidiary of the Company
(other than dividends, distributions or payments made solely in Qualified
Capital Interests in the Company);
(b) any payment made by the Company or any of its Restricted
Subsidiaries to purchase, redeem, acquire or retire any Capital Interests in the
Company (including the conversion into, or exchange for, Debt, of any Capital
Interests);
(c) any payment made by any Restricted Subsidiary of the Company,
other than to the Company or another Restricted Subsidiary of the Company, to
purchase, redeem, acquire or retire any Capital Interests in a Restricted
Subsidiary (other than payments made with Qualified Capital Interests in the
Company);
(d) any payment made by the Company or any of its Restricted
Subsidiaries (other than a payment made solely in Qualified Capital Interests in
the Company) to redeem, repurchase, defease (including an in substance or legal
defeasance) or otherwise acquire or retire for value (including pursuant to
mandatory repurchase covenants), prior to any scheduled maturity, scheduled
sinking fund or mandatory redemption payment, Debt of either of the Issuers that
is subordinate (whether pursuant to its terms or by operation of law) in right
of payment to the Notes and which was scheduled to mature on or after the
maturity of the Notes;
(e) any Investment by the Company or a Restricted Subsidiary in any
Person, other than a Permitted Investment;
(f) any designation of a Restricted Subsidiary as an Unrestricted
Subsidiary on the basis of the greater of the fair market or book value of such
Subsidiary; and
(g) any advisory fee paid to an Affiliate with respect to a specific
transaction (other than fees that were payable on the Closing Date upon
consummation of the Transactions).
26
<PAGE>
"Restricted Subsidiary" means any Subsidiary, at least 75% of the
outstanding Common Interests of which are owned and controlled, directly or
indirectly, by the Company that has not been designated as an "Unrestricted
Subsidiary" in accordance with this Indenture.
"Rule 144" means Rule 144 under the Securities Act (or any successor
rule).
"Rule 144A" means Rule 144A under the Securities Act (or any successor
rule).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement pursuant to which property is sold or transferred by the Company or
a Restricted Subsidiary and is thereafter leased back from the purchaser or
transferee thereof by the Company or a Restricted Subsidiary.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" has the meaning set forth in Rule 1-02 of
Regulation S-X under the Securities Act and Exchange Act but shall include any
direct or indirect Restricted Subsidiary of the Company owning one or more
Stopping Centers, but shall not include any Unrestricted Subsidiary.
"Standard & Poor's" means Standard & Poor's Ratings Group and its
successors.
"State Income Tax Rate" means, with respect to any Person, the
weighted average highest marginal state and local income tax (inclusive of
franchise or other taxes in the nature of income taxes) rates applicable to
corporations or to individuals in any state in which such Person does business.
The highest applicable marginal state and local income tax rates of the states
from which the Person derives net income shall be weighted by the ratio of the
Person's net income apportioned to a state by that state to the sum of the
Person's net income apportioned to all states in which such Person is doing
business.
"Stated Maturity," when used with respect to:
(i) any Note or any installment of interest thereon, means the date
specified in such Note as the fixed date on which the principal amount of such
Note or such installment of interest is due and payable; and
(ii) any other Debt or any installment of interest thereon,
means the date specified in the instrument governing such Debt as the fixed date
on which the principal of such Debt or such installment of interest is due and
payable.
"Stopping Centers" means multi-service truck stops or travel plaza
facilities, including "full-sized" and "Petro:2" units and Petro:Lube
maintenance facilities, which provide services and amenities to commercial truck
drivers as well as to other highway motorists and
27
<PAGE>
local residents, including without limitation, facilities currently operated by
the Company and its Restricted Subsidiaries and businesses related or ancillary
thereto.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, trust, association or other business entity of
which an aggregate of at least a majority of the outstanding Capital Interests
therein is, at the time, directly or indirectly, owned by such Person and/or one
or more Subsidiaries of such Person.
"Successor Entity" means a corporation or other entity that succeeds
to and continues the business of the Company.
"Taxable Income" means, with respect to any partner or member of a
Person that is a partnership or substantially similar pass-through entity for
federal income tax purposes, such partner's allocation of taxable income from
such Person for federal income tax purposes inclusive of each item of taxable
gain, loss, income, and deduction required to be taken into account separately
by the partners or members of such Person and taking into account allocations
pursuant to Section 704(c) of the Code. The character of each separately stated
item shall be disregarded for purposes of determining Taxable Income; provided,
that net capital loss, as defined in Section 1222(10) of the Code, shall not be
taken into account in determining Taxable Income.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.3 hereof).
"Transactions" means:
(a) the investment in the Company of equity capital by Volvo
Trucks and Mobil Oil;
(b) the purchase of the Chartwell Interests and the Kirschner
Interests by the Company;
(c) the execution of, and consummation of borrowings under, a
Credit Agreement to be entered into by the Operating Partnership and the
Company with BankBoston and a syndicate of lenders;
(d) the amendment of the 10 1/2% Notes Indenture; and
(e) the consummation of the sale of the Units.
"Treasury Rate" means the yield to maturity at the time of computation
of U.S. Treasury securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Release H.15 (519) which has become publicly
available at least two business days prior to the Redemption Date (or, if such
statistical release is no longer published, any publicly available source of
similar market data)) closest to the period from the Redemption Date to August
1, 2004; provided, however, that if the period from the Redemption Date to
August 1, 2004, is not equal to the constant maturity of a U.S. Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to
28
<PAGE>
the nearest one-twelfth of one year) from the weekly average yields of U.S.
Treasury securities for which such yields are given, except that if the period
from the Redemption Date to August 1, 2004, is less than one year, the weekly
average yield on actually traded U.S. Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trust Officer" when used with respect to the Trustee, means any
officer or assistant officer of the Trustee assigned to the Corporate Trust
Administration department or similar department performing corporate trust work
of the Trustee or any successor to such department or, in the case of a
successor Trustee, any officer of such successor Trustee performing corporate
trust functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"U.S. Government Obligations" means (i) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the 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 a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Volvo Trucks" means Volvo Trucks North America, Inc. and Affiliates.
"Voting Interests" means, with respect to any Person, securities of
any class or classes of Capital Interests in such Person entitling the holders
thereof generally to vote on the election of members of the board of directors
or comparable body of such Person.
"Warrant Agreement" means that certain warrant agreement among Warrant
Holdings, the Company, Sixty Eighty LLC, First Union Capital Markets Corp., CIBC
World Markets Corp. and State Street Bank and Trust Company.
"Warrant Holdings" means Petro Warrant Holdings Corporation, a
Delaware corporation.
"Warrants" means the exchangeable warrants issued by Warrant Holdings
pursuant to the Warrant Agreement.
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<PAGE>
"Wholly-Owned" means, with respect to a Subsidiary, any Subsidiary, at
least 99% of the outstanding voting securities (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
Section 1.2. Other Definitions.
------------------
The definitions of the following terms may be found in the sections
indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"Affiliate Transaction"........................... 4.10
"Agent Members"................................... 2.6
"Authenticating Agent"............................ 2.2
"Bankruptcy Law".................................. 6.1
"Business Day".................................... 10.8
"Covenant Defeasance"............................. 9.3
"Custodian"....................................... 6.1
"Defaulted Interest".............................. Exhibit A
"Discharge"....................................... 9.1
"Event of Default"................................ 6.1
"Excess Proceeds"................................. 4.9
"Exchange Notes".................................. 2.2
"Global Notes".................................... 2.1
"Legal Defeasance"................................ 9.2
"Legal Holiday"................................... 10.8
"Paying Agent".................................... 2.3
"Private Placement Legend"........................ 2.7
"Registrar"....................................... 2.3
"Required Filing Dates"........................... 4.2
"Reinvestment Date"............................... 4.9
"Special Record Date"............................. 2.12
"Specified Period"................................ 4.6
"Surviving Entity"................................ 5.1
"Unrestricted Subsidiary"......................... 4.13
</TABLE>
Section 1.3 Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the portion
of such provision required to be incorporated herein in order for this Indenture
to be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
30
<PAGE>
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Issuers or any other
obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.4. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) words used herein implying any gender shall apply to every gender;
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or Subdivision,
unless expressly stated otherwise; and
(7) the term "interest" shall include all Additional Interest as
provided in the Registration Rights Agreement for purposes of this Indenture and
the Notes.
ARTICLE II.
THE NOTES
---------
Section 2.1. Form and Dating.
---------------
(a) The Issue Date Notes are being originally offered and sold by the
Issuers pursuant to a purchase agreement, dated July 19, 1999 among the Issuers
and First Union Capital Markets Corp. and CIBC World Markets Corp. and pursuant
to a purchase agreement, dated July 19, 1999 among the Issuers and Chartwell.
The Notes will be issued in fully-registered form without coupons, and only in
denominations of $1,000 and any integral multiple thereof. The
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<PAGE>
Notes and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit A hereto.
---------
(b) The terms and provisions of the Notes, the form of which is in
Exhibit A, shall constitute, and are hereby expressly made, a part of this
- ---------
Indenture, and, to the extent applicable, the Issuers and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. Except as otherwise expressly permitted in
this Indenture, all Notes shall be identical in all respects. Notwithstanding
any differences among them, all Notes issued under this Indenture shall vote and
consent together on all matters as one class.
(c) The Notes may have notations, legends or endorsements as specified
in Section 2.7 or as otherwise required by law, stock exchange rule or the
-----------
Depository rule or usage. The Issuers and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its authentication.
(d) Notes originally offered and sold to QIBs in reliance on Rule 144A
will be issued on the issue date therefor in the form of a permanent Global Note
or in the form of Certificated Notes.
(e) Notes originally offered and sold to Chartwell in reliance on an
exemption from the registration requirements of the Securities Act, will be
issued on the issue date therefor in the form of a single Certificated Note.
Section 2.2. Execution and Authentication.
----------------------------
(a) Two Officers of each Issuer, one of whom shall be the Chairman of
the Board, the President, the Chief Executive Officer or the Chief Financial
Officer, shall sign the Notes for the Issuers by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the
time the Trustee authenticates the Note, the Note shall be valid nevertheless.
(b) A Note shall not be valid until an authorized signatory of the
Trustee manually authenticates the Note. The signature of the Trustee on a Note
shall be conclusive evidence that such Note has been duly and validly
authenticated and issued under this Indenture.
(c) At any time and from time to time after the execution and delivery
of this Indenture, the Trustee shall authenticate and make available for
delivery: Notes upon a written order of the Issuers signed by two Officers or by
an Officer and either an Assistant Treasurer or an Assistant Secretary of each
Issuer (the "Issuer Order"). An Issuer Order shall specify the amount of the
------------
Notes to be authenticated and the date on which the original issue of Notes is
to be authenticated.
(d) The Trustee may appoint an agent (the "Authenticating Agent")
--------------------
reasonably acceptable to the Issuers to authenticate the Notes. Unless limited
by the terms of such appointment, any such Authenticating Agent may authenticate
Notes whenever the Trustee
32
<PAGE>
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by the Authenticating Agent.
(e) In case the Company:
(i) shall be consolidated with or merged into any other Person,
(ii) or shall convey, transfer, lease or otherwise dispose of its
properties and assets substantially as an entirety to any Person,
and the Successor Company resulting from such consolidation, or surviving such
merger, or which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article IV, any of the Notes authenticated or
----------
delivered prior to such transaction may, from time to time, at the request of
the Successor Company, be exchanged for other Notes executed in the name of the
Successor Company with such changes in phraseology and form as may be
appropriate, but otherwise identical to the Notes surrendered for such exchange
and of like principal amount; and the Trustee, upon Issuer Order of the
Successor Company, shall authenticate and deliver Notes as specified in such
order for the purpose of such exchange. If Notes shall at any time be
authenticated and delivered in any new name of a Successor Company pursuant to
this Section 2.2 in exchange or substitution for or upon registration of
-----------
transfer of any Notes, such Successor Company, at the option of the Holders but
without expense to them, shall provide for the exchange of all Notes at the time
outstanding for Notes authenticated and delivered in such new name.
Section 2.3. Registrar and Paying Agent.
--------------------------
(a) The Issuers shall maintain an office or agency in the Borough of
Manhattan, City of New York, where Notes may be presented for registration of
transfer or for exchange (the "Registrar"), where Notes may be presented for
---------
payment (the "Paying Agent") and for the service of notices and demands to or
------------
upon the Issuers in respect of the Notes and this Indenture. The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Issuers may have one or more co-Registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
(b) The Issuers shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-Registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuers shall
notify the Trustee of the name and address of each such agent. If the Issuers
fail to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.7.
-----------
The Company may act as Paying Agent, Registrar, co-Registrar or transfer agent.
(c) The Issuers initially appoint the Trustee at the principal
corporate trust office of its Affiliate, State Street Bank and Trust Company of
New York, N.A., located at 61 Broadway, 15/th/ Floor, in the Borough of
Manhattan, City of New York 10006 (the "Affiliate Trust Office") as Registrar,
----------------------
Paying Agent and agent for service of demands and notices in
33
<PAGE>
connection with the Notes and this Indenture, until such time as the Trustee has
resigned or a successor Trustee has been appointed.
Section 2.4. Paying Agent to Hold Money in Trust.
-----------------------------------
The Issuers shall require each Paying Agent (other than the Trustee)
to agree in writing that such Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all money held by such Paying Agent for the payment of
principal of or interest on the Notes and shall notify the Trustee in writing of
any default by the Issuers in making any such payment. If the Company acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Issuers at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it to the Trustee and to
account for any funds disbursed by such Paying Agent. Upon complying with this
Section 2.4, the Paying Agent (if other than the Company) shall have no further
- -----------
liability for the money delivered to the Trustee. Upon any proceeding under any
Bankruptcy Law with respect to the Company or any Affiliate of the Company, if
the Company is then acting as Paying Agent, the Trustee shall replace the
Company as Paying Agent.
Section 2.5. Holder Lists
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, or to the extent otherwise
required under the TIA, the Issuers shall furnish to the Trustee, in writing at
least seven Business Days before each Interest Payment Date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Holders.
Section 2.6. Global Note Provisions.
----------------------
(a) Each Global Note initially shall: (i) be registered in the name of
the Depository or the nominee of the Depository, (ii) be delivered to the Note
Custodian, and (iii) bear the appropriate legend, as set forth in Section 2.7
-----------
and Exhibit A. Any Global Note may be represented by more than one certificate.
---------
The aggregate principal amount of each Global Note may from time to time be
increased or decreased by adjustments made on the records of the Note Custodian,
as provided in this Indenture.
(b) Members of, or participants in, the Depository ("Agent Members")
-------------
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository or by the Note Custodian under such Global
Note, and the Depository may be treated by the Issuers, the Trustee, the Paying
Agent and the Registrar and any of their agents as the absolute owner of such
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Issuers, the Trustee, the Paying Agent or the Registrar
or any of their agents 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 the
Depository governing the exercise of the rights of an owner of a beneficial
interest in any Global Note. The registered Holder of a Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold
34
<PAGE>
interests through Agent Members, to take any action that a Holder is entitled to
take under this Indenture or the Notes.
(c) Except as provided in Section 2.8 and below, owners of beneficial
interests in Global Notes will not be entitled to receive Certificated Notes.
Certificated Notes shall be issued to all owners of beneficial interests in a
Global Note in exchange for such interests if:
(i) the Depository notifies the Company that it is unwilling or unable
to continue as depositary for such Global Note or the Depository ceases to
be a clearing agency registered under the Exchange Act, at a time when the
Depository is required to be so registered in order to act as depositary,
and in each case a successor depositary is not appointed by the Company
within 90 days of such notice, or
(ii) the Company executes and delivers to the Trustee and Registrar an
Officers' Certificate stating that such Global Note shall be so
exchangeable.
In connection with the exchange of an entire Global Note for Certificated Notes
pursuant to this subsection (c), such Global Note shall be deemed to be
surrendered to the Trustee for cancellation, and the Issuers shall execute, and
upon Issuer Order the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
such Global Note, an equal aggregate principal amount of Certificated Notes of
authorized denominations.
(d) In connection with the exchange of a portion of a Certificated
Note for a beneficial interest in a Global Note, the Trustee shall cancel such
Certificated Note, and the Issuers shall execute, and upon Issuer Order the
Trustee shall authenticate and deliver, to the exchanging Holder a new
Certificated Note representing the principal amount not so exchanged.
Section 2.7 Legends.
-------
(a) Each Global Note shall bear the legend specified therefor in
Exhibit A on the face thereof.
- ---------
(b) Each Restricted Note shall bear the private placement legend
specified therefor in Exhibit A on the face thereof (together with, if
---------
applicable, the legend specified in clause (c) below, the "Private Placement
-----------------
Legend").
- ------
(c) Each Certificated Note that is a Restricted Note shall bear the
legend specified therefor in Exhibit A on the face thereof.
---------
Section 2.8. Transfer and Exchange.
---------------------
(a) The following provisions shall apply with respect to any proposed
transfer of a Certificated Note (or portion thereof) that is a Restricted Note:
(i) If the Holder of a Certificated Note wishes to deliver such Note
to the Registrar for registration in the name of such Holder, without
transfer, or if the Holder
35
<PAGE>
wishes to transfer such Note to the Company or any of its Subsidiaries, the
Registrar shall authenticate and deliver Certificated Notes to such Holder or to
the Company or any of its Subsidiaries, as the case may, (x) upon receipt by the
Registrar of:
(A) such Certificated Note, duly endorsed as provided herein,
(B) instructions from such Holder directing the Registrar to issue one
or more Certificated Notes in the amounts specified to the transferee,
and, if the entire principal amount of such Certificated Note is not
being transferred, to issue one or more Certificated Notes to the
transferor in an amount equal to the principal amount not transferred,
and
(C) a certificate in the form of Exhibit B-1 duly executed by the
-----------
transferor, and
(y) the Registrar shall:
(1) cancel the Certificated Note delivered to it, and
(2) if applicable, issue to the transferor one or more Certificated
Note(s) in accordance with the foregoing;
(ii) If the Holder of a Certificated Note wishes to transfer such
Certificated Note (or a portion thereof) to a QIB pursuant to Rule 144A,
the Registrar shall authenticate and deliver Certificated Notes to the
appropriate QIB (x) upon receipt by the Note Custodian and Registrar of:
(A) such Certificated Note, duly endorsed as provided herein,
(B) instructions from such Holder directing the Registrar to issue one
or more Certificated Notes in the amounts specified to the transferee,
and, if the entire principal amount of such Certificated Note is not
being transferred, to issue one or more Certificated Notes to the
transferor in an amount equal to the principal amount not transferred,
and
(C) a certificate in the form of Exhibit C duly executed by the
---------
transferor, and
(y) the Registrar shall:
(1) cancel the Certificated Note delivered to it, and
(2) if applicable, issue to the transferor one or more Certificated
Note(s) in accordance with the foregoing;
(iii) If the Holder of Certificated Note wishes to transfer such
Certificated Note (or any portion thereof) to an IAI, the Registrar shall
authenticate and deliver Certificated Note(s) to the appropriate IAI(s)
upon receipt by Registrar of:
36
<PAGE>
(A) such Certificated Note, duly endorsed as provided herein,
(B) instructions from such Holder directing the Registrar to issue one
or more Certificated Notes in the amounts specified to the transferee
IAI and, if the entire principal amount of such Certificated Note is
not being transferred, to issue one or more Certificated Notes to the
transferor in an amount equal to the principal amount not transferred,
and
(C) a certificate in the form of Exhibit D-1 duly executed by the
-----------
transferee, and
(y) the Registrar shall:
(1) cancel the Certificated Note delivered to it,
(2) if applicable, issue to the transferor one or more Certificated
Note(s) in accordance with the foregoing;
(iv) If the Holder of Certificated Note wishes to transfer such
Certificated Note (or any portion thereof) to an Accredited Investor, the
Registrar shall authenticate and deliver Certificated Note(s) to the
appropriate Accredited Investors upon receipt by Registrar of:
(A) such Certificated Note, duly endorsed as provided herein,
(B) instructions from such Holder directing the Registrar to issue one
or more Certificated Notes in the amounts specified to the transferee
Accredited Investor and, if the entire principal amount of such
Certificated Note is not being transferred, to issue one or more
Certificated Notes to the transferor in an amount equal to the
principal amount not transferred,
(C) a certificate in the form of Exhibit D-2 duly executed by the
-----------
transferee,
(D) an opinion of counsel in form and substance satisfactory to the
Registrar and the Company from an independent law firm of recognized
standing and experienced in matters involving the federal securities
laws, to the effect that such transfer does not violate the Securities
Act; and
(y) the Registrar shall:
(1) cancel the Certificated Note delivered to it,
(2) if applicable, issue to the transferor one or more Certificated
Note(s) in accordance with the foregoing;
(v) If the Holder of a Certificated Note wishes to transfer such
Certificated Note (or a portion thereof) to a Non-U.S. Person pursuant to
Regulation S, the Registrar
37
<PAGE>
shall authenticate and deliver Certificated Notes to the appropriate Non-
U.S. Person (x) upon receipt by the Note Custodian and Registrar of:
(A) such Certificated Note, duly endorsed as provided herein,
(B) instructions from the Holder of such Certificated Note directing
the Registrar to issue one or more Certificated Notes in the amounts
specified to the transferee, and, if the entire principal amount of
such Certificated Note is not being transferred, to issue one or more
Certificated Notes to the transferor in an amount equal to the
principal amount not transferred, and
(C) a certificate in the form of Exhibit E from the transferor, and
---------
(y) the Registrar shall:
(1) cancel the Certificated Note delivered to it, and
(2) if applicable, issue to the transferor one or more Certificated
Note(s) in accordance with the foregoing.
(b) Any Person having a beneficial interest in a Global Note may,
upon request and subject to the rules and procedures of the Depository, exchange
such beneficial interest for one or more Certificated Notes. To effect any such
transfer, the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Note must deliver to the Registrar written
instructions or such other form of instructions as is customary for the
Depository. In addition, in the case of a Restricted Note, the following
additional procedures shall apply:
(i) If such beneficial interest in a Global Note is being transferred
to the Person designated by the Depository as being the beneficial owner or
to the Company or any of its Subsidiaries, (x) upon receipt by the Note
Custodian and the Registrar of:
(A) instructions from the Holder of the Global Note directing the Note
Custodian and Registrar to issue one or more Certificated Notes in the
amounts specified to the Person designated by the Depository as being
the beneficial owner or to the Company or any of its Subsidiaries, as
the case may be, and, debit or cause to be debited an equivalent
amount of beneficial interest in the Global Note, and
(B) a certificate in the form of Exhibit B-2 from the transferor,
-----------
and (y) subject to the rules and procedures of the Depository, the Note
Custodian and Registrar shall:
(A) authenticate and deliver to the Person designated by the
Depository as being the beneficial owner or to the Company or any of
its Subsidiaries, as the case may be, Certificated Note(s) in an
equivalent amount to the beneficial interest in the Global Note being
transferred in accordance with the foregoing, and
38
<PAGE>
(B) decrease the Global Note by such amount in accordance with the
foregoing.
(ii) If the owner of a beneficial interest in the Global Note wishes
to transfer such interest (or any portion thereof) to a QIB pursuant to
Rule 144A, (x) upon receipt by the Note Custodian and Registrar of:
(A) instructions from the Holder of the Global Note directing the Note
Custodian and Registrar to issue one or more Certificated Notes in the
amounts specified to the transferee QIB and, debit or cause to be
debited an equivalent amount of beneficial interest in the Global
Note, and
(B) a certificate in the form of Exhibit C from the transferor,
---------
and (y) subject to the rules and procedures of the Depository, the Note
Custodian and Registrar shall:
(A) authenticate and deliver to the QIB transferee Certificated
Note(s) in an equivalent amount to the beneficial interest in the
Global Note being transferred in accordance with the foregoing, and
(B) decrease the Global Note by such amount in accordance with the
foregoing.
(iii) If the owner of a beneficial interest in a Global Note wishes
to transfer such interest (or a portion thereof) to an IAI, (x) upon
receipt by the Note Custodian and Registrar of:
(A) instructions from the Holder of the Global Note directing the Note
Custodian and Registrar to issue one or more Certificated Notes in the
amounts specified to the transferee IAI and, debit or cause to be
debited an equivalent amount of beneficial interest in the Global
Note, and
(B) a certificate in the form of Exhibit D-1 from the IAI transferee,
-----------
and (y) subject to the rules and procedures of the Depository, the Note
Custodian and Registrar shall:
(A) authenticate and deliver to the IAI transferee Certificated
Note(s) in an equivalent amount to the beneficial interest in the
Global Note being transferred in accordance with the foregoing, and
(B) decrease the Global Note by such amount in accordance with the
foregoing.
(iv) If the owner of a beneficial interest in a Global Note wishes to
transfer such interest (or portion thereof) to a Non-U.S. Person pursuant
to Regulation S, (x) upon receipt by the Note Custodian and Registrar of:
39
<PAGE>
(A) instructions from the Holder of the Global Note directing the Note
Custodian and Registrar to issue one or more Certificated Notes in the
amounts specified to the transferee and, debit or cause to be debited
an equivalent amount of beneficial interest in the Global Note, and
(B) a certificate in the form of Exhibit E from the transferor,
---------
and (y) subject to the rules and procedures of the Depository, the Note
Custodian and Registrar shall:
(A) authenticate and deliver to the transferee Certificated Note(s) in
an equivalent amount to the beneficial interest in the Global Note
being transferred in accordance with the foregoing, and
(B) decrease the Global Note by such amount in accordance with the
foregoing.
(v) Certificated Notes issued in exchange for a beneficial interest in
a Global Note, pursuant to this Section 2.8(b) shall be registered in such names
and in such authorized denominations as the Depository, pursuant to instructions
from its direct or Indirect Participants or otherwise, shall instruct the
Registrar. The Registrar shall deliver such Certificated Notes to the Persons in
whose names such Notes are so registered. Following any such issuance of
Certificated Notes, the Registrar, shall instruct the Depository to reduce or
cause to be reduced the aggregate principal amount at maturity of the applicable
Global Note to reflect the transfer.
(c) If the holder of a Certificated Note wishes to transfer such Note
(or a portion thereof) to a QIB that wishes to hold such Note in the form
of an interest in the Global Note, (x) upon receipt by the Note Custodian
and Registrar of:
(A) such Certificated Note, duly endorsed as provided herein,
(B) instructions from such Holder directing the Note Custodian and
Registrar to credit or cause to be credited a beneficial interest in
the Global Note equal to the principal amount (or portion thereof) of
such Certificated Note to be transferred, and, if the entire principal
amount of such Certificated Note is not being transferred to issue one
or more certificated Notes to the transferor in an amount equal to the
principal amount not transferred, and
(C) a certificate in the form of Exhibit C duly executed by the
---------
transferor, and
(y) subject to the rules and procedures of the Depository, the Note
Custodian and Registrar shall:
(1) cancel the Certificated Note delivered to it,
(2) increase the Global Note in accordance with the foregoing, and
40
<PAGE>
(3) if applicable, issue to the transferor one or more Certificated
Note(s) in accordance with the foregoing;
(d) Other Transfers. Any transfer of Restricted Notes not described
---------------
above (other than a transfer of a beneficial interest in a Global Note that does
not involve an exchange of such interest for a Certificated Note or a beneficial
interest in another Global Note, which must be effected in accordance with
applicable law and the rules and procedures of the Depository, but is not
subject to any procedure required by this Indenture) shall be made only upon
receipt by the Registrar of such opinions of counsel (which opinions shall be in
form and substance satisfactory to the Registrar and the Company and delivered
by independent counsel of recognized standing and experienced in matters
involving the federal securities laws), and such certificates and/or other
information reasonably required by and satisfactory to the Registrar in order,
in each case, to ensure compliance with the Securities Act or in accordance with
Section 2.8(e).
- --------------
(e) Use and Removal of Private Placement Legends. Upon the transfer,
--------------------------------------------
exchange or replacement of Certificated Notes (or beneficial interests in a
Global Note) not bearing a Private Placement Legend, the Registrar (and the Note
Custodian, in the case of beneficial interests in a Global Note) shall exchange
such Notes (or beneficial interests) for Certificated Notes (or beneficial
interests in a Global Note) that do not bear a Private Placement Legend. Upon
the transfer, exchange or replacement of Certificated Notes (or beneficial
interests in a Global Note) bearing a Private Placement Legend, the Registrar
(and the Note Custodian, in the case of beneficial interests in a Global Note)
shall deliver only Certificated Notes (or beneficial interests in a Global Note)
that bear a Private Placement Legend unless:
(i) such Notes (or beneficial interests) are exchanged in a
Registered Exchange Offer;
(ii) such Notes (or beneficial interests) are transferred pursuant to
a Registration Statement;
(iii) such Notes (or beneficial interests) are transferred pursuant
to Rule 144 upon delivery to the Registrar of a certificate of the
transferor in the form of Exhibit F and an Opinion of Counsel reasonably
---------
satisfactory to the Registrar;
(iv) such Notes (or beneficial interests) are transferred, replaced
or exchanged after the Resale Restriction Termination Date therefor; or
(v) in connection with such transfer, exchange or replacement the
Registrar shall have received an Opinion of Counsel and other evidence
reasonably satisfactory to it to the effect that neither such Private
Placement Legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
The Private Placement Legend on any Note shall be removed at the request of the
Holder on or after the Resale Restriction Termination Date therefor. The Holder
of a Global Note may exchange an interest therein for an equivalent interest in
a Global Note not bearing a Private
41
<PAGE>
Placement Legend upon transfer of such interest pursuant to any clauses (i)-(v)
above. The Company shall deliver to the Trustee an Officers' Certificate
promptly upon effectiveness, withdrawal or suspension of any Registration
Statement.
(f) Consolidation of Global Notes. If a Global Note not bearing a
-----------------------------
Private Placement Legend is outstanding at the time of a Registered Exchange
Offer, any interests in a Global Note bearing a Private Placement Legend
exchanged in such Registered Exchange Offer shall be exchanged for interests in
such outstanding Global Note; and
(g) Retention of Documents. The Registrar shall retain copies of all
----------------------
letters, notices and other written communications received pursuant to this
Article II. The Issuers shall have the right to inspect and make copies of all
- ----------
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
(h) Execution, Authentication of Notes, etc.
----------------------------------------
(i) Subject to the other provisions of this Section 2.8, when Notes
-----------
are presented to the Registrar or a co-Registrar with a request to register
the transfer of such Notes or to exchange such Notes for an equal principal
amount of Notes of other authorized denominations, the Registrar or co-
Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided that any Notes
--------
presented or surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Registrar or co-Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit
registrations of transfers and exchanges and subject to the other terms and
conditions of this Article II, the Company will execute and upon Issuer
----------
Order the Trustee will authenticate Certificated Notes and Global Notes at
the Registrar's or co-Registrar's request. In accordance with the
Registration Rights Agreement, the Issuers will execute and upon Issuer
Order the Trustee will authenticate Exchange Notes in exchange for Issue
Date Notes.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Issuers may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charges payable upon exchange or
transfer pursuant to a Registered Exchange Offer, or Section 4.9, Section
4.18, Section 5.1 or Section 9.5).
(iii) The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Note for a period beginning: (1) 15
days before the mailing of a notice of an offer to repurchase or redeem
Notes and ending at the close of business on the day of such mailing or (2)
15 days before an Interest Payment Date and ending on such Interest Payment
Date.
(iv) Prior to the due presentation for registration of transfer of
any Note, the Issuers, the Trustee, the Paying Agent, the Registrar or any
co-Registrar may deem and
42
<PAGE>
treat the person in whose name a Note is registered as the absolute owner
of such Note for the purpose of receiving payment of principal of and
interest on such Note and for all other purposes whatsoever, whether or not
such Note is overdue, and none of the Issuers, the Trustee, the Paying
Agent, the Registrar or any co-Registrar shall be affected by notice to the
contrary.
(v) All Notes 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 Notes surrendered upon
such transfer or exchange.
(i) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of interest in a Global Note, a member of, or a
participant in, the Depository or other Person with respect to the accuracy
of the records of the Depository or its nominee or of any participant or
member thereof, with respect to any ownership interest in the Notes 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 amount or delivery of any Notes
(or other security or property) under or with respect to such Notes. All
notices and communications to be given to the Holders and all payments to
be made to Holders in respect of the Notes 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 Note). The Trustee may rely and
shall be fully protected in relying upon information furnished by the
Depository with respect to its members, participants and any beneficial
owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among the Depository participants, members or beneficial owners in any
Global Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes.
------------------------------------------
(a) If a mutilated Note is surrendered to the Registrar or if the
Holder of a Note claims that the Note has been lost, destroyed or stolen, the
Issuers shall execute and upon Issuer Order the Trustee shall authenticate a
replacement Note if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable requirements of the
Trustee. If required by the Trustee or the Issuers, such Holder shall furnish
an affidavit of loss and indemnity bond sufficient in the judgment of the
Issuers and the Trustee to protect the Issuers, the Trustee, the Paying Agent,
the Registrar and any co-Registrar from any loss that any of them may suffer if
a Note is replaced, and, in the absence of notice to the Issuers or the Trustee
that such Note has been acquired by a bona fide purchaser, the Issuers shall
execute and upon Issuer Order the Trustee shall authenticate and make available
43
<PAGE>
for delivery, in exchange for any such mutilated Note or in lieu of any such
destroyed, lost or stolen Note, a new Note of like tenor and principal amount,
bearing a number not contemporaneously outstanding.
(b) Upon the issuance of any new Note under this Section 2.9, the
-----------
Issuers may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
(c) Every new Note issued pursuant to this Section in exchange for any
mutilated Note, or in lieu of any destroyed, lost or stolen Note, shall
constitute an original additional contractual obligation of the Issuers and any
other obligor upon the Notes, whether or not the mutilated, destroyed, lost or
stolen Note 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 Notes duly issued hereunder.
Section 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Issuers may execute
and upon Issuer Order the Trustee will authenticate temporary Notes. Temporary
Notes will be substantially in the form of definitive Notes but may have
variations that the Issuers consider appropriate for temporary Notes. Without
unreasonable delay, the Issuers will prepare and execute and upon Issuer Order
the Trustee will authenticate definitive Notes. After the preparation of
definitive Notes, the temporary Notes will be exchangeable for definitive Notes
representing an equal principal amount upon surrender of the temporary Notes at
any office or agency maintained by the Company for that purpose and such
exchange shall be without charge to the Holder. Until so exchanged, the Holder
of temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as a Holder of definitive Notes.
Section 2.11. Cancellation.
------------
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel and return to the Issuers all Notes
surrendered for registration of transfer, exchange or payment. The Issuers may
not issue new Notes to replace Notes that have been paid or delivered to the
Trustee for cancellation for any reason other than in connection with a transfer
or exchange.
Section 2.12. Defaulted Interest.
------------------
When any installment of interest becomes Defaulted Interest (as
defined in the form of Note), such installment shall forthwith cease to be
payable to the Holders in whose names the Notes were registered on the record
date applicable to such installment of interest. Defaulted Interest, and any
interest payable on such Defaulted Interest, may be paid by the Issuers, at
their election, as provided in clause (a) or (b) below.
44
<PAGE>
(a) The Issuers may elect to make payment of any Defaulted Interest,
and any interest payable on such Defaulted Interest, to the Holders in whose
names the Notes are registered at the close of business on a special record date
for the payment of such Defaulted Interest (a "Special Record Date"), which
-------------------
shall be fixed in the following manner. The Issuers shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on the Notes and
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, such money when deposited to be held in trust for the benefit of the
Holders entitled to such Defaulted Interest as provided in this clause (a).
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest, which shall be not more than 15 calendar days and not less
than ten calendar days prior to the date of the proposed payment and not less
than ten calendar days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Issuers of such Special
Record Date and, in the name and at the expense of the Issuers, shall cause
notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be sent, first-class mail, postage prepaid, to each Holder at
such Holder's address as it appears in the registration books of the Registrar,
not less than ten calendar days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be paid
to the Holders in whose names the Notes are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following clause (b); or
(b) The Issuers may make payment of any Defaulted Interest, and any
interest payable on such Defaulted Interest, on the Notes in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Issuers to the Trustee of the proposed
payment pursuant to this clause (b), such manner of payment shall be deemed
practicable by the Trustee.
Section 2.13. Add-On Notes.
------------
The Issuers may, from time to time, subject to compliance with any
other applicable provisions of this Indenture, without the consent of the
Holders, create and issue pursuant to this Indenture additional notes ("Add-On
------
Notes") having terms and conditions set forth in Exhibit A identical to those of
- ----- ---------
the other outstanding Notes, except that Add-On Notes:
(i) may have a different issue date from other outstanding Notes;
(ii) may have a different amount of interest payable on the first
Interest Payment Date after issuance than is payable on other outstanding
Notes;
(iii) may have terms specified in the Add-On Note Board Resolution or
Add-On Note Supplemental Indenture for such Add-On Notes making appropriate
adjustments to this Article II and Exhibit A (and related definitions)
---------- ---------
applicable to such Add-On Notes in order to conform to and ensure
compliance with the Securities Act (or other applicable securities laws)
and any registration rights or similar agreement applicable to such Add-
45
<PAGE>
On Notes, which are not adverse in any material respect to the Trustee or
the Holder of any outstanding Notes (other than such Add-On Notes); and
(iv) may be entitled to additional interest as contemplated in Section
-------
2.14 not applicable to other outstanding Notes and may not be entitled to
----
such additional interest applicable to other outstanding Notes.
Section 2.14. Additional Amounts Under Registration Rights Agreements.
-------------------------------------------------------
Under certain circumstances, the Issuers may be obligated to pay the
Damage Amount to Holders, all as and to the extent set forth in the Registration
Rights Agreement or any registration rights agreement applicable to Add-On
Notes. The terms thereof are hereby incorporated herein by reference and such
additional interest is deemed to be interest for purposes of this Indenture.
ARTICLE III.
REDEMPTION
----------
Section 3.1. Notices to Trustee.
------------------
If the Issuers elect to redeem Notes pursuant to Section 3.7 hereof,
(i) at least 60 days prior to the Redemption Date in the case of a partial
redemption, (ii) at least 45 days prior to the Redemption Date in the case of a
total redemption or (iii) during such other period as the Trustee may agree to
in writing, the Issuers shall notify the Trustee in writing of the Redemption
Date, the principal amount of Notes to be redeemed and the Redemption Price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in Section 3.7 hereof, as appropriate.
Section 3.2. Selection by Trustee of Notes to Be Redeemed.
--------------------------------------------
In the event that fewer than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, by lot, pro rata or by such other method as it
shall deem fair and reasonable. The Trustee shall promptly notify the Issuers
of the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed. The Trustee
may select for redemption portions of the principal of the Notes that have
denominations larger than $1,000. Notes and portions thereof the Trustee
selects shall be redeemed in amounts of $1,000 or whole multiples of $1,000.
For all purposes of this Indenture unless the context otherwise requires,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
--------------------
At least 30 days, but no more than 60 days, before a Redemption Date,
the Issuers shall mail, or cause to be mailed, a notice of redemption by first-
class mail to each Holder of
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<PAGE>
Notes to be redeemed at his or her last address as the same appears on the
registry books maintained by the Registrar pursuant to Section 2.3 hereof.
The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption Date
and upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(6) that unless the Issuers default in making the redemption payment,
Accreted Value will cease to accrete or interest will cease to accrue, as the
case may be, on Notes or portions thereof called for redemption on and after the
Redemption Date;
(7) the paragraph of Section 3.7 hereof pursuant to which the Notes
called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
At the request of the Issuers, the Trustee shall give the notice of redemption
in the name of the Issuers and at the sole expense of the Issuers.
Section 3.4. Effect of Notice of Redemption.
------------------------------
Once the notice of redemption described in Section 3.3 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the Redemption Price, plus, in the case of redemptions occurring on or after
August 1, 2004, interest accrued to the Redemption Date. Upon surrender to the
Paying Agent, such Notes shall be paid at the Redemption Price, plus, in the
case of redemptions occurring on or after August 1, 2004, interest accrued to
the Redemption Date; provided, that if the Redemption Date is after a regular
interest payment record date and on or prior to the Interest Payment Date, any
accrued interest shall be payable to the Holder of the redeemed Notes registered
on the relevant record date, and provided, further, that if a Redemption Date is
a Legal Holiday, payment shall be made on the next succeeding Business Day and
no Accreted Value shall accrete and no interest shall accrue for the period from
such Redemption Date to such succeeding Business Day. Failure to give notice or
any defect in the notice to any Holder shall not affect the validity of the
notice to any other Holder.
47
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Section 3.5. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Issuers shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the Redemption Price of, and accrued and unpaid
interest to the Redemption Date in the case of redemptions occurring on or after
August 1, 2004, on all Notes to be redeemed on that date other than Notes or
portions thereof called for redemption on that date which have been delivered by
the Issuers to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
Redemption Price of, and accrued and unpaid interest to the Redemption Date in
the case of redemptions occurring on or after August 1, 2004, on Notes called
for redemption shall have been made available in accordance with the preceding
paragraph and payment thereof is not prohibited pursuant to the terms of this
Indenture, the Notes called for redemption will cease to accrete Accreted Value
or to accrue interest, as the case may be, and the only right of the Holders of
such Notes will be to receive payment of the Redemption Price of and, subject to
the first proviso in Section 3.4, accrued interest to the Redemption Date in the
case of redemptions occurring on or after August 1, 2004, on such Notes to the
Redemption Date. If any Note called for redemption shall not be so paid,
Accreted Value will accrete or interest will be paid, from the Redemption Date
until such redemption payment is made, on the unpaid Redemption Price of the
Note and any Accreted Value or interest not paid on such unpaid amount, in each
case, at the rate and in the manner provided in the Notes.
Section 3.6. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
Section 3.7. Optional Redemption.
-------------------
(a) The Issuers may redeem the Notes, at the option of the Issuers, in
whole or in part, at any time upon not less than 30 nor more than 60 days'
notice at a Redemption Price equal to:
(i) if the Redemption Date is prior to August 1, 2004, the Accreted
Value of the Notes, plus the Make-Whole Premium, as of the Redemption Date; or
(ii) if the Redemption Date is on or after August 1, 2004, the
following Redemption Prices (expressed as percentages of principal amount at
Stated Maturity) set forth below, plus accrued and unpaid interest, if any, to
the 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 the Redemption Date), if redeemed during the 12 month period
beginning on August 1, of the years indicated:
48
<PAGE>
<TABLE>
<CAPTION>
YEAR Redemption Price
<S> <C>
2004 107.500%
2005 105.000%
2006 102.500%
2007 and thereafter 100.000%
</TABLE>
(b) In addition to the foregoing, prior to August 1, 2002, the Issuers
may, with the net proceeds of one or more Public Equity Offerings of Qualified
Capital Interests in either the Issuer or a Successor Entity, redeem all, but
not less than all, of the aggregate principal amount of the outstanding Notes at
a Redemption Price equal to 115% of the Accreted Value thereof; provided that
any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
ARTICLE IV.
COVENANTS
---------
Section 4.1. Payment of Notes.
----------------
The Issuers shall pay or cause to be paid the principal, Redemption
Price or Purchase Price of, and Accreted Value or accrued interest, as the case
may be (which shall include any Damage Amount as provided in the Registration
Rights Agreement), on, the Notes on the dates and in the manner provided in the
Notes and this Indenture. An installment of principal, Redemption Price or
Purchase Price of, or Accreted Value or accrued interest on, the Notes shall be
considered paid on the date it is due if the Trustee or a Paying Agent holds on
that date money designated for and sufficient to pay such installment. The
Issuers shall pay interest on overdue principal, Redemption Price and Purchase
Price (including post-petition interest in a proceeding under any Bankruptcy
Law) and overdue interest, to the extent lawful, at the rate specified in the
Notes.
Section 4.2. SEC Reports.
-----------
(a) Whether or not the Issuers are subject to Section 13(a) or 15(d)
of the Exchange Act, or any successor provision thereto, the Issuers will, to
the extent accepted by the SEC and not prohibited under the Exchange Act, file
with the SEC the annual reports, quarterly reports and other documents which the
Issuers would have been required to file with the SEC pursuant to such Section
13(a) or 15(d) or any successor provision thereto if the Issuers were subject
thereto, such documents to be filed with the SEC on or prior to the respective
dates (the "Required Filing Dates") by which the Issuers would have been
required to file them. The Issuers will also, in any event, (i) within 15 days
of each Required Filing Date (A) transmit by mail to all Holders, as their names
and addresses appear in the security register maintained by the Registrar,
without cost to such Holders, and (B) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Issuers would have been
required to file with the SEC pursuant to Section 13(a) or 15(d) of the Exchange
Act or any successor provisions
49
<PAGE>
thereto if the Issuers were subject thereto and (ii) if filing such documents by
the Issuers with the SEC is not accepted by the SEC or is prohibited under the
Exchange Act, promptly upon written request, supply copies of such documents to
any prospective Holder.
(b) The Issuers will, upon request, provide to any Holder of Notes or
any prospective transferee of any such Holder any information concerning the
Issuers (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144A under the
Securities Act; provided, however, that the Issuers shall not be required to
furnish such information in connection with any request made on or after the
date which is two years from the later of (i) the date such Note (or any
predecessor Note) was acquired from the Issuers or (ii) the date such Note (or
any predecessor Note) was last acquired from an "affiliate" of the Issuers
within the meaning of Rule 144 under the Securities Act.
Section 4.3. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Issuers covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, or plead (as a defense or otherwise) or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Issuers from paying all or any portion of the principal, Redemption Price or
Purchase Price of, and Accreted Value or accrued interest on, the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture and (to the
extent that they may lawfully do so) the Issuers hereby expressly waive all
benefit or advantage of any such law, and covenant that they will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 4.4. Compliance Certificate.
----------------------
(a) The Issuers shall deliver to the Trustee, within 100 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during such fiscal year has
been made under the supervision of the signing Officers with a view to
determining whether each of the Issuers has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to each
such Officer signing such certificate, that to the best of his or her knowledge
each of the Issuers has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all or such Defaults
or Events of Default of which he or she may have knowledge and what action the
Issuers are taking or propose to take with respect thereto) and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which payments on account of the principal, Redemption Price or Purchase
Price of, and Accreted Value or accrued interest on, the Notes are prohibited
or, if such event has occurred, a description of the event and what action each
of the Issuers is taking or proposes to take with respect thereto.
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end
50
<PAGE>
financial statements delivered pursuant to Section 4.2 above shall be
accompanied by a written statement of each Issuer's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Issuer has violated any provisions of this Article IV or Article V of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly for any failure to obtain knowledge of any such
violation.
(c) The Issuers will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto.
Section 4.5. Taxes.
-----
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
The Issuers shall provide to the Trustee within 30 days from the Issue
Date, any and all information required by the Trustee to enable it to complete
and file with the IRS 1099 original issue discount forms.
Section 4.6. Limitation on Debt.
------------------
(a) Holdings will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Debt (including Acquired Debt), unless, immediately
after giving effect to the Incurrence of such Debt and the receipt and
contemporaneous application of the proceeds therefrom,
(i) The Interest Coverage Ratio of the Company and its Restricted
Subsidiaries for the last four fiscal quarters for which financial information
is available at the date of determination (the "Specified Period"), determined
on a pro forma basis as if any such Debt, and any other Debt Incurred since the
beginning of the Specified Period, had been Incurred and the proceeds thereof
had been applied at the beginning of the Specified Period, and any other Debt
repaid since the beginning of the Specified Period had been repaid at the
beginning of the Specified Period, would be (1) at any time prior to August 1,
2001, greater than 1.75:1 and (2) at anytime on or after August 1, 2001, greater
than 2.0:1; and
(ii) no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence of the Incurrence of such Debt.
(b) If, during the Specified Period or subsequent thereto and prior
to the date of determination, the Company or any of its Restricted Subsidiaries
shall have engaged in any Asset Sale or acquisition or shall have designated any
Restricted Subsidiary to be an Unrestricted Subsidiary or any Unrestricted
Subsidiary to be a Restricted Subsidiary, EBITDA, as defined,
51
<PAGE>
and Adjusted Interest Expense for the Specified Period shall be calculated on a
pro forma basis giving effect to such Asset Sale or acquisition or designation,
as the case may be, and the application of any proceeds therefrom as if such
Asset Sale or acquisition or designation had occurred on the first day of the
Specified Period.
(c) If the Debt which is the subject of a determination under this
provision is Acquired Debt, or Debt Incurred in connection with the simultaneous
acquisition of any Person, business, property or assets, or Debt of an
Unrestricted Subsidiary being designated as a Restricted Subsidiary, then such
ratio shall be determined by giving effect (on a pro forma basis, as if the
transaction had occurred at the beginning of the Specified Period) to both the
Incurrence or assumption of such Acquired Debt or such other Debt by the Company
or any of its Restricted Subsidiaries and the inclusion in EBITDA, of the EBITDA
of the acquired Person, business, property or assets or redesignated Subsidiary.
(d) Notwithstanding the first paragraph above, the Company and its
Restricted Subsidiaries may Incur Permitted Debt.
(e) The Incurrence of Debt solely to develop a Stopping Center shall
be determined in accordance with the definition of "Incur" set forth in Section
1.1. The accretion of original issue discount (and any accruals of interest or
payment of interest in Add-On Notes) on the Notes shall not be deemed an
incurrence of Debt for purposes of this covenant.
Section 4.7. Limitation on Issuance and Sale of Capital Interests in
-------------------------------------------------------
Restricted Subsidiaries.
-----------------------
The Company will not permit any Restricted Subsidiary of the Company
to issue any Capital Interest (other than any required directors' qualifying
shares) to any Person other than the Company or a Wholly-Owned Restricted
Subsidiary thereof. The Company will not sell, and will not permit any of its
Restricted Subsidiaries to sell, any Capital Interests in any Restricted
Subsidiary to any Person other than the Company or a Wholly-Owned Restricted
Subsidiary unless all such Capital Interests owned by the Company and its
Restricted Subsidiaries are sold in one or more contemporaneous transactions;
provided, however, that the Company will not sell any Capital Interest in PFC to
any Person other than a Wholly-Owned Restricted Subsidiary.
Section 4.8. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries 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 shall have occurred and be
continuing or will occur as a consequence thereof;
(ii) after giving effect to such Restricted Payment on a pro
forma basis, the Company would be permitted to Incur at least $1.00 of
additional Debt (other than
52
<PAGE>
Permitted Debt) pursuant to the provisions described in paragraph (a) of
Section 4.6 hereof; and
(iii) after giving effect to such Restricted Payment on a pro
forma basis, the aggregate amount expended or declared for all Restricted
Payments made on or after the date of initial issuance of the Notes shall
not exceed the sum (without duplication) of:
(1) 50% of the Adjusted Net Income (or, if Adjusted Net
Income shall be a deficit, minus 100% of such deficit) of the Company
accrued on a cumulative basis during the period (taken as one accounting
period) beginning on the first day of the fiscal quarter in which the
initial issuance of the Notes occurred and ending on the last day of the
fiscal quarter immediately preceding the date of such proposed Restricted
Payment, plus
(2) 100% of the aggregate net cash proceeds received by the
Company subsequent to the initial issuance of the Notes from the issuance
and sale (other than to a Restricted Subsidiary) of its Qualified Capital
Interests, including Qualified Capital Interests issued upon the conversion
of Debt or Redeemable Capital Interests of the Company issued after the
initial issuance of the Notes, and from the exercise of options, warrants
or other rights to purchase such Qualified Capital Interests, plus
(3) 100% of the net reduction in Investments (other than
Permitted Investments), subsequent to the date of the initial issuance of
the Notes, in any Person, resulting from payments of interest on Debt,
dividends, repayments of loans or advances (but only to the extent such
interest, dividends or repayments are not included in the calculation of
Adjusted Net Income), in each case to the Company or any Restricted
Subsidiary from any Person (including, without limitation, from
Unrestricted Subsidiaries) or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries in accordance with this Indenture,
not to exceed in the case of any Person the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person,
plus
(4) $5,000,000.
(b) Notwithstanding paragraph (a) of this Section 4.8, the Company
and its Restricted Subsidiaries may take the following actions, provided that
with respect to clauses (ii), (iii), (iv), (vi) and (vii) below, immediately
after giving effect to such action, no Default or Event of Default has occurred
and is continuing:
(i) the payment of any dividend on Capital Interests in the
Company or a Restricted Subsidiary within 60 days after declaration thereof
if at the declaration date such payment would not have been prohibited by
the foregoing provisions of this covenant;
(ii) the retirement of any Qualified Capital Interests of the
Company or any Restricted Subsidiary by conversion into, or by or in
exchange for, Qualified Capital
53
<PAGE>
Interests, or out of net cash proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Qualified Capital
Interests of the Company;
(iii) the redemption, defeasance, repurchase or acquisition or
retirement for value of any Debt of the Company that is subordinate in
right of payment to the Notes out of the net cash proceeds of a
substantially concurrent issue and sale (other than to a Restricted
Subsidiary) of new subordinated Debt of the Company incurred in accordance
with this Indenture;
(iv) payments due under the Permitted Affiliate Agreements
that would otherwise constitute Restricted Payments (other than pursuant to
clause (v) below);
(v) cash distributions by the Company to its partners on its
Capital Interests, for so long as it is organized as a partnership or other
substantially similar pass-through entity for federal income tax purposes,
in aggregate amounts not exceeding the aggregate amount of Permitted Tax
Distributions accrued after December 31, 1997;
(vi) the purchase, redemption, retirement or other acquisition
for value of Capital Interests in the Company held by employees or former
employees of the Company or any Restricted Subsidiary (or their estates or
beneficiaries under their estates) upon death, disability, retirement,
termination of employment or pursuant to the terms of any agreement under
which such Capital Interests were issued; provided that the aggregate cash
consideration paid for such purchase, redemption, retirement or other
acquisition of such Capital Interests does not exceed $1,000,000 in any
fiscal year;
(vii) payments that would otherwise constitute Restricted
Payments, not to exceed $100,000 in any fiscal year;
(viii) the purchase on the Issue Date of the Chartwell Interests
and the Kirschner Interests;
(ix) the purchase of any Warrants; and
(x) the conversion of employee options issued under the
Option Plan into rights under the Phantom Option Plan.
(c) The actions described in clauses (i), (ii), (iv), (vi) and (vii)
of paragraph (b) of this Section 4.8 shall reduce, but without duplication, the
amount that would otherwise be available for Restricted Payments under clause
(iii) of paragraph (a) of this Section 4.8.
(d) If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment, in the good faith determination of the
Board of Directors of the Company, would be permitted under the requirements of
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustment made in
good faith to the Company's financial statements affecting Adjusted Net Income.
54
<PAGE>
(e) If any Person in which an Investment is made, which Investment
constitutes a Restricted Payment when made, thereafter becomes a Restricted
Subsidiary in accordance with this Indenture, all such Investments previously
made in such Person shall no longer be counted as Restricted Payments for
purposes of calculating the aggregate amount of Restricted Payments pursuant to
clause (iii) of paragraph (a) of this Section 4.8, in each case to the extent
such Investments would otherwise be so counted.
(f) If the Company or a Restricted Subsidiary transfers, conveys,
sells, leases or otherwise disposes of an Investment in accordance with Section
4.9 hereof, which Investment was originally included in the aggregate amount
expended or declared for all Restricted Payments pursuant to clause (c) of the
definition of "Restricted Payments," the aggregate amount expended or declared
for all Restricted Payments shall be reduced by the lesser of:
(i) the Net Cash Proceeds from the transfer, conveyance, sale,
lease or other disposition of such Investment or
(ii) the amount of the original Investment,
in each case, to the extent originally included in the aggregate amount expended
or declared for all Restricted Payments pursuant to clause (c) of the definition
of "Restricted Payments."
(g) For purposes of this Section 4.8, if a particular Restricted
Payment involves a non-cash payment, including a distribution of assets, then
such Restricted Payment shall be deemed to be an amount equal to the cash
portion of such Restricted Payment, if any, plus an amount equal to the Fair
Market Value of the non-cash portion of such Restricted Payment.
Section 4.9. Limitation on Asset Sales.
-------------------------
(a) The Company will not consummate an Asset Sale unless the
Company:
(i) receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the property or assets sold or otherwise
disposed of;
(ii) at least 85% of the consideration received by the Company for
such property or assets consists of cash or Eligible Cash Equivalents; provided
that the amount of any liabilities (as shown on the Company' most recent balance
sheet) of the Company (other than contingent liabilities and liabilities that
are by their terms subordinate to the Notes) that are assumed or forgiven by the
transferee of any such assets will be deemed to be cash for the purposes of this
clause (ii); and
(iii) the Net Cash Proceeds received by the Company are applied, to
the extent the Company or any Restricted Subsidiary elects or is required,
(A) to repay or purchase and permanently reduce outstanding Debt
of a Restricted Subsidiary, and to permanently reduce any commitments in
respect thereof, provided, however, that such repayment and commitment
reduction occurs within 270 days following the receipt of such Net Cash
Proceeds; or
55
<PAGE>
(B) to an investment in Replacement Assets, provided, however,
that such investment occurs or the Company or such Restricted Subsidiary
enters into contractual commitments to make such investment, subject only
to customary conditions (other than the obtaining of financing), on or
prior to the 270th day following receipt of such Net Cash Proceeds (the
"Reinvestment Date") and Net Cash Proceeds contractually committed are so
applied within 365 days following the receipt of such Net Cash Proceeds.
Notwithstanding any provision of this Section 4.9, Asset Swaps and Fuel Hedging
Obligations entered into in the ordinary course of business shall not be subject
to clause (ii) of the immediately preceding sentence.
(b) Any Net Cash Proceeds from any Asset Sale that are not used to
reinvest in Replacement Assets and/or repay Debt of a Restricted Subsidiary
shall constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds
$10,000,000, the Company shall make an Offer to Purchase, from all Holders,
Notes:
(x) having an aggregate Accreted Value as of the Purchase Date, if
the Purchase Date is on or prior to August 1, 2004, or
(y) in an aggregate principal amount at Stated Maturity, if the
Purchase Date is after August 1, 2004,
in either case equal to the Excess Proceeds, at a Purchase Price in cash equal
to:
(x) 100% of the Accreted Value thereof, if the Purchase Date is on
or prior to August 1, 2004, or
(y) 100% of the principal amount thereof, together with accrued
interest, if any, to the Purchase Date, if the Purchase Date is after August 1,
2004.
On or before the Purchase Date, the Trustee shall, to the extent lawful, accept
for payment, on a pro rata basis or by such other method as the Trustee shall
deem fair and appropriate to the extent necessary, Notes or portions thereof or
beneficial interests under a Global Note properly tendered pursuant to the Offer
to Purchase, deposit with the Paying Agent U.S. legal tender sufficient to pay
the purchase price plus accrued interest, if any, on the Notes to be purchased
and deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Issuers in accordance with the
terms of this Section 4.9. The Paying Agent shall promptly mail or deliver to
each tendering Holder an amount equal to the Purchase Price of the Note tendered
by such Holder and accepted by the Company for purchase (which payment shall, in
the case of the Holders of interests in the Global Note, be through the
facilities of the Depository), and the Issuers shall promptly issue a new Note,
and the Trustee shall authenticate and mail or make available for delivery such
new Note to such Holder equal in principal amount to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Issuers to the Holder thereof. the Company will publicly
announce
56
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the results of the Offer to Purchase on the Purchase Date. To the extent that
any amount of Excess Proceeds remains after completion of such Offer to
Purchase, the Company may use such remaining amount for general corporate
purposes, and the amount of Excess Proceeds shall be reset to zero.
(d) the Company will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and other securities laws or
regulations in the event that an Offer to Purchase is required under the
circumstances described in this Section 4.9.
Section 4.10. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, conduct any business or enter into or
permit to exist any transaction or series of related transactions (including,
but not limited to, the purchase, sale or exchange of property, the making of
any Investment, the giving of any Guarantee or the rendering of any service)
with any Unrestricted Subsidiary or any Affiliate of the Company or any
Restricted Subsidiary other than transactions solely among any of the Company
and its Restricted Subsidiaries (an "Affiliate Transaction") unless:
(i) such business, transaction or series of related transactions is
on terms no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained in a comparable arm's length transaction between
unaffiliated parties; and
(ii) with respect to an Affiliate Transaction involving an amount or
having a value in excess of $500,000, the Company delivers to the Trustee an
officers' certificate stating that such business, transaction or series of
related transactions complies with clause (i) above.
In the case of an Affiliate Transaction involving an amount or having a value in
excess of $2,000,000 but less than or equal to $5,000,000, the Company must
obtain a resolution of the Board of Directors (including a majority of
Disinterested Directors, if any) certifying that such Affiliate Transaction
complies with clause (i) above. In the case of an Affiliate Transaction
involving an amount or having a value in excess of $5,000,000, the Company must
obtain a written opinion of a nationally recognized investment banking firm or
other expert stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view. The foregoing limitation
does not limit, and shall not apply to,
(1) any transaction or series of related transactions pursuant to
the terms of the Permitted Affiliate Agreements,
(2) cash distributions permitted under clause (v) of Section 4.8(b),
relating to Permitted Tax Distributions,
(3) the payment of reasonable and customary fees to members of the
Board of Directors of the Company or a Restricted Subsidiary who are outside
directors,
(4) the payment of reasonable and customary compensation to officers
and employees of the Company or any Restricted Subsidiary as determined by the
Board of Directors thereof in good faith,
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(5) any transaction pursuant to an agreement, arrangement or
understanding existing on the Issue Date and described in the Offering
Memorandum and any amendment to such agreements, arrangements or understandings
that is not adverse to the Company, and
(6) any transaction, approved by the Board of Directors of the
Company, with an officer or director of the Company or of any Subsidiary in his
or her capacity as officer or director entered into in the ordinary course of
business.
the Company may in addition pay advisory fees to an Affiliate of the Company
with respect to specific transactions, provided such payments would be permitted
under Section 4.8(a). In addition, for purposes of this Section 4.10, any
transaction or series of related transactions between the Company or any
Restricted Subsidiary and an Affiliate of the Company that is approved by a
majority of the Disinterested Directors, if any, shall be deemed to comply with
clause (i) above. Notwithstanding the provisions of this Section 4.10, the
Company and its Restricted Subsidiaries will be permitted to consummate the
Transactions and to pay fees on the Closing Date in connection with the
consummation of the Transactions as described in the Offering Memorandum.
Section 4.11. Limitations on Liens.
--------------------
The Company will not create, incur or otherwise cause or suffer to
exist or become effective any Liens of any kind (other than Permitted Liens)
upon any property or asset of the Company (including, without limitation, any
Capital Interest or Debt of any Restricted Subsidiary), now owned or hereafter
acquired by the Company, unless:
(i) if such Lien secures Debt which is pari passu with the Notes,
then the Notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien; or
(ii) if such Lien secures Debt which is subordinated to the Notes,
any such Lien shall be subordinated to the Lien granted to the Holders of the
Notes to the same extent as such subordinated Debt is subordinated to the Notes.
Section 4.12. [INTENTIONALLY OMITTED].
-----------------------
Section 4.13. Limitation on Creation of Unrestricted Subsidiaries.
---------------------------------------------------
The Company may designate any Subsidiary of the Company to be an
"Unrestricted Subsidiary" as provided below in which event such Subsidiary and
each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary. "Unrestricted
Subsidiary" means:
(1) any Subsidiary designated as such by the Board of Directors as
set forth below where;
(a) neither the Company nor any of its Restricted Subsidiaries;
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(i) provides credit support for, or Guarantee of, any Debt
of such Subsidiary or any Subsidiary of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Debt) or
(ii) is directly or indirectly liable for any Debt of such
Subsidiary or any Subsidiary of such Subsidiary, and
(b) no default with respect to any Debt of such Subsidiary or
any Subsidiary of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Debt of
the Company and its Restricted Subsidiaries to declare a default on such
other Debt or cause the payment thereof to be accelerated or payable prior
to its final scheduled maturity; and
(2) any Subsidiary of an Unrestricted Subsidiary.
the Company may designate any Subsidiary (other than the Operating Partnership
or PFC) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital
Interests of, or owns or holds any Lien on any property of, any other Restricted
Subsidiary of the Company, provided that either:
(x) the Subsidiary to be so designated has total assets of $1,000 or
less; or
(y) immediately after giving effect to such designation, the Company
could Incur at least $1.00 of additional Debt pursuant to Section 4.6(a) and
provided, further, that the Company could make a Restricted Payment in an amount
equal to the greater of the fair market value or book value of such Subsidiary
pursuant to Section 4.8 and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the aggregate amount available for
Restricted Payments thereunder.
An Unrestricted Subsidiary may be designated as a Restricted Subsidiary if:
(i) all the Debt of such Unrestricted Subsidiary could be Incurred
under Section 4.6; and
(ii) all the Liens on the property and assets of such Unrestricted
Subsidiary could be incurred pursuant to Section 4.11.
Section 4.14. [INTENTIONALLY OMITTED].
---------------------
Section 4.15. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any Sale and Leaseback Transaction unless:
(i) the consideration received in such Sale and Leaseback
Transaction is at least equal to the fair market value of the property sold, as
determined by a board resolution of the Company, and
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(ii) immediately prior to and after giving effect to the Attributable
Debt in respect of such Sale and Leaseback Transaction, the Company could incur
at least $1.00 of additional Debt (other than Permitted Debt) in compliance with
Section 4.6.
Section 4.16. Payments for Consent.
--------------------
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Notes that so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
Section 4.17. Limitation on Conduct of Business of PFC.
----------------------------------------
Except to the extent permitted under Section 5.1, PFC will not hold
any operating assets or other properties or conduct any business other than to
serve as an Issuer and co-obligor with respect to the Notes and will not own any
Capital Interest of any other Person.
Section 4.18. Change of Control.
-----------------
Upon the occurrence of a Change of Control, the Company will make an
Offer to Purchase all of the outstanding Notes at a Purchase Price in cash equal
to:
(x) 101% of the Accreted Value thereof, if the Purchase Date is on
or prior to August 1, 2004, or
(y) 101% of the principal amount at Stated Maturity thereof,
together with accrued interest, if any, to the Purchase Date if the Purchase
Date is after August 1, 2004.
For purposes of the foregoing, an Offer to Purchase shall be deemed to have been
made if:
(i) within 30 days following the date of the consummation of a
transaction or series of transactions that constitutes a Change of Control, the
Company commences an Offer to Purchase all outstanding Notes at the Purchase
Price (provided that the running of such 30-day period shall be suspended, for
up to a maximum of 30 days, during any period when the commencement of such
Offer to Purchase is delayed or suspended by reason of any court's or
governmental authority's review of or ruling on any materials being employed by
the Company to effect such Offer to Purchase, so long as the Company has used
and continues to use its best efforts to make and conclude such Offer to
Purchase promptly) and
(ii) all Notes properly tendered pursuant to the Offer to Purchase
are purchased on the terms of such Offer to Purchase.
(b) the Company will not be required to make an Offer to Purchase
upon a Change of Control if a third party makes an Offer to Purchase
contemporaneously with or upon a Change of Control in the manner, at the times
and otherwise in compliance with the requirements
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of this Indenture and purchases all Notes validly tendered and not withdrawn
under its Offer to Purchase.
(c) On the Purchase Date, the Issuers shall, to the extent lawful,
(i) accept for payment Notes or portions thereof or beneficial interests under a
Global Note properly tendered pursuant to the Offer to Purchase, (ii) deposit
with the Paying Agent (by no later than 11:00 a.m. on such date) money
sufficient to pay the Purchase Price of all Notes or portions thereof or
beneficial interests so tendered and (iii) deliver or cause to be delivered to
the Trustee Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Issuers. The Paying Agent shall
promptly (1) mail to each holder of Notes so accepted and (2) remit to the
Depository for crediting to the respective accounts of the Holders under a
Global Note of beneficial interest so accepted, payment in an amount equal to
the purchase price for such Notes (which payment shall, in the case of the
Holders of beneficial interests in a Global Note, be through the facilities of
the Depository), and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered and shall issue a
Global Note equal in principal amount to any unpurchased portion of beneficial
interest so surrendered; provided that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
(d) If the Company or any Subsidiary thereof has issued any
outstanding (A) Debt that is subordinated in right of payment to the Notes or
(B) Preferred Interests, and the Company or such Subsidiary is required to make
a Offer to Purchase or to make a distribution with respect to such subordinated
Debt or Preferred Interests in the event of a Change of Control, the Company
shall not consummate any such offer or distribution with respect to such
subordinated Debt or Preferred Interests until such time as the Company shall
have paid the Purchase Price in full to the holders of Notes that have accepted
the Company's Offer to Purchase and shall otherwise have consummated the Offer
to Purchase made to holders of the Notes. The Company will not issue Debt that
is subordinated in right of payment to the Notes or Preferred Interests with
change of control provisions requiring the payment of such Debt or Preferred
Interests prior to making and consummating an offer to purchase the Notes in the
event of a Change of Control under this Indenture.
(e) The Issuers will comply, to the extent applicable, with the
requirements of Rule l4e-1 under the Securities Exchange Act of 1934 and other
securities laws or regulations in connection with any repurchase of the Notes as
described above.
Section 4.19. Maintenance of Office or Agency.
-------------------------------
The Issuers shall maintain in New York, New York an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Issuers in
respect of the Notes and this Indenture may be served. The Issuers shall give
prompt written notice to the Trustee of the location, and any change in the
location, of 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 address of the Trustee as set forth in Section
10.2. The Issuers may also from time to time
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designate one or more other offices or agencies where the Notes may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations, provided, however, that no such designation or rescission
shall in any manner relieve the Issuers of their obligation to maintain an
office or agency in New York, New York for such purposes. The Issuers shall give
prompt written notice to the Trustee of such designation or rescission and of
any change in the location of any such other office or agency. The Issuers
hereby initially designate the Affiliate Trust Office of the Trustee set forth
in Section 2.3(c) as such office of the Company.
Section 4.20. Maintenance of Properties and Insurance.
---------------------------------------
(a) The Company shall cause all material properties used or useful
to the conduct of its business or the business of any of its Restricted
Subsidiaries to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all equipment deemed
necessary in the good faith judgment of the Officers of the Company and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof; provided, however, that nothing in this Section 4.20 shall
prevent the Company or any Restricted Subsidiary from discontinuing the
operation or maintenance of any of such properties, or disposing of any of them,
if such discontinuance or disposal is in the good faith judgment of the Board of
Directors of the Company or the Restricted Subsidiary concerned, as the case may
be, desirable in the conduct of the business of the Company or such Restricted
Subsidiary, as the case may be, and is not adverse in any material respect to
the Holders.
(b) The Company shall provide or cause to be provided, for itself
and each of its Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that are adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries
in a prudent manner, with reputable insurers or with the government of the
United States of America or an agency or instrumentality thereof, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the good faith judgment of the Company, for corporations similarly situated in
the industry.
ARTICLE V.
SUCCESSOR CORPORATION
---------------------
Section 5.1. Limitation on Merger, Conveyance, Transfer and Lease.
----------------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, in any transaction or series of transactions, consolidate with or merge into
any other Person (other than a merger of a Restricted Subsidiary into the
Company in which the Company is the continuing Person or the merger of a
Restricted Subsidiary into or with another Restricted Subsidiary or another
Person that as a result of such transaction becomes a Restricted Subsidiary), or
transfer all or substantially all of the assets of the Company and its
Restricted Subsidiaries, taken as a whole, to any other Person, unless, in the
case of the Company:
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(i) either:
(a) the Company shall be the continuing Person; or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged, or the Person that
acquires, by sale, assignment, conveyance, transfer, lease or disposition,
all or substantially all of the property and assets of the Company (such
Person, the "Surviving Entity"),
(1) shall be a corporation, partnership, limited liability
company or similar entity organized and validly existing under the
laws of the United States, any political subdivision thereof or any
state thereof or the District of Columbia and
(2) shall expressly assume, by a supplemental indenture,
the due and punctual payment of all amounts due in respect of the
principal of (and premium, if any) and interest on all the Notes and
the performance of the covenants and obligations of the Company under
this Indenture;
provided that at any time the Company or its successor is a limited
partnership, there shall be a co-issuer of the Notes that is a corporation;
(ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Debt Incurred or anticipated to be Incurred in connection with
or in respect of such transaction or series of transactions), no Default or
Event of Default shall have occurred and be continuing or would result
therefrom;
(iii) immediately after giving effect to any such transaction or
series of transactions on a pro forma basis (including, without limitation, any
Debt Incurred or anticipated to be Incurred in connection with or in respect of
such transaction or series of transactions) as if such transaction or series of
transactions had occurred on the first day of the determination period, the
Company (or the Surviving Entity if the Company is not continuing) could Incur
$1.00 of additional Debt (other than Permitted Debt) under Section 4.6(a);
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any Debt
Incurred or anticipated to be Incurred in connection with or in respect of such
transaction or series of transactions), the Company (or the Surviving Entity if
the Company is not continuing) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to such
transaction; and
(v) the Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger, sale, conveyance, assignment, transfer, lease or other disposition
comply with the requirements of this Indenture.
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Notwithstanding the foregoing, if, in the good faith determination of
the Board of Directors of the Company,
(I) the purpose of such transaction is:
(A) to transform the Company into a corporation or
(B) to change the state of organization of the Company or a
Restricted Subsidiary, and
(II) no material adverse effect on the creditworthiness of the
Company (or the Surviving Entity if the Company is not continuing) and its
Restricted Subsidiaries, taken as a whole, shall result as a consequence of the
transaction,
then clauses (iii) and (iv) above shall not apply; it being recognized that such
reorganization shall not be considered to have a material adverse effect on the
creditworthiness of the Company solely because the Surviving Entity is subject
to income taxation.
For all purposes of this Indenture and the Notes, Subsidiaries of any
Surviving Entity will, upon such transaction or series of transactions, become
Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to
this Indenture and all Debt, and all Liens on property or assets, of the
Surviving Entity and its Subsidiaries that was not Debt, or were not Liens on
property or assets, of the Company and its Subsidiaries immediately prior to
such transaction or series of transactions shall be deemed to have been Incurred
upon such transaction or series of transactions.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, conditions described in the
immediately preceding paragraphs, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or PFC,
as the case may be, under this Indenture with the same effect as if such
Surviving Entity had been named as the Company or PFC therein; and when a
Surviving Person duly assumes all of the obligations and covenants of the
Company or PFC, as the case may be, pursuant to this Indenture and the Notes,
except in the case of a lease, the predecessor Person shall be relieved of all
such obligations.
(b) In connection with any consolidation, merger or transfer of
assets contemplated by this Section 5.1, the Company shall deliver or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.1 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
Section 5.2. Successor Person Substituted.
----------------------------
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, conditions described in
Section 5.1 herein, the Surviving Entity shall succeed to, and be substituted
for, and may exercise every right and power of, the
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Company or PFC, as the case may be, under this Indenture with the same effect as
if such Surviving Entity had been named as the Company or PFC therein; and when
a Surviving Person duly assumes all of the obligations and covenants of the
Company or PFC, as the case may be, pursuant to this Indenture and the Notes,
except in the case of a lease, the predecessor Person shall be relieved of all
such obligations.
ARTICLE VI.
DEFAULTS AND REMEDIES
---------------------
Section 6.1. Events of Default.
-----------------
Each of the following is an "Event of Default":
(1) default in the payment in respect of the principal,
Redemption Price or Purchase Price of, and accrued interest on, any Note at
its maturity (whether at Stated Maturity or upon repurchase, acceleration,
optional redemption or otherwise);
(2) default in the payment of any interest upon any Note when
it becomes due and payable, and continuance of such default for a period of
30 days;
(3) default in the making of an Offer to Purchase as required
by this Indenture;
(4) failure to perform or comply with Section 5.1 hereof;
(5) default in the performance, or breach, of any covenant or
agreement of an Issuer in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is specifically
dealt with in (1), (2), (3) or (4) above), and continuance of such default
or breach for a period of 30 days after written notice thereof has been
given to the Issuers by the Trustee or to the Issuers and the Trustee by
the Holders of at least 25% in aggregate principal amount at Stated
Maturity of the outstanding Notes;
(6) a default or defaults under any bonds, debentures, notes
or other evidences of Debt (other than the Notes) by the Company or any
Restricted Subsidiary having, individually or in the aggregate, a principal
or similar amount outstanding of at least $5,000,000, whether such Debt now
exists or shall hereafter be created, which default or defaults shall have
resulted in the acceleration of the maturity of such Debt prior to its
express maturity or shall constitute a failure to pay such Debt when due
and payable after the expiration of any applicable grace period with
respect thereto;
(7) the entry against the Company or any Restricted Subsidiary
of a final judgment or final judgments for the payment of money in an
aggregate amount in excess of $5,000,000 by a court or courts of competent
jurisdiction, which judgments remain undischarged, unwaived, unstayed,
unbonded or unsatisfied for a period of 60 consecutive days; or
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(8) the Company or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it
in an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become due; or
(9) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of the
Company or any Significant Subsidiary, or
(C) orders the liquidation of the Company or any Significant
Subsidiary,
and, in each case, the order or decree remains unstayed and in effect for
60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
The Trustee may withhold notice to the Holders of the Notes of any
Default (except in payment of principal, Redemption Price or Purchase Price of,
and accrued interest on, the Notes) if the Trustee considers it to be in the
best interest of the Holders of the Notes to do so.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Notes pursuant to Section
3.7(a) hereof, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the Notes.
If an Event of Default occurs prior to the first date on which the Issuers could
redeem the Notes pursuant to Section 3.7(a) hereof, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding the prohibition on
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redemption of the Notes prior to such first date, then the greatest premium
specified in Section 3.7(a) (expressed as a percentage of the principal amount
that would otherwise be due) shall also become immediately due and payable to
the extent permitted by law upon acceleration of the Notes.
Section 6.2. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
Section 6.1(8) or (9) above) occurs and is continuing, then and in every such
case the Trustee or the Holders of not less than 25% in aggregate principal
amount at Stated Maturity of the outstanding Notes may declare by a notice in
writing to Holdings (and to the Trustee if given by Holders), the Notes to be
due and payable immediately in an amount equal to:
(x) the Accreted Value of the Notes outstanding on the date of
acceleration, if such declaration is made on or prior to August 1, 2004, or
(y) the entire principal amount at Stated Maturity of the Notes
outstanding on the date of acceleration plus accrued but unpaid interest, if
any, to the date of acceleration, if such declaration is made after August 1,
2004;
provided, however, that after such acceleration, but before a judgment or decree
based on acceleration, the Holders of a majority in aggregate principal amount
of the outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the nonpayment of
accelerated principal of or interest on the Notes, have been cured or waived as
provided in the Indenture. If an Event of Default specified in clause 6.1(8) or
6.1(9) above occurs, the principal, Redemption Price or Purchase Price of, and
accrued interest on, the Notes then outstanding shall ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Trustee may withhold from Holders notice of any
Default (except in payment of principal of, premium, if any, and interest) if
the Trustee determines that withholding notice is in the best interest of the
Holders to do so.
Section 6.3. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal, Redemption Price or Purchase Price of, and accrued
interest on, the Notes or to enforce the performance of any provision of the
Notes or this Indenture and may take any necessary action requested of it as
Trustee to settle, compromise, adjust or otherwise conclude any proceedings to
which it is a party. The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
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Section 6.4. Waiver of Past Defaults and Events of Default.
---------------------------------------------
Subject to Sections 6.2, 6.7 and 8.2 hereof, the Holders of not less
than a majority in aggregate principal amount of the outstanding Notes may on
behalf of the Holders of all the Notes waive any past Default under this
Indenture and its consequences, except a Default (1) in any payment in respect
of the principal, Redemption Price or Purchase Price of, and accrued interest
on, any Notes (including any Note which is required to have been purchased
pursuant to an Offer to Purchase which has been made by the Issuers), or (2) in
respect of a covenant or provision hereof which under this Indenture cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture, but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
Section 6.5. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another Noteholder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Trust Officer, determine that the proceedings
so directed, or the exercise of such trust or power, may involve it in personal
liability; provided that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
Section 6.6. Limitation on Suits.
-------------------
Subject to Section 6.7 hereof, no Holder of any Note will have any
right to institute any proceeding with respect to this Indenture or for any
remedy thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default and unless the Holders of at
least 25% in aggregate principal amount of the outstanding Notes shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the outstanding Notes a
direction inconsistent with such request and shall have failed to institute such
proceeding within 60 days. A Noteholder may not use this Indenture to prejudice
the rights of another Noteholder or to obtain a preference or priority over
another Noteholder.
Section 6.7. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, Redemption Price or
Purchase Price of, and accrued interest on, the Note on or after the respective
due dates expressed in the Note, or to bring suit
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for the enforcement of any such payment on or after such respective dates, is
absolute and unconditional and shall not be impaired or affected without the
consent of the Holder.
Section 6.8. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, Redemption Price or
Purchase Price of, or accrued interest on, the Notes specified in Section 6.1(1)
or (2) hereof occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Issuers (or any other
obligor on the Notes) for the whole amount of unpaid principal, Redemption
Price, Purchase Price of, and accrued interest on, the Notes remaining unpaid,
together with interest on overdue principal, Redemption Price or Purchase Price,
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate then borne by the Notes, and
such further amounts 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, including all sums due and
owing to the Trustee pursuant to Section 7.7.
Section 6.9. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Issuers (or any
other obligor upon the Notes), their creditors or their property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its reasonable charges and expenses to the extent that any such
charges and expenses are not paid out of the estate in any such proceedings and
any custodian in any such judicial proceeding is hereby authorized by each
Noteholder 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
Noteholders, to pay to 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 under Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Noteholder any plan or
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article VI, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.7 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, Redemption Price or Purchase Price of, and accrued interest as to
each, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes; and
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THIRD: to the Issuers.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 6.12. 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 case, subject to any
determination in such proceeding, the Issuers, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII.
TRUSTEE
-------
Section 7.1. 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 man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture but, in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the
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Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.2 and 6.5 hereof.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured
to it.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c), (e), (f) and (g) of this Section 7.1 shall govern every provision of
this Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity reasonably satisfactory to it against any
loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
(g) The Trustee shall not be deemed to have notice of any fact or
matter with respect hereto, including without limitation, the occurrence of a
Default or Event of Default, unless such fact or matter is actually known by a
Trust Officer charged with responsibility for administering this Indenture or
unless in writing received by a Trust Officer and making specific reference to
this Indenture.
Section 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1 hereof:
(1) The Trustee may rely on and shall be protected in acting or
refraining from acting upon any document (including without limitation any
Company Request or Officers'
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Certificate) reasonably believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate any fact or
matter stated in any document.
(2) Before the Trustee acts or refrains from acting, including
whenever the Trustee deems it desirable that a matter be proved or established
prior to it acting or refraining from acting, it may require an Officers'
Certificate or an Opinion of Counsel, or both, which shall conform to the
provisions of Section 10.5 hereof. The Trustee shall be protected and shall not
be liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent (other than the negligence or
willful misconduct of an agent who is an employee of the Trustee) appointed by
it with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or within
its rights or powers; provided that the Trustee's conduct does not constitute
negligence or bad faith.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
Section 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the Issuers, or any Affiliates thereof, with
the same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. The Trustee, however, shall be subject to Sections 7.10 and
7.11 hereof.
Section 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Issuers' use of
the proceeds from the sale of Notes or any money paid to the Company pursuant to
the terms of this Indenture and it shall not be responsible for any statement in
the Notes or any document used in connection with the sale of the Notes other
than its certificate of authentication.
Section 7.5. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of the
principal, Redemption Price or Purchase Price of, and accrued interest on, any
Note, the Trustee may withhold the notice if and so long as the board of
directors of the Trustee, the executive committee or any trust committee of such
board and/or its Trust Officers in good faith determine(s) that withholding the
notice is in the interest of the Noteholders.
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Section 7.6. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after May 15 of any
year, commencing the May 15 following the date of this Indenture, the Trustee
shall mail to each Noteholder a brief report dated as of such May 15 that
complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c) and TIA (S) 313(d). A copy of each report at the time of its
mailing to Noteholders shall be filed with the SEC and each stock exchange on
which the Notes are listed. The Company shall promptly notify the Trustee when
the Notes are listed on any stock exchange.
Section 7.7. Compensation and Indemnity.
--------------------------
The Issuers jointly and severally shall pay to the Trustee from time
to time such reasonable compensation as shall be agreed in writing between the
Issuers and the Trustee for its services hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust). The Issuers shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances incurred or made by it in
connection with its duties under this Indenture, including the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Issuers, jointly and severally, agree to indemnify each of the
Trustee and any predecessor Trustee for, and hold it harmless against, any and
all loss, damage, claim, liability, reasonable expense (including but not
limited to reasonable attorneys' fees and expenses) or taxes (other than taxes
based on the income of the Trustee) incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable 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 (including, without limitation, settlement costs). The Trustee shall
notify the Issuers in writing promptly of any claim asserted against the Trustee
for which it may seek indemnity. However, the failure by the Trustee to so
notify the Issuers shall not relieve the Issuers of their obligations hereunder.
Notwithstanding the foregoing, the Issuers need not reimburse the
Trustee for any expense or indemnify it against any loss or liability incurred
by the Trustee through its negligence or bad faith. To secure the payment
obligations of the Issuers in this Section 7.7, the Trustee shall have a lien
prior to the Notes on all money or property held or collected by the Trustee in
its capacity as such, except such money or property held in trust to pay
principal, Redemption Price or Purchase Price of, and accrued interest on,
particular Notes. The obligations of the Issuers under this Section 7.7 to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses, disbursements
and advances shall be joint and several liabilities of the Issuers and shall
survive the satisfaction and discharge of this Indenture, including the
termination or rejection hereof in any bankruptcy proceeding to the extent
permitted by law.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(8) or (9) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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For purposes of this Section 7.7, the term "Trustee" shall include any
trustee appointed pursuant to Article 9.
Section 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Issuers in writing, such
resignation to become effective upon the appointment of a successor Trustee.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Company's written consent which consent shall not be
unreasonably withheld. The Company may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or any
Holder of outstanding Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee. If the Trustee fails to comply with
Section 7.10 hereof, any Noteholder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers.
Immediately following such delivery, the retiring Trustee shall,
subject to its rights under Section 7.7 hereof, transfer all property held by it
as Trustee to the successor Trustee, the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Noteholder. Notwithstanding
replacement of the Trustee pursuant to this Section 7.8, the Issuers'
obligations under Section 7.7 hereof shall continue for the benefit of the
retiring Trustee.
Section 7.9. Successor Trustee by Consolidation, Merger or
---------------------------------------------
Conversion.
----------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation or national banking association, subject to Section 7.10 hereof, the
successor corporation or national banking association without any further act
shall be the successor Trustee.
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Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA (S) 310(b), including the provision in (S) 310(b)(1); provided
that there shall be excluded from the operation of TIA (S) 310(b)(1) any
indenture or indentures under which other securities, or conflicts of interest
or participation in other securities, of the Issuers are outstanding if the
requirements for exclusion set forth in TIA (S) 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Issuers.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
Section 7.12. Paying Agents.
-------------
The Issuers shall cause each Paying Agent other than the Trustee or an
Affiliate of the Trustee to execute and deliver to it and the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment of
principal, Redemption Price or Purchase Price of, and accrued interest on, the
Notes (whether such sums have been paid to it by the Issuers or by any obligor
on the Notes) in trust for the benefit of Holders of the Notes or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all sums
so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Issuers (or by any obligor on the Notes) in
the payment of any installment of the principal, Redemption Price or Purchase
Price of, and accrued interest on, the Notes when the same shall be due and
payable.
ARTICLE VIII.
AMENDMENT, SUPPLEMENT AND WAIVER
--------------------------------
Section 8.1. Without Consent of Holders.
--------------------------
Without the consent of any Holders, the Issuers, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental to this Indenture for any of the following purposes:
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(1) to evidence the succession of another Person to the Issuers and
the assumption by any such successor of the covenants of the Issuers in this
Indenture and in the Notes; or
(2) to add to the covenants of the Issuers for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Issuers;
or
(3) to add additional Events of Default; or
(4) to provide for uncertificated Notes in addition to or in place of
the certificated Notes; or
(5) to evidence and provide for the acceptance of appointment under
this Indenture by a successor Trustee; or
(6) to secure the Notes; or
(7) to cure any ambiguity, to correct or supplement any provision in
this Indenture which may be defective or inconsistent with any other provision
in this Indenture, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such actions pursuant to
this clause shall not adversely affect the interests of the Holders in any
material respect; or
(8) to issue Add-On Notes or Exchange Notes; or
(9) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act.
The Trustee is hereby authorized to join with the Issuers in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into any such supplemental indenture which adversely affects its own rights,
duties or immunities under this Indenture.
Section 8.2. With Consent of Holders.
-----------------------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes, the Issuers and the Trustee
may enter into an indenture or indentures supplemental to this Indenture 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, including the definitions therein; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each outstanding Note affected thereby:
(1) change the Stated Maturity of any Note or of any installment of
interest on any Note, or reduce the amount payable in respect of the principal
thereof or the rate of interest thereon or any premium payable thereon, or
reduce the amount that would be due and payable on acceleration of the maturity
thereof, or change the place of payment where, or the coin or
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currency in which, any Note or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof; or
(2) reduce the percentage in aggregate principal amount of the
outstanding Notes, the consent of whose Holders if 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 thereunder and their consequences) provided for in this Indenture; or
(3) modify the obligations of the Issuers to make Offers to Purchase
upon a Change of Control or from the Excess Proceeds of Asset Sales; or
(4) subordinate, in right of payment, the Notes to any other Debt of
the Issuers; or
(5) modify any of the provisions of this proviso to Section 8.2 or
provisions relating to waiver of defaults or certain covenants contained in
Section 6.2, 6.4 or 6.7 hereof, except to increase any such percentage required
for such actions or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
outstanding Note affected thereby, or
(6) release any Guarantees required to be maintained under this
Indenture.
After a modification, amendment, supplement or waiver under this
Section 8.2 becomes effective, the Issuers shall mail to the Holders a notice
briefly describing the modification, amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders under this
Section 8.2 to approve the particular form of any proposed amendment,
modification, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
Section 8.3. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
Section 8.4. Revocation and Effect of Consents.
---------------------------------
Until a modification, amendment, supplement, waiver or other action
becomes effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may
revoke the consent as to his Note or portion of a Note, if the Trustee receives
the notice of revocation before the date the modification, amendment,
supplement, waiver or other action becomes effective.
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The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any modification,
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such modification, amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 120 days after such record date unless the consent of the requisite
number of Holders has been obtained. After a modification, amendment,
supplement, waiver or other action becomes effective, it shall bind every
Noteholder.
Section 8.5. Notation on or Exchange of Notes.
--------------------------------
If a modification, amendment, supplement or waiver changes the terms
of a Note, the Trustee may request the Holder of the Note to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the Holder. Alternatively, if the
Issuers or the Trustee so determine, the Issuers in exchange for the Note shall
issue and the Trustee shall authenticate a new security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such modification, amendment,
supplement or waiver.
Section 8.6. Trustee To Sign Amendments, etc.
-------------------------------
The Trustee shall sign any modification, amendment, supplement or
waiver authorized pursuant to this Indenture if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may, but need not, sign
it. In signing or refusing to sign such modification, amendment, supplement or
waiver, the Trustee shall be entitled to receive and, subject to Section 7.1
hereof, shall be fully protected in relying upon an Officers' Certificate and an
Opinion of Counsel stating that such modification, amendment, supplement or
waiver is authorized or permitted by this Indenture and such supplemental
indenture constitutes the legal, valid and binding obligation of the Issuers
enforceable against each of them in accordance with its terms (subject to
customary exceptions). Neither of the Issuers may sign a modification,
amendment or supplement until the Board of Directors of the Issuers approves it.
ARTICLE IX.
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
Section 9.1. Discharge of Indenture.
----------------------
The Issuers may terminate their obligations under this Indenture,
except the obligations referred to in the last paragraph of this Section 9.1
when (1) either: (A) all Notes theretofore authenticated and delivered have been
delivered to the Trustee for cancellation, or (B) all such Notes not theretofore
delivered to the Trustee for cancellation (i) have become due and payable, or
(ii) will become due and payable within 60 days or are to be called for
redemption within 60 days (a "Discharge") under irrevocable arrangements
satisfactory to the
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Trustee for the giving 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 Notes, not theretofore delivered to the
Trustee for cancellation, for principal, Redemption Price of, and accrued
interest on, the Notes to the Stated Maturity or date of redemption; (2) the
Issuers have paid or caused to be paid all other sums then due and payable
hereunder by the Issuers; and (3) the Issuers have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
After such delivery the Trustee upon request shall acknowledge in
writing the satisfaction and discharge of the Issuers' obligations under the
Notes, the Guarantees and this Indenture except for those surviving obligations
specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuers in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9,
2.14, 4.19, 9.5, 9.6 and 9.8, the rights, powers, duties and immunities of the
Trustee hereunder (including claims of, or payments to, the Trustee under or
pursuant to Section 7.7 hereof), the provisions of Article III and the Trustee's
and Paying Agent's obligations in Section 9.8 shall survive until the Notes are
no longer outstanding. Upon such satisfaction and discharge, only the
obligations of the Issuers in Sections 2.9, 7.7, 9.5, 9.6 and 9.8 hereof shall
survive.
Section 9.2. Legal Defeasance.
----------------
The Issuers may at their option, by Board Resolution, be discharged
from their obligations with respect to the Notes on the date the conditions set
forth in Section 9.4 below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, such Legal Defeasance means that the Issuers shall be deemed to
have paid and discharged the entire indebtedness represented by the Notes and to
have satisfied all their other obligations under such Notes and this Indenture
insofar as such Notes are concerned (and the Trustee, at the expense of the
Issuers, shall, subject to Section 9.6 hereof, 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 Notes to receive solely from the trust funds described in Section
9.4 hereof and as more fully set forth in such Section, payments in respect of
the principal, Redemption Price or Purchase Price of, and accrued interest on,
such Notes when such payments are due, (B) the Issuers' obligations with respect
to such Notes under Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 4.19 hereof, (C)
the rights, powers, trusts, duties and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.7 hereof), (D) Article III and (E) this Article IX. Subject to compliance
with this Article IX, the Issuers may exercise their option under this Section
9.2 with respect to the Note notwithstanding the prior exercise of its option
under Section 9.3 below with respect to the Notes.
Section 9.3. Covenant Defeasance.
-------------------
At the option of the Issuers, pursuant to a Board Resolution, the
Issuers shall be released from their respective obligations under Sections 4.2
through 4.18 hereof, inclusive, Section 4.20, clause (a)(ii) of Section 5.1
hereof (with respect to Sections 4.2 through 4.18
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hereof, inclusive, and Section 4.20), Sections 6.1(3) and 6.1(7), clause
(a)(iii) of Section 5.1 hereof and clause (a)(iv) of Section 5.1 hereof, with
respect to the outstanding Notes on and after the date the conditions set forth
in Section 9.4 hereof are satisfied (hereinafter, "Covenant Defeasance"), any
omission to comply with such obligations shall not constitute a Default or Event
of Default, and the Notes shall thereafter be deemed not to be outstanding for
purposes of any direction, waiver, consent, declaration or act of the Holders
(and the consequences thereof) in connection with such covenants but shall
continue to be outstanding for all other purposes hereunder. For this purpose,
such Covenant Defeasance means that 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 specified Section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
Section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Notes shall be unaffected
thereby.
Section 9.4. Conditions to Legal Defeasance or Covenant Defeasance.
-----------------------------------------------------
The following shall be the conditions to application of Section 9.2 or
Section 9.3 hereof to the outstanding Notes:
(1) the Issuers must irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 hereof who shall agree to comply with the provisions of this
Article IX 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 benefits of the Holders of such Notes: (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their terms will provide, not
later than the due date of any payment, money in an amount, or (C) a combination
thereof, in each case sufficient without reinvestment, 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 entire indebtedness in respect of the principal, Redemption
Price or Purchase Price of, and accrued interest on, such Notes on the Stated
Maturity thereof or (if the Issuers have made irrevocable arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name and at the expense of the Issuers) the Redemption Date
thereof, as the case may be, in accordance with the terms of this Indenture and
such Notes;
(2) in the case of Legal Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel stating that (A) the Issuers have
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case (A) or (B) to the effect that,
and based thereon such opinion shall confirm that, the Holders of such Notes
will not recognize gain or loss for federal income tax purposes as a result of
the Legal Defeasance to be effected with respect to such Notes and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would be the case if such Legal Defeasance were not to occur;
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(3) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders of
such outstanding Notes will not recognize gain or loss for federal income tax
purposes as a result of the Covenant Defeasance to be effected with respect to
such Notes and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would be the case if such Covenant
Defeasance were not to occur;
(4) no Default or Event of Default with respect to the outstanding
Notes shall have occurred and be continuing at the time of such deposit after
giving effect thereto or, in the case of Legal Defeasance, either: (A) the
Issuers shall have delivered to the Trustee an Opinion of Counsel to the effect
that, based upon existing precedents, if the matter were properly briefed, a
court should hold that the deposit of moneys and/or U.S. Government Obligations
as provided in clause (1) of this Section 9.4 would not constitute a preference
voidable under Section 547 or 548 of the federal bankruptcy laws; or (B) no
Default or Event of Default relating to bankruptcy or insolvency shall have
occurred and be continuing at any time on or prior to the 91st day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day);
(5) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the TIA (assuming
all Notes are in default within the meaning of such Act);
(6) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other agreement or
instrument to which either of the Issuers is a party or by which either of them
is bound;
(7) such Legal Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder; and
(8) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Legal Defeasance or Covenant Defeasance have been
complied with.
Section 9.5. Deposited Money and U.S. Government Obligations To Be
-----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
---------------------------------------------
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.4 hereof in respect of
the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent as the Trustee may determine, to the
Holders of such Notes, of all sums due and to become due thereon in respect of
principal, Redemption Price or Purchase Price of, and accrued interest on, the
Notes, but such money need not be segregated from other funds except to the
extent required by law. The Trustee shall be under no duty to invest such money
or U.S. Government Obligations. The Issuers shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or
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assessed against the U.S. Government Obligations deposited pursuant to Section
9.4 hereof or the principal, Redemption Price or Purchase Price of, and accrued
interest on, the Notes 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 Notes.
Anything in this Article IX to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.4 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.
Section 9.6. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.1, 9.2 or 9.3 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Issuers under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to this Article IX until such time as the Trustee or Paying Agent is permitted
to apply all such money or U.S. Government Obligations in accordance with
Section 9.1 hereof; provided, however, that if the Issuers have made any payment
of principal, Redemption Price or Purchase Price of, and accrued interest on,
any Notes because of the reinstatement of their Obligations, the Issuers shall
be subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
Section 9.7. Moneys Held by Paying Agent.
---------------------------
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Issuers, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.1 or 9.4 hereof, to the
Issuers, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 9.8. Moneys Held by Trustee.
----------------------
Any moneys deposited with the Trustee or any Paying Agent or then held
by the Issuers in trust for the payment of the principal, Redemption Price or
Purchase Price of, and accrued interest on, any Note that are not applied but
remain unclaimed by the Holder of such Note for two years after the date upon
which the principal, Redemption Price or Purchase Price of, and accrued interest
on, such Note shall have respectively become due and payable shall be repaid to
the Issuers upon Company Request, or if such moneys are then held by the Issuers
in trust, such moneys shall be released from such trust; and the Holder of such
Note entitled to receive such payment shall thereafter, as an unsecured general
creditor, look only to the Issuers for the payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or any such Paying
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Agent, before being required to make any such repayment, may, at the expense of
the Issuers either mail to each Noteholder affected, at the address shown in the
register of the Notes maintained by the Registrar pursuant to Section 2.3
hereof, or cause to be published once a week for two successive weeks, in a
newspaper published in the English language, customarily published each Business
Day and of general circulation in The City of New York, New York, a 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 mailing or publication, any
unclaimed balance of such moneys then remaining will be repaid to the Issuers.
After payment to the Issuers or the release of any money held in trust by the
Issuers, Noteholders entitled to the money must look only to the Issuers for
payment as general creditors unless applicable abandoned property law designates
another person.
ARTICLE X.
MISCELLANEOUS
-------------
Section 10.1. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture or any Guarantee limits, qualifies
or conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 10.2. Notices.
-------
Any notice or communication shall be given in writing and delivered in
person, sent by facsimile, delivered by commercial courier service or mailed by
first-class mail, postage prepaid, addressed as follows:
If to the Issuers:
Petro Stopping Centers Holdings, L.P.
6080 Surety Drive
El Paso, Texas 79905
Attention: James A. Cardwell, Sr.
Fax Number: (915) 774-7373
If to the Trustee:
State Street Bank and Trust Company
Corporate Trust
2 Avenue de Lafayette
Sixth Floor
Boston, Massachusetts 02111-1724
Reference: Petro Stopping Centers
Fax Number: (617) 662-1465
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
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The Issuers or the Trustee by written notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar. If a notice or communication to a Noteholder is mailed
in the manner provided above, it shall be deemed duly given on the date so
deposited in the mail, whether or not the addressee receives it. Failure to
mail a notice or communication to a Noteholder or any defect in it shall not
affect its sufficiency with respect to other Noteholders. In case by reason of
the suspension of regular mail service, or by reason of any other cause, it
shall be impossible to mail any notice as required by this Indenture, then such
method of notification as shall be made with the approval of the Trustee shall
constitute a sufficient mailing of such notice.
Section 10.3. Communications by Holders with Other Holders.
--------------------------------------------
Noteholders may communicate pursuant to TIA ((S)) 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Issuers, the Trustee, the Registrar and anyone else shall have the protection of
TIA ((S)) 312(c).
Section 10.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuers to the Trustee to take
any action under this Indenture, the Issuers shall furnish to the Trustee at the
request of the Trustee:
1. an Officers' Certificate (which shall include the statements
set forth in Section 10.5 below) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
2. an Opinion of Counsel (which shall include the statements
set forth in Section 10.5 below) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
Section 10.5. Statements Required in Certificate and Opinion.
----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
1. a statement that the Person making such certificate or
opinion has read such covenant or condition;
2. a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
3. a statement that, in the opinion of such Person, it or he
has made such examination or investigation as is necessary to enable it or
him to express an
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informed opinion as to whether or not such covenant or condition has been
complied with; and
4. a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such Person
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or
more other such Persons as to other matters, and any such Person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of an Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters, upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of an Issuer stating that the
information with respect to such factual matters is in the possession of such
Issuer, unless such counsel knows or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 10.6. When Treasury Notes Disregarded.
-------------------------------
In determining whether the Holders of the required aggregate principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuers or any other obligor on the Notes or by any Affiliate of any of
them shall be disregarded as though they were not outstanding, except that for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Notes which the Trustee actually
knows are so owned shall be so disregarded. Notes so owned which have been
pledged in good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to the
Notes and that the pledgee is not an Issuer or any other obligor upon the Notes
or any Affiliate of any of them.
Section 10.7. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or meetings of
Noteholders and any Registrar or Paying Agent may make reasonable rules for
their functions provided that no such rule shall conflict with the terms of this
Indenture or the TIA.
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Section 10.8. Business Days; Legal Holidays.
-----------------------------
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York
or the state in which the Corporate Trust Office is located. If a payment date
is a Legal Holiday at a place of payment, payment may be made at that place on
the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
Section 10.9. Governing Law.
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW
RULES. THE ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR
ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR THEMSELVES AND IN RESPECT
OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. THE ISSUERS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THAT THEY MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH
THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ISSUERS IN ANY OTHER
JURISDICTION.
Section 10.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Issuers or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 10.11. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal, Redemption Price or
Purchase Price of, and accrued interest on, any of the Notes, or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Issuers in this Indenture or in any
supplemental indenture, or in any Guarantee, or in any of the Notes, or because
of the creation of any Debt represented thereby, shall be had against any
stockholder, officer, director, partner, affiliate, beneficiary or employee, as
such, past, present or
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future, of the Issuers or of any successor corporation or against the property
or assets of any such stockholder, officer, employee, partner, affiliate,
beneficiary or director, either directly or through the Issuers, or any
successor corporation thereof, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Indenture and the Notes are solely
obligations of the Issuers, and that no such personal liability whatever shall
attach to, or is or shall be incurred by, any stockholder, officer, employee,
partner, affiliate, beneficiary or director of the Issuers, or any successor
corporation or partnership thereof, because of the creation of the Debt hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or the Notes or implied therefrom, and that any and
all such personal liability of, and any and all claims against every
stockholder, officer, employee, partner, affiliate, beneficiary and director,
are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture, and the issuance of the
Notes. It is understood that this limitation on recourse is made expressly for
the benefit of any such shareholder, employee, officer, partner, affiliate,
beneficiary or director and may be enforced by any one or all of them.
Section 10.12. Successors.
----------
All agreements of the Issuers in this Indenture and the Notes shall
bind their respective successors. All agreements of the Trustee, any additional
trustee and any Paying Agents in this Indenture shall bind its successor.
Section 10.13. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 10.14. Table of Contents, Headings, etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 10.15. Separability.
------------
Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Notes 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.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date and year first written above.
PETRO STOPPING CENTERS HOLDINGS, L.P.
By __________________________________
Name:
Title:
PETRO HOLDINGS FINANCIAL CORPORATION
By __________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By ____________________________
Name:
Title:
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EXHIBIT A
FORM OF NOTE
------------
PETRO STOPPING CENTERS HOLDINGS, L.P. AND PETRO HOLDINGS
FINANCIAL CORPORATION
15% Senior Discount Notes Due 2008
[Include the following legend for Global Notes only:
"THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO
HEREINAFTER.
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 IN 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."]
[Include the following legend on all Notes that are Restricted Notes:]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A ADOPTED UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(l), (2), (3), OR
(7) UNDER THE SECURITIES ACT) (AN "IAI"), OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
ADOPTED UNDER
1
<PAGE>
THE SECURITIES ACT OR (D) IN THE CASE OF A HOLDER THAT IS NOT A DIRECT OR
INDIRECT TRANSFEREE OF AN INITIAL PURCHASER, THAT IT IS AN "ACCREDITED INVESTOR"
AS DEFINED IN RULE 501 (A) UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A ADOPTED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
IAI THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN IAI, IN EITHER CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF U.S.
$250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, AND THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 ADOPTED UNDER THE SECURITIES
ACT (IF AVAILABLE) OR ANOTHER AVAILABLE EXEMPTION UNDER THE SECURITIES ACT, OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT;
AND (2) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS MAY BE REQUIRED
PURSUANT TO THE INDENTURE 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. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
BY ITS ACQUISITION HEREOF, THE HOLDER FURTHER REPRESENTS THAT, ON EACH DAY FROM
THE DATE ON WHICH SUCH HOLDER ACQUIRES THE NOTE THROUGH AND INCLUDING THE DATE
ON WHICH SUCH HOLDER DISPOSES OF ITS INTEREST IN THE NOTE, EITHER THAT (A) IT IS
NOT A PLAN, AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH
PLAN, OR A GOVERNMENT PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW
THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE
2
<PAGE>
OR (B) ITS PURCHASE, HOLDING AND DISPOSITION OF SUCH NOTE WILL NOT RESULT IN A
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE
(OR, IN THE CASE OF A GOVERNMENT PLAN, ANY SUBSTANTIALLY SIMILAR FEDERAL, STATE
OR LOCAL LAW) FOR WHICH AN EXEMPTION IS NOT AVAILABLE.]
[Include the following legend on all Certificated Notes that are Restricted
Notes:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR SUCH
OPINIONS OF COUNSEL, CERTIFICATES AND/OR OTHER INFORMATION AS IT MAY REASONABLY
REQUIRE IN FORM REASONABLY SATISFACTORY TO IT TO CONFIRM THAT THE TRANSFER
COMPLIED WITH THE FOREGOING RESTRICTIONS AS PROVIDED FOR IN THE INDENTURE."]
[Include the following legend on all Certificated Notes:
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S. FEDERAL INCOME
TAX PURPOSES. FOR FURTHER INFORMATION REGARDING THE ISSUE PRICE, ISSUE DATE AND
THE YIELD TO MATURITY OF THIS NOTE, THE HOLDER OF THIS NOTE SHOULD CONTACT THE
OFFICE OF THE CHIEF FINANCIAL OFFICER OF PETRO STOPPING CENTERS HOLDINGS, L.P.
AT (915) 779-4711 AT ANY TIME AFTER AUGUST 1, 1999.]
3
<PAGE>
NO. [___]
PRINCIPAL AMOUNT $[______________]
[If the Note is a Global Note include the following two lines:
as revised by the Schedule of Increases and
Decreases in Global Note attached hereto]
NOTE CUSIP NO. [144A: 71646DAA0]
[IAI:71646DAB8]
[Reg S:U71660AA9]
UNIT CUSIP NO.71646DAC6
Petro Stopping Centers Holdings, L.P., a Delaware limited partnership
and Petro Holdings Financial Corporation, a Delaware corporation, as joint and
several obligors, promise to pay to [___________], or registered assigns, the
principal sum of [__________________] Dollars [If the Note is a Global Note, add
the following, as revised by the Schedule of Increases and Decreases in Global
Note attached hereto], on August 1, 2008.
Interest Payment Dates: February 1 and August 1, beginning February 1,
2005
Record Dates: January 15 and July 15
Additional provisions of this Note are set forth on the other side of
this Note.
PETRO STOPPING CENTERS HOLDINGS, L.P.
By:____________________________________________
Name:
Title:
By:____________________________________________
Name:
Title:
PETRO HOLDINGS FINANCIAL CORPORATION
By:____________________________________________
Name:
Title:
By:____________________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
State Street Bank and Trust Company as Trustee, certifies
that this is one of the Notes referred to in the Indenture.
4
<PAGE>
By: _______________________ Date: _____________, 1999
Authorized Signatory
5
<PAGE>
FORM OF REVERSE SIDE OF NOTE
15% Senior Discount Notes Due 2008
1. Interest
--------
Interest will not accrue or be payable on the Notes prior to August 1,
2004. Petro Stopping Centers Holdings, L.P., a Delaware limited partnership
(the "Company"), and Petro Holdings Financial Corporation, a Delaware
corporation ("PFC" and together with the Company, the "Issuers"), jointly and
severally promise, subject to the preceding sentence, to pay interest on the
principal amount of this Note at the rate per annum shown above.
The Issuers will pay interest semiannually in arrears on each Interest
Payment Date of each year commencing February 1, 2005. Interest on the Notes
will accrue from the most recent date to which interest has been paid on the
Notes or, if no interest has been paid, from August 1, 2004. The Issuers shall
pay interest on overdue principal or premium, if any (plus interest on such
interest to the extent lawful), at the rate borne by the Notes to the extent
lawful. Interest will be computed on the basis of a 360-day year of twelve 30-
day months. For U.S. federal income tax purposes, you will be required to
include original issue discount on a Note in gross income for each taxable year
in which you hold the Note even though cash interest on the Note does not begin
to accrue until August 1, 2004, and you will receive no cash interest payments
until February 1, 2005.
The Issuers shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and, to the extent
such payments are lawful, interest on overdue installments of interest, without
regard to any applicable grace periods ("Defaulted Interest") at the rate of
------------------
2.0% per annum in excess of the rate shown on this Note, as provided in the
Indenture.
2. Method of Payment
-----------------
By at least 10:00 a.m. (New York City time) on the date on which any
principal of, premium, if any, or interest on any Note is due and payable, the
Issuers shall irrevocably deposit with the Trustee or the Paying Agent money
sufficient to pay such principal, premium, if any, and/or interest. The Issuers
will pay interest (except Defaulted Interest) to the Persons who are registered
Holders of Notes at the close of business on the Record Date preceding the
interest payment date even if Notes are canceled, repurchased or redeemed after
the record date and on or before the relevant Interest Payment Date. Holders
must surrender Notes to a Paying Agent to collect principal payments and premium
payments, if any. The Issuers will pay principal and interest in U.S. legal
tender.
Payments in respect of Notes represented by a Global Note (including
principal, premium, if any, and interest) will be made by the transfer of
immediately available funds to the accounts specified by the Depository Trust
Company. The Issuers will make all payments in respect of a Certificated Note
(including principal, premium, if any, the Damage Amount, if any, and interest)
at the office or agency of the Issuers in The City of New York maintained for
such purposes, which, initially, will be the office of the Trustee or an agent
thereof; provided,
6
<PAGE>
however, that payment of interest and the Damage Amount, if any, may be made at
the option of Holdings by check mailed to the Person entitled thereto as shown
on the register of the Notes maintained by the Registrar.
3. Paying Agent and Registrar
--------------------------
Initially, State Street Bank and Trust Company (the "Trustee"), will
act as Trustee, Paying Agent and Registrar. The Issuers may appoint and change
any Paying Agent, Registrar or co-registrar without notice to any Holder. The
Company may act as Paying Agent, Registrar or co-registrar.
4. Indenture
---------
The Issuers issued the Notes under an Indenture dated as of July 23,
1999, (as it may be amended or supplemented from time to time in accordance with
the terms thereof, the "Indenture"), among the Issuers and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
------
77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and Holders
are referred to the Indenture and the Act for a statement of those terms. Each
Holder by accepting a Note, agrees to be bound by all of the terms and
provisions of the Indenture.
The Notes are general unsecured senior obligations of the Issuers.
Subject to the conditions set forth in the Indenture and without the consent of
the Holders, the Issuers may issue an unlimited principal amount of Add-On
Notes. All Notes will be treated as a single class of securities under the
Indenture.
The Indenture imposes certain limitations on, among other things: the
ability of the Company and its Restricted Subsidiaries to incur Debt, to make
Restricted Payments, to incur Liens, to issue or sell Capital Interests of
Restricted Subsidiaries, to consummate Asset Sales, enter into transactions with
Affiliates, enter into Sale and Leaseback transactions, create Unrestricted
Subsidiaries, consolidate or merge or transfer or convey all or substantially
all of the Company's and its Restricted Subsidiaries' assets.
5. Redemption
----------
The Notes are subject to redemption, at the option of the Issuers, in
whole or in part, at any time, upon not less than 30 nor more than 60 days
notice, at a Redemption Price equal to: (A) if the Redemption Date is prior to
August 1, 2004, the Accreted Value of the Notes, plus the Make-Whole Premium, as
of the Redemption Date; or (B) if the Redemption Date is on or after August 1,
2004, the following Redemption Prices (expressed as percentages of principal
amount at Stated Maturity) set forth below, plus accrued and unpaid interest, if
any, to the 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 the Redemption Date), if redeemed during the 12 month
period beginning on August 1, of the years indicated:
7
<PAGE>
YEAR Redemption Price
2004 107.500%
2005 105.000%
2006 102.500%
2007 and thereafter 100.000%
In addition to the optional redemption of the Notes in accordance with
the provisions of the preceding paragraph, prior to August 1, 2002, the Issuers
may, with the net proceeds of a Public Equity Offering of Qualified Capital
Interests in either Issuer or a Successor Entity, redeem all, but not less than
all, of the aggregate principal amount of the outstanding Notes at a Redemption
Price equal to 115.0% of the Accreted Value thereof; provided, that any such
redemption occurs within 90 days following the closing of any such Public Equity
Offering.
If the Issuers are not redeeming all of the Notes, the Trustee shall
select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in another fair and reasonable manner chosen at the
discretion of the Trustee. The Notes will be redeemable in whole or in part
upon not less than 30 nor more than 60 days' prior written notice, mailed by
first class mail to a holder's address as it shall appear on the register
maintained by the Registrar of the Notes. On and after any redemption date,
Accreted Value will cease to accrete or interest will cease to accrue, as the
case may be, on the Notes or portions thereof called for redemption unless the
Issuers shall fail to redeem any such Note.
6. Repurchase Provisions
---------------------
Repurchase Upon a Change of Control. Upon the occurrence of a Change
of Control, Holdings will make an Offer to Purchase all of the outstanding Notes
at a Purchase Price in cash equal to: (x) 101% of the Accreted Value thereof, if
the Purchase Date is on or prior to August 1, 2004, or (y) 101% of the principal
amount at Stated Maturity thereof, together with accrued interest, if any, to
the Purchase Date if the Purchase Date is after August 1, 2004. For purposes of
the foregoing, an Offer to Purchase shall be deemed to have been made if: (i)
within 30 days following the date of the consummation of a transaction or series
of transactions that constitutes a Change of Control, Holdings commences an
Offer to Purchase all outstanding Notes at the Purchase Price (provided that the
running of such 30-day period shall be suspended, for up to a maximum of 30
days, during any period when the commencement of such Offer to Purchase is
delayed or suspended by reason of any court's or governmental authority's review
of or ruling on any materials being employed by Holdings to effect such Offer to
Purchase, so long as Holdings has used and continues to use its best efforts to
make and conclude such Offer to Purchase promptly) and (ii) all Notes properly
tendered pursuant to the Offer to Purchase are purchased on the terms of such
Offer to Purchase.
8
<PAGE>
Repurchase With Proceeds from Asset Sales. Any Net Cash Proceeds from
any Asset Sale that are not used to reinvest in Replacement Assets and/or repay
Debt of a Restricted Subsidiary shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10,000,000, Holdings shall make an
Offer to Purchase, from all Holders, Notes: (x) having an aggregate Accreted
Value as of the Purchase Date, if the Purchase Date is on or prior to August 1,
2004, or (y) in an aggregate principal amount at Stated Maturity, if the
Purchase Date is after August 1, 2004, in either case equal to the Excess
Proceeds, at a Purchase Price in cash equal to: (x) 100% of the Accreted Value
thereof, if the Purchase Date is on or prior to August 1 , 2004, or (y) 100% of
the principal amount thereof, together with accrued interest, if any, to the
Purchase Date, if the Purchase Date is after August 1, 2004. If the aggregate
Purchase Price of Notes surrendered by Holders exceeds the amount equal to the
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. To the extent that any amount of Excess Proceeds remains after
completion of such Offer to Purchase, Holdings may use such remaining amount for
general corporate purposes, and the amount of Excess Proceeds shall be reset to
zero.
Holdings will comply, to the extent applicable, with the requirements
of Rule 14e-1 under the Exchange Act and other securities laws or regulations in
the event that an Offer to Purchase is required in connection with a Change of
Control or an Asset Sale.
7. Denominations; Transfer; Exchange
---------------------------------
The Notes are in fully registered form without coupons in
denominations of principal amount of $1,000 and any integral multiple thereof.
A Holder may transfer or exchange Notes only in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by law
or permitted by the Indenture. The Registrar need not register the transfer of
or exchange (i) any Notes selected for redemption (except, in the case of a Note
to be redeemed in part, the portion of the Note not to be redeemed) for a period
beginning 15 days before the mailing of a notice of Notes to be redeemed and
ending on the date of such mailing or (ii) any Notes for a period beginning 15
days before an interest payment date and ending on such interest payment date.
8. Persons Deemed Owners
---------------------
The registered holder of this Note may be treated as the owner of it
for all purposes.
9. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuers at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Issuers and not to the Trustee for payment.
9
<PAGE>
10. Discharge Prior to Redemption or Maturity
-----------------------------------------
Subject to certain conditions set forth in the Indenture, the Issuers
at any time may terminate some or all of their obligations under the Notes and
the Indenture if the Issuers deposit with the Trustee U.S. legal tender or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be.
11. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then outstanding Notes and (ii)
any default (other than with respect to nonpayment or in respect of a provision
that cannot be amended without the written consent of each Holder affected) or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in principal amount of the then outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder, the Issuers and the Trustee may amend the Indenture or the Notes to,
among other things, to evidence the succession of another Person to the Issuers
and the assumption by any such successor of the covenants of the Issuers in the
Indenture and in the Notes; to add to the covenants of the Issuers for the
benefit of the Holders, or to surrender any right or power herein conferred upon
the Issuers; to add additional Events of Default; to provide for uncertificated
Notes in addition to or in place of the certificated Notes; to evidence and
provide for the acceptance of appointment under the Indenture by a successor
Trustee; to secure the Notes; to cure any ambiguity, to correct or supplement
any provision in the Indenture which may be defective or inconsistent with any
other provision in the Indenture, or to make any other provisions with respect
to matters or questions arising under the Indenture, provided that such actions
pursuant to this clause shall not adversely affect the interests of the Holders
in any material respect; to issue Add-On Notes or Exchange Notes; or to comply
with any requirements of the Commission in order to effect and maintain the
qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount at Stated Maturity of the
outstanding Notes may declare all the Notes to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Notes being due and payable immediately upon the occurrence of
such Events of Default.
Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes
unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount at Stated Maturity of the
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing Default or Event
of Default (except a Default or Event of Default in payment of principal or
interest) if it determines that withholding notice is in their interest.
10
<PAGE>
13. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with and collect obligations
owed to it by the Issuers or their Affiliates and may otherwise deal with the
Issuers or their affiliates with the same rights it would have if it were not
Trustee.
14. No Recourse Against Others
--------------------------
No recourse for the payment of the principal, Redemption Price or
Purchase Price of, and accrued interest on, any of the Notes, or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Issuers in this Indenture or in any
supplemental indenture, or in any Guarantee, or in any of the Notes, or because
of the creation of any Debt represented thereby, shall be had against any
stockholder, officer, director, partner, affiliate, beneficiary or employee, as
such, past, present or future, of the Issuers or of any successor corporation or
against the property or assets of any such stockholder, officer, employee,
partner, affiliate, beneficiary or director, either directly or through the
Issuers, or any successor corporation thereof, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
Notes are solely obligations of the Issuers, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, any stockholder,
officer, employee, partner, affiliate, beneficiary or director of the Issuers,
or any successor corporation or partnership thereof, because of the creation of
the Debt hereby authorized, or under or by reason of the obligations, covenants
or agreements contained in this Indenture or the Notes or implied therefrom, and
that any and all such personal liability of, and any and all claims against
every stockholder, officer, employee, partner, affiliate, beneficiary and
director, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture, and the issuance of the
Notes. It is understood that this limitation on recourse is made expressly for
the benefit of any such shareholder, employee, officer, partner, affiliate,
beneficiary or director and may be enforced by any one or all of them.
15. Authentication
--------------
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Note.
16. Abbreviations
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
11
<PAGE>
17. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Issuers have caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
18. Governing Law
-------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW
RULES.
The Company will furnish to any Holder upon written request and
without charge to the Holder a copy of the Indenture which has in it the text of
this Note in larger type. Requests may be made to:
Petro Stopping Centers Holdings, L.P.
6080 Surety Drive
El Paso, Texas 79905
Attn: Vice President of Finance
12
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note 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 Note on the books of the
Issuers. The agent may substitute another to act for him.
Date:____________________ Your Signature:___________________
Signature Guarantee:_________________________________
(Signature must be guaranteed)
_______________________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
13
<PAGE>
[To be attached to Global Notes only:
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease in Principal Amount of increase in Principal Principal Amount of this Global Signature of authorized
Exchange Amount of this Global Note Amount of this Global Note Note following such decrease or signatory of Trustee or
increase Note Custodian
________ _______________________________ _______________________________ _______________________________ _______________________
</TABLE>
14
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.9 or 4.18 of the Indenture, check either box:
[_] [_]
4.9 4.18
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.9 or 4.18 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Note)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
15
<PAGE>
EXHIBIT B-1
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO BENEFICIAL OWNER OR TO THE COMPANY
- -------------------------------------------------------------------------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and
Petro Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $____ aggregate principal amount of Notes which
are held in the name of the undersigned (the "Transferor") and evidenced by one
or more Certificated Notes. The Transferor has requested an exchange or
transfer of such Certificated Notes in the form of an equal principal amount of
Notes evidenced by one or more Certificated Notes to be delivered to [in the
case of an exchange of Certificated Notes without transfer: the Transferor's own
account, without transfer] [in the case of a transfer of such Certificated Notes
to the Company or any of its Subsidiaries: to the Company or one of its
Subsidiaries, as instructed by the Transferor].
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:____________________________
_______________________________
Authorized Signature
1
<PAGE>
EXHIBIT B-2
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO BENEFICIAL OWNER OR TO THE COMPANY
- -------------------------------------------------------------------------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and
Petro Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $___ aggregate principal amount of Notes which
represents an interest in a Global Note beneficially owned by the undersigned
(the "Transferor"). The Transferor has requested an exchange or transfer of such
beneficial interest in the Global Note in the form of an equal principal amount
of Notes evidenced by one or more Certificated Notes, to be delivered to [in the
case of an exchange of a beneficial interest without transfer: the Transferor's
own account, without transfer and in connection therewith, the Transferor hereby
certifies that it is the beneficial owner of such Notes] [in the case of a
transfer of a beneficial interest in a Global Note to the Company or any of its
Subsidiaries: to the Company or one of its Subsidiaries, as instructed by the
Transferor].
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:____________________________
_______________________________
Authorized Signature
1
<PAGE>
EXHIBIT C
---------
FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QIB
------------------------------------------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and
Petro Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $___ aggregate principal amount of Notes [in
the case of an exchange or transfer of an interest in a Global Note: which
represents an interest in a Global Note beneficially owned by the undersigned
(the "Transferor")] [in the case of an exchange or transfer of Certificated
Notes: which are held in the name of the undersigned (the "Transferor") and
evidenced by one or more Certificated Notes]. The Transferor has requested an
exchange or transfer of such [in the case of an exchange or transfer of an
interest in a Global Note: beneficial interest in the Global Note][ in the case
of an exchange or transfer of Certificated Notes: Certificated Note(s)] in the
form of an equal principal amount of Notes evidenced by [in the case of
transfers of Certificated Notes for beneficial interests in a Global Note
pursuant to Section 2.8(c) of the Indenture: a beneficial interest in a Global
Note][in the case of all other transfers or exchanges: one or more Certificated
Notes], to be delivered to such Person as the Transferor instructs the Trustee.
In connection with such request, and with respect to such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the Securities Act of 1933, as amended ("Rule
144A"), to a transferee that the Transferor reasonably believes is purchasing
the Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion, and the transferee, as well as any such
account, is a "qualified institutional buyer" within the meaning of Rule 144A,
in a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.
1
<PAGE>
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:____________________________
_______________________________
Authorized Signature
2
<PAGE>
EXHIBIT D-1
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
----------------------------------------------------------------
TO INSTITUTIONAL ACCREDITED INVESTORS
-------------------------------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and
Petro Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $___ aggregate principal amount of Notes (the
"Transferred Notes") [in the case of an exchange or transfer of an interest in a
Global Note: which represents an interest in a Global Note beneficially owned
by [name of beneficial owner (the "Transferor")]] [in the case of an exchange or
transfer of Certificated Notes: which are held in the name of [name of
registered owner] (the "Transferor") and evidenced by one or more Certificated
Notes]. The Transferor has requested an exchange or transfer of such [in the
case of an exchange or transfer of an interest in a Global Note: beneficial
interest in the Global Note][in the case of an exchange or transfer of
Certificated Notes: Certificated Note(s)] in the form of an equal principal
amount of Notes evidenced by one or more Certificated Notes, to be delivered to
the undersigned (the "Transferee").
Upon transfer, the Transferred Notes should be registered in the name
of the Transferee as follows:
Name: ___________________________________ [as nominee for the
transferee]/1/
Address: ________________________________
_________________________________
/1/ Strike if inapplicable.
1
<PAGE>
Taxpayer ID Number: _____________________
The Transferee represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")) purchasing for our own account or for the account of
such an institutional "accredited investor" at least $250,000 principal amount
of the Notes, and we are acquiring the Notes not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date (the "Resale Restriction
Termination Date") which is two years after the later of the date of original
issue and the last date on which the Issuers or any affiliate of the Issuers was
the owner of such Notes (or any predecessor thereto) only (a) to the Issuers or
any subsidiaries thereof, (b) inside the United States to a qualified
institutional buyer in compliance with Rule 144A adopted under the Securities
Act, (c) inside the United States to an accredited investor that delivers a
certification substantially in the form of this certification, (d) outside the
United States in compliance with Regulation S adopted under the Securities Act,
(e) pursuant to the exemption from registration provided by Rule 144 adopted
under the Securities Act (if available) or another available exemption under the
Securities Act, or (f) pursuant to an effective registration statement under the
Securities Act, subject to the Issuer's and the trustee's right prior to any
such offer, sale or transfer pursuant to clauses (d) and (e) to require the
delivery of an opinion of counsel, certification and/or other information
satisfactory to each of them. As used herein, the terms "Offshore Transaction"
and "United States" have the meaning given to them by Regulation S adopted under
the Securities Act." The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:___________________________
______________________________
Authorized Signature
2
<PAGE>
EXHIBIT D-2
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
----------------------------------------------------------------
TO ACCREDITED INVESTORS
-----------------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and Petro
Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $___ aggregate principal amount of Notes (the
"Transferred Notes") [in the case of an exchange or transfer of an interest in a
Global Note: which represents an interest in a Global Note beneficially owned
by [name of beneficial owner (the "Transferor")]] [in the case of an exchange or
transfer of Certificated Notes: which are held in the name of [name of
registered owner] (the "Transferor") and evidenced by one or more Certificated
Notes]. The Transferor has requested an exchange or transfer of such [in the
case of an exchange or transfer of an interest in a Global Note: beneficial
interest in the Global Note][in the case of an exchange or transfer of
Certificated Notes: Certificated Note(s)] in the form of an equal principal
amount of Notes evidenced by one or more Certificated Notes, to be delivered to
the undersigned (the "Transferee").
Upon transfer, the Transferred Notes should be registered in the name
of the Transferee as follows:
Name: ___________________________________ [as nominee for the
transferee]/2/
Address: ________________________________
_______________________________
/2/ Strike if inapplicable.
1
<PAGE>
Taxpayer ID Number: _____________________
The Transferee represents and warrants to you that:
1. We are an "accredited investor" (as defined in Rule 501(a)(4),
(5), (6) or (8) under the Securities Act of 1933, as amended (the "Securities
Act")) purchasing for our own account or for the account of such an "accredited
investor", and we are acquiring the Notes not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date (the "Resale Restriction Termination
Date") which is two years after the later of the date of original issue and the
last date on which the Issuers or any affiliate of the Issuers was the owner of
such Notes (or any predecessor thereto) only (a) to the Issuers or any
subsidiaries thereof, (b) inside the United States to a qualified institutional
buyer in compliance with Rule 144A adopted under the Securities Act, (c) inside
the United States to an accredited investor that delivers a certification
substantially in the form of this certification, (d) outside the United States
in compliance with Regulation S adopted under the Securities Act, (e) pursuant
to the exemption from registration provided by Rule 144 adopted under the
Securities Act (if available) or another available exemption under the
Securities Act, or (f) pursuant to an effective registration statement under the
Securities Act, subject to the Issuer's and the trustee's right prior to any
such offer, sale or transfer pursuant to clauses (d) and (e) to require the
delivery of an opinion of counsel, certification and/or other information
satisfactory to each of them. As used herein, the terms "Offshore Transaction"
and "United States" have the meaning given to them by Regulation S adopted under
the Securities Act." The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:_______________________________
____________________
Authorized Signature
2
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO
----------------------------------------------------------------------------
REGULATION S
------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and Petro
Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $___ aggregate principal amount of Notes [in
the case of an exchange or transfer of an interest in a Global Note: which
represents an interest in a Global Note beneficially owned by the undersigned
(the "Transferor")] [in the case of an exchange or transfer of Certificated
Notes: which are held in the name of the undersigned (the "Transferor") and
evidenced by one or more Certificated Notes]. The Transferor has requested an
exchange or transfer of such [in the case of an exchange or transfer of an
interest in a Global Note: beneficial interest in the Global Note][ in the case
of an exchange or transfer of Certificated Notes: Certificated Note(s)] in the
form of an equal principal amount of Notes evidenced by one or more Certificated
Notes, to be delivered to such Person as the Transferor instructs the Trustee.
In connection with the foregoing, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the Transferor
represents that:
(a) the offer of the Notes was not made to a person in the United
States;
(b) either (i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and any person
acting on its behalf reasonably believed that the transferee was outside
the United States or (ii) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither the
Transferor nor any person acting on its behalf knows that the transaction
has been pre-arranged with a buyer in the United States;
1
<PAGE>
(c) 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;
(d) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(e) the Transferor is the beneficial owner of the principal amount of
Notes being transferred.
In addition, if the sale is made during a "distribution compliance
period" (as defined in Regulation S) and the provisions of Rule 904(b)(1) or
Rule 904(b)(2) of Regulation S are applicable thereto, the Transferor confirms
that such sale has been made in accordance with the applicable provisions of
Rule 904(b)(1) or Rule 904(b)(2), as the case may be.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this letter have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:____________________________
_______________________________
Authorized Signature
2
<PAGE>
EXHIBIT F
FORM OF RULE 144 CERTIFICATION
------------------------------
[Date]
State Street Bank & Trust Company
Corporate Trust
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Re: Petro Stopping Centers Holdings, L.P. (the "Company") and Petro
Holdings Financial Corporation ("Holdings" and together with the
Company, the "Issuers") 15% Senior Discount Notes Due 2008 (the
--------------------------------------------------
"Notes")
--------
Ladies and Gentlemen:
Reference is hereby made to the Indenture, dated as of July 23, 1999
(as amended and supplemented from time to time, the "Indenture"), among the
Issuers, as issuers, and State Street Bank and Trust Company, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
This letter relates to $___ aggregate principal amount of Notes [in
the case of an exchange or transfer of an interest in a Global Note: which
represents an interest in a Global Note beneficially owned by the undersigned
(the "Transferor")] [in the case of an exchange or transfer of Certificated
Notes: which are held in the name of the undersigned (the "Transferor") and
evidenced by one or more Certificated Notes]. The Transferor has requested an
exchange or transfer of such [in the case of an exchange or transfer of an
interest in a Global Note: beneficial interest in the Global Note][ in the case
of an exchange or transfer of Certificated Notes: Certificated Note(s)] in the
form of an equal principal amount of Notes evidenced by one or more Certificated
Notes, to be delivered to such Person as the Transferor instructs the Trustee.
In connection with the foregoing, we confirm that such sale has been effected
pursuant to and in accordance with Rule 144 under the Securities Act.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:____________________________
3
<PAGE>
_______________________________
Authorized Signature
4
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
PETRO STOPPING CENTERS HOLDINGS, L.P.
PETRO HOLDINGS FINANCIAL CORPORATION
15% Senior Discount Notes Due 2008
REGISTRATION RIGHTS AGREEMENT
New York, New York
July 23, 1999
First Union Capital Markets Corp.
CIBC World Markets Corp.
As Initial Purchasers under the Purchase Agreement
c/o First Union Capital Markets Corp.
301 South College Street, TW-5
Charlotte, NC 28288-0606
Petro Holdings LP Corp.
c/o Chartwell Investments Inc.
717 Fifth Avenue, 23/rd/ Floor
New York, NY 10022
Ladies and Gentlemen:
This Registration Rights Agreement (the "Agreement") is dated as of
July 23, 1999, by and among Petro Stopping Centers Holdings L.P., a Delaware
limited partnership (the "Partnership"), and Petro Holdings Financial
Corporation, a Delaware corporation ("Holdings Corp." and together with the
Partnership the "Issuers"), on the one hand, and First Union Capital Markets
Corp. and CIBC World Markets Corp. (the "Initial Purchasers") and Petro Holdings
LP Corp. ("Chartwell"), on the other hand.
This Agreement is being entered into in connection with (i) a certain
purchase agreement, dated July 19, 1999, among the Issuers, Petro Warrant
Holdings Corporation ("Warrant Holdings") and the Initial Purchasers (the
"Purchase Agreement"), which provides for the sale by the Issuers to the Initial
Purchasers of 82,707 units (the "Units"), consisting of $82,707,000 aggregate
principal amount at stated maturity of the Issuers' 15% Senior Discount Notes
Due 2008 (the "Investor Notes") and warrants to purchase 82,707 shares of common
stock of Warrant Holdings (the "Warrants") and (ii) a certain purchase
agreement, dated July 23, 1999 (the "Chartwell Purchase Agreement") among Petro,
Inc., a Texas corporation, Chartwell, Petro Holdings GP Corp., a Delaware
corporation, Petro Stopping Centers, L.P., a Delaware limited partnership, Mobil
Long Haul, Inc., a Delaware corporation, James A. Cardwell, Sr., James A.
Cardwell, Jr., JAJCO II, Inc., a Delaware corporation, Volvo Petro Holdings,
LLC, a Delaware limited liability company, and Petro Warrant Holdings
Corporation, a Delaware corporation, which provides for the sale by the Issuers
to Chartwell of $30,663,000 aggregate principal amount at stated maturity of the
Issuers' 15% Senior Discount Notes Due 2008 (the "Chartwell Notes" and together
with the Investor Notes, the "Notes"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement and Chartwell to enter into the
Chartwell Purchase Agreement, the Issuers have agreed to provide the
registration rights set forth in this
<PAGE>
Agreement for the benefit of the Initial Purchasers and Chartwell and their
direct and indirect transferees. The execution and delivery of this Agreement is
a condition to the obligation of the Initial Purchasers to purchase the Units
under the Purchase Agreement and of Chartwell to enter into the Chartwell
Purchase Agreement. The parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Accreted Value" means, as of any date prior to August 1, 2004, an
--------------
amount per $1,000 principal amount at Stated Maturity of Notes that is equal to
the sum of (a) $483.64 and (b) the portion of the excess of the principal amount
at Stated Maturity of each Note over $483.64 which shall have been amortized on
a daily basis and compounded semi-annually on each February 1 and August 1 at
the rate of 15% per annum from the Issue Date through the date of determination
computed on the basis of a 360-day year of twelve 30-day months; and, as of any
date on or after August 1, 2004, the Accreted Value of each Note shall mean the
aggregate principal amount at Stated Maturity of such Note.
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission promulgated thereunder.
"Affiliate" means, with respect to any specified person, any other
---------
person that, directly or indirectly, is in control of, is controlled by, or is
under common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such person whether by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the preamble hereto.
---------
"Business Day" means any day excluding Saturday, Sunday or any other
------------
day which is a legal holiday under the laws of Charlotte, North Carolina or New
York, New York or is a day on which banking institutions therein located are
authorized or required by law or other governmental action to close.
"Commission" means the Securities and Exchange Commission.
----------
"Consummate" means, with respect to a Registered Exchange Offer, the
----------
occurrence of (a) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Exchange Notes to be issued in the
Registered Exchange Offer, (b) the maintenance of such Registration Statement
continuously effective and the keeping of the Registered Exchange Offer open for
a period not less than the minimum period required pursuant to Section 2(c)(ii)
hereof, (c) the Issuers' acceptance for exchange of all Transfer Restricted
Notes duly tendered and not validly withdrawn pursuant to the Registered
Exchange Offer and (d) the delivery of Exchange Notes by the Issuers to the
registrar under the Indenture in the same aggregate principal amount as the
aggregate principal amount of Transfer Restricted Notes duly tendered and not
validly withdrawn by Holders thereof pursuant to the Registered Exchange
2
<PAGE>
Offer and the delivery of such Exchange Notes to such Holders. The term
"Consummation" has a meaning correlative to the foregoing.
"Damage Amount" has the meaning set forth in Section 4 hereto.
-------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" means debt securities of the Issuers substantially
--------------
identical in all material respects to the Notes (except that the Damage Amount
provisions and the transfer restrictions pertaining to the Notes will be
modified or eliminated, as appropriate), to be issued under the Indenture.
"Exchange Offer Registration Period" means the one-year period (or
----------------------------------
longer, if required by applicable law) following the Consummation of the
Registered Exchange Offer, exclusive of any period during which any stop order
shall be in effect suspending the effectiveness of the Exchange Offer
Registration Statement; provided, however, that in the event that all resales of
-------- -------
Exchange Notes (including, subject to the time periods set forth herein, any
resales by Participating Broker-Dealers) covered by such Exchange Offer
Registration Statement have been made, the Exchange Offer Registration Statement
need not thereafter remain continuously effective for such period.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of the Issuers on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Filing Date" has the meaning set forth in Section 2 hereto.
-----------
"Holder" means any holder from time to time of Transfer Restricted
------
Notes or Exchange Notes (including either of the Initial Purchasers).
"Indenture" means the indenture relating to the Notes and the Exchange
---------
Notes, to be dated as of the Closing Date, among the Issuers and State Street
Bank and Trust Company, as trustee, as the same may be amended, supplemented,
waived or otherwise modified from time to time in accordance with the terms
thereof.
"Initial Purchasers" has the meaning set forth in the preamble hereto.
------------------
"Issue Date" means July 23, 1999.
----------
"Issuers" has the meaning set forth in the preamble hereto.
-------
"Losses" has the meaning set forth in Section 8(d) hereto.
------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of Transfer Restricted Notes registered under a Registration
Statement.
3
<PAGE>
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering
under a Shelf Registration Statement.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Participating Broker-Dealer" means any Holder (which may include any
---------------------------
of the Initial Purchasers) that is a broker-dealer, electing to exchange Notes
acquired for its own account as a result of market-making activities or other
trading activities for Exchange Notes.
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Transfer Restricted Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
------------------
"Registered Exchange Offer" means the proposed offer to the Holders to
-------------------------
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Transfer
Restricted Notes (including any guarantees of each thereof) pursuant to the
provisions of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(c)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of the Issuers pursuant to the provisions of Section 3 hereof, which covers some
or all of the Transfer Restricted Notes, as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Stated Maturity" means August 1, 2008.
---------------
"Transfer Restricted Notes" means each Note upon original issuance
-------------------------
thereof and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(iii) and Section 3(a)(iv) apply upon original issuance and at all
times subsequent thereto, until in the case of any
4
<PAGE>
such Note or Exchange Note, as the case may be, the earliest to occur of (i) the
date on which such Note has been exchanged by a person other than a
Participating Broker-Dealer for an Exchange Note (other than with respect to an
Exchange Note as to which Section 3(a)(iii) and Section 3(a)(iv) apply), (ii)
with respect to Exchange Notes received by Participating Broker-Dealers in the
Registered Exchange Offer, the date on which such Exchange Note has been sold by
such Participating Broker-Dealer by means of the Prospectus contained in the
Exchange Offer Registration Statement, (iii) a Shelf Registration Statement
covering such Note or Exchange Note, as the case may be, has been declared
effective by the Commission and such Note or Exchange Note, as the case may be,
has been disposed of in accordance with such effective Shelf Registration
Statement, (iv) the date on which such Note or Exchange Note, as the case may
be, is disposed of pursuant to Rule 144 under the Act or (v) such Note or
Exchange Note, as the case may be, ceases to be outstanding for purposes of the
Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trustee" means the trustee with respect to the Notes or Exchange
-------
Notes, as applicable, under the Indenture.
2. Registered Exchange Offer; Resales of Exchange Notes by
-------------------------------------------------------
Participating Broker-Dealers; Private Exchange. (a) The Issuers shall prepare
- ----------------------------------------------
and, not later than 75 days from the Issue Date (or, if such 75th day is not a
Business Day, by the first Business Day thereafter), shall file with the
Commission the Exchange Offer Registration Statement with respect to the
Registered Exchange Offer (the date of such filing hereinafter referred to as
the "Filing Date"). The Issuers shall use their best efforts (i) to cause the
Exchange Offer Registration Statement to be declared effective under the Act
within 150 days from the Issue Date (or, if such 150th day is not a Business
Day, by the first Business Day thereafter), and (ii) to Consummate the
Registered Exchange Offer within 30 Business Days from the date the Exchange
Offer Registration Statement becomes effective (or, if such 30th day is not a
Business Day, by the first Business Day thereafter).
(b) The objective of such Registered Exchange Offer is to enable each
Holder electing to exchange Transfer Restricted Notes for Exchange Notes
(assuming that such Holder (x) is not an "affiliate" of the Issuers within the
meaning of the Act, (y) is not a broker-dealer that acquired the Transfer
Restricted Notes in a transaction other than as a part of its market-making or
other trading activities and (z) if such Holder is not a broker-dealer, acquires
the Exchange Notes in the ordinary course of such Holder's business, is not
participating in the distribution of the Exchange Notes and has no arrangements
or understandings with any person to participate in the distribution of the
Exchange Notes) to resell such Exchange Notes from and after their receipt
without any limitations or restrictions under the Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the Issuers
shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
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<PAGE>
(ii) keep the Registered Exchange Offer open for acceptance for not
less than 20 Business Days after the date notice thereof is mailed to
Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all material respects with all applicable laws
relating to the Registered Exchange Offer.
(d) The Issuers may suspend the use of the Prospectus for a period
not to exceed 30 days in any six month period or an aggregate of 45 days in any
twelve-month period for valid business reasons, to be determined by the Issuers
in their sole reasonable judgment (not including avoidance of their obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided that the Issuers promptly thereafter comply with the
--------
requirements of Section 5(k) hereof, if applicable.
(e) As soon as practicable after the Consummation of the Registered
Exchange Offer, the Issuers shall cause the Trustee promptly to authenticate and
deliver to each Holder Exchange Notes equal in principal amount to the Transfer
Restricted Notes of such Holder so accepted for exchange.
(f) The Initial Purchasers and the Issuers acknowledge that, pursuant
to interpretations by the staff of the Commission of Section 5 of the Act, and
in the absence of an applicable exemption therefrom, each Participating Broker-
Dealer is required to deliver a Prospectus in connection with a sale of any
Exchange Notes received by such Participating Broker-Dealer pursuant to the
Registered Exchange Offer in exchange for Transfer Restricted Notes acquired for
its own account as a result of market-making activities or other trading
activities. Accordingly, the Issuers will allow Participating Broker-Dealers
and other persons, if any, with similar prospectus delivery requirements to use
the Prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of Exchange Notes and shall:
(i) include the information set forth in Annex A hereto on the
cover of the Prospectus forming a part of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange Offer
Registration Statement in a section setting forth details of the Registered
Exchange Offer, in Annex C hereto in the underwriting or plan of
distribution section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the letter of transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use their best efforts to keep the Exchange Offer Registration
Statement continuously effective (subject to Section 2(d)) under the Act
during the Exchange Offer Registration Period for delivery of the
Prospectus included therein by Participating Broker-Dealers in connection
with sales of Exchange Notes received pursuant to the Registered Exchange
Offer, as contemplated by Section 5(h) below.
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<PAGE>
(g) In the event that (i) either Initial Purchaser determines that it
is not eligible to participate in the Registered Exchange Offer with respect to
the exchange of Transfer Restricted Notes constituting any portion of an unsold
allotment or (ii) any Holder delivers to the issuers the notice described in
clause (iv) of Section 3(a), upon the effectiveness of the Shelf Registration
Statement as contemplated by Section 3 hereof and at the request of such Initial
Purchaser or such Holder, as the case may be, the Issuers shall issue and
deliver to such Initial Purchaser or such Holder, as the case may be, or to the
party purchasing Transfer Restricted Notes registered under the Shelf
Registration Statement from such Initial Purchaser or such Holder, as the case
may be, in exchange for such Transfer Restricted Notes, a like principal amount
of Exchange Notes to the extent permitted by applicable law. The Issuers shall
use their reasonable best efforts to cause the CUSIP Service Bureau to issue the
same CUSIP number for such Exchange Notes as for Exchange Notes issued pursuant
to the Registered Exchange Offer.
3. Shelf Registration. (a) If (i) the Issuers are not permitted to
------------------
file the Exchange Offer Registration Statement or to Consummate the Registered
Exchange Offer because the Registered Exchange Offer is not permitted by
applicable law or Commission policy, (ii) for any other reason the Registered
Exchange Offer is not Consummated within 30 Business Days of the date the
Exchange Offer Registration Statement has become effective, (iii) an Initial
Purchaser so requests with respect to Notes acquired by it directly from the
Issuers on or prior to the 20th Business Day following the Consummation of the
Registered Exchange Offer, (iv) any Holder notifies the Issuers on or prior to
the 20th Business Day following the Consummation of the registered Exchange
Offer that such Holder is not eligible to participate in the Registered Exchange
Offer or the Exchange Notes such Holder would receive would not be freely
tradable, or (v) in the case where an Initial Purchaser participates in the
Registered Exchange Offer or acquires Exchange Notes pursuant to Section 2(g)
hereof, the Initial Purchaser does not receive freely tradable Exchange Notes in
exchange for Notes constituting any portion of an unsold allotment and such
Initial Purchaser notifies the Issuers on or prior to the 20th Business day
following the Consummation of the Registered Exchange Offer (it being understood
that, for purposes of this Section 3, (x) the requirement that the Initial
Purchaser deliver a Prospectus containing the information required by Items 507
and/or 508 of Regulation S-K under the Act in connection with sales of Exchange
Notes acquired in exchange for such Transfer Restricted Notes shall result in
such Exchange Notes being not "freely tradable" and (y) the requirement that a
Participating Broker-Dealer deliver a Prospectus in connection with sales of
Exchange Notes acquired in the Registered Exchange Offer in exchange for
Transfer Restricted Notes acquired as a result of market-making activities or
other trading activities shall not result in such Exchange Notes being not
"freely tradable"), the following provisions shall apply:
(b) The Issuers shall file with the Commission a Shelf Registration
Statement prior to the 75th day following the earliest to occur of (i) the date
on which the Issuers determine that they are not permitted to file the Exchange
Offer Registration Statement or to Consummate the Exchange Offer; (ii) 30
Business Days after the Exchange Offer registration Statement has been declared
effective if the Registered Exchange Offer has not been Consummated by such date
and (iii) the date notice is given pursuant to Section (a)(iii), (iv) or (v)
above (or if such 75th day is not a Business Day, by the first Business Day
thereafter) and shall use their reasonable efforts to cause the Shelf
Registration Statement to be declared effective by the Commission within 135
days thereafter. With respect to Exchange Notes received by either Initial
Purchaser in exchange for Notes constituting any portion of an unsold allotment,
the Issuers may, if
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<PAGE>
permitted by current interpretations by the Commission's staff, file a post-
effective amendment to the Exchange Offer Registration Statement containing the
information required by Regulation S-K Items 507 and/or 508, as applicable, in
satisfaction of its obligations under this paragraph (b) with respect thereto,
and any such Exchange Offer Registration Statement, as so amended, shall be
referred to herein as, and governed by the provisions herein applicable to, a
Shelf Registration Statement.
(c) The Issuers shall keep such Shelf Registration Statement
continuously effective (subject to Section 3(d)) in order to permit the
Prospectus forming a part thereof to be usable by Holders until the earliest of
(i) such time as the Notes or Exchange Notes covered by the Shelf Registration
Statement can be sold without any limitations under clauses (c), (e), (f) and
(h) of Rule 144, (ii) two years from the date on which the Shelf Registration
Statement was filed and (iii) such date as of which all the Transfer Restricted
Notes have been sold pursuant to the Shelf Registration Statement (in any such
case, such period being called the "Shelf Registration Period"). The Issuers
shall be deemed not to have used their best efforts to keep the Shelf
Registration Statement effective during the requisite period if they voluntarily
take any action that would result in Holders of Transfer Restricted Notes
covered thereby not being able to offer and sell such notes during that period,
unless such action is required (x) by applicable law or (y) pursuant to Section
3(d) hereof, and, in either case, so long as the Issuers promptly thereafter
comply with the requirements of Section 5(k) hereof, if applicable.
(d) The Issuers may suspend the use of the Prospectus for a period
not to exceed 30 days in any six month period or an aggregate of 45 days in any
twelve-month period for valid business reasons, to be determined by the Issuers
in their sole reasonable judgment (not including avoidance of its obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided that the Issuers promptly thereafter comply with the
--------
requirements of Section 5(k) hereof, if applicable.
(e) No Holder of Transfer Restricted Notes may include any of its
Transfer Restricted Notes in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Issuers in writing,
within 20 Business Days after receipt of a request therefor, such information as
the Issuers may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Transfer Restricted Notes shall be entitled to a Damage Amount
pursuant to Section 4 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested information. Each Holder
of Transfer Restricted Notes as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Issuers all information
required to be disclosed in order to make the information previously furnished
to the Issuers by such Holder not misleading.
4. Damage Amount.
-------------
(a) The parties hereto agree that Holders will suffer damages if the
Issuers fail to perform their obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable Registration Statement is not
filed with the Commission on or prior to the date specified herein
8
<PAGE>
for such filing, (ii) the applicable Registration Statement has not been
declared effective by the Commission on or prior to the date specified herein
for such effectiveness after such obligation arises, (iii) if the Registered
Exchange Offer is required to be Consummated hereunder, the Registered Exchange
Offer has not been Consummated by the Issuers within the time period set forth
in Section 2(a), or (iv) prior to the end of the Exchange Offer Registration
Period or the Shelf Registration Period, the Commission shall have issued a stop
order suspending the effectiveness of the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, or proceedings have
been initiated with respect to the Registration Statement under Section 8(d) or
8(e) of the Act, (v) the aggregate number of days in any one such suspension
period exceeds the period permitted pursuant to Section 2(d) or 3(d) hereof, as
each may be applicable, or (vi) the number of suspension periods exceeds the
number permitted pursuant to Section 2(d) or 3(d) hereof, as each may be
applicable (each such event referred to in clauses (i) through (vi), a
"Registration Default"), then liquidated damages (the "Damage Amount") will
accrue with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $0.05 per week per
$1,000 of Accreted Value of such Transfer Restricted Notes and will increase by
an additional $0.05 per week per $1,000 of Accreted Value of such Transfer
Restricted Notes for each subsequent 90-day period until such Registration
Default has been cured, up to an aggregate maximum Damage Amount of $0.30 per
week per $1,000 of Accreted Value of Notes for all Registration Defaults.
Following the cure of a Registration Default, the accrual of Damage Amounts with
respect to such Registration Default will cease and upon the cure of all
Registration Defaults the accrual of all Damage Amounts will cease.
(b) The Issuers shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) immediately upon the happening
of each and every Registration Default. The Issuers shall pay the Damage Amount
due on the Transfer Restricted Notes by depositing with the paying agent (which
shall not be either of the Issuers for these purposes) for the Transfer
Restricted Notes, in trust, for the benefit of the Holders thereof, prior to
11:00 A.M. on each February 1 and August 1, sums sufficient to pay the Damage
Amount then due. The Damage Amount due shall be payable semi-annually on each
February 1 and August 1, to the record holders of Notes at the close of business
on the January 15 and July 15 immediately preceding such dates, commencing with
the first such date occurring after any Damage Amounts commence to accrue and
until such Registration Default is cured. Each obligation to pay Damage Amounts
shall be deemed to accrue from and include the date of the applicable
Registration Default.
(c) The parties hereto agree that the Damage Amount provided for in
this Section 4 constitutes a reasonable estimate of the damages that will be
suffered by holders of Transfer Restricted Notes by reason of the happening of
any Registration Default.
(d) All of the Issuers' obligations set forth in this Section 4 which
are outstanding with respect to any Transfer Restricted Note at the time such
Note ceases to be covered by an effective Registration Statement shall survive
until such time as all such obligations with respect to such security have been
satisfied in full (notwithstanding termination of the Agreement).
9
<PAGE>
5. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuers shall furnish to each of the Initial Purchasers,
prior to the filing thereof with the Commission, a copy of any Registration
Statement, and each amendment thereof and each amendment or supplement, if any,
to the Prospectus included therein and shall use their best efforts to reflect
in each such document, when so filed with the Commission, such comments as each
of the Initial Purchasers reasonably may propose.
(b) The Issuers shall ensure that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Act;
(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided that no representation or agreement is made hereby with respect to
- --------
information with respect to either of the Initial Purchasers, any Underwriter or
any Holder required to be included in any Registration Statement or Prospectus
pursuant to the Act or provided by either of the Initial Purchasers, any Holder
or any Underwriter specifically for inclusion in any Registration Statement or
Prospectus.
(c) (1) The Issuers shall advise the Initial Purchasers and, in the
case of a Shelf Registration Statement, the Holders of Transfer Restricted Notes
covered thereby, and, if requested by either of the Initial Purchasers or any
such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus included therein or for
additional information.
(2) The Issuers shall advise the Initial Purchasers and, in the case
of a Shelf Registration Statement, the Holders of Transfer Restricted Notes
covered thereby, and, in the case of an Exchange Offer Registration Statement,
any Participating Broker-Dealer that has provided in writing to the Issuers a
telephone or facsimile number and address for notices, and, if
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<PAGE>
requested by either of the Initial Purchasers or any such Holder or
Participating Broker-Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Issuers of any notification with respect
to the suspension of the qualification of the Transfer Restricted Notes
included in any Registration Statement for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(iii) of the suspension of the use of the Prospectus or of the
happening of any event that requires the making of any changes in the
Registration Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading (which advice shall be accompanied by
an instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(d) The Issuers shall use their best efforts to obtain the withdrawal
of any order suspending the effectiveness of any Registration Statement at the
earliest possible time and in any event shall within 30 days of any such order
(or, if such 30th day is not a Business Day, by the first Business Day
thereafter) amend the Registration Statement covering all of the Transfer
Restricted Notes (whereupon references herein to the Registration Statement
shall be deemed to include references to such additional filing).
(e) The Issuers shall furnish to each Holder of Transfer Restricted
Notes included within the coverage of any Shelf Registration Statement, without
charge, at least one copy of such Shelf Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all exhibits thereto (including those
incorporated by reference).
(f) The Issuers shall, during the Shelf Registration Period, deliver
to each Holder of Transfer Restricted Notes included within the coverage of any
Shelf Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Issuers consent to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders of Transfer Restricted
Notes in connection with the offering and sale of the Transfer Restricted Notes
covered by the Prospectus or any amendment or supplement thereto.
(g) The Issuers shall furnish to each Participating Broker-Dealer
that so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents
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<PAGE>
incorporated by reference therein and, if the Participating Broker-Dealer so
requests in writing, all exhibits thereto (including those incorporated by
reference).
(h) The Issuers shall, during the Exchange Offer Registration Period,
deliver to each Participating Broker-Dealer, without charge, as many copies of
the Prospectus (including each preliminary Prospectus) included in such Exchange
Offer Registration Statement and any amendment or supplement thereto as such
Participating Broker-Dealer may reasonably request; and the Issuers consent to
the use of the Prospectus or any amendment or supplement thereto by any such
Participating Broker-Dealer in connection with the offering and sale of the
Exchange Notes, as provided in Section 2(f) above.
(i) Prior to the Registered Exchange Offer or any other offering of
Transfer Restricted Notes pursuant to any Registration Statement, the Issuers
shall register, qualify or cooperate with the Holders of Transfer Restricted
Notes included therein and their respective counsel in connection with the
registration or qualification of such Transfer Restricted Notes for offer and
sale under the securities or blue sky laws of such states as any such Holders
reasonably request in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the Transfer
Restricted Notes covered by such Registration Statement; provided, however, that
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the neither of the Issuers will be required to qualify generally to do business
in any jurisdiction in which it is not then so qualified, to file any general
consent to service of process or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction where it is
not then so subject.
(j) The Issuers shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer Restricted
Notes to be sold pursuant to any Registration Statement free of any restrictive
legends and in denominations and registered in such names as Holders may request
prior to sales of Transfer Restricted Notes pursuant to such Registration
Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Issuers shall promptly prepare and file a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so that, as
thereafter delivered to purchasers of the Transfer Restricted Notes included
therein, the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(l) The Issuers shall use their reasonable best efforts to cause The
Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Registration Statement hereunder or as soon as possible
thereafter to remove (i) from any existing CUSIP number assigned to the Transfer
Restricted Notes or Exchange Notes, as the case may be, any designation
indicating that such notes are "restricted securities," which efforts shall
include delivery to DTC of a letter executed by the Issuers substantially in the
form of Annex E hereto and (ii) any other stop or restriction on DTC's system
with respect to the Transfer Restricted Notes or Exchange Notes, as the case may
be. In the event the Issuers are unable to cause DTC to take actions described
in the immediately preceding sentence, the Issuers shall take such actions as
the Initial Purchasers may reasonably request to provide, as soon as
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<PAGE>
practicable, a CUSIP number for the Transfer Restricted Notes or Exchange Notes
registered under such Registration Statement and to cause such CUSIP number to
be assigned to the Transfer Restricted Notes or Exchange Notes (or to the
maximum aggregate principal amount of the securities to which such number may be
assigned).
(m) The Issuers shall use their best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
(n) The Issuers shall cause the Indenture to be qualified under the
Trust Indenture Act in a timely manner.
(o) The Issuers may require each Holder of Transfer Restricted Notes
to be sold pursuant to any Shelf Registration Statement to furnish to the
Issuers such information regarding the Holder and the distribution of such
Transfer Restricted Notes as may, from time to time, be reasonably required by
the Act, and the obligations of the Issuers to any Holder hereunder shall be
expressly conditioned on the compliance of such Holder with such request.
(p) The Issuers shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement (i) such information as the Majority Holders provide or, if the
Transfer Restricted Notes are being sold in an underwritten offering, as the
Managing Underwriters and the Majority Holders reasonably agree should be
included therein and provided to the Issuers in writing for inclusion in the
Shelf Registration Statement or Prospectus, and (ii) such information as a
Holder may provide from time to time to the Issuers in writing for inclusion in
a Prospectus or any Shelf Registration Statement concerning such Holder and the
distribution of such Holder's Transfer Restricted Notes and, in either case,
shall make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after being notified in writing of the matters
to be incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Issuers
shall enter into such agreements (including underwriting agreements) and take
all other customary and appropriate actions as may be reasonably requested in
order to expedite or facilitate the registration or the disposition of any
Transfer Restricted Notes, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures no less favorable than those set forth in Section 8 (or such
other provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any, with respect to all parties to be indemnified
pursuant to Section 8).
(r) In the case of any Shelf Registration Statement, the Issuers
shall:
(i) make reasonably available for inspection by the Holders of
Transfer Restricted Notes to be registered thereunder, any Underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such Underwriter, all relevant financial and
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<PAGE>
other records, pertinent corporate documents and properties of the Issuers
and any of their subsidiaries;
(ii) cause the Issuers' officers, directors and employees to supply
all relevant information reasonably requested by the Holders or any such
Underwriter, attorney, accountant or agent in connection with any such
Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information so provided will be
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deemed confidential at the time of delivery of such information and shall
be kept confidential by the Holders or any such Underwriter, attorney,
accountant or agent, unless (x) disclosure thereof is made in connection
with a court proceeding or required by law; provided that each Holder and
--------
any such Managing Underwriter, attorney, accountant or agent will, upon
learning that disclosure of such information is sought in a court
proceeding or required by law, give reasonable notice to the Issuers with
enough time to allow the Issuers to undertake appropriate action to prevent
disclosure at the Issuers' sole expense, or (y) such information has
previously been made or becomes available to the public generally through
the Issuers or through a third party without an accompanying obligation of
confidentiality;
(iii) make such representations and warranties to the Holders of
Transfer Restricted Notes registered thereunder and the Managing
Underwriters, if any, in form, substance and scope as are customarily made
by issuers to Managing Underwriters and covering matters including, but not
limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Issuers and updates thereof
(which counsel and opinions, in form, scope and substance, shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the Managing Underwriters, if any, covering such
matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Holders and Managing Underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuers (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Issuers or of any business acquired by the Issuers for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each selling Holder of the Transfer
Restricted Notes covered by such Shelf Registration Statement (provided
such Holder furnishes the accountants with such representations as the
accountants customarily require in similar situations) and the Managing
Underwriters, if any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings;
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 5(i) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuers; and
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<PAGE>
(vii) The foregoing actions set forth in this Section 5(r) shall be
performed at (x) the effectiveness of such Shelf Registration Statement and
each post-effective amendment thereto and (y) each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(s) The Issuers shall, if and to the extent required under the Act
and/or the Trust Indenture Act and the rules and regulations thereunder in order
to register the Transfer Restricted Notes under the Act and qualify the
Indenture under the Trust Indenture Act.
6. Registration Expenses. The Issuers shall bear all fees and
---------------------
expenses (including the fees and expenses, if any, of Cleary, Gottlieb, Steen &
Hamilton, counsel for the Initial Purchasers, incurred in connection with the
Registered Exchange Offer) incurred in connection with the performance of its
obligations under Sections 2, 3, 4 and 5 hereof (other than brokers', dealers'
and underwriters' discounts and commissions and brokers', dealers' and
underwriters' counsel fees).
7. Rules 144 and 144A. The Issuers shall use their best efforts to
------------------
file any reports required to be filed by them under the Act and the Exchange Act
in a timely manner and, if at any time the Partnership is not required to file
such reports, it will, upon the request of any Holder of Transfer Restricted
Notes, make publicly available other information so long as necessary to permit
sales of the Notes pursuant to Rules 144 and 144A. The Partnership covenants
that it will take such further action as any Holder of Transfer Restricted Notes
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Partnership will
provide a copy of this Agreement to prospective purchasers of Transfer
Restricted Notes identified to the Partnership by the Initial Purchasers upon
request. Upon the request of any Holder of Transfer Restricted Notes, the
Partnership shall deliver to such Holder a written statement as to whether it
has complied with such requirements. Notwithstanding the foregoing, nothing in
this Section 7 shall be deemed to require the Partnership to register any of its
securities pursuant to the Exchange Act.
8. Indemnification and Contribution.
--------------------------------
(a) (i) In connection with any Registration Statement, the Issuers
agree to indemnify and hold harmless each Holder of Transfer Restricted
Notes covered thereby, the directors, officers, employees and agents of
each such Holder and each person who controls any such Holder within the
meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (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 as
originally filed or in any amendment thereof, in any preliminary Prospectus
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 not
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<PAGE>
misleading, and agree to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Issuers will not be liable
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in any case to the extent that any such loss, claim, damage or liability
arises out of or is based upon (A) any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information relating to the Holder
furnished to the Issuers by or on behalf of any such Holder specifically
for inclusion therein, (B) use of a Registration Statement or the related
Prospectus during a period when a stop order has been issued in respect of
such Registration Statement or any proceedings for that purpose have been
initiated or use of a Prospectus when use of such Prospectus has been
suspended pursuant to Section 5(c); provided, further, in each case, that
-------- -------
Holders received prior notice of such stop order, initiation of proceedings
or suspension or (C) if the Holder is required to but does not deliver a
Prospectus or the then current Prospectus. This indemnity agreement will be
in addition to any liability which the Issuers may otherwise have.
(ii) The Issuers also agree to indemnify or contribute to Losses, as
provided in Section 8(d), of any Managing Underwriters of Transfer
Restricted Notes registered under a Registration Statement, their officers
and directors and each person who controls such Managing Underwriters on
substantially the same basis as that of the indemnification of the selling
Holders provided in this Section 8(a) and shall, if requested by any
Holder, enter into an underwriting agreement reflecting such agreement, as
provided in Section 5(q) hereof.
(b) Each Holder of Transfer Restricted Notes covered by a
Registration Statement severally agrees to indemnify and hold harmless the
Issuers, their directors, officers, employees and agents and each person who
controls either of the Issuers within the meaning of either the Act or the
Exchange Act to the same extent as the foregoing indemnity from the Issuers to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Issuers by or on behalf of such Holder specifically
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election
16
<PAGE>
to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall have authorized the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided further, that the indemnifying party shall not be responsible for the
- -------- -------
fees and expenses of more than one separate counsel (together with appropriate
local counsel) representing all the indemnified parties under paragraph (a) or
paragraph (b) above. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such Losses; provided, however, that in no case shall any
-------- -------
Underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the Transfer Restricted Notes purchased by such
Underwriter under the Registration Statement which resulted in such Losses. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Issuers shall be deemed to be equal to
the sum of (x) the aggregate principal amount of the Notes and (y) the total
Damage Amount which the Issuers were not required to pay as a result of
registering the Transfer Restricted Notes covered by the Registration Statement
which resulted in such Losses. Benefits received by any Holder shall be deemed
to be equal to the value of receiving Transfer Restricted Notes registered under
the Act. Benefits received by any Underwriter shall be deemed to be equal to
the total underwriting discounts and commissions, as set forth on the cover page
of the Prospectus forming a part of the Registration Statement which resulted in
such Losses. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue
17
<PAGE>
statement or omission relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand. The parties
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), 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 Section 8, each person who controls a
Holder within the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of such Holder shall have the same rights
to contribution as such Holder, and each person who controls the Issuers within
the meaning of either the Act or the Exchange Act and each director, officer ,
employee and agent of the Issuers shall have the same rights to contribution as
the Issuers, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section 8 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, the
Issuers or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted
Notes covered by a Registration Statement.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Issuers have not, as of the date
--------------------------
hereof, entered into nor shall they, on or after the date hereof, enter into any
agreement that is inconsistent with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuers have obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Transfer Restricted Notes are
being sold pursuant to a Shelf Registration Statement or whose Notes are being
exchanged pursuant to an Exchange Offer Registration Statement, as the case may
be, and which does not directly or indirectly affect the rights of other Holders
may be given by such Holders, determined on the basis of Notes being sold rather
than registered. Notwithstanding any of the foregoing, no amendment,
modification, supplement, waiver or consents to any departure from the
provisions of Section 8 hereof shall be effective as against any Holder of
Transfer Restricted Notes unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
18
<PAGE>
(i) if to the Initial Purchasers, as follows:
First Union Capital Markets Corp.
CIBC World Markets Corp.
c/o First Union Capital Markets Corp.
301 South College Street, TW-5
Charlotte, NC 28288-0604
Attention: Corporate Finance Department
(ii) if to any other Holder, at the most current address given by
such Holder to the Issuers in accordance with the provisions of this
Section 9(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the registrar under the Indenture,
with a copy in like manner to the Initial Purchasers; and
(iii) if to the Issuers, as follows:
Petro Stopping Centers Holdings, L.P.
6080 Surety Drive
El Paso, Texas 79905
Attention: General Counsel
(iv) if to Chartwell, as follows:
Petro Holdings LP Corp.
c/o Chartwell Investments Inc.
717 Fifth Avenue, 23/rd/ Floor
New York, NY 10022
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail, telex or telecopier.
The Issuers by notice to the others may designate additional or
different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Issuers thereto, subsequent Holders. The Issuers hereby agree to extend the
benefits of this Agreement to any Holder and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
19
<PAGE>
(g) Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State, without regard to the conflicts of law
rules thereof.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Issuers, etc. Whenever the consent or approval
-------------------------------
of Holders of a specified percentage of principal amount of Transfer Restricted
Notes or Exchange Notes is required hereunder, Transfer Restricted Notes or
Exchange Notes held by either of the Issuers or their respective Affiliates
(other than subsequent Holders of Transfer Restricted Notes or Exchange Notes if
such subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such notes) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
20
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers, the Initial Purchasers and Chartwell.
Very truly yours,
PETRO STOPPING CENTERS HOLDINGS, L.P.
By___________________________________________
Name:
Title:
PETRO HOLDINGS FINANCIAL CORPORATION
By___________________________________________
Name:
Title:
The foregoing Agreement is hereby
accepted as of the date first written above
FIRST UNION CAPITAL MARKETS CORP.
CIBC WORLD MARKETS CORP.
BY FIRST UNION CAPITAL MARKETS CORP.
By______________________________________
Name:
Title:
PETRO HOLDINGS LP CORP.
By______________________________________
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account in the
Registered Exchange Offer must acknowledge that it will deliver a prospectus
when it resells them. By doing so, a broker-dealer will not be deemed to admit
that it is an "underwriter" under the Act. We have agreed that we will make
this Prospectus available to broker-dealers for resales of Exchange Notes. See
"Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Notes, where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account in
the Registered Exchange Offer must acknowledge that it will deliver a prospectus
when it resells them. This Prospectus may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Notes where
the Notes were acquired as a result of market-making activities or other trading
activities. The Issuers have agreed that, starting on the Expiration Date and
ending on the close of business one year after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in any such resale. In addition, until ____________, all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their
own account in the Registered 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 prevailing market prices or negotiated prices.
Any 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 the broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes received by it for its own account in
the Registered Exchange Offer, and any broker or dealer that participates in a
distribution of such Exchange Notes, may be deemed to be an "underwriter" under
the Act and any profit from 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 Act. The Letter of Transmittal states that
by acknowledging that it will deliver, and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" under the Act.
For a period of one year after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that so requests in the
Letter of Transmittal. The Issuers have agreed to pay all expenses incident to
the Registered Exchange Offer (including the expenses of one counsel for the
holders of the Notes), other than dealers' and brokers' discounts, commissions
and counsel fees and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Act.
[If applicable, add information required by Regulation S-K Items 507
and/or 508.]
<PAGE>
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
[_]
Name:____________________________________
Address:_________________________________
The undersigned represents that it is not an affiliate of either of
the Issuers, that any Exchange Notes to be received by it will be acquired in
the ordinary course of business and that at the time of the commencement of the
Registered Exchange Offer it had no arrangement with any person to participate
in a distribution of the Exchange Notes.
In addition, if the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Notes, it
represents that the Notes to be exchanged for Exchange Notes were acquired by it
as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
<PAGE>
ANNEX E
FORM OF LETTER TO BE PROVIDED BY THE ISSUERS TO
THE DEPOSITORY TRUST COMPANY
The Depository Trust Company
55 Water Street, 50th Floor
New York, NY 10041
Re: 15% Senior Discount Notes Due 2008 (the "Notes") of Petro
Stopping Centers Holdings, L.P. and Petro Holdings Financial
Corporation
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission has
declared effective a Registration Statement on Form S-__ under the Securities
Act of 1933, as amended, with regard to all of the Notes referenced above.
Accordingly, there is no longer any restriction as to whom such Notes may be
sold and any restrictions on the CUSIP designation are no longer appropriate and
may be removed. I understand that upon receipt of this letter, DTC will remove
any stop or restriction on its system with respect to this issue.
As always, please do not hesitate to call if we can be of further
assistance.
Very truly yours,
Authorized Officer
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
________________________________________________________________________________
REGISTRATION RIGHTS AND PARTNERS' AGREEMENT
dated as of July 23, 1999
by and among
PETRO STOPPING CENTERS HOLDINGS, L.P.,
PETRO WARRANT HOLDINGS CORPORATION,
PERMITTED HOLDERS OF PETRO STOPPING CENTERS HOLDINGS, L.P.,
SIXTY EIGHTY, LLC,
and
FIRST UNION CAPITAL MARKETS CORP. and
CIBC WORLD MARKETS CORP.
as the Initial Purchasers
________________________________________________________________________________
<PAGE>
THIS REGISTRATION RIGHTS AND PARTNERS' AGREEMENT (this "Agreement") is
dated as of July 23, 1999, by and among Petro Stopping Centers Holdings, L.P., a
Delaware limited partnership (the "Partnership"), Petro Warrant Holdings
Corporation, a Delaware corporation ("Warrant Holdings"), the Permitted Holders
(as defined herein), Sixty Eighty, LLC and First Union Capital Markets Corp.
(the "Representative") and CIBC World Markets Corp. (together with the
Representative, the "Initial Purchasers").
WHEREAS, pursuant to a purchase agreement dated as of July 19, 1999
(the "Purchase Agreement") by and among the Partnership, Warrant Holdings, Petro
Holdings Financial Corporation, a Delaware corporation ("Financial Corp." and
together with the Partnership, the "Issuers") and the Initial Purchasers, the
Issuers propose to issue and sell to the Initial Purchasers 82,707 units (the
"Units"), consisting in the aggregate of $82,707,000 principal amount at stated
maturity of 15% Senior Discount Notes Due 2008 (the "Notes") issued by the
Issuers and 82,707 warrants issued by Warrant Holdings (the "Warrants")
initially exchangeable for an aggregate of 82,707 shares of common stock of
Warrant Holdings (the "Common Stock");
WHEREAS, each Unit will consist of $1,000 principal amount at stated
maturity of Notes and one Warrant entitling the holder thereof to receive, upon
exchange of such Warrant, one share of Common Stock in accordance with the
provisions of the warrant agreement, dated the date hereof (the "Warrant
Agreement") by and among Warrant Holdings, the Partnership, Sixty Eighty, LLC,
the Initial Purchasers and the Warrant Agent (as defined herein);
WHEREAS, the parties hereto contemplate that, at some time in the
future, the business of the Partnership may be transferred to a Successor
Corporation (as defined herein);
WHEREAS, in order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Permitted Holders have agreed to provide the Holders (as
defined herein) and Warrant Holdings, among other things, the tag-along rights
as set forth herein; and
WHEREAS, in order to induce the Permitted Holders to enter into this
Agreement, Warrant Holdings and the Initial Purchasers have agreed to provide
the Permitted Holders, among other things, the drag-along rights as set forth
herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Partnership, Warrant Holdings, the Permitted
Holders, the Initial Purchasers and the Holders, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the referenced Person or such other Person, as the
case may be. For the purposes of this definition, "control" (including, with
correlative meanings, the term "controlling," "controlled by," and "under common
control with"), when used with respect to any specified Person, means the power
to direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise. None of
1
<PAGE>
Warrant Holdings, the Holders or any of their Affiliates shall be deemed to be
an Affiliate of the Partnership, any of the Permitted Holders or of any of their
Affiliates in their capacities as such.
"Agreement" shall have the meaning set forth in the first paragraph
hereof.
"Business Day" means any day excluding Saturday, Sunday or any other
day which is a legal holiday under the laws of New York, New York or is a day on
which banking institutions therein located are authorized or required by law or
other governmental action to close.
"Change of Control" shall have the meaning ascribed thereto in the
Warrant Agreement.
"Common Stock" shall have the meaning set forth in the recitals
hereof.
"Company" means the Partnership and shall also mean its successors and
assigns, subject to the provisions of Section 5 hereof.
"Drag-Along Notice" shall have the meaning set forth in Section 4.1
hereof.
"Drag-Along Right" shall have the meaning set forth in Section 4.1
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exempt Transfer" means a Transfer by a Permitted Holder (i) to a
Permitted Transferee or (ii) in a bona fide public distribution pursuant to an
effective registration statement under the Securities Act.
"Financial Corp." shall have the meaning set forth in the recitals
hereof.
"Holder" shall mean the Initial Purchasers, for so long as either of
them owns any Warrants, Holdings Warrant Shares or Successor Warrant Shares, and
each of their respective successors, assigns and direct and indirect transferees
who become holders of record of Warrants, Holdings Warrant Shares and Successor
Warrant Shares as shown on the register of Warrants maintained by the Warrant
Agent or, after the issuance of Holdings Warrant Shares or Successor Warrant
Shares, as shown on the books and records of the transfer agent responsible for
recording transfers of Holdings Warrant Shares or Successor Corporation Shares.
"Holdings Warrant Shares" means shares of Common Stock, issuable in
exchange for Warrants.
"Indemnified Person" shall have the meaning set forth in Section 2.4
hereof.
"Indemnifying Person" shall have the meaning set forth in Section 2.4
hereof.
"Initial Purchasers" shall have the meaning set forth in the first
paragraph hereof.
"Issuers" shall have the meaning set forth in the recitals hereof.
2
<PAGE>
"Notes" shall have the meaning set forth in the recitals hereof.
"Participant" shall have the meaning set forth in Section 2.4 hereof.
"Participating Holders" shall have the meaning set forth in Section
3.2 hereof.
"Partnership" shall have the meaning set forth in the first paragraph
hereof.
"Partnership Agreement" means the Limited Partnership Agreement of
Petro Stopping Centers Holdings, L.P., dated July 23, 1999, by and among Petro,
Inc., as general partner, and James A. Cardwell, Sr., James A. Cardwell, Jr.,
JAJCO II, Inc., Petro, Inc. Mobil Long Haul Inc., Volvo Petro Holdings, L.L.C.,
and Warrant Holdings as limited partners, as the same may be amended from time
to time.
"Partnership Interests" means common limited partnership interests or
preferred partnership interests convertible into common limited partnership
interests in the Partnership.
"Permitted Holders" means (1) J.A. Cardwell, Sr., James A. Cardwell,
Jr., and their respective spouses, lineal descendants, estates and Affiliates,
including Petro, Inc. (a corporation wholly owned by J.A. Cardwell, Sr.) and
JAJCO II, Inc. a company wholly owned by James A. Cardwell, Jr.), (2) Mobil Long
Haul, Inc. and (3) Volvo Petro Holdings, L.L.C.
"Permitted Transferee" means, with respect to a Permitted Holder, an
Affiliate of such Permitted Holder to the extent such Person agrees to be bound
by this Agreement.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Piggy-Back Registration" shall have the meaning set forth in Section
2.1 hereof.
"Proposed Drag-Along Transfer" shall have the meaning set forth in
Section 4.1 hereof.
"Proposed Majority-Interest Purchaser" shall have the meaning set
forth in Section 4.1 hereof.
"Proposed Purchaser" shall have the meaning set forth in Section 3.2
hereof.
"Proposed Tag-Along Transfer" shall have the meaning set forth in
Section 3.2 hereof.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Successor Warrant Shares covered by such Registration Statement,
3
<PAGE>
and all other amendments and supplements to the Prospectus, including post-
effective amendments, and all material incorporated by reference, if any, in
such Prospectus.
"Purchase Agreement" shall have the meaning set forth in the recitals
hereof.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with the terms of this Agreement,
including, without limitation, all SEC and stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees and
expenses, fees and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements of counsel for
the underwriters in connection with blue sky qualifications of the Successor
Warrant Shares), rating agency fees, printing expenses, messenger, telephone and
delivery expenses, fees and disbursements of counsel for the Company and all
independent certified public accountants, the fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Successor Warrant Shares by Holders of such
Successor Warrant Shares) and other reasonable out-of-pocket expenses of
Holders.
"Registration Statement" shall mean any registration statement of the
Successor Corporation, other than a registration statement on Form S-4 or S-8 or
any successor to such form, which covers any of the Successor Corporation Shares
pursuant to the provisions of this Agreement and all amendments and supplements
to any such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Representative" shall have the meaning set forth in the first
paragraph hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Successor Corporation" means any corporation (i) into which the
Partnership is consolidated or merged, or (ii) any other corporation to which
the Partnership leases, sells or conveys its property as an entirety or
substantially as an entirety that is authorized to acquire or lease and operate
the same in a transaction that does not constitute a Change of Control.
"Successor Corporation Shares" means shares of common stock of a
Successor Corporation.
"Successor Corporation Transaction" means any transaction pursuant to
which a corporation becomes a Successor Corporation.
"Successor Warrant Shares" means Successor Corporation Shares issued
by the Successor Corporation to Warrant Holdings or the Holders.
"Tag-Along Notice" shall have the meaning set forth in Section 3.2
hereof.
"Tag-Along Right" shall have the meaning set forth in Section 3.2
hereof.
4
<PAGE>
"Transfer" shall have the meaning set forth in Section 3.1 hereof.
"Units" shall have the meaning set forth in the recitals hereof.
"Warrant Agent" means State Street Bank and Trust Company or the
successor or successors of such Warrant Agent appointed in accordance with the
terms of the Warrant Agreement.
"Warrant Agreement" shall have the meaning set forth in the recitals
hereof.
"Warrant Holdings" shall have the meaning set forth in the first
paragraph hereof.
"Warrants" shall have the meaning set forth in the recitals hereof.
2. REGISTRATION RIGHTS.
2.1. Piggy-Back Registration.
-----------------------
(a) If at any time following or in connection with a Successor
Corporation Transaction, the Company proposes to file a Registration Statement
under the Securities Act with respect to an offering for the account of any
holder of Successor Corporation Shares, then the Company shall give written
notice of such proposed filing to the Holders as soon as practicable (but in no
event less than 15 Business Days before the anticipated filing date), and such
notice shall offer the Holders the opportunity to register such number of
Successor Warrant Shares as each of the Holders may request (which request shall
specify the Successor Warrant Shares intended to be disposed of by such selling
Holder and the intended method of distribution thereof) (a "Piggy-Back
Registration"), unless such Successor Warrant Shares are freely transferable
under the Securities Act, in which case such Holders shall have no right to
request, and the Company shall have no obligation to undertake, a Piggy-Back
Registration. The Company shall use its reasonable best efforts to cause the
managing underwriter or underwriters of any underwritten offering described in
the Registration Statement to permit the Successor Warrant Shares requested to
be included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of any other securityholder included
therein and to permit the sale or other disposition of such Successor Warrant
Shares in accordance with the intended method of distribution thereof, and it
shall be a condition of inclusion of Successor Warrant Shares in any such
Registration Statement that the selling Holder execute the underwriting
agreement for such offering. Any selling Holder shall have the right to withdraw
its request for inclusion of its Successor Warrant Shares in any Registration
Statement pursuant to this Section 2.1 by giving written notice to the Company
of its request to withdraw. The Company may withdraw a Piggy-Back Registration
at any time prior to the time it becomes effective; provided, however, that the
-------- -------
Company shall give prompt notice thereof to participating selling Holders. The
Company will pay all Registration Expenses in connection with each registration
of Successor Warrant Shares requested pursuant to this Section 2.1, and each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Successor Warrant
Shares pursuant to a Registration Statement effected pursuant to this Section
2.1.
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<PAGE>
(b) No failure to effect a registration under this Section 2.1 and to
complete the sale of Successor Warrant Shares in connection therewith shall
relieve the Company of any other obligation under this Agreement.
2.2. Reduction of Offering.
---------------------
(a) If the managing underwriter or underwriters of any underwritten
offering described in Section 2.1 have informed, in writing, the selling Holders
of the Successor Warrant Shares requesting inclusion in such offering that it is
their opinion that the total amount of Successor Corporation Shares (or other
equity securities) which the Company, the selling Holders and any other Persons
desiring to participate in such registration intend to include in such offering
is such as to materially and adversely affect the success of such offering,
including the price at which such securities can be sold, then the amount of
Successor Corporation Shares to be offered for the account of the selling
Holders and all other Persons (other than the Successor Corporation)
participating in such registration shall be reduced or limited pro rata in
proportion to the respective amounts of Successor Corporation Shares requested
to be registered to the extent necessary to reduce the total amount of Successor
Corporation Shares requested to be included in such offering to the amount of
Successor Corporation Shares, if any, recommended by such managing underwriters.
(b) If, as a result of the proration provisions of this Section 2.2,
any selling Holder shall not be entitled to include all Successor Warrant Shares
in a Piggy-Back Registration that such selling Holder has requested to be
included, such selling Holder may elect to withdraw his request to include
Successor Warrant Shares in such registration; provided, however, that such a
-------- -------
withdrawal shall be irrevocable and, after making such withdrawal, a selling
Holder shall no longer have any right to include Successor Warrant Shares in the
registration as to which such withdrawal was made.
2.3. Registration Procedures. In connection with the obligations of the
-----------------------
Company with respect to any Registration Statement pursuant to Section 2.1, if
any, to the extent Successor Warrant Shares are sought to be registered pursuant
thereto, the Company shall, subject to the Company's right to withdraw such
Registration Statement at any time:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the Securities Act, which form (i) shall be selected by
the Company and (ii) shall comply as to form in all material respects with the
requirements of such form and include all financial statements required by the
SEC to be filed therewith, and the Company shall use its reasonable best efforts
to cause such Registration Statement to become effective and remain effective;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective, cause each Prospectus to be supplemented by
any required prospectus supplement and, as so supplemented, to be filed pursuant
to Rule 424 under the Securities Act;
(c) furnish to each Holder of Successor Warrant Shares and to each
underwriter of an underwritten offering of Successor Warrant Shares, if any,
without charge, as
6
<PAGE>
many copies of each Prospectus, including each preliminary prospectus, and any
amendment or supplement thereto and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public sale or
other disposition of the Successor Warrant Shares;
(d) use its reasonable best efforts to register or qualify the
Successor Warrant Shares under all applicable state securities or blue sky laws
of such jurisdictions as any Holder shall reasonably request in writing by the
time the applicable Registration Statement is declared effective by the SEC, and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Successor Warrant Shares owned by such Holder; provided,
--------
however, that the Company shall not be required (i) to qualify as a foreign
- -------
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Subsection 2.3(d), (ii) to file
any general consent to service of process or (iii) to subject itself to taxation
in any such jurisdiction if it is not so subject;
(e) notify each Holder of Successor Warrant Shares promptly and, if
requested by such Holder, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC or any
state securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the Registration
Statement has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Registration Statement and the closing
of any sale of Successor Warrant Shares covered thereby, the representations and
warranties of the Company contained in any underwriting agreement, securities
sales agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification of the
Successor Warrant Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose and (v) of the happening of any event during the
period a Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not misleading;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(g) furnish to each Holder of Successor Warrant Shares, without
charge, at least one conformed copy of each Registration Statement and any post-
effective amendment thereto (with documents incorporated therein by reference or
exhibits thereto);
(h) cooperate with the selling Holders of Successor Warrant Shares to
facilitate the timely preparation and delivery of certificates representing
Successor Warrant Shares to be sold and not bearing any restrictive legends and
registered in such names as the selling Holders may reasonably request at least
two Business Days prior to the closing of any sale of Successor Warrant Shares;
7
<PAGE>
(i) upon the occurrence of any event contemplated by Subsection
2.3(e)(v) hereof, use reasonable efforts to prepare a supplement or post-
effective amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Successor Warrant
Shares, such Prospectus will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
--------
however, that the Company shall not be required to amend or supplement a
- -------
Registration Statement, any related Prospectus or any document incorporated
therein by reference in the event that, and for so long as, an event occurs and
is continuing as a result of which the Registration Statement, any related
Prospectus or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in light of the circumstances
under which they are made. The Company agrees to notify each Holder to suspend
use of the Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission. At such time as such public disclosure is otherwise made or the
Company determines in good faith that such disclosure is not necessary, the
Company shall promptly notify each Holder of such determination, amend or
supplement the Prospectus if necessary to correct any untrue statement or
omission therein and furnish each Holder such numbers of copies of the
Prospectus as so amended or supplemented as each Holder may reasonably request;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of such document to
the Holders and make available for discussion of such document the
representatives of the Company as shall be reasonably requested by the Holders
of Successor Warrant Shares;
(k) obtain a CUSIP number for the Successor Corporation Shares;
(l) (i) make reasonably available for inspection by a representative
of, and counsel for, any underwriter participating in any disposition pursuant
to a Registration Statement, all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the Company's
officers and employees to supply all relevant information reasonably requested
by such representative, counsel or any such underwriter in connection with any
such Registration Statement; and
(m) if requested by the Holders in connection with any Registration
Statement, shall use its reasonable best efforts to cause (i) counsel for the
Company to deliver an opinion relating to the Registration Statement and the
interests of the Company, in customary form, (ii) its President to execute and
deliver all customary documents and certificates requested by a representative
of the Holders or any underwriter, as applicable and (iii) its independent
public accountants to provide a comfort letter in customary form.
8
<PAGE>
The Company may, as a condition to such Holder's participation in any
Registration Statement, require such Holder of Successor Warrant Shares to (i)
furnish to the Company such information regarding the Holder and the proposed
distribution by such Holder of such Successor Warrant Shares as the Company may
from time to time reasonably request in writing and (ii) agree in writing to be
bound by this Agreement and the terms of any applicable underwriting agreement.
2.4. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Holder of
Successor Warrant Shares offered pursuant to a Registration Statement, the
Affiliates, directors, officers, agents, representatives and employees of each
such Person or its affiliates, and each other Person, if any, who controls any
such Person or its Affiliates within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant") from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement pursuant to which the offering of such Successor Warrant Shares is
registered (or any amendment thereto) or related Prospectus (or any amendments
or supplements thereto) or any related preliminary prospectus, or caused by,
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company shall not be required to
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indemnify a Participant if (i) such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished to
the Company in writing by or on behalf of such Participant expressly for use
therein or (ii) if such Participant sold to the person asserting the claim the
Successor Warrant Shares which are the subject of such claim and such untrue
statement or omission or alleged untrue statement or omission was contained or
made in any preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto and the Prospectus does not contain any other
untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding and such
Participant failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Successor Warrant Shares sold to such Person if required by applicable
laws, unless such failure to deliver or provide a copy of the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company with
Section 2.3 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its officers and each Person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to each Participant, but only (i) with reference to information furnished to the
Company in writing by or on behalf of such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus or (ii) with respect to any untrue statement or
representation made by such Participant in writing to the Company.
9
<PAGE>
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, shall have the right to retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding; provided, however,
-------- -------
that the failure to so notify the Indemnifying Person shall not relieve it of
any obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure results in the loss or compromise of any
material rights or defenses by the Indemnifying Person). In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed in writing to the contrary, (ii) the Indemnifying Person shall
have failed within a reasonable period of time to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that, unless there exists a conflict among
Indemnified Persons, the Indemnifying Person shall not, in connection with any
one such proceeding or separate but substantially similar related proceeding in
the same jurisdiction arising out of the same general allegations, be liable for
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such reasonable fees and
expenses shall be reimbursed promptly as they are incurred. Any such separate
firm for the Participants shall be designated in writing by Participants who
sold a majority in interest of Successor Warrant Shares sold by all such
Participants and any such separate firm for the Company and its directors, its
officers and such control Persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent, but if settled
with such consent or if there be a final non-appealable judgment for the
plaintiff for which the Indemnified Person is entitled to indemnification
pursuant to this Agreement the Indemnifying Person agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Person, effect any settlement or
compromise of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party, and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement (A) includes
an unconditional written release of such Indemnified Person, in form and
substance reasonably satisfactory to such Indemnified Person, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any Indemnified Person.
(d) If the indemnification provided for in Subsections 2.4(a) and
2.4(b) hereof is for any reason unavailable to an Indemnified Person in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such Subsections, in lieu of indemnifying such
Indemnified Person thereunder and in order to provide for just and equitable
10
<PAGE>
contribution, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other from the exchange of the Warrants or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Subsection 2.4 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purposes) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
Subsection shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Subsection 2.4, in no event
shall a Participant be required to contribute any amount in excess of the amount
by which proceeds received by such Participant from sales of Successor Warrant
Shares exceeds the amount of any damages that such Participant has otherwise
been required to pay or has paid by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Subsection 2.4 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
3. TAG-ALONG RIGHTS
3.1. Permitted Holders. No Permitted Holder shall, directly or indirectly,
-----------------
sell, transfer (other than a pledge), or otherwise dispose of for value, in any
transaction or series of transactions (each, a "Transfer"), any Partnership
Interests or Successor Corporation Shares, as the case may be, or the beneficial
ownership thereof or any interest therein except in compliance with this Section
3.
11
<PAGE>
3.2. Transfer by Permitted Holders.
-----------------------------
(a) In the event of any proposed Transfer contemplated in this Section
3 (a "Proposed Tag-Along Transfer"), prior to a Successor Corporation
Transaction, of any Partnership Interests or, following a Successor Corporation
Transaction, of any Successor Corporation Shares, by any of the Permitted
Holders or their respective Permitted Transferees, in a single transaction or a
series of related transactions involving (i) Partnership Interests aggregating
at least 20% of the total Partnership Interests of the Partnership or (ii)
Successor Corporation Shares aggregating at least 20% of the total Successor
Corporation Shares of the Successor Corporation to a Person or Persons,
including any other Permitted Holder (the "Proposed Purchaser"), other than
pursuant to an Exempt Transfer, prior to a Successor Corporation Transaction,
Warrant Holdings shall have, and following a Successor Corporation Transaction,
each Holder shall have, the irrevocable and exclusive right, but not the
obligation (the "Tag-Along Right"), to require the purchase, prior to a
Successor Corporation Transaction, from Warrant Holdings up to such percentage
of Partnership Interests or, following a Successor Corporation Transaction, from
each Holder up to such percentage of Successor Corporation Shares, in either
case as determined in accordance with Section 3.4.
(b) Any Partnership Interests purchased from Warrant Holdings or
Successor Corporation Shares purchased from the Holders pursuant to this Section
3.2 shall be paid for at the same price per security and upon the same terms and
conditions as apply to the proposed Transfer by such Permitted Holders and/or
Permitted Transferees.
(c) The Permitted Holders and/or Permitted Transferees proposing such
Transfer shall give or cause the Company to give, prior to a Successor
Corporation Transaction, to Warrant Holdings and, following a Successor
Corporation Transaction, to each of the Holders, written notice at least 25 days
prior to the date of any Proposed Tag-Along Transfer stating (i) the name and
address of the Proposed Purchaser and the percentage of Partnership Interests or
Successor Corporation Shares, as the case may be, proposed to be transferred,
(ii) the proposed amount of consideration and terms and conditions of payment
offered by such Proposed Purchaser (if the proposed consideration is not cash,
the notice shall describe the terms of the proposed consideration) and (iii)
that either the Proposed Purchaser has been informed of the Tag-Along Right and
has agreed to purchase Partnership Interests or Successor Corporation Shares, as
the case may be, in accordance with the terms hereof or that the Permitted
Holders and/or Permitted Transferees proposing such Transfer will make such
purchase.
(d) The Tag-Along Right may be exercised, prior to a Successor
Corporation Transaction, by Warrant Holdings, subject to the approval of the
holders of Warrants as contemplated in the Warrant Agreement, or following a
Successor Corporation Transaction, by any or all of the Holders (the
"Participating Holders"), by giving written notice to the Company (the "Tag-
Along Notice"), within 20 days of receipt of the notice specified in the
preceding paragraph, indicating its election to exercise the Tag-Along Right.
(e) The Tag-Along Notice shall state, prior to a Successor Corporation
Transaction, the amount of Partnership Interests that Warrant Holdings proposes,
and following a Successor Corporation Transaction, the amount of Successor
Corporation Shares that such Participating Holder proposes, to include in the
Transfer to the Proposed Purchaser. Failure to
12
<PAGE>
give the Tag-Along Notice within the 20 day notice period shall be deemed an
election not to sell Partnership Interests or Successor Corporation Shares, as
the case may be, in connection with such proposed Transfer. The closing with
respect to any sale to a Proposed Purchaser pursuant to this Section 3.2 shall
be held at the time and place specified in the notice specified in paragraph (c)
above but in any event within 60 days of the date the Tag-Along Notice is given;
provided, however, that if through the exercise of reasonable efforts the
- -------- -------
Permitted Holders or Permitted Transferees so proposing to transfer Partnership
Interests or Successor Corporation Shares, as the case may be, are unable to
cause such transaction to close within 60 days, such period may be extended for
such reasonable period of time as may be necessary to close such transaction.
Consummation of the sale of Partnership Interests or Successor Corporation
Shares, as the case may be, by any Permitted Holders or Permitted Transferee to
a Proposed Purchaser shall be conditioned upon consummation of the sale by
Warrant Holdings or each Participating Holder, as the case may be, to such
Proposed Purchaser of the securities subject to the Tag-Along Right.
3.3. Purchase Obligation of Permitted Holders. In the event that the
----------------------------------------
Proposed Purchaser does not purchase such Partnership Interests from Warrant
Holdings or Successor Corporation Shares from the Participating Holders, as the
case may be, on the same terms and conditions as purchased from the Permitted
Holders and/or Permitted Transferees, then the Permitted Holders and/or
Permitted Transferees making such Transfer shall purchase such securities if the
Transfer occurs on such terms and conditions.
3.4. Determination of Transferred Interests. Pursuant to the exercise by
--------------------------------------
Warrant Holdings of a Tag-Along Right, the percentage of Partnership Interests
purchased from Warrant Holdings shall be determined by multiplying the
percentage of the total outstanding Partnership Interests proposed to be sold by
the Permitted Holders and/or Permitted Transferees to the Proposed Purchaser by
the percentage of the total outstanding Partnership Interests owned by Warrant
Holdings.
(a) Pursuant to the exercise by a Participating Holder of a Tag-Along
Right, the percentage of Successor Corporation Shares purchased from each
Participating Holder shall be determined by multiplying the percentage of the
total outstanding Successor Corporation Shares proposed to be sold by the
Permitted Holders and/or Permitted Transferees to the Proposed Purchaser by the
percentage of the total outstanding Successor Corporation Shares owned by such
Participating Holder. In the event that any Participating Holder shall elect to
sell less than the maximum percentage of Successor Corporation Shares it is
entitled to sell pursuant to the provisions of this Section 3, then each other
Participating Holder shall have the right to sell additional Successor
Corporation Shares, pro rata according to the respective number of Successor
Corporation Shares offered for sale by the Participating Holders.
3.5. Costs of Transfer. The Permitted Holders and/or Permitted Transferees
-----------------
who are parties to a sale to a Proposed Purchaser shall arrange for payment
directly by the Proposed Purchaser to Warrant Holdings or to each Participating
Holder, as the case may be, upon delivery of such documents as the Proposed
Purchaser may reasonably request.
(a) The reasonable costs and expenses incurred by the Permitted
Holders and/or Permitted Transferees and Warrant Holdings or Participating
Holders, as the case may be,
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<PAGE>
in connection with a sale of Partnership Interests or Successor Corporation
Shares subject to this Section 3 shall be allocated pro rata based upon the
proceeds from the securities sold by each Permitted Holder and/or Permitted
Transferee and Warrant Holdings or each Participating Holder, as the case may
be, to a Proposed Purchaser; provided, however, that the costs and expenses
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shall not include the fees and expenses of more than one law firm, which firm
shall be selected by the Permitted Holders and/or Permitted Transferees, unless
representation of the Permitted Holders and/or Permitted Transferees and Warrant
Holdings or the Participating Holders, as the case may be, by the same counsel,
due to actual or potential differing interests between them, shall create a
conflict of interest, in which case the costs and expenses shall include the
reasonable fees and expenses of one additional law firm designated by Warrant
Holdings or by Participating Holders proposing to sell a majority of the
Successor Corporation Shares proposed to be sold by all Participating Holders,
as the case may be.
3.6. Termination. Tag-Along Rights and all of the provisions of this
-----------
Section 3.6 shall terminate upon the effectiveness of any registration statement
filed with the SEC with respect to Successor Corporation Shares (or any security
exchanged therefor) in a firmly underwritten public offering, but shall be
reinstated in the event that such offering is not completed.
4. DRAG-ALONG RIGHTS.
4.1. Transfer by Permitted Holders.
-----------------------------
(a) In the event of any proposed Transfer contemplated in this Section
4 (a "Proposed Drag-Along Transfer"), prior to a Successor Corporation
Transaction, of any Partnership Interests or, following a Successor Corporation
Transaction, of any Successor Corporation Shares, by any of the Permitted
Holders or their respective Permitted Transferees in any single transaction or a
series of related transactions involving Partnership Interests aggregating at
least 51% of the total Partnership Interests or Successor Corporation Shares
aggregating at least 51% of the total Successor Corporation Shares then owned by
the Permitted Holders and/or Permitted Transferees, to a Person or Persons other
than any Permitted Holder or Permitted Transferee (the "Proposed Majority-
Interest Purchaser"), such selling Permitted Holders shall have the exclusive
and irrevocable right, but not the obligation (the "Drag-Along Right"), prior to
a Successor Corporation Transaction, to require Warrant Holdings to Transfer to
the Proposed Majority-Interest Purchaser such percentage of Partnership
Interests or, following a Successor Corporation Transaction, to require each
Holder to Transfer to the Proposed Majority-Interest Purchaser such percentage
of Successor Corporation Shares, in either case, as determined in accordance
with Subsection 4.3.
(b) Any Partnership Interests purchased from Warrant Holdings or
Successor Corporation Shares purchased from Holders pursuant to this Section 4.1
shall be paid for at the same price per security, and upon the same terms and
conditions of such proposed Transfer by such Permitted Holders and/or Permitted
Transferees.
(c) To exercise a Drag-Along Right, the Permitted Holders and/or
Permitted Transferees shall give or cause the Company to give, prior to a
Successor Corporation Transaction, to Warrant Holdings, and following a
Successor Corporation Transaction, to each of the Holders, written notice of any
Proposed Drag-Along Transfer at least 15 days prior to the
14
<PAGE>
date thereof (the "Drag-Along Notice"). Such notice shall set forth (i) the name
and address of the Proposed Majority-Interest Purchaser and the percentage of
Partnership Interests or Successor Corporation Shares, as the case may be,
proposed to be transferred, (ii) the proposed amount of consideration and terms
and conditions of payment offered by such Proposed Majority-Interest Purchaser
(if the proposed consideration is not cash, the notice shall describe the terms
of the proposed consideration) and (iii) that the Permitted Holders and/or
Permitted Transferees have elected to exercise their Drag-Along Right and that
either the Proposed Majority-Interest Purchaser has been informed of the Drag-
Along Right and has agreed to purchase Partnership Interests or Successor
Corporation Shares, as the case may be, in accordance with the terms hereof or
that the Permitted Holders and/or Permitted Transferees proposing such Transfer
will make such purchase. The closing with respect to any Transfer to a Proposed
Majority-Interest Purchaser pursuant to this Section 4 shall be held at the time
and place specified in the Drag-Along Notice but in any event within 60 days of
the date the Drag-Along Notice is given; provided, however, that if through the
-------- -------
exercise of reasonable efforts the Permitted Holders and/or Permitted
Transferees so proposing to transfer Partnership Interests or Successor
Corporation Shares, as the case may be, are unable to cause such transaction to
close within 60 days, such period may be extended for such reasonable period of
time as may be necessary to close such transaction. If a Drag-Along Notice has
been delivered, consummation of the sale of Partnership Interests or Successor
Corporation Shares, as the case may be, by any Permitted Holders and/or
Permitted Transferees to a Proposed Majority-Interest Purchaser shall be
conditioned upon consummation of the sale by Warrant Holdings or by each Holder,
as the case may be, to such Proposed Majority-Interest Purchaser of the
securities subject to the Drag-Along Right.
4.2. Purchase Obligation of the Permitted Holders. If a Drag-Along Notice
--------------------------------------------
has been delivered, in the event that the Proposed Majority-Interest Purchaser
does not purchase Partnership Interests from Warrant Holdings or Successor
Corporation Shares from the Holders, as the case may be, on the same terms and
conditions as purchased from the Permitted Holders and/or Permitted Transferees,
then the Permitted Holders and/or Permitted Transferees making such Transfer
shall purchase such securities if the Transfer occurs on such terms and
conditions.
4.3. Determination of Transferred Interests. (a) The percentage of
--------------------------------------
Partnership Interests of Warrant Holdings which shall be subject to a Drag-Along
Right shall be equal to the percentage of the total Partnership Interests that
are to be sold by the Permitted Holders and/or Permitted Transferees to the
Proposed Majority-Interest Purchaser.
(b) The percentage of Successor Corporation Shares of each Holder
which shall be subject to a Drag-Along Right shall be equal to the percentage of
the total Successor Corporation Shares that are to be sold by the Permitted
Holders and/or Permitted Transferees to the Proposed Majority-Interest
Purchaser.
4.4. Costs of Transfer. (a) The Permitted Holders and/or Permitted
-----------------
Transferees who are parties to a sale to a Proposed Majority-Interest Purchaser
shall arrange for payment directly by the Proposed Majority-Interest Purchaser
to Warrant Holdings or each Holder, as the case may be, upon delivery of such
documents as the Proposed Majority-Interest Purchaser may reasonably request.
15
<PAGE>
(b) The reasonable costs and expenses incurred by the Permitted
Holders and/or Permitted Transferees and Warrant Holdings or each Holder, as the
case may be, in connection with a sale of Partnership Interests or Successor
Corporation Shares subject to this Section 4 shall be allocated pro rata based
upon the proceeds from the securities sold to the Proposed Majority-Interest
Purchaser by each Permitted Holder and/or Permitted Transferee, and Warrant
Holdings or each Holder, as the case may be; provided, however, that the costs
-------- -------
and expenses shall not include the fees and expenses of more than one law firm,
which firm shall be selected by the Permitted Holders and/or Permitted
Transferees, unless representation of the Permitted Holders and/or Permitted
Transferees, and Warrant Holdings or the Holders, as the case may be, by the
same counsel, due to actual or potential differing interests between them shall
create a conflict of interest, in which case the costs and expenses shall
include the reasonable fees and expenses of one additional law firm designated
by Warrant Holdings or by the Holders selling a majority of the Successor
Corporation Shares to be sold by all Holders, as the case may be.
4.5. Termination. Drag-Along Rights and all of the provisions of this
-----------
Section 4.5 shall terminate upon the effectiveness of any registration statement
filed with the SEC with respect to Successor Corporation Shares (or any security
exchanged therefor) in a firmly underwritten public offering, but shall be
reinstated in the event that such offering is not completed.
5. MERGER, CONSOLIDATION, ETC.
5.1. Successors. Nothing contained in this Agreement shall prevent the
----------
consolidation or merger of the Company with or into any other entity, or shall
prevent any lease, sale or conveyance of the property of the Company as an
entirety or substantially as an entirety to any other entity authorized to
acquire or lease and operate the same; provided, however, the Company and each
-------- -------
of the Permitted Holders hereby covenants and agrees, that (a) in the case of a
Successor Corporation Transaction any such consolidation or merger shall be upon
the condition that the performance and observance of all of the agreements,
covenants and conditions of this Agreement to be performed or observed by the
Company shall be expressly assumed by the entity formed by such consolidation or
into which the Company shall have been merged; (b) in the case of a Successor
Corporation Transaction, Warrant Holdings is merged into the Successor
Corporation; and (c) in the case of a Successor Corporation Transaction Holders
shall receive, and otherwise Warrant Holdings shall receive, the number of
shares of capital stock or other securities or property which holders of a like
amount of common limited partnership interests of the Company would be entitled
to receive upon completion of such consolidation, merger, lease, sale or
conveyance.
5.2. Merger of Warrant Holdings. Warrant Holdings and the Holders agree
--------------------------
that, in the case of a Successor Corporation Transaction, Warrant Holdings and
the Holders shall take all action necessary to cause Warrant Holdings to be
merged into the Successor Corporation.
5.3. Lock-Up. In the event of an initial public offering by the Successor
-------
Corporation of Successor Corporation Shares, none of the Successor Corporation,
any Permitted Holder or any Holder shall, until 180 days following such initial
public offering, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any securities issued by
the Successor Corporation, except as may be agreed to by the underwriters. Each
of
16
<PAGE>
the Successor Corporation, the Permitted Holders and any of their Permitted
Transferees, and the Holders shall execute such form of lock-up agreement
covering such 180-day period as may be requested by the underwriters. The
Successor Corporation shall have the right to withhold issuance of certificates
representing Successor Corporation shares to any Person who refuses to execute
such an agreement prior to such 180-day period.
5.4. Amendment of Certificate of Incorporation. The Certificate of
-----------------------------------------
Incorporation or the Bylaws of Warrant Holdings shall not be amended without the
consent of the Partnership and Holders of a majority of the Warrants.
5.5. Amendment of Partnership Agreement. No provision of the Partnership
----------------------------------
Agreement shall be amended in a manner which would alter or change the powers,
preferences or special rights of the Partnership Interests of Warrant Holdings
so as adversely to affect the rights of Warrant Holdings under the Partnership
Agreement without the consent of Holders of a majority of the Warrants.
5.6. No Adverse Action. Warrant Holdings shall not take any action intended
-----------------
or likely adversely to effect the Holders of Warrants.
5.7. No Dividends or Dissolution. As long as Holdings is organized as a
---------------------------
Partnership, (i) Warrant Holdings shall not, and shall not attempt to,
distribute its Partnership Interests to its shareholders by dividend,
dissolution or otherwise and (ii) Warrant Holdings shall maintain its corporate
existence and shall not merge with or consolidate with any other entity except a
Successor Corporation.
5.8. Incorporation of Certain Provisions from the Warrant Agreement.
--------------------------------------------------------------
Section 7 (and all exhibits referred to therein) of the Warrant Agreement is
incorporated herein by this reference and all references therein to "Warrant
Certificates" shall instead refer to Common Stock certificates, all references
therein to "Warrants" shall instead refer to Holdings Warrant Shares and all
references to "Warrant Agent" shall instead refer to transfer agent.
6. MISCELLANEOUS.
6.1. No Inconsistent Agreements. Neither the Company nor any Permitted
--------------------------
Holder has entered or shall enter into any agreement with respect to any
securities of the Company that is inconsistent with the rights granted to
Warrant Holdings or Holders in this Agreement or otherwise conflicts with the
provisions hereof. The Company has not entered and shall not enter into any
agreement with respect to any securities which will grant to any Person piggy-
back registration rights with a higher priority than the rights granted under
this Agreement.
6.2. Adjustments Affecting Successor Warrant Shares. The Company shall not,
----------------------------------------------
directly or indirectly, take any action with respect to the Successor Warrant
Shares as a class that would adversely affect the ability of the Holders of
Successor Warrant Shares to include such Successor Warrant Shares in a
registration undertaken pursuant to this Agreement.
6.3. Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of a majority of the
17
<PAGE>
Holders, the Partnership and Warrant Holdings. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Successor Warrant Shares
whose securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect, impair, limit or compromise the rights
of other Holders of Successor Warrant Shares may be given by Holders of at least
a majority of the Successor Warrant Shares being sold by such Holders pursuant
to such Registration Statement; provided, however, that the provisions of this
-------- -------
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence.
6.4. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile: if to a Holder, at the most
current address of such Holder set forth on the records of the Warrant Agent
under the Warrant Agreement or, after the issuance of Holdings Warrant Shares or
Successor Warrant Shares, at the most current address of such Holder set forth
on the records of the transfer agent responsible for recording transfers of such
shares; if to the Initial Purchasers, to First Union Capital Markets Corp., 301
South College Street, TW-5, Charlotte, NC 28288-0604, Attention: Kevin Smith; if
to the Partnership, to 6080 Surety Drive, El Paso, TX 79905, Attention: General
Counsel; if to Warrant Holdings, to 6080 Surety Drive, El Paso, TX 79905,
Attention: General Counsel; if to the Permitted Holders, to 6080 Surety Drive,
El Paso, TX 79905, Attention: General Counsel; if to Sixty Eighty, LLC, to 6080
Surety Drive, El Paso, TX 79905, Attention: General Counsel. All such notices
and communications shall be deemed to have been duly given: when delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; one Business Day after being timely delivered
to a next-day air courier; and when receipt is acknowledged by the addressee, if
sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Warrant Agent at the
address and in the manner specified in the Warrant Agreement.
6.5. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns (including the Holders and any
Successor Corporation) of each of the parties hereto.
6.6. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.7. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning thereof.
6.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. EACH
18
<PAGE>
OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
6.9. Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
19
<PAGE>
IN WITNESS, the parties have executed this Registration Rights and
Partners' Agreement as of the date first written above.
PETRO STOPPING CENTERS HOLDINGS, L.P.
By___________________________________
Name:
Title:
PETRO, INC.
By___________________________________
Name:
Title:
_____________________________________
James A. Cardwell, Sr.
_____________________________________
James A. Cardwell, Jr.
JAJCO II, INC.
By_____________________________________
Name:
Title:
MOBIL LONG HAUL, INC.
By_____________________________________
Name:
Title:
VOLVO PETRO HOLDINGS, L.L.C.
By_____________________________________
Name:
Title:
PETRO WARRANT HOLDINGS CORPORATION
By_____________________________________
Name:
Title:
<PAGE>
SIXTY EIGHTY, LLC
By_____________________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written:
FIRST UNION CAPITAL MARKETS CORP.
CIBC WORLD MARKETS CORP.
BY FIRST UNION CAPITAL MARKETS CORP.
By_____________________________________
Name:
Title:
2
<PAGE>
================================================================================
EXHIBIT 4.5
EXECUTION COPY
WARRANT AGREEMENT
Dated July 23, 1999
by and between
PETRO WARRANT HOLDINGS CORPORATION
PETRO STOPPING CENTERS HOLDINGS, L.P.
SIXTY EIGHTY, LLC
FIRST UNION CAPITAL MARKETS CORP.
CIBC WORLD MARKETS CORP.
and
STATE STREET BANK AND TRUST COMPANY, as Warrant Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions..................................................................... 1
Section 2. Appointment of Warrant Agent............................................................ 7
Section 3. Issuance of Warrants.................................................................... 7
Section 4. Execution of Warrant Certificates....................................................... 7
Section 5. Separation of Warrants.................................................................. 8
Section 6. Registration and Countersignature....................................................... 8
Section 7. Registration of Transfers and Exchanges of Warrants..................................... 8
(b) Legends......................................................................... 9
(c) Obligations with Respect to Transfers and Exchanges of Warrant Certificates..... 11
(d) Restrictions on Transfer and Exchange of Warrants............................... 11
(e) Restrictions on Transfer and Exchange of Warrant Shares......................... 11
Section 8. Terms of Warrants: Exchange of Warrants................................................. 11
Section 9. Payment of Taxes........................................................................ 15
Section 10. Mutilated or Missing Warrant Certificates............................................... 16
Section 11. Reservation of Warrant Shares........................................................... 16
Section 12. Additional Covenants and Agreements..................................................... 16
Section 13. Right of Holders to Cause Exchange Event................................................ 18
Section 14. Right to Vote in Connection With a Proposed Tag-Along Transfer.......................... 18
Section 15. Notices to Warrant Holders of an Exchange Event......................................... 18
Section 16. Merger, Consolidation or Change of Name of Warrant Agent................................ 19
Section 17. Warrant Agent........................................................................... 19
Section 18. Resignation and Removal of Warrant Agent; Appointment of Successor...................... 21
Section 19. Agreement of Holdings to Pay Ongoing Expenses of the Company............................ 22
Section 20. Financial Information................................................................... 22
Section 21. Notices to Company and Warrant Agent.................................................... 22
Section 22. Supplements and Amendments.............................................................. 23
Section 23. Successors.............................................................................. 23
Section 24. Termination............................................................................. 23
Section 25. Governing Law........................................................................... 24
Section 26. Benefits of This Agreement.............................................................. 24
Section 27. Counterparts............................................................................ 24
EXHIBIT A Form of Warrant Certificate........................................................... A-1
EXHIBIT B Form of Certificate for Transfer to Beneficial Owner or to the Company................ B-1
EXHIBIT C Form of Certificate for Transfer to a QIB............................................. C-1
EXHIBIT D Form of Certificate for Transfer to an Institutional Accredited Investor.............. D-1
EXHIBIT E Form of Qualified Purchaser Certification............................................. E-1
</TABLE>
i
<PAGE>
WARRANT AGREEMENT dated July 23, 1999 (this "Agreement") among PETRO
WARRANT HOLDINGS CORPORATION, a Delaware corporation (together with its
successors and assigns, the "Company"), PETRO STOPPING CENTERS HOLDINGS, L.P., a
Delaware limited partnership ("Holdings") SIXTY EIGHTY, LLC, a Delaware limited
liability company ("Sixty Eighty"), FIRST UNION CAPITAL MARKETS CORP., CIBC
WORLD MARKETS CORP. and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, as warrant agent.
WHEREAS, pursuant to a purchase agreement dated July 19, 1999 (the
"Purchase Agreement") among the Company, Holdings, Petro Holdings Financial
Corporation ("Financial Corp."), Petro Stopping Centers, L.P., First Union
Capital Markets Corp. ("First Union") and CIBC World Markets Corp. ("CIBC" and
together with First Union, the "Initial Purchasers"), Holdings and Financial
Corp. propose to issue and sell to the Initial Purchasers 82,707 units (the
"Units"), consisting in the aggregate of $82,707,000 principal amount at stated
maturity of Holdings' and Financial Corp.'s 15% Senior Discount Notes due 2008
(the "Notes") issued under the Indenture (as defined below) pursuant to the
Indenture (as defined below) and warrants issued by the Company (the "Warrants")
to receive 82,707 shares of common stock of the Company (the "Common Stock").
WHEREAS, pursuant to a purchase agreement dated July 19, 1999 by and
among the Company, Holdings and Financial Corp. (the "Warrant Purchase
Agreement"), the Company initially issued and sold the Warrants to Holdings and
Financial Corp.
WHEREAS, each Unit will represent $1,000 principal amount of Notes and
one Warrant entitling the holder thereof to receive, upon exchange of such
Warrant in accordance with the provisions hereof, one share of Common Stock.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
exchange of the Warrant Certificates (as defined below) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined below), the parties hereto agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following respective meanings:
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings that correspond to the foregoing.
"Bankruptcy Event" means, with respect to any Person, pursuant to or
within the meaning of any Bankruptcy Law:
<PAGE>
(A) the commencement of a voluntary case,
(B) the consent to the entry of an order for relief against it in an
involuntary case,
(C) the consent to the appointment of a Custodian of it or for all or
substantially all of its property,
(D) the making of a general assignment for the benefit of its
creditors, or
(E) the failure generally to be paying its debts as they become due;
or
a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that:
(A) is for relief against such Person or a subsidiary of such Person
in an involuntary case,
(B) appoints a Custodian of such Person or a subsidiary of such
Person or for all or substantially all of the property of such
Person or any subsidiary of such Person, or
(C) orders the liquidation of such Person or a subsidiary of such
Person,
and, in each case, the order or decree remains unstayed and in effect for 60
days.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or
state law for the relief of debtors.
"Board of Directors" means (i) with respect to Holdings or any of its
Restricted Subsidiaries, its Board of Directors; (ii) with respect to a
corporation, the board of directors of such corporation or any duly authorized
committee thereof; and (iii) with respect to any other entity, the board of
directors or similar body of the general partner or managers of such entity or
any duly authorized committee thereof.
"Business Day" shall mean any day on which banks in New York City are
open for business.
"Call Purchase Date" has the meaning assigned to such term in Section
8(c).
"Call Purchase Price" has the meaning assigned to such term in Section
8(c).
"Capital Interests" in any Person means any and all shares, interests
(including Preferred Interests), participations or other equivalents in the
equity interest (however designated) in such Person and any rights (other than
debt securities convertible into an equity interest), warrants or options to
acquire an equity interest in such Person.
2
<PAGE>
"Change of Control" means, with respect to Holdings, the occurrence of
any of the following events:
(i) prior to a Public Equity Offering, either:
(A) the Permitted Holders cease to be the "beneficial
owner" (as such term is used in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, in
the aggregate of a majority of the Common Interests
in Holdings, whether as a result of issuance of
securities of Holdings or any parent company of
Holdings, any merger, consolidation, liquidation or
dissolution of Holdings, any direct or indirect
transfer of securities by Holdings or otherwise; or
(B) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other
than one or more Permitted Holders, has the power or
right to designate a majority of the members of
Holdings' Board of Directors;
(ii) after the consummation of a Public Equity Offering;
(A) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other
than one or more Permitted Holders, is or becomes the
"beneficial owner" (as such term is used in Rules
13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (ii) such person or group
shall be deemed to have "beneficial ownership" of all
shares that any such person or group has the right to
acquire, whether such right is exercisable
immediately or only after the passage of time),
directly or indirectly, of more than 30% of the
Common Interests in Holdings; and
(B) the Permitted Holders "beneficially own" (as defined
in this clause (ii)), directly or indirectly, in the
aggregate a lesser percentage of the total Common
Interests of Holdings than such other person or
group;
(iii) Holdings ceases to own directly or indirectly at least 99% of
the total voting power and economic benefit of the Capital Interests of the
Operating Partnership;
(iv) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by the Board of Directors or
whose nomination for election by the stockholders of Holdings was approved by a
vote of a majority of the directors of Holdings then still in office who were
either directors at the beginning of such period or whose election or
3
<PAGE>
nomination for election was previously so approved) cease for any reason to
constitute 66-2/3% of Holdings' Board of Directors then in office; or
(v) Holdings sells, conveys, transfers or leases (either in one
transaction or a series of related transactions) all or substantially all of its
assets to a Person other than a Restricted Subsidiary of Holdings or a Successor
Entity in which a majority or more of the voting power of the Voting Interests
is held by the Permitted Holders.
"Commission" means the Securities and Exchange Commission or any
successor.
"Common Interests" of any Person means Capital Interests in such
Person that do not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to Capital Interests of any other
class in such Person.
"Common Stock" has the meaning assigned to such term in the recitals
hereto.
"Company" has the meaning assigned to such term in the introductory
paragraph hereto.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Exchange Date" means the first date on which an Exchange Event
occurs.
"Exchange Event" means (i) the occurrence of a Change of Control, (ii)
the occurrence of a Successor Corporation Transaction, (iii) the occurrence of a
Tag-Along Transaction, (iv) the occurrence of a Bankruptcy Event with respect to
Holdings or (v) the delivery to the Company by the Warrant Agent of the notice
described in Section 13 hereof in connection with a Holdings Termination Event.
"Holder" means a registered holder of Warrants.
"Holdings Termination Event" means the dissolution, liquidation or
winding-up of Holdings.
"Indenture" means the indenture relating to the Notes, dated as of
July 23, 1999, between Holdings, Financial Corp. and State Street Bank and Trust
Company, as trustee.
"Initial Purchasers" means First Union Capital Markets Corp. and CIBC
World Markets Corp.
"Investment Company Act" has the meaning assigned to such term in
Section 7(a).
"Mandatory Purchase Date" has the meaning assigned to such term in
Section 8(d).
4
<PAGE>
"Mandatory Purchase Price" has the meaning assigned to such term in
Section 8(d).
"Minimum Principal Amount" has the meaning assigned to such term in
Section 8(d).
"Notes" has the meaning assigned to such term in the recitals hereto.
"Officer's Certificate" has the meaning assigned to such term in the
Indenture.
"Operating Partnership" means Petro Stopping Centers, L.P.
"Partnership Interests" means common partnership interests or
preferred partnership interests convertible into common partnership interests of
Holdings.
"Permitted Holders" means (1) J. A. Cardwell, Sr., James A. Cardwell,
Jr., and their respective spouses, lineal descendents, estates and Affiliates,
including Petro, Inc. (a corporation wholly owned by J. A. Cardwell, Sr.) and
JAJCO II, Inc. (a company wholly owned by James A. Cardwell, Jr.), (2) Mobil Oil
Corporation and its Affiliates and (3) Volvo Trucks North America, Inc. and its
Affiliates.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Plan" has the meaning assigned to such term in the Form of Qualified
Purchaser Certification hereto.
"Preferred Interests" as applied to the Capital Interests in any
Person, means Capital Interests in such Person of any class or classes (however
designated) that rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Common Interests in such
Person.
"Proposed Tag-Along Transfer" means a transaction whereby any one or
more of the Permitted Holders proposes, directly or indirectly, to transfer
(other than a pledge), sell or otherwise dispose of for value (collectively, a
"Transfer") common partnership interests of Holdings in any transaction, or a
series of related transactions, involving Partnership Interests aggregating at
least 20% of the total Partnership Interests of Holdings to a Person or Persons,
including, except in certain circumstances set forth in the Partnership Interest
Registration Rights Agreement, any other Permitted Holder.
"Public Equity Offering" means any underwritten public offering of
Capital Interests of Holdings or a successor entity pursuant to an effective
registration statement (other than a registration statement on Form S-4 or Form
S-8 or any successor or similar form) under the Securities Act.
5
<PAGE>
"QIB" has the meaning assigned to such term in Exhibit C attached
hereto.
"Qualified Purchaser Certification" has the meaning assigned to such
term in Section 7(a).
"Registration Rights and Partners' Agreement" means the agreement
dated as of July 23, 1999, by and among Holdings, the Company, the Permitted
Holders, Sixty Eighty and the Initial Purchasers with respect to the common
partnership interests of Holdings owned by the Company and shares of common
stock in the Successor Corporation.
"Restricted Subsidiary" means, with respect to Holdings, any
subsidiary, at least 75% of the outstanding Common Interests of which are owned
and controlled, directly or indirectly, by Holdings that has not been designated
as an "Unrestricted Subsidiary" in accordance with the Indenture.
"SEC Reports" has the meaning assigned to such term in Section 20.
"Securities Act" means the Securities Act of 1933, as amended.
"Successor Corporation" means any corporation (i) into which Holdings
is consolidated or merged, or (ii) any other corporation to which Holdings
leases, sells or conveys its property as an entirety or substantially as an
entirety in a transaction that does not constitute a Change of Control.
"Successor Corporation Transaction" means any transaction pursuant to
which a corporation becomes a Successor Corporation.
"Tag-Along Transaction" means a transaction whereby, in accordance
with the Registration Rights and Partners' Agreement, (i) any of the Permitted
Holders or their permitted transferees (as contemplated in the Registration
Rights and Partners' Agreement), directly or indirectly, Transfers Partnership
Interests of Holdings in a single transaction or a series of related
transactions involving Partnership Interests aggregating at least 20% of the
total Partnership Interests of Holdings to a Person or Persons, including,
except in certain circumstances set forth in the Registration Rights and
Partners' Agreement, any other Permitted Holder, (such other Person being
hereinafter referred to as the "Tag-Along Purchaser"); (ii) in connection with
any such Transfer, the Company exercises its right, pursuant to the Registration
Rights and Partners' Agreement, to require the Permitted Holders (or their
permitted transferees) effecting such Transfer to cause the Tag-Along Purchaser
to purchase from the Company a percentage of the Partnership Interests of
Holdings owned by the Company (the "Tag-Along Interests") equal to the
percentage of the total Partnership Interests of Holdings sold by the Permitted
Holders (or their permitted transferees) to the Tag-Along Purchaser and (iii) in
connection with the exercise referred to in clause (ii), the Tag-Along Purchaser
purchases (or the Permitted Holders participating in such Transfer purchase) the
Tag-Along Interests.
"Total Mandatory Purchase Price" has the meaning assigned to such term
in Section 8(d).
6
<PAGE>
"Transfer Agent" has the meaning assigned to such term in Section 11.
"Units" has the meaning assigned to such term in the recitals hereto.
"Voting Interests" means, with respect to any Person, securities of
any class or classes of Capital Interests in such Person entitling the holders
thereof generally to vote on the election of members of the board of directors
or comparable body of such Person.
"Warrant Agent" means State Street Bank and Trust Company or the
successor or successors of such Warrant Agent appointed in accordance with the
terms hereof.
"Warrant Certificates" has the meaning assigned to such term in
Section 3.
"Warrant Interests" has the meaning assigned to such term in Section
8(d).
"Warrant Purchase Agreement" has the meaning assigned to such term in
the recitals hereto.
"Warrant Shares" means shares of Common Stock or, in the case of a
Successor Corporation Transaction, shares of common stock of a Successor
Corporation, in either case, issuable in exchange for Warrants.
"Warrants" has the meaning assigned to such term in the recitals
hereto.
Section 2. Appointment of Warrant Agent. The Company hereby appoints
----------------------------
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Section 3. Issuance of Warrants. Warrants shall be issued in
--------------------
definitive, fully registered certificated form (the "Warrant Certificates"),
substantially in the form of Exhibit A hereto (including footnote 1 thereto).
Section 4. Execution of Warrant Certificates. Warrant Certificates
---------------------------------
to be delivered pursuant hereto shall be signed on behalf of the Company by its
Chairman of the Board or its President or a Vice President and by its Secretary
or an Assistant Secretary. Each such signature upon the Warrant Certificates
may be in the form of a facsimile signature of the present or any future
Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be countersigned and delivered or
disposed of such person shall have ceased to hold such office.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such
7
<PAGE>
person had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date of
the execution of this Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of countersignature.
Section 5. Separation of Warrants. The Notes and Warrants shall be
----------------------
automatically separated upon issuance of the Units.
Section 6. Registration and Countersignature. The Warrant Agent, on
---------------------------------
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board, the
President, a Vice President, the Treasurer or the Controller of the Company and
at the expense of the Company, initially countersign, issue and deliver Warrants
entitling the Holders thereof to purchase not more than the aggregate number of
Warrant Shares referred to above in the first recital hereof and shall
countersign and deliver Warrants as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the Holder(s) of
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
Section 7. Registration of Transfers and Exchanges of Warrants. (a)
---------------------------------------------------
When Warrant Certificates are presented to the Warrant Agent with a request:
(i) to register the transfer of the Warrant Certificates; or
(ii) to exchange such Warrant Certificates for an equal number
of Warrant Certificates,
the Warrant Agent shall, subject to the other restrictions contained herein
(including those in Section 7(d)) or in the Warrant Certificates, register the
transfer or make the exchange as requested if the requirements under this
Warrant Agreement as set forth in this Section 7 for such transactions are met;
provided that as a requirement for such transfer the Warrant Certificates
presented or surrendered for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the Holder
thereof or by his attorney, duly authorized in writing;
and
8
<PAGE>
(y) shall be accompanied by the following additional information
and documents, as applicable:
(A) if such Warrant is being delivered to the Warrant Agent
by a Holder for registration in the name of such
Holder, without transfer, or for registration of
transfer to the Company, a certification from such
Holder to that effect (in the form of Exhibit B
hereto); or
(B) if such Warrant is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the
Securities Act, a certification from the transferor to
that effect (in the form of Exhibit C hereto) and a
certification from the transferee in the form of
Exhibit E hereto (a "Qualified Purchaser
Certification") to the effect that, among other things,
such transferee is a "qualified purchaser" (as defined
in Section 2(a)(51) of the Investment Company Act of
1940, as amended (the "Investment Company Act")); or
(C) if such Warrant is being transferred to an
institutional "accredited investor" within the meaning
of subparagraphs (a)(l), (a)(2), (a)(3) or (a)(7) of
Rule 501 under the Securities Act, (i) a certification
from the transferee in the form of Exhibit D hereto,
(ii) a Qualified Purchaser Certification from the
transferee and (iii) an opinion of counsel and/or other
information satisfactory to the Company to the effect
that such transfer is in compliance with the Securities
Act.
(b) Legends.
-------
(i) Each Warrant Certificate (and all Warrants issued in
exchange therefor or substitution thereof) and each
certificate representing Warrant Shares shall bear the
following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND THE COMPANY IS NOT AND WILL NOT BE REGISTERED
UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(THE "1940 ACT") IN RELIANCE IN PART ON SECTION 3(C)(7)
THEREUNDER. THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED
9
<PAGE>
OR OTHERWISE TRANSFERRED, EXCEPT (A) TO A PERSON THAT IS A
"QUALIFIED PURCHASER" (AS DEFINED IN SECTION 2(A)(51) OF THE
1940 ACT) THAT, PRIOR TO SUCH TRANSFER DELIVERS A
CERTIFICATION TO THAT EFFECT AND THAT IS ALSO EITHER (1) A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER
THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2) AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN
"IAI") THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF SUCH AN IAI, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
AND THAT PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED
ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE WARRANT AGENT
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY, SUBJECT TO THE SATISFACTION OF CERTAIN CONDITIONS
SPECIFIED IN THE WARRANT AGREEMENT REFERRED TO HEREIN AND
THE TERMS OF THE REGISTRATION RIGHTS AND PARTNERS' AGREEMENT
RELATING TO THIS SECURITY, AND WHICH IN ANY SUCH CASE MAY BE
EFFECTED WITHOUT LOSS OF ANY APPLICABLE 1940 ACT EXEMPTION
AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION.
EACH TRANSFEREE OF THIS SECURITY WILL BE REQUIRED TO DELIVER
TO THE WARRANT AGENT A TRANSFER CERTIFICATE, MAKING THE
REPRESENTATIONS AND AGREEMENTS SET FORTH IN THE WARRANT
AGREEMENT REFERRED TO HEREIN. ANY TRANSFER IN VIOLATION OF
THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID
AB INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO
THE TRANSFEREE, NOTWITHSTANDING ANY
10
<PAGE>
INSTRUCTIONS TO THE CONTRARY TO THE COMPANY, THE WARRANT
AGENT OR ANY INTERMEDIARY.
ANY TRANSFER OF THIS SECURITY WILL BE SUBJECT TO COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THE REGISTRATION RIGHTS AND
PARTNERS' AGREEMENT RELATING TO THE WARRANTS. A COPY OF SUCH
AGREEMENT IS AVAILABLE FROM THE COMPANY. SUCH AGREEMENT
IMPOSES OBLIGATIONS ON THE OWNER OF THIS SECURITY.
(c) Obligations with Respect to Transfers and Exchanges of Warrant
--------------------------------------------------------------
Certificates.
- ------------
(i) To permit registrations of transfers and exchanges, the
Company shall execute, at the Warrant Agent's request, and
the Warrant Agent shall, upon receipt of a
countersignature order in accordance with Section 6
hereof, countersign Warrant Certificates.
(ii) All Warrant Certificates issued upon any registration,
transfer or exchange of Warrant Certificates shall be the
valid obligations of the Company, entitled to the same
benefits under this Warrant Agreement as the Warrant
Certificates surrendered upon the registration of transfer
or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Warrant Agent and the Company may deem
and treat the person in whose name any Warrant is
registered as the absolute owner of such Warrant, and
neither the Warrant Agent nor the Company shall be
affected by notice to the contrary.
(d) Additional Restrictions on Transfer and Exchange of Warrants.
------------------------------------------------------------
Notwithstanding any other provisions of this Warrant Agreement, any transfer of
Warrants or Warrant Shares that would result in the number of such holders
exceeding 67 shall be void ab initio and of no effect.
(e) Restrictions on Transfer and Exchange of Warrant Shares.
-------------------------------------------------------
Following an Exchange Event, the transfer of Warrant Shares will be subject to
the transfer restrictions described herein with relation to the Warrants.
Section 8. Terms of Warrants: Exchange of Warrants. (a) Subject to
---------------------------------------
the terms of this Agreement, each Warrant Holder shall automatically on the
Exchange Date, receive from the Company or, if the Exchange Event giving rise to
the Exchange Date is a Successor Corporation Transaction, receive from the
Successor Corporation, for no additional consideration, the number of fully paid
and nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exchange of such Warrants; provided that if the Exchange
11
<PAGE>
Event giving rise to the Exchange Date is a Successor Corporation Transaction,
each Warrant shall be exchanged for such securities of the Successor Corporation
as the Holder of such Warrant would have received if, immediately prior to such
transaction, (i) the Warrant had been exchanged for Warrant Shares and (ii) the
Company had dissolved and distributed its assets (including its Partnership
Interests in Holdings) to the Holder of Warrant Shares in proportion to such
holdings (as certified by the Company to the Warrant Agent).
The Company acknowledges that it has already received, and shall hold
in escrow, the par value of such shares of Common Stock.
(b) Subject to the provisions of Section 9 hereof, the Company or the
Successor Corporation, as the case may be, shall deliver no later than 5:00 p.m.
on the Exchange Date, to each Holder a certificate or certificates for the
appropriate number of Warrant Shares to which such Holder is entitled. Any such
certificate or certificates representing the Warrant Shares shall be deemed to
have been issued to, and such Holder shall be deemed to have become, a holder of
record of such Warrant Shares as of the Exchange Date. Any and all certificates
representing Common Stock issued in exchange for Warrants will bear the same
legends and be subject to the same transfer restrictions as the Warrants, as set
forth in Section 7 hereof.
(c) (i) Holdings may, at its option at any time on or prior to
August 1, 2002, require each Holder of Warrants to sell for cash all, but not
less than all, of such Holder's Warrants to Holdings at a price per Warrant (the
"Call Purchase Price"), if such option is exercised during the 12 month period
beginning on August 1 of the years indicated, equal to:
<TABLE>
<CAPTION>
Year Purchase Price
---- --------------
<S> <C>
1999...................... $134.87
2000...................... $155.10
2001...................... $178.37
</TABLE>
(ii) If Holdings exercises its option to require the sale of
Warrants described in the preceding paragraph, at least 30 days, but no more
than 60 days, before the date of purchase (the "Call Purchase Date"), Holdings
shall mail, or cause to be mailed, a notice by first-class mail to the Warrant
Agent and to each Holder of Warrants at his or her last address as the same
appears on the register maintained by the Warrant Agent pursuant to Section 6
hereof. Such notice shall state: (1) the Call Purchase Date; (2) the Call
Purchase Price, (3) the name and address of the Warrant Agent, (4) the manner in
which Warrants may be surrendered to the Warrant Agent for purchase by Holdings
and (5) that Warrants must be surrendered to the Warrant Agent in the manner set
forth in such notice in order for Holders to receive the Call Purchase Price for
such Warrants.
(iii) On or prior to 10:00 A.M., New York City time, on the Call
Purchase Date, Holdings shall deposit with the Warrant Agent in immediately
available funds money sufficient to pay the Call Purchase Price for all of the
then outstanding Warrants; provided, however, that if the Call Purchase Date is
not a Business Day, such deposit shall be made on the next succeeding Business
Day. Failure to give notice or any defect in the notice to any Holder
12
<PAGE>
shall not affect the validity of the purchase of the Warrants. All amounts due
to a Holder in connection with a purchase of Warrants pursuant to this Section
8(c) shall be paid to such Holder by the Warrant Agent as soon as possible, but
in any event within 5 Business Days of the Call Purchase Date (subject to
receipt by the Warrant Agent of such amounts pursuant to the first sentence of
this paragraph).
(iv) On and after the Call Purchase Date, if money sufficient to pay
the Call Purchase Price for all of the then outstanding Warrants shall have been
made available in accordance with the preceding paragraph, the only right of
each Holder hereunder will be the right to receive payment of the Call Purchase
Price in respect of each Warrant held by such Holder.
(v) Upon the purchase of the Warrants by Holdings pursuant to this
Section 8(c), Holdings shall have the option to exchange such Warrants for
Common Stock at anytime until August 1, 2009, at which time the Warrants shall
be automatically exchanged for Common Stock and the shares of Common Stock held
by Sixty Eighty shall be redeemed for $1.00.
(d) (i) If any Warrants remain unexchanged as of August 1, 2004
(the "Mandatory Purchase Date"), Holdings will be required to purchase, and the
Holders of the Warrants will be required to sell, all of the unexchanged
Warrants at a cash purchase price per Warrant (the "Mandatory Purchase Price")
equal to: (A) the fair market value (determined in accordance with Section
8(d(ii))) of the capital interests in Holdings (the "Warrant Interests") then
held by the Company, as adjusted pursuant to Section 8(d)(ii) (the "Total
Mandatory Purchase Price") divided by (B) the total number of Warrants then
outstanding.
(ii) For purposes of determining the Total Mandatory Purchase Price,
not later than 90 days prior to the Mandatory Purchase Date, Holdings and the
Holders of a majority of the Warrants (or, if Holders of a majority of the
Warrants cannot agree among themselves, then the Holder of the largest number of
Warrants) will each select a nationally recognized investment banking firm to
prepare an appraisal of the fair market value of the Warrant Interests, which
appraisal must be completed not less than 45 days prior to the Mandatory
Purchase Date. Such appraisals shall be based on (i) the portion of the total
capital of Holdings comprised by the Warrant Interests and (ii) the value of
100% of Holdings as a going concern, without any minority or illiquidity
discount, and shall be based on the greater of an initial public offering
valuation and a private sale valuation; provided, however, that if an
appraiser's private sale valuation is less than 80% of such appraiser's initial
public offering valuation, then such appraisal shall be based on a value of
Holdings equal to the initial public offering valuation less one-half of the
amount by which the private sale valuation is less than 80% of the initial
public offering valuation. The average of the two appraisals (as so adjusted) by
the investment banking firms will be the fair market value of the Warrant
Interests and will, subject to adjustment as described below, be the Total
Mandatory Purchase Price; provided, however, that in the event that the lower of
the two appraisals is less than 85% of the higher appraisal, Holdings and the
Holders of a majority of the Warrants (or, if Holders of a majority of the
Warrants cannot agree among themselves, then the Holder of the largest number of
Warrants) will either (1) mutually agree on the fair market value of the
Warrants or (2) hire a third nationally recognized investment banking firm to
prepare an appraisal of the Warrant Interests calculated in the manner
13
<PAGE>
described above, which appraisal must be completed no later than 15 days prior
to the Mandatory Purchase Date. Such third appraisal shall determine the fair
market value of the Warrant Interests; provided, however, that if the third
appraisal is greater than the higher, or less than the lower of the first two
appraisals, the fair market value of the Warrant Interests will be deemed to be
the value provided in the earlier appraisal closest to the third appraisal. Once
determined in accordance with the provisions of this Section 8(d), notice of the
Total Mandatory Purchase Price and the purchase price per Warrant will be given
promptly to the Warrant Agent and to the Holders of Warrants. The costs of
completing these appraisals will be borne by Holdings.
(iii) The Total Mandatory Purchase Price shall be adjusted by an
amount, if any, equal to the difference between (i) the value of the cash or
other property (other than the capital interests in Holdings) held by Warrant
Holdings and (ii) the current liabilities of Warrant Holdings (other than those
required to be paid or reimbursed by Holdings).
(iv) If, in the opinion of counsel to Holdings, which opinion shall
be delivered to the Holders of Warrants, a violation of applicable law or a
breach of or a default or event of default under any contractual obligation of
Holdings would result (whether with notice, lapse of time or both) from a
payment in cash of the Total Mandatory Purchase Price or the Operating
Partnership would be prohibited for any such reasons from distributing to
Holdings sufficient funds to enable Holdings to make such cash payment, then
Holdings will issue on the Mandatory Purchase Date to each Holder of Warrants,
in lieu of the Mandatory Purchase Price for all of such Holder's Warrants, debt
securities of Holdings with such commercially reasonable terms as shall be
reasonably determined by Holdings and with a fair market value at least equal to
the Mandatory Purchase Price that would have been payable to each such Holder
for all of such Holder's Warrants (as certified for each Holder to the Warrant
Agent by an authorized officer of Holdings). The issuance of such debt
securities shall either be exempt from registration, or registered under, the
Securities Act; provided however, that such debt securities will not be
registered in the event that such registration would be likely to cause Holdings
to be treated as a corporation for tax purposes. The determination of the
aggregate principal amount of such debt securities required to be issued so that
such debt securities have a fair market value equal to the Total Mandatory
Purchase Price (such aggregate principal amount, the "Minimum Principal Amount")
will be made by nationally recognized investment banking firms (which may be the
same firms used pursuant to Section 8(d)(ii)) using, to the extent applicable,
the same procedures used to determine the fair market value of the Warrant
Interests; provided, however, that if such debt securities are not registered
under the Securities Act, the investment banking firms shall take any resulting
lack of liquidity into consideration in determining the Minimum Principal
Amount. None of the investment banks (or their affiliates) retained to perform
an appraisal of the Warrant Interests, or the debt securities, shall have an
investment banking relationship with, or own any debt or equity securities of,
Holdings, Warrant Holdings, or their affiliates.
(v) At least 15 days, but no more than 30 days, before the
Mandatory Purchase Date, Holdings shall mail, or cause to be mailed, a notice by
first-class mail to the Warrant Agent and to each Holder of Warrants at his or
her last address as the same appears on the register maintained by the Warrant
Agent pursuant to Section 6 hereof. Such notice shall state: (1) that Holdings
is making a mandatory offer to purchase Warrants pursuant to Section 8(d) of the
Warrant Agreement; (2) the Mandatory Purchase Price, (3) the name and address of
14
<PAGE>
the Warrant Agent, (4) the manner in which Warrants may be surrendered to the
Warrant Agent for purchase by Holdings and (5) that Warrants must be surrendered
to the Warrant Agent in the manner set forth in such notice in order for Holders
to receive the Mandatory Purchase Price for their Warrants. Holdings will
comply, to the extent applicable, with the requirements of Rule l4e-1 under the
Securities Exchange Act of 1934 and other securities laws or regulations in
connection with any mandatory offer to purchase Warrants as described in this
Section 8(d).
(vi) On or prior to 10:00 A.M., New York City time, on the
Mandatory Purchase Date, Holdings shall deposit with the Warrant Agent the Total
Mandatory Purchase Price, in immediately available funds, or the Minimum
Principal Amount of debt securities, as the case may be; provided, however, that
if the Mandatory Purchase Date is not a Business Day, such deposit shall be made
on the next succeeding Business Day. Failure to give notice or any defect in the
notice to any Holder shall not affect the validity of the purchase of Warrants.
All amounts due to a Holder in connection with a purchase of Warrants pursuant
to this Section 8(d) shall be paid or distributed (in the case of debt
securities) to such Holder by the Warrant Agent as soon as possible, but in any
event within 5 Business Days of the Mandatory Purchase Date (subject to receipt
by the Warrant Agent of such amounts pursuant to the first sentence of this
paragraph).
(vii) On and after the Mandatory Purchase Date, if the Total
Mandatory Purchase Price or the Minimum Principal Amount of debt securities, as
the case may be, shall have been made available in accordance with the preceding
paragraph, the only right of each Holder hereunder will be to receive payment of
the Mandatory Purchase Price in respect of each Warrant held by such Holder or
the principal amount of debt securities distributable to such Holder in respect
of such Holder's Warrants.
(viii) Notwithstanding the foregoing, any obligation of Holdings to
purchase the Warrants will terminate upon the bankruptcy of Holdings.
(ix) Upon the purchase of the Warrants by Holdings pursuant to this
Section 8(d), Holdings shall have the option to exchange such Warrants for
Common Stock at anytime until August 1, 2009, at which time the Warrants shall
be automatically exchanged for Common Stock and the shares of Common Stock held
by Sixty Eighty shall be redeemed for $1.00.
(e) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
Section 9. Payment of Taxes. The Company or a Successor Corporation,
----------------
as the case may be, will pay all documentary stamp taxes attributable to the
initial issuance of Warrant Shares upon the exchange of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the Person or Persons requesting the
issuance thereof
15
<PAGE>
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
Section 10. Mutilated or Missing Warrant Certificates. In case any
-----------------------------------------
of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue and the Warrant Agent shall countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate, or
in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
reasonably satisfactory to them. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may prescribe.
Section 11. Reservation of Warrant Shares. The Company will at all
-----------------------------
times reserve and keep available, free from preemptive rights, all of its
authorized but unissued Common Stock for the purpose of enabling it to satisfy
any obligation to issue Warrant Shares upon exchange of Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
(the "Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exchange of any of the Warrants will
be irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep
a copy of this Agreement on file with the Transfer Agent and with every
subsequent transfer agent for any shares of the Company's capital stock issuable
upon the exchange of the Warrants. The Company will supply such Transfer Agent
with duly executed certificates for such purposes. The Company will furnish
such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder of the Warrants pursuant to Section
16 hereof. Prior to the initial Public Equity Offering of the Company, the
Company may act as Transfer Agent for the Common Stock.
The Company will take any corporate action which may, in the opinion
of its counsel (which may be counsel employed by the Company), be necessary from
time to time in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares.
The Company covenants that all Warrant Shares which may be issued upon
exchange of Warrants in accordance with the terms of this Agreement will, upon
issue, be duly and validly issued, fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
Section 12. Additional Covenants and Agreements. The Company,
-----------------------------------
Holdings and Sixty Eighty covenant and agree as follows:
(a) The Company shall not (i) hold any operating assets or other
properties, (ii) engage in or conduct any business or operations (other than
owning common partnership
16
<PAGE>
interests in Holdings (currently representing 10% of the aggregate common
limited partnership interests of Holdings), (iii) own any Capital Interests in
any other Person, other than the common limited partnership interests in
Holdings and (iv) incur or become liable for any indebtedness or become liable
for any other obligation, contingent or otherwise, other than in connection with
this Agreement, the Registration Rights and Partners' Agreement, the Purchase
Agreement, and the Warrant Purchase Agreement.
(b) The Company shall not (i) authorize any shares of capital stock
of any class or series or (ii) directly or indirectly, issue, sell or otherwise
dispose of any shares of its capital stock (other than, in the case of each of
(i) and (ii), shares of Common Stock owned by Sixty Eighty on the date hereof
and shares to be issued in exchange for Warrants in accordance with this
Agreement).
(c) The Company shall not amend its certificate of incorporation or
by-laws without the prior consent of not less than a majority of the Holders of
all Warrants issued hereunder and Holdings.
(d) (i) The Company shall take such action required to maintain any
applicable exemption from registration provided by the Securities Act, the
Investment Company Act and applicable state securities laws for the issuance of
shares of Common Stock, as evidenced by an opinion of counsel to the Company,
delivered to the Warrant Agent, in order that the issuance and delivery of the
shares of Common Stock upon exchange of the Warrants will not violate the
Securities Act, the Investment Company Act or applicable state securities laws;
and
(ii) Holdings shall take such action required to maintain any
applicable exemption from registration provided by the Securities Act, the
Investment Company Act and applicable state securities laws for the issuance of
shares of common stock of the Successor Corporation, as evidenced by an opinion
of counsel to the Successor Corporation, delivered to the Warrant Agent, or will
cause the Successor Corporation to register and otherwise qualify the shares of
common stock of the Successor Corporation issuable in exchange for the Warrants
pursuant to the provisions of the Securities Act, the Investment Company Act and
pursuant to applicable state securities laws in order that the issuance and
delivery of the shares of common stock of the Successor Corporation in exchange
for the Warrants will not violate the Securities Act, the Investment Company Act
or applicable state securities laws.
(e) (i) Holdings shall, as required under the Registration Rights
and Partners' Agreement, deliver written notice to the Company of each Proposed
Tag-Along Transfer (such notice, a "Proposed Tag-Along Notice").
(ii) Holdings shall deliver written notice to the Company of any
Change of Control (a "Change of Control Notice"), Successor Corporation
Transaction (a "Successor Corporation Transaction Notice"), Holdings Termination
Event (a "Holdings Termination Event Notice") or any bankruptcy Event with
respect to Holdings (a "Bankruptcy Event Notice") at least 15 days prior to the
date thereof.
17
<PAGE>
(f) Immediately upon the occurrence of an Exchange Event, Sixty
Eighty shall take all action necessary to cause the director of the Company to
call a special shareholders' meeting for the purpose of allowing Holders of
Warrant Shares to take control of the Company.
(g) On the Exchange Date, Sixty Eighty shall deliver to the Company
for redemption the share or shares of Common Stock then held by Sixty Eighty,
and the Company shall thereupon cancel such share or shares of Common Stock such
that, upon exchange of all Warrants, the Warrant holders will hold, in the
aggregate, 100% of the Common Stock.
Section 13. Right of Holders to Cause Exchange Event. Promptly upon
----------------------------------------
receipt by the Company of a Holdings Termination Event Notice, the Company shall
cause to be filed with the Warrant Agent and shall cause to be delivered to each
of the registered Holders of the Warrant Certificates at such Holder's address
appearing on the Warrant register, by first class mail, postage prepaid, a
written notice stating that a Holdings Termination Event has occurred and that
Holders of a majority of the Warrants may elect to cause an exchange of all
Warrants issued by the Company for Warrant Shares by submitting to the Warrant
Agent, within 10 Business Days from the date that the foregoing notice is
delivered by the Company, duly executed Forms of Election to Cause Exchange of
Warrants (which form is attached to each Warrant Certificate). Upon receipt by
the Warrant Agent of such forms, duly executed, from Holders of a majority of
the Warrants, the Warrant Agent shall promptly deliver written notice to that
effect to the Company.
Section 14. Right to Vote in Connection With a Proposed Tag-Along
-----------------------------------------------------
Transfer. Promptly upon the receipt by the Company of a Proposed Tag-Along
- --------
Notice, the Company shall cause to be filed with the Warrant Agent and shall
cause to be mailed, within 5 days of receipt of such notice by the Company, to
each of the registered Holders of the Warrant Certificates at such Holder's
address appearing on the Warrant register, by first class mail, postage prepaid,
a written notice stating: (1) the name and address of the proposed purchaser and
the percentage of common partnership interests proposed to be transferred, (2)
the proposed amount of consideration and terms and conditions of payment offered
by such proposed purchaser (if the proposed consideration is not cash, the
notice shall describe the terms of the proposed consideration) and (3) that
Holders of a majority of the Warrants may vote to cause the Company to
participate in such Proposed Tag-Along Transfer by submitting to the Warrant
Agent, within ten days from the date that the foregoing notice is delivered by
the Company, a duly executed Form of Election to Participate in Proposed Tag-
Along Transfer (which form is attached to each Warrant Certificate). Upon
receipt by the Warrant Agent of such forms, duly executed, from Holders of a
majority of the Warrants, the Warrant Agent shall promptly, and in no event
later than eighteen days following receipt by the Company of the Proposed Tag-
Along Notice, deliver written notice to that effect to the Company, whereupon
the Company shall deliver notice to Holdings as provided in the Registration
Rights and Partners' Agreement.
Section 15. Notices to Warrant Holders of an Exchange Event. Not
-----------------------------------------------
later than 10 Business Days prior to an anticipated Exchange Date, the Company
shall cause to be filed with the Warrant Agent and shall cause to be given to
each of the registered Holders of the Warrant Certificates at such Holder's
address appearing on the Warrant register, by first class mail, postage prepaid,
a written notice stating (i) the anticipated Exchange Date and (ii) that
18
<PAGE>
Holders of record of Warrants will receive in exchange for such Warrants,
Warrant Shares in accordance with the provisions hereof upon the anticipated
Exchange Date. The failure to give the notice required by this Section 15 or any
defect therein shall not affect the legality or validity of any Exchange Event.
Nothing contained in this Agreement or in any of the Warrant Certificates shall
be construed as conferring upon the Holders thereof the right to vote or to
consent or to receive notice as shareholders in respect of the meetings of
shareholders or the election of Directors of the Company or any other matter, or
any rights whatsoever as shareholders of the Company.
Section 16. Merger, Consolidation or Change of Name of Warrant Agent.
--------------------------------------------------------
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 18. Any such successor Warrant Agent shall promptly cause notice of its
succession as Warrant Agent to be mailed (by first class mail, postage prepaid)
to each Holder at such Holder's last address as shown on the register maintained
by the Warrant Agent pursuant to this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
Section 17. Warrant Agent. The Warrant Agent undertakes the duties
-------------
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound:
(i) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the
Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken or
to be taken by it. The Warrant Agent assumes no responsibility with
respect to the distribution of the Warrant Certificates or the
19
<PAGE>
issuance or distribution of the debt securities of Holdings provided
for in Section 8(d) except as herein otherwise provided.
(ii) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant Certificates to be complied with by the
Company.
The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any Holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
The Warrant Agent shall incur no liability or responsibility to the
Company or to any Holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument,
whether in its original or facsimile form, believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties.
Holdings agrees to pay to the Warrant Agent such compensation for all
services rendered by the Warrant Agent in the execution of this Agreement as the
parties shall agree from time to time, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature reasonably incurred by the Warrant Agent in the execution of this
Agreement and to indemnify each of the Warrant Agent and any predecessor Warrant
Agent and save it harmless against any and all claims, damages, losses, expenses
and liabilities, including judgments, costs and counsel fees, for anything done
or omitted by the Warrant Agent in the execution of this Agreement except as a
result of its gross negligence or willful misconduct. The indemnity described
in the previous sentence shall survive the termination of this Agreement or
resignation of the Warrant Agent.
The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more Holders of Warrant Certificates shall
furnish the Warrant Agent with security and indemnity satisfactory to the
Warrant Agent for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such action as
it may consider proper, whether with or without any such security or indemnity.
All rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the Holders of the Warrants, as their respective
rights or interests may appear. No provision of this Agreement shall require
the Warrant Agent to expend or risk its own funds.
The Warrant Agent, and any stockholder, director, officer or employee
of it, may buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily
20
<PAGE>
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
The Warrant Agent shall act hereunder solely as agent for the Company,
and its duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not be liable for anything which it may do or refrain from doing in
connection with this Agreement except for its own negligence or willful
misconduct.
The Warrant Agent shall not be accountable with respect to the
validity or value or the kind or amount of any Warrant Shares or of any
securities (including debt securities) or property which may at any time be
issued or delivered upon the exchange of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable, and makes no representation with respect
thereto.
With respect to the Holders, the Warrant Agent undertakes to perform
or to observe only such of its covenants and obligations as are specifically set
forth in this Agreement, and no implied covenants or obligations with respect to
the Holders shall be read into this Agreement against the Warrant Agent. The
Warrant Agent shall not be deemed to owe any fiduciary duty to the Holders.
Section 18. Resignation and Removal of Warrant Agent; Appointment of
--------------------------------------------------------
Successor. No resignation or removal of the Warrant Agent and no appointment of
- ---------
a successor warrant agent shall become effective until the acceptance of
appointment by the successor warrant agent as provided herein. The Warrant
Agent may resign its duties and be discharged from all further duties and
liability hereunder (except liability arising as a result of the Warrant Agent's
own negligence or willful misconduct) after giving written notice to the
Company. The Company may remove the Warrant Agent upon written notice, and the
Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall,
at the Company's expense, cause to be mailed (by first class mail, postage
prepaid) to each Holder of a Warrant at such Holder's last address as shown on
the register maintained by the Warrant Agent a copy of said notice of
resignation or notice of removal, as the case may be. Upon such resignation or
removal, the Company shall appoint in writing a new warrant agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such resignation by the resigning Warrant Agent
or after such removal, then the Company shall become Warrant Agent until a
successor Warrant Agent has been appointed, and the resigning Warrant Agent or
the Holder of any Warrant may, at the expense of the Company, apply to any court
of competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
corporation doing business under the laws of the United States or any state
thereof, in good standing and having a combined capital and surplus of not less
than $50,000,000. The combined capital and surplus of any such new warrant
agent shall be deemed to be the combined capital and surplus as set forth in the
most recent annual report of its condition published by such warrant agent prior
to its appointment, provided that such reports are published at least annually
pursuant to law or to the requirements of a federal or state
21
<PAGE>
supervising or examining authority. After acceptance in writing of such
appointment by the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein as
the Warrant Agent, without any further assurance, conveyance, act or deed; but
if for any reason it shall be necessary or expedient to execute and deliver any
further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning or removed Warrant Agent. Not later than the effective date of
any such appointment, the Company shall give notice thereof to the resigning or
removed Warrant Agent. Failure to give any notice provided for in this Section
18, however, or any defect therein, shall not affect the legality or validity of
the resignation of the Warrant Agent or the appointment of a new warrant agent,
as the case may be.
Section 19. Agreement of Holdings to Pay Ongoing Expenses of the
----------------------------------------------------
Company. (i) Prior to the Exchange Date, Holdings agrees to pay, or to promptly
- -------
reimburse the Company for payment of, any and all expenses, costs, fees,
liabilities or any other obligations of any kind whatsoever of the Company
(other than tax liabilities), whether existing on the date hereof or arising at
any time on or before the Exchange Date, including all such expenses, costs,
fees, liabilities or other obligations relating to the formation of the Company.
(ii) After the Exchange Date, Holdings agrees to pay, or to promptly
reimburse the Company for payment of, (A) any and all expenses, costs or fees
relating to, arising from or in connection with the Exchange Event that gave
rise to the Exchange Date (other than tax liabilities) and (B) the reasonable
operating expenses and franchise fees of the Company (other than tax
liabilities) not to exceed $1,000 in any given calendar year.
(iii) Holdings agrees to indemnify and hold harmless the Company and
its officers, directors, employees and agents against any and all losses,
claims, damages or liabilities to which they or any of them may become subject
under the Securities Act, the Exchange Act or any other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon this Agreement,
the Warrant Purchase Agreement, the Warrants, the Warrant Shares, the
Registration Rights and Partners' Agreement, the Holdings Partnership Agreement
and the Purchase Agreement or any of the transactions contemplated by any of the
foregoing.
Section 20. Financial Information. Whether or not required by the
---------------------
rules and regulations of the Commission, so long as any Warrants are
outstanding, Holdings will furnish to the Holders of Warrants the annual
reports, quarterly reports and other documents ("SEC Reports") that Holdings is
required to provide to Holders of the Notes pursuant to Section 4.2 of the
Indenture (in the same manner and within the same time periods specified
therein).
Section 21. Notices to Company and Warrant Agent. Any notice or
------------------------------------
demand authorized or required by this Agreement to be given or made by the
Warrant Agent or by the Holder of any Warrant Certificate to or on the Company
shall be sufficiently given or made when and if deposited in the mail, first
class or registered, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent) as follows:
22
<PAGE>
Petro Warrant Holdings Corporation
6080 Surety Drive
El Paso, Texas 79905
Attention: James A. Cardwell, Sr.
Fax Number: (915) 774-7373
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the Holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent as follows:
State Street Bank and Trust Company
Corporate Trust Division
2 Avenue de Lafayette
Sixth Floor
Boston, MA 02111-1724
Reference: Petro Stopping Centers
Section 22. Supplements and Amendments. The Company, Holdings, Sixty
--------------------------
Eighty and the Warrant Agent may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates in order
to cure any ambiguity or to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provision herein; provided
that no such amendment or supplement shall have a material adverse effect on the
Holders of Warrant Certificates. Any other amendment or supplement to this
Agreement shall also require the written consent of Holders representing a
majority of the then outstanding Warrants. The consent of each Holder of a
Warrant affected shall be required for any amendment pursuant to which the
number of Warrant Shares obtainable upon exchange of Warrants would be
decreased. The Warrant Agent shall be entitled to receive and, subject to
Section 17, shall be fully protected in relying upon, an officers' certificate
and opinion of counsel as conclusive evidence that any such amendment or
supplement is authorized or permitted hereunder, that it is not inconsistent
herewith, and that it will be valid and binding upon the Company, Holdings and
Sixty Eighty in accordance with its terms. Notwithstanding any other provision
hereof, the Warrant Agent's consent must be obtained regarding any supplement or
amendment pursuant to this Section which alters the Warrant Agent's rights or
duties.
Section 23. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of each of the parties hereto shall bind and
inure to the benefit of their respective successors and assigns hereunder.
Section 24. Termination. This Agreement (other than (i) the
-----------
obligations of Holdings pursuant to Section 8(c), 8(d), 17 and 19, (ii) any
party's obligations with respect to
23
<PAGE>
Warrants previously exchanged and (iii) with respect to indemnification under
Section 17) shall terminate at 5:00 p.m., New York City time on August 1, 2009.
Section 25. Governing Law. THIS AGREEMENT AND EACH WARRANT
-------------
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
Section 26. Benefits of this Agreement.
--------------------------
(a) Nothing in this Agreement shall be construed to give to any
Person other than the parties hereto and the Holders of the Warrant Certificates
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the parties hereto and
the Holders of the Warrant Certificates.
(b) Prior to the exchange of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote (other than the right to vote in certain
limited circumstances), to consent, to exercise any preemptive right, to receive
any notice of meetings of stockholders for the election of directors of the
Company or any other matter or to receive any notice of any proceedings of the
Company, except as may be specifically provided for herein. The Holders of the
Warrants are not entitled to share in the assets of the Company in the event of
the liquidation, dissolution or winding up of the Company's affairs.
(c) All rights of action in respect of this Agreement are vested in
the Holders of the Warrants, and any Holder of any Warrant, without the consent
of the Warrant Agent or the Holder of any other Warrant, may, on such Holder's
own behalf and for such Holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
or otherwise in respect of, such Holder's rights hereunder, including the right
to exchange such Holder's Warrants in the manner provided in this Agreement.
Section 27. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
PETRO WARRANT HOLDINGS CORPORATION
By___________________________________________
Name:
Title:
PETRO STOPPING CENTERS HOLDINGS, L.P.
By___________________________________________
Name:
Title:
SIXTY EIGHTY, LLC
By___________________________________________
Name:
Title:
FIRST UNION CAPITAL MARKETS CORP.
on behalf of itself and CIBC World Markets Corp.
By___________________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By___________________________________________
Name:
Title:
25
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND THE COMPANY IS NOT AND WILL NOT BE REGISTERED
UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT") IN
RELIANCE IN PART ON SECTION 3(C)(7) THEREUNDER. THIS SECURITY MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT (A) TO A PERSON THAT IS
A "QUALIFIED PURCHASER" (AS DEFINED IN SECTION 2(A)(51) OF THE 1940 ACT) THAT,
PRIOR TO SUCH TRANSFER DELIVERS A CERTIFICATION TO THAT EFFECT AND THAT IS ALSO
EITHER (1) A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A OR (2) AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "IAI") THAT IS
ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN IAI,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, AND THAT
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY, SUBJECT TO THE SATISFACTION OF CERTAIN CONDITIONS SPECIFIED IN THE
WARRANT AGREEMENT REFERRED TO HEREIN AND THE TERMS OF THE REGISTRATION RIGHTS
AND PARTNERS' AGREEMENT RELATING TO THE WARRANTS, AND WHICH IN ANY SUCH CASE MAY
BE EFFECTED WITHOUT LOSS OF ANY APPLICABLE 1940 ACT EXEMPTION AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
AND ANY OTHER APPLICABLE JURISDICTION.
EACH TRANSFEREE OF THIS SECURITY WILL BE REQUIRED TO DELIVER TO THE WARRANT
AGENT A TRANSFER CERTIFICATE, MAKING THE REPRESENTATIONS AND AGREEMENTS SET
FORTH IN THE WARRANT AGREEMENT REFERRED TO HEREIN. ANY TRANSFER IN VIOLATION OF
THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB INITIO, AND WILL
NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY
INSTRUCTIONS TO THE CONTRARY TO THE COMPANY, THE WARRANT AGENT OR ANY
INTERMEDIARY.
A-1
<PAGE>
ANY TRANSFER OF THIS SECURITY WILL BE SUBJECT TO COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THE REGISTRATION RIGHTS AND PARTNERS' AGREEMENT RELATING TO THE
WARRANTS. A COPY OF SUCH AGREEMENT IS AVAILABLE FROM THE COMPANY. SUCH
AGREEMENT IMPOSES OBLIGATIONS UPON THE OWNER OF THIS SECURITY.
No. ______ _________ Warrants
WARRANT CUSIP No.:
UNIT CUSIP No.:
This Warrant Certificate certifies that , or registered assigns, is
the registered holder of Warrants (the "Warrants") to purchase shares of Common
Stock (the "Common Stock"), of PETRO WARRANT HOLDINGS CORPORATION, a Delaware
corporation (the "Company"). Each Warrant entitles the holder to receive from
the Company upon the date an Exchange Event occurs (the "Exchange Date"), one
fully paid and non-assessable share of Common Stock (a "Share" for no additional
consideration, subject to the conditions set forth herein and in the Warrant
Agreement. No Warrant may be exchanged before the Exchange Date.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PROVISIONS THEREOF.
A-2
<PAGE>
WITNESS the signatures of the Company's duly authorized officers.
Dated July , 1999:
PETRO WARRANT HOLDINGS CORPORATION
By____________________________
Name:
Title:
By____________________________
Name:
Title:
Certificate of Countersignature:
This is one of the Warrants referred
to in the within mentioned Warrant
Agreement:
STATE STREET BANK AND TRUST
COMPANY,
as Warrant Agent
By_________________________
Authorized Signatory
A-3
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to receive on
or after the Exchange Date, one share of the Company's common stock (the "Common
Stock"). The Warrants are issued pursuant to a Warrant Agreement dated as of
July 23, 1999 (the "Warrant Agreement"), duly executed and delivered by the
Company, Petro Stopping Centers Holdings, L.P. ("Holdings"), Sixty Eighty, LLC
("Sixty Eighty"), and the Initial Purchasers to State Street Bank and Trust
Company, as warrant agent (the "Warrant Agent"), which Warrant Agreement is
hereby incorporated by reference in and made a part of this instrument and is
hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company,
Holdings, Sixty Eighty and the holders (the words "holders" or "holder" meaning
the registered holders or registered holder) of the Warrants. A copy of the
Warrant Agreement may be obtained by the holder hereof upon written request to
the Company. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Warrant Agreement.
Subject to the terms of the Warrant Agreement, each Warrant holder
shall automatically, on the Exchange Date, receive from the Company or, if the
Exchange Event giving rise to the Exchange Date is a Successor Corporation
Transaction, receive from the Successor Corporation, for no additional
consideration, the number of fully paid and nonassessable Warrant Shares which
the holder may at the time be entitled to receive on exchange of such Warrants.
The Warrant Agreement provides that Petro Stopping Centers Holdings,
L.P. ("Holdings') may, at its option at any time on or prior to August 1, 2002,
require each holder of Warrants to sell for cash all, but not less than all, of
such holder's Warrants to Holdings at a price per Warrant (the "Call Purchase
Price"), if such option is exercised during the 12 month period beginning on
August 1 of the years indicated, equal to:
<TABLE>
<CAPTION>
Year Purchase Price
---- --------------
<S> <C>
1999..................... $134.87
2000..................... $155.10
2001..................... $178.37
</TABLE>
If Holdings exercises its option to require the sale of Warrants
described in the preceding paragraph, at least 30 days, but no more than 60
days, before the date of purchase (the "Call Purchase Date"), Holdings shall
mail, or cause to be mailed, a notice by first-class mail to each holder of
Warrants at his or her last address as the same appears on the register
maintained by the Warrant Agent pursuant to Section 6 hereof. Such notice shall
state: (1) the Call Purchase Date; (2) the Call Purchase Price and (3) the name
and address of the Warrant Agent.
A-4
<PAGE>
If any Warrants remain unexchanged as of August 1, 2004 (the
"Mandatory Purchase Date"), Holdings will be required to purchase, and the
holders of the Warrants will be required to sell, all of the unexchanged
Warrants as provided in Section 8 of the Warrant Agreement.
Warrant Certificates, when surrendered for registration of transfer or
exchange at any office or agency maintained by the Company for that purpose by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged for a new Warrant Certificate or
new Warrant Certificates evidencing in the aggregate a like number of Warrants,
in the manner and subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone) for the
purpose of any exchange hereof and for all other purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
A-5
<PAGE>
(FORM OF ELECTION TO CAUSE EXCHANGE OF WARRANTS)
Pursuant to Section 13 of the Warrant Agreement to which this Form
relates, the undersigned acknowledges that it has received from the Company
notice of the occurrence of a Holdings Termination Event (as defined in the
Warrant Agreement) and hereby elects to cause an exchange of all of the
Company's outstanding Warrants in connection therewith. The undersigned
acknowledges that, unless the Warrant Agent receives a duly executed Form of
Election to Cause Exchange of Warrants from the minimum number of holders and
within the applicable time period required by the Warrant Agreement, the
Warrants held by the undersigned will not be exchangeable as a result of the
aforementioned Holdings Termination Event.
Dated _________________, ___
Name of holder of Warrant Certificate:
(Please Print)
Tax Identification or Social Security Number: _________________
Address: ____________________________________
____________________________________
____________________________________
____________________________________
Signature: __________________________________
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Dated _________________, ___
A-6
<PAGE>
(FORM OF ELECTION TO PARTICIPATE IN PROPOSED TAG-ALONG TRANSFER)
Pursuant to Section 14 of the Warrant Agreement to which this Form
relates, the undersigned acknowledges that it has received from the Company
notice of a Proposed Tag-Along Transfer (as defined in the Warrant
Agreement) and hereby elects to participate in such Proposed Tag-Along
Transfer. The undersigned acknowledges that, unless the Warrant Agent
receives a duly executed Form of Election to Participate in a Proposed Tag-
Along Transfer from the minimum number of holders and within the time
period required by the Warrant Agreement, neither the undersigned, nor any
other holder of Warrants, will be permitted to participate in such Proposed
Tag-Along Transfer.
Dated _________________, ___
Name of holder of Warrant Certificate:
(Please Print)
Tax Identification or Social Security Number: ____________________
Address: ____________________________________
____________________________________
____________________________________
____________________________________
Signature: __________________________________
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
Dated _________________, ___
A-7
<PAGE>
[FORM OF ASSIGNMENT]
For value received ________________________ hereby sells, assigns and
transfers unto _________________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _________________________________ attorney, to transfer
said Warrant Certificate on the books of the within-named Company, with full
power of substitution in the premises.
Dated ___________________, ___
Signature:______________________
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
A-8
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE FOR TRANSFER TO BENEFICIAL OWNER OR TO THE COMPANY
----------------------------------------------------------------------
[Date]
State Street Bank and Trust Company
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Re: Petro Warrant Holdings Corporation (the "Company");
Warrants Exchangeable for Shares of the Company's
Common Stock (the "Warrants")
---------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Warrant Agreement, dated as of July
23, 1999 (as amended and supplemented from time to time, the "Warrant
Agreement"), among the Company, Holdings, Sixty Eighty, LLC, First Union Capital
Markets Corp., CIBC World Markets Corp. and State Street Bank and Trust Company,
as Warrant Agent. Capitalized terms used but not defined herein shall have the
meanings given them in the Warrant Agreement.
This letter relates to the Warrants which are held in the name of the
undersigned (the "Transferor") and evidenced by one or more Warrant
Certificates. The Transferor has requested an exchange or transfer of such
Warrant Certificates in the form of an equal amount of Warrants evidenced by one
or more Warrant Certificates to be delivered to [in the case of an exchange of
Warrant Certificates without transfer: the Transferor's own account, without
transfer] [in the case of a transfer of such Warrant Certificates to the Company
or any of its Subsidiaries: to the Company or one of its Subsidiaries, as
instructed by the Transferor].
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By_____________________________
_______________________________
Authorized Signature
B-1
<PAGE>
EXHIBIT C
---------
FORM OF CERTIFICATE FOR TRANSFER TO QIB
---------------------------------------
[Date]
State Street Bank and Trust Company
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Re: Petro Warrant Holdings Corporation (the "Company");
Warrants Exchangeable for Shares of the Company's
Common Stock (the "Warrants")
---------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Warrant Agreement, dated as of July
23, 1999 (as amended and supplemented from time to time, the "Warrant
Agreement"), among the Company, Holdings, Sixty Eighty, LLC, First Union Capital
Markets Corp., CIBC World Markets Corp. and State Street Bank and Trust Company,
as Warrant Agent. Capitalized terms used but not defined herein shall have the
meanings given them in the Warrant Agreement.
This letter relates to the Warrants which are held in the name of the
undersigned (the "Transferor") and evidenced by one or more Warrant
Certificates. The Transferor has requested an exchange or transfer of such
Warrant Certificates to be delivered to such Person as the Transferor instructs
the Warrant Agent.
In connection with such request, and with respect to such Warrant
Certificates, the Transferor does hereby certify that such Warrant Certificates
are being transferred in accordance with Rule 144A under the Securities Act of
1933, as amended ("Rule 144A"), to a transferee that the Transferor reasonably
believes is purchasing the Warrant Certificates for its own account or an
account with respect to which the transferee exercises sole investment
discretion, and the transferee, as well as any such account, is a "qualified
institutional buyer" within the meaning of Rule 144A, in a transaction meeting
the requirements of Rule 144A and in accordance with applicable securities laws
of any state of the United States or any other jurisdiction.
C-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By_____________________________
_______________________________
Authorized Signature
C-2
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FOR TRANSFER
--------------------------------
TO AN INSTITUTIONAL ACCREDITED INVESTOR
---------------------------------------
[Date]
State Street Bank and Trust Company
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Re: Petro Warrant Holdings Corporation (the "Company");
Warrants Exchangeable for Shares of the Company's
Common Stock (the "Warrants")
---------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Warrant Agreement, dated as of July
23, 1999 (as amended and supplemented from time to time, the "Warrant
Agreement"), among the Company, Holdings, Sixty Eighty, LLC, First Union Capital
Markets Corp., CIBC World Markets Corp. and State Street Bank and Trust Company,
as Warrant Agent. Capitalized terms used but not defined herein shall have the
meanings given them in the Warrant Agreement.
This letter relates to Warrants (the "Transferred Warrants") which are
held in the name of [name of registered owner] (the "Transferor") and evidenced
by one or more Warrant Certificates. The Transferor has requested an exchange
or transfer of such Warrant Certificates, to be delivered to the undersigned
(the "Transferee").
Upon transfer, the Transferred Warrants should be registered in the
name of the new owner as follows:
Name: ____________________________ [as nominee for the transferee]/1/
Address: _________________________
Taxpayer ID Number: ______________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
("IAI") and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Warrant Certificates, and we and any accounts for
_______________________
/1/ Strike if inapplicable.
D-1
<PAGE>
which we are acting are each able to bear the economic risk of our or their
investment for an indefinite period of time, as the case may be.
2. We are acquiring the Warrant Certificates purchased by us for
our account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
3. We understand that the offer and sale of the Warrant
Certificates have not been registered under the Securities Act. We agree,
on our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell or otherwise transfer any
Warrant Certificates prior to the date which is two years after the
original issuance of the Warrant Certificates, we will do so only:
(a) to the Company,
(b) to a "qualified institutional buyer" in compliance with Rule
144A or
(c) to an IAI or, if the Warrants are to be purchased for one or
more accounts ("investor accounts") for which the purchaser is acting as
fiduciary or agent, each account is an IAI and each IAI:
. in the normal course of its business, invests in or purchases
securities similar to the Warrants and has such knowledge and
experience in financial and business matters that it is
capable of evaluating the merits and risks of purchasing the
Warrants,
. is aware that it (or any investor account) may be required to
bear the economic risk of an investment in the Warrants for an
indefinite period of time and (or such account) is able to
bear that risk for an indefinite period, and
. prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to the Warrant Agent a signed
letter containing certain representations and agreements
relating to the restrictions on transfer of the Warrants (the
form of which can be obtained from the Warrant Agent).
4. We understand that, on any proposed resale of any Warrant
Certificates, we will be required to furnish to the Warrant Agent and the
Company such certification, legal opinions and other information as the
Warrant Agent and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further
understand that the Warrant Certificates purchased by us will bear a legend
to the foregoing effect.
5. We understand that no transfer of any Warrant Certificate will
be made that results in there being more than 67 holders of Warrants.
D-2
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By________________________________________
__________________________________________
Authorized Signature
D-3
<PAGE>
EXHIBIT E
FORM OF "QUALIFIED PURCHASER" CERTIFICATION
-------------------------------------------
State Street Bank and Trust Company
2 Avenue de Lafayette
Fifth Floor
Boston, MA 02111-1724
Re: Petro Warrant Holdings Corporation (the "Company");
Warrants Exchangeable for Shares of the Company's
Common Stock (the "Warrants")
---------------------------------------------------
Ladies and Gentlemen:
Reference is hereby made to the Warrant Agreement, dated as of July
23, 1999 (as amended and supplemented from time to time, the "Warrant
Agreement"), among the Company, Holdings, Sixty Eighty, LLC, First Union Capital
Markets Corp., CIBC World Markets Corp. and State Street Bank and Trust Company,
as Warrant Agent. Capitalized terms used but not defined herein shall have the
meanings given them in the Warrant Agreement.
This letter relates to the Warrants which are held in the name of
[Insert Name Of Registered Holder] (the "Transferor") and evidenced by one or
more Warrant Certificates. The Transferor has requested an exchange or transfer
of such Warrant Certificates to the undersigned (the "Transferee") be delivered
to such Person as the Transferor instructs the Warrant Agent.
The Transferee understands that ownership of the Warrants is
restricted in order to enable the Company to rely on the exemption from
registration provided in Section 3(c)(7) of the Investment Company Act of 1940,
as amended (the "1940 Act"). The Transferee acknowledges, represents to and
agrees with the Company as follows:
(a) The purchaser (or each account for which we are purchasing
Warrants) is a qualified purchaser (as defined in Section 2(a)(51) of the 1940
Act).
(b) We were (and each account for which we are purchasing Warrants
was) not formed solely for the purpose of investing in the Warrants and are not
(and each account for which we are purchasing Warrants is not) a (i)
partnership, (ii) common trust fund or (iii) special trust, pension fund or
retirement plan in which partners, beneficiaries or participants, as applicable,
may designate the particular investments to be made, and that, in accordance
with the provisions therefor in the Warrant Agreement, we (and each account for
which we are purchasing Warrants) shall not sell participation interests in the
Warrants or enter into any other arrangement pursuant to which any other person
shall be entitled to a beneficial interest in the Warrants and further that the
Warrants purchased directly or indirectly by us (and each account for which we
are purchasing Warrants) constitute an investment of no more than 40% of our (or
such account's) assets.
E-1
<PAGE>
(c) The purchaser understands that the Warrants have not been and
will not be registered under the Securities Act, and, if in the future the
purchaser decides to offer, resell, pledge or otherwise transfer the Warrants,
they may be offered, resold, pledged or otherwise transferred only in accordance
with the legend on such Warrants and the terms of the Warrant Agreement and the
Registration Rights and Partners' Agreement. The purchaser acknowledges that no
representation is made by the Company as to the availability of any exemption
under the Securities Act or any other securities laws for resale of the
Warrants.
(d) The purchaser understands and agrees that (i) no transfer may be
made that would result in more than 67 persons owning Warrants; (ii) no transfer
of a Warrant that would have the effect of requiring the Company to register as
an investment company under the 1940 Act will be permitted; and (iii) no
transfer of a Warrant will be effective, and the Warrant Agent will not
recognize any such transfer, if such transfer would be made to a Plan (as
defined herein). The purchaser also understands that no transfer of a Warrant
may be made (i) to a transferee that was organized or reorganized for the
specific purpose of acquiring such Warrant, (ii) to a transferee if additional
capital or similar contributions were specifically solicited from any person
owning an equity or similar interest in the transferee for the purpose of
enabling the transferee to purchase such Warrant or (iii) if any person owning
any equity or similar interest in the transferee has the ability to control any
investment decision of the transferee or to determine, on an investment-by-
investment basis, the amount of such person's contribution to any investment
made by the transferee. The purchaser further understands and agrees that any
transfer in violation of the applicable provisions of the Warrant Agreement will
be void.
(e) The purchaser is not (i) an "employee benefit plan" that is
subject to the provisions of Part 4 of subtitle B of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) a "plan"
within the meaning of Section 4975(e)(1) of the Internal Revenue Code of 1986
(the "Code") or (iii) a person whose assets include the assets of any such
employee benefit plan or plan within the meaning of 29 C.F.R. 2510.3-101(f) or
otherwise, or any government or other plan subject to federal, state or local
law substantially similar to the fiduciary responsibility provisions of ERISA or
Section 4975 of the Code (each of clauses (i), (ii) and (iii), a "Plan").
(f) The purchaser agrees to treat the Warrants as equity for U.S.
federal income tax purposes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By____________________________
______________________________
Authorized Signature
E-2
<PAGE>
EXHIBIT 10.27
COLLATERAL ASSIGNMENT
---------------------
OF
--
PARTNERSHIP INTERESTS
---------------------
This COLLATERAL ASSIGNMENT OF PARTNERSHIP INTERESTS (this "Assignment"),
dated as of July 23, 1999, from PETRO STOPPING CENTERS HOLDINGS, L.P., a
Delaware limited partnership (the "Assignor") in favor of BANKBOSTON, N.A.
(f/k/a The First National Bank of Boston), a national banking association, in
its capacity as agent (the "Assignee") for itself and the other lending
institutions (hereinafter, collectively the "Banks") which are or may become
parties to an Second Amended and Restated Revolving Credit and Term Loan
Agreement dated as of July 23, 1999 (as amended and in effect from time to time,
the "Credit Agreement") among the Assignee, the Banks, UNION BANK OF CALIFORNIA,
N.A., as Co-Agent, FIRST UNION NATIONAL BANK, as Documentation Agent, and PETRO
STOPPING CENTERS, L.P., a Delaware limited partnership (the "Partnership").
WHEREAS, the Assignor is the legal and beneficial owner of approximately
ninety-eight percent (98%) of the partnership interests of the Partnership; and
WHEREAS, pursuant to the terms of the Credit Agreement, the Banks have,
upon the terms and subject to the conditions contained therein, agreed to make
loans and otherwise to extend credit to the Partnership; and
WHEREAS, the Assignor has executed and delivered to the Assignee for the
benefit of the Assignee and the Banks a Guaranty dated as of July 23, 1999 (as
amended and in effect from time to time, the "Guaranty"), guaranteeing the
Obligations of the Partnership to the Assignee and the Banks under the Credit
Agreement and the other Loan Documents; and
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit to the Partnership under the Credit Agreement that
the Assignor execute and deliver to the Assignee a collateral assignment of
partnership interests in substantially the form hereof;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
-2-
1. DEFINITIONS.
-----------
All terms not specifically defined herein, which terms are defined in the
Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, shall
have the meanings assigned to them therein. The following terms shall have the
following meanings herein:
Assignee, Assignor. See preamble.
------------------
Assigned Interests. See (S)2.1 hereof.
------------------
Business Day. Any day on which banks are open for business in Boston,
------------
Massachusetts.
Cash Collateral. See (S)4.2.
---------------
Cash Collateral Account. See (S)4.2.
-----------------------
Collateral. The Assigned Interests, the Cash Collateral, the Cash
----------
Collateral Account, and all other property now or hereafter pledged or assigned
to the Assignee by the Assignor hereunder, and all income therefrom, increases
therein and proceeds thereof.
Credit Agreement. See preamble.
----------------
Event of Default. See (S)6.
----------------
Loan Documents. As defined in the Credit Agreement.
--------------
Obligations. All obligations and liabilities of any kind, now existing or
-----------
hereafter arising, of the Partnership and the Assignor to the Assignee, certain
or contingent, direct or indirect, due or to become due, including, without
limitation, those arising under or in connection with the Credit Agreement, the
Guaranty, the other Loan Documents or under any other document, instrument or
agreement executed in connection therewith.
Partnership. See preamble.
-----------
Partnership Agreement. Fourth Amended and Restated Limited Partnership
---------------------
Agreement dated as of July 23, 1999.
Time Deposits. See (S)4.2.
-------------
2. ASSIGNMENT.
----------
2.1. Grant of Security Interest. The Assignor hereby pledges, grants a
--------------------------
security interest in, and delivered to the Agent, for the benefit of the Banks
and the Agent, as security for the payment and performance in full when due of
all of the Obligations, all the right, title and interest of the Assignor in and
to the Assignor's
<PAGE>
-3-
partnership interests in the Partnership. The certificates for such partnership
interests, accompanied by appropriate instruments of assignment thereof duly
executed in blank by the Assignor, have been delivered to the Agent (the
"Assigned Interests").
2.2. Additional Partnership Interests. In case the Assignor shall acquire
--------------------------------
any additional partnership interests in the Partnership, then the Assignor shall
forthwith deliver to and pledge such partnership interests to the Agent, for the
benefit of the Banks and the Agent, under this Agreement and shall deliver to
the Agent forthwith any certificates therefor, accompanied by appropriate
instruments of assignment duly executed by the Assignor in blank.
2.3. Pledge of Cash Collateral Account. The Assignor also hereby pledges
---------------------------------
and assigns to the Assignee, and grants to the Assignee a security interest in,
the Cash Collateral Account and all of the Cash Collateral, subject to the terms
of this Assignment.
2.4. Waiver of Certain Partnership Agreement Provisions. The Assignor
--------------------------------------------------
irrevocably waives any and all provisions of the Partnership Agreement that (a)
prohibit, restrict, condition or otherwise affect the grant hereunder of any
lien, security interest or encumbrance on any of the Collateral or any
enforcement action which may be taken in respect of any such lien, security
interest or encumbrance, or (b) otherwise conflict with the terms of this
Assignment.
2.5. Limitations; Tender of Partners' Consents. Notwithstanding the
-----------------------------------------
foregoing provisions of this (S)2, such grant of security interest shall not
extend to, and the term "Collateral" shall not include, any general intangibles,
including, without limitation, a partnership interest or right to a distribution
by virtue of ownership of such partnership interest, which is now or hereafter
held by the Assignor as partner in the Partnership, to the extent that (a) such
general intangibles are not assignable or capable of being encumbered as a
matter of law or under the terms of the Partnership Agreement or other agreement
applicable thereto) or would cause a default by the Assignor or the Partnership
(but solely to the extent that any such restriction referred to in this clause
(a) shall be enforceable under applicable law), without the consent of one or
more of the other partners thereof or other applicable party thereto and (b)
such consent has not been obtained; provided, however, that the foregoing grant
-------- -------
of security interest shall extend to, and the term "Collateral" shall include,
(A) any and all proceeds of such general intangibles to the extent that the
assignment or encumbering of such proceeds is not so restricted and (B) upon any
such other partner's or other applicable party's consent with respect to any
such otherwise excluded general intangibles being obtained, thereafter such
general intangibles as well as any and all proceeds thereof that might
theretofore have been excluded from such grant of a security interest and the
term "Collateral".
3. REPRESENTATIONS AND WARRANTIES OF ASSIGNOR.
------------------------------------------
<PAGE>
-4-
3.1. Representations and Warranties. The Assignor hereby represents and
------------------------------
warrants to, Assignee as follows:
(a) The Partnership is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware; the
Partnership Agreement is in full force and effect; the Assignor is a duly
constituted partner of the Partnership pursuant to the Partnership
Agreement; to the best of Assignor's knowledge and belief, the persons and
entities listed as partners in the Partnership Agreement are the only
partners of the Partnership as of the date hereof; and the Assigned
Interests are validly issued, non-assessable and, except as set forth in
(S)3.1(g) hereof, fully paid partnership interests in the Partnership.
(b) The Assignor has full right, power and authority to make this
Assignment under the Partnership Agreement and under applicable law,
without the consent, approval or authorization of, or notice to, any other
person, including any regulatory authority or any person having any
interest in the Partnership (except if the Agent exercises its remedies
under (S)7 hereof), other than any consents to this Assignment required to
be given by the other partners under the Partnership Agreement, which
consents, if any, have been duly received, and other than any consents
which would not reasonably be expected to have a material adverse effect on
the collateral assignment of partnership interests to the Assignee.
(c) The execution, delivery, and performance of this Assignment and
the transactions contemplated hereby (i) have been duly authorized by all
necessary corporate, partnership or other proceedings on behalf of the
Assignor, (ii) do not conflict with or result in any breach or
contravention of any applicable law, regulation, judicial order or decree
to which such Assignor is subject, (iii) other than if the Agent exercises
its remedies under (S)7 hereof, do not conflict with or violate any
provision of the corporate charter or bylaws, limited partnership
certificate or agreement, general partnership agreement or other
organizational document of the Assignor, and (iv) other than if the Agent
exercises its remedies under (S)7 hereof, do not violate, conflict with,
constitute a default or event of default under, or result in any rights to
accelerate or modify any obligations under any agreement, instrument,
lease, mortgage or indenture to which such Assignor is party or subject, or
to which any of its assets are subject.
(d) This Assignment has been duly executed and delivered by the
Assignor and is the legal, valid, and binding obligation of the Assignor
enforceable against it in accordance with the terms hereof except as
enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium, or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability
of the remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any case or proceeding therefor
may be brought.
<PAGE>
-5-
(e) As of the Closing Date, the Assignor is the sole, direct, legal
and beneficial owner of all Assigned Interests, which Assigned Interests
constitute a approximately ninety-eight percent (98%) partnership interest
in the Partnership, and has good title thereto, free and clear of any lien,
security interest, mortgage or other encumbrance, other than the liens and
security interest granted to the Assignee hereunder; and the liens and
security interests hereunder constitute valid and perfected first priority
liens and security interests.
(f) The Assignor's principal place of business, chief executive
office, and the place where its records concerning the Collateral are kept
is located at 6080 Surety Drive, El Paso, TX 79905.
(g) The Assignor has no obligation to make any contribution, capital
call or other payment to the Partnership with respect to the Assigned
Interests.
(h) The copy of the Partnership Agreement attached hereto as Exhibit
-------
A is a true, correct, and complete copy thereof, and the Partnership
-
Agreement has not been amended or modified in any respect, except for such
amendments or modifications as are attached to the copy thereof delivered
to the Assignee.
4. RIGHTS OF ASSIGNEE.
------------------
4.1. Distributions Paid to Agent. Any sums or other property paid or
---------------------------
distributed upon or with respect to any of the Assigned Interests (except to the
extent permitted by the Credit Agreement), whether by dividend, distribution or
redemption or upon the liquidation or dissolution of the Partnership or
otherwise, shall, except to the limited extent provided in (S)5, be paid over
and delivered to the Agent to be held by the Agent, for the benefit of the Banks
and the Agent, as security for the payment and performance in full of all of the
Obligations. In case, pursuant to the recapitalization or reclassification of
the capital of the Partnership or pursuant to the reorganization thereof, any
distribution of capital shall be made on or in respect of any of the Assigned
Interests or any property shall be distributed upon or with respect to any of
the Assigned Interests, the property so distributed shall be delivered to the
Agent, for the benefit of the Banks and the Agent, to be held by it as security
for the Obligations. Except to the limited extent provided in (S)6, all sums of
money and property paid or distributed in respect of the Assigned Interests,
whether as a dividend, distribution or upon such a liquidation, dissolution,
recapitalization or reclassification or otherwise, that are received by the
Assignor shall, until paid or delivered to the Agent, be held in trust for the
Agent, for the benefit of the Banks and the Agent, as security for the payment
and performance in full of all of the Obligations.
4.2. Cash Collateral Account. All sums of money that are delivered to the
-----------------------
Agent pursuant to (S)(S)4.1 or 4.3 shall be deposited into an interest bearing
account with the Agent (the "Cash Collateral Account"). Some or all of the funds
from time
<PAGE>
-6-
to time in the Cash Collateral Account may be invested, without limitation, in
time deposits, including, without limitation, certificates of deposit issued by
the Agent (such certificates of deposit or other time deposits being hereinafter
referred to, collectively, as "Time Deposits"), that are satisfactory to the
Agent after consultation with the Assignor, provided, that, in each such case,
--------
arrangements satisfactory to the Agent are made and are in place to perfect and
to insure the first priority of the Agent's security interest therein. Interest
earned on the Cash Collateral Account and on the Time Deposits, and the
principal of the Time Deposits at maturity that is not invested in new Time
Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral
Account, all sums from time to time standing to the credit of the Cash
Collateral Account, any and all Time Deposits, any and all instruments or other
writings evidencing Time Deposits and any and all proceeds or any thereof are
hereinafter referred to as the "Cash Collateral."
4.3. Assignor's Rights to Cash Collateral, etc. Except as otherwise
-----------------------------------------
expressly provided in (S)10.2, the Assignor shall have no right to withdraw sums
from the Cash Collateral Account, to receive any of the Cash Collateral or to
require the Agent to part with the Agent's possession of any instruments or
other writings evidencing any Time Deposits.
5. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY.
------------------------------------------
To the extent permitted under the Credit Agreement or the Holdings
Guaranty, the Assignor shall be entitled to receive all distributions, dividends
and all payments paid in respect of the Assigned Interests, to vote the Assigned
Interests and to give consents, waivers and ratifications in respect of the
Assigned Interests; provided, however, that no vote shall be cast or consent,
-------- -------
waiver or ratification given by the Assignor if the effect thereof would result
in any violation of any of the provisions of the Credit Agreement or any of the
other Loan Documents. All such rights of the Assignor to receive cash and
dividends shall cease in case an Event of Default shall have occurred and be
continuing. All such rights of the Assignor to vote and give consents, waivers
and ratifications with respect to the Assigned Interests shall, at the Agent's
option, as evidenced by the Agent's notifying the Assignor of such election,
cease in case an Event of Default shall have occurred and be continuing.
6. EVENTS OF DEFAULT.
-----------------
Any one or more of the following events shall constitute an "Event of
Default" hereunder:
(a) the Assignor permits or agrees to any amendment or modification
of the Partnership Agreement (except as otherwise permitted under the
provisions of the Credit Agreement or the Holdings Guaranty and except for
a conversion of the Partnership into a corporation or other ministerial or
other non-substantive amendments or modifications or any changes which
would not materially adversely effect the Assignee's interests hereunder or
the Assignor's ability to fulfill its obligations hereunder) as in effect
on the
<PAGE>
-7-
date hereof (or other governing document with respect to the Assigned
Interests), or waives any rights or benefits under the Partnership
Agreement (or such other governing document);
(b) the Assignor sells, disposes of or assigns, beneficially or of
record, or grants, creates, permits or suffers any lien or encumbrance on,
any of the Assigned Interests, or withdraws as a limited partner of the
Partnership, except as otherwise permitted herein or under (S)10.2 of the
Credit Agreement or under Section 9.2 of the Holdings Guaranty;
(c) the Assignor casts any vote or gives or grants any consent,
waiver or ratification or takes any other action which could reasonably be
expected to (i) directly or indirectly authorize or permit the dissolution,
liquidation or sale of the Partnership or the sale, lease, assignment,
transfer or other disposition of any of the assets of the Partnership
(except as expressly permitted pursuant to (S)(S)9.6, 10.3, 10.4, 10.5.2 or
10.6 of the Credit Agreement and pursuant to (S)8.4 and 9.3 of the
Holdings Guaranty and except for personal property which is disposed of in
the ordinary course of business and so long as no Event of Default has
occurred and is continuing), whether by operation of law or otherwise, (ii)
have the result of materially and adversely affecting any of the Assignee's
rights under this Assignment or (iii) violate the terms of this Assignment
or any of the other Loan Documents;
(d) the Assignor shall fail to comply with all laws, regulations,
judicial orders or decrees applicable to the Collateral or any portion
thereof, or fails to perform and observe its duties under the Partnership
Agreement or other governing documents with respect to the Assigned
Interests in each case that would reasonably be expected to have a material
adverse effect on the Collateral;
(e) the Assignor shall fail to (i) keep and maintain at its own cost
and expense at its principal place of business, true and accurate records
of the Collateral including a record of all payments received and all other
dealings of a material nature with the Collateral, and (ii) mark its books
and records pertaining to the Collateral and its books and records kept in
its jurisdiction of organization to evidence this Assignment and the liens
and security interests granted hereby;
(f) the Assignor shall fail to pay promptly when due any taxes,
assessments, and governmental charges or levies imposed upon the Collateral
or in respect of its income or profits therefrom, as well as all claims of
any kind relating to the Collateral; provided that any such tax,
--------
assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if the Assignor shall have set aside on its books adequate
reserves, to the extent required by generally accepted accounting
principles with respect thereto; and, provided, further, that the Assignor
-------- -------
will pay all such taxes,
<PAGE>
-8-
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security
therefor;
(g) the Assignor shall fail to advise the Assignee promptly, in
reasonable detail, of (i) any lien, charge, claim or other encumbrance made
or asserted against any of the Collateral (other than those permitted under
(S)10.2 of the Credit Agreement or under (S)9.2 of the Holdings Guaranty);
(ii) any material change in the composition of the Collateral; (iii) the
occurrence of any other event or condition which to its knowledge would
have a material adverse effect on the validity, perfection or priority of
the liens and security interests granted hereunder; and (iv) any bankruptcy
or litigation case or proceeding relating to any of the Collateral, of
which it is aware;
(h) the Assignor (i) changes its principal place of business or chief
executive office or the location of the records concerning the Collateral
without giving prior written notice to the Assignee and without taking such
actions as may be necessary or appropriate in the reasonable opinion of the
Assignee duly to perfect and continue the perfection of the Assignee's
first priority lien and security interest in the Collateral pursuant to the
laws of any jurisdiction into which such place of business, chief executive
office, or records is or are transferred, or (ii) changes its name,
identity, or organizational structure in any matter that might make any
financing statement filed hereunder misleading or invalid without having
notified the Assignee thereof and taken all such actions as may be
necessary or appropriate in the reasonable opinion of the Assignee to make
any financing statement filed in favor of the Assignee not misleading or
invalid;
(i) the Assignor shall fail to do or cause to be done all things
necessary to preserve, renew and keep in full force and effect the legal
existence of the Partnership and the power and authority of the Assignor to
own its property and carry on its business, except as otherwise permitted
under (S)(S)9.6 and 9.10 of the Credit Agreement or (S)8.4 and 8.7 of the
Holdings Guaranty or where the failure so to qualify would not have a
material adverse effect on the rights and interests of the Assignee
hereunder;
(j) any representation or warranty made or furnished to the Assignee
by the Assignor in connection with this Assignment or any document or
instrument furnished, or to be furnished, in connection herewith or
therewith, proves to have been untrue in any material respect when so made
or furnished;
(k) the Assignor shall make an assignment for the benefit of
creditors, or admit in writing its inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition or apply for
the appointment of a trustee or other custodian, liquidator or receiver of
the Assignor or of any substantial part of the assets of the Assignor or
shall commence any case or other proceeding relating to the Assignor under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution
<PAGE>
-9-
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or any
such case or other proceeding shall be commenced against the Assignor or
any of its Subsidiaries and the Assignor shall indicate its approval
thereof, consent thereto or acquiescence therein or such petition or
application shall not have been dismissed within forty-five (45) days
following the filing thereof;
(l) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Assignor bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or
a decree or order for relief is entered in respect of the Assignor in an
involuntary case under federal bankruptcy laws as now or hereafter
constituted; or
(m) the occurrence of any "Default" or "Event of Default" or other
like occurrence under the Credit Agreement, the other Loan Documents or any
other agreement between the Assignor or the Partnership and the Assignee or
under any other instrument executed by the Assignor or the Partnership in
favor of the Assignee.
7. REMEDIES.
--------
7.1. In General. If an Event of Default shall have occurred and be
----------
continuing, the Agent shall thereafter have the following rights and remedies
(to the extent permitted by applicable law) in addition to the rights and
remedies of a secured party under the Uniform Commercial Code of the
Commonwealth of Massachusetts, all such rights and remedies being cumulative,
not exclusive, and enforceable alternatively, successively or concurrently, at
such time or times as the Agent deems expedient:
(a) if the Agent so elects and gives notice of such election to the
Assignor, the Agent may vote any or all partnership interest of the
Assigned Interests (whether or not the same shall have been transferred
into its name or the name of its nominee or nominees) for any lawful
purpose, including, without limitation, if the Agent so elects, for the
liquidation of the assets of the issuer thereof, and give all consents,
waivers and ratifications in respect of the Assigned Interests and
otherwise act with respect thereto as though it were the outright owner
thereof (the Assignor hereby irrevocably constituting and appointing the
Agent the proxy and attorney-in-fact of the Assignor, with full power of
substitution, to do so);
(b) the Agent may demand, sue for, collect or make any compromise or
settlement the Agent deems suitable in respect of any Assigned Interests;
(c) the Agent may sell, resell, assign and deliver, or otherwise
dispose of any or all of the Assigned Interests, for cash or credit or both
and upon such terms at such place or places, at such time or times and to
such entities
<PAGE>
-10-
or other persons as the Agent thinks expedient, all without demand for
performance by the Assignor or any notice or advertisement whatsoever
except as expressly provided herein or as may otherwise be required by law;
(d) the Agent may cause all or any part of the Assigned Interests
held by it to be transferred into its name or the name of its nominee or
nominees; and
(e) the Agent may set off against the Obligations any and all sums
deposited with it or held by it, including without limitation, any sums
standing to the credit of the Cash Collateral Account and any Time Deposits
issued by the Agent.
7.2. Remedies Not Exclusive. No single or partial exercise by the Assignee
----------------------
of any right, power or remedy hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. Each
right, power and remedy herein specifically granted to the Assignee or otherwise
available to it shall be cumulative, and shall be in addition to every other
right, power, and remedy herein specifically given or now or hereafter existing
at law, in equity, or otherwise. Each such right, power and remedy, whether
specifically granted herein or otherwise existing, may be exercised at any time
and from time to time and as often and in such order as may be deemed expedient
by the Assignee in its sole discretion.
7.3. Public Sale. In the event of any disposition of the Collateral as
-----------
provided in this (S)8, the Assignee shall give to the Assignors at least ten
(10) Business Days prior written notice of the time and place of any public sale
of the Collateral or of the time after which any private sale or any other
intended disposition is to be made. The Assignor hereby acknowledges that ten
(10) Business Days prior written notice of such sale or sales shall be
reasonable notice. The Assignee may enforce its rights hereunder without any
other notice and without compliance with any other condition precedent now or
hereafter imposed by law, regulation, judicial order or decree or otherwise (all
of which are hereby expressly waived by the Assignor, to the fullest extent
permitted by law). The Assignee may buy any part or all of the Collateral at any
public sale and if any part or all of the Collateral is of a type customarily
sold in a recognized market or is of a type which is the subject of widely-
distributed standard price quotations, the Assignee may buy at private sale and
may make payments thereof by any means. The Assignee may apply the cash proceeds
actually received from any sale or other disposition to the reasonable out-of-
pocket expenses of retaking, holding, preparing for sale, selling, and the like
(including, without limitation, reasonable attorneys' fees and costs), travel,
and all other expenses which may be incurred by the Assignee in attempting to
collect the Obligations or to enforce this Assignment or in the prosecution or
defense of any case or proceeding related to this Assignment, and then to the
Obligations in accordance with (S)14.4 of the Credit Agreement. To the extent
that any of the Obligations are to be paid or performed by a person or entity
other than the Assignor, to the extent permitted by applicable law, the Assignor
waives and agrees not to assert any rights or privileges which it may have under
(S)9-112 of the
<PAGE>
-11-
Uniform Commercial Code of the Commonwealth of Massachusetts. Without limiting
the foregoing, the Assignor hereby specifically agrees that a public sale
subject to the foregoing restrictions is commercially reasonable, even though it
may not produce the highest possible price for the Collateral, and that the
foregoing restrictions do not constitute the exclusive means of holding a
commercially reasonable sale.
7.4. Private Sale. The Assignor recognizes that the Assignee may be unable
------------
to effect a public sale of the Collateral by reason of the lack of a ready
market for the Collateral, of the limited number of potential buyers of the
Collateral or of certain prohibitions contained in the Securities Act of 1933,
state securities laws, federal banking laws, and other applicable laws, and that
the Assignee may be compelled to resort to one or more private sales thereof to
a restricted group of purchasers. The Assignor agrees that any such private
sales may be at prices and other terms less favorable to the seller than if sold
at public sales and that such private sales shall not solely by reason thereof
be deemed not to have been made in a commercially reasonable manner. The
Assignee shall be under no obligation hereunder or otherwise (except as provided
by applicable law) to delay a sale of any of the Collateral for the period of
time necessary to permit the registration of such securities for public sale
under the Securities Act of 1933 and applicable state securities laws. Any such
sale of all or a portion of the Collateral may be for cash or on credit or for
future delivery and may be conducted at a private sale where the Assignee or any
other person or entity may be the purchaser of all or part of the Assigned
Interests so sold. The Assignor agrees that at least ten (10) Business Days
prior written notice to the Assignor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification. Subject to the foregoing, the Assignee agrees that any sale of the
Assigned Interests shall be made in a commercially reasonable manner. The
Assignee shall incur no liability as a result of the sale of any of the
Collateral, or any part thereof, at any private sale which complies with the
requirements of this (S)6.4. The Assignor hereby waives, to the extent permitted
by applicable law, any claims against the Assignee arising by reason of the fact
that the price at which any of the Collateral, or any part thereof, may have
been sold at such private sale was less than the price that might have been
obtained at a public sale, even if the Assignee accepts the first offer deemed
by the Assignee in good faith deemed to be commercially reasonable under the
circumstances and does not offer any of the Collateral to more than one offeree.
8. ASSIGNMENT NOT AFFECTED BY OTHER ACTS.
-------------------------------------
To the fullest extent permitted under applicable law, the obligations of
the Assignor hereunder shall remain in full force and effect without regard to,
and shall not be impaired by (a) any exercise or nonexercise, or any waiver, by
the Agent or any Bank of any right, remedy, power or privilege under or in
respect of any of the Obligations or any security thereof (including this
Agreement); (b) any amendment to or modification of the Credit Agreement, the
other Loan Documents or any of the Obligations; (c) any amendment to or
modification of any instrument (other than this Agreement) securing any of the
Obligations, including, without limitation, any
<PAGE>
-12-
of the Security Documents; or (d) the taking of additional security for, or any
other assurances of payment of, any of the Obligations or the release or
discharge or termination of any security or other assurances of payment or
performance for any of the Obligations; whether or not the Assignor shall have
notice or knowledge of any of the foregoing.
9. REGISTRATION AND FILING.
-----------------------
The Assignor (a) has caused the Partnership to duly register the security
interests granted hereby on the books of the Partnership as required by (S)(S)8-
108, 8-313 and 8-321 of the Uniform Commercial Code of the Commonwealth of
Massachusetts, and has furnished the Assignee with evidence thereof (including,
without limitation, appropriate initial transaction statements), in form and
substance satisfactory to the Assignee, (b) has duly executed and delivered any
financing statements with respect to the Assigned Interests as the Agent shall
reasonably require, and (c) will execute and deliver any financing statements
with respect to the Assigned Interests as the Agent shall reasonably request at
all times to be kept recorded and filed by the Agent at the Assignor's expense
in such a manner and in such places as may be required by law in order to fully
perfect the interests and protect the rights of the Assignee hereunder.
10. MISCELLANEOUS.
-------------
10.1. Additional Instruments and Assurances. The Assignor hereby agrees, at
-------------------------------------
its own expense, to execute and deliver, from time to time, any and all further,
or other, instruments, and to perform such acts, as the Assignee may reasonably
request to effect the purposes of this Assignment and to secure to the Assignee
the benefits of all rights and remedies conferred upon the Assignee by the terms
of this Assignment.
10.2. Termination; Release. If and only if all of the Obligations shall
--------------------
have been indefeasibly paid, performed, and discharged in full in cash, any
commitments to lend under the Credit Agreement shall have been canceled, the
Assignee shall, upon demand and at the sole expense of the Assignor, release
this Assignment and the lien hereof by proper instrument or instruments, at the
request and expense of the Assignor. Upon the cure of any Default or Event of
Default by the Assignor, and so long as no other Default or Event of Default has
occurred and is continuing, any sums or assets received by the Agent, if any,
pursuant to (S)4 hereof shall be promptly returned to the Assignor.
10.3. Assignee's Exoneration. Under no circumstances shall the Assignee be
----------------------
deemed to assume any responsibility for or obligation or duty with respect to
any part or all of the Collateral of any nature or kind or any matter or
proceeding arising out of or relating thereto, other than (a) to exercise
reasonable care in the physical custody of the Collateral and (b) if an Event of
Default shall have occurred and be continuing, to act in a commercially
reasonable manner in exercising its rights and remedies with respect to the
Collateral. Subject to the foregoing, the
<PAGE>
-13-
Assignee shall not be required to take any action of any kind to collect,
preserve or protect its or the Assignor's rights in the Collateral.
10.4. No Waiver, etc. Any term of this Assignment may be amended or
--------------
modified with, but only with, the written consent of the Assignor and the
Assignee. Any term of this Assignment may be waived by a writing executed by the
party to be charged with such waiver. No act, failure, or delay by the Assignee
shall constitute a waiver of its rights and remedies hereunder or otherwise. No
single or partial waiver by the Assignee of any default, right, or remedy that
it may have shall operate as a waiver of any other default, right, or remedy or
of the same default, right, or remedy on a future occasion.
10.5. Waiver By Assignor. The Assignor hereby waives presentment, notice
------------------
(including without limitation the notice of intent to accelerate and notice of
such acceleration) of dishonor, and protest of all instruments included in or
evidencing any of the Obligations or the Collateral, and any and all other
notices and demands whatsoever (except as expressly provided herein or in the
Credit Agreement or for notices required in connection with judicial
proceedings).
10.6. Notice, etc. All notices, requests, and other communications
-----------
hereunder shall be made and effective in the manner set forth in (S)22 of the
Credit Agreement.
10.7. Overdue Amounts. Until paid, all amounts due and payable by the
---------------
Assignor hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest at the rate of interest for overdue
principal set forth in the Credit Agreement.
It is the intention of the parties hereto that each Bank shall conform strictly
to usury laws applicable to it. Accordingly, if the transactions contemplated
hereby would be usurious as to any Bank under laws applicable to it (including
the laws of the United States of America or any other jurisdictions whose laws
may be mandatorily applicable to such Bank notwithstanding the other provision
of the Credit Agreement), then, in that event, notwithstanding anything to the
contrary in this Agreement, the Loan Documents, the Credit Agreement or any
other agreements entered into in connection with or as security for the
Obligations, it is agreed as follows: (a) the aggregate of all consideration
which constitutes interest under law applicable to any Bank that is contracted
for, taken, reserved, charged or received by such Bank under the this Agreement,
the Loan Documents, the Credit Agreement or any other agreements entered into in
connection with or as security for the Obligations or otherwise in connection
with the Credit Agreement shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be cancelled automatically
and if theretofore paid shall be credited by such Bank on the principal amount
of the indebtedness (or, to the extent that the principal amount of the
indebtedness shall have been or would thereby be paid in full, refunded by such
Bank to the Partnership); and (b) in the event that the maturity of the
Obligations is accelerated by reason of an election of the holder thereof
resulting from any Event of Default under the Credit Agreement, or in the event
of any required or permitted prepayment, then such consideration that
<PAGE>
-14-
constitutes interest under law applicable to any Bank may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in the Credit Agreement or otherwise shall be cancelled
automatically by such Bank as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Bank on the principal amount
of the indebtedness (or, to the extent that the principal amount of the
indebtedness shall have been or would thereby be paid in full, refunded by such
Bank to the Partnership). All sums paid or agreed to be paid to any Bank for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Bank, be amortized, prorated, allocated and
spread throughout the term of the Loan evidenced by the Credit Agreement until
payment in full so that the rate or amount of interest on account of any Loans
does not exceed the maximum amount allowed by such applicable law. If at any
time and from time to time (a) the amount of interest payable to any Bank on any
date shall be computed at the highest lawful rate applicable to such Bank
pursuant to this paragraph and (b) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Bank would
be less that the amount of interest payable to such Bank computed at the highest
lawful rate applicable to such Bank, then the amount of interest payable to such
Bank computed at the highest lawful rate applicable to such Bank, then the
amount of interest payable to such Bank in respect of such subsequent interest
computation period shall continue to be computed at the highest lawful rate
applicable to such Bank until the total amount of interest payable to such Bank
shall equal the total amount of interest which would have been payable to such
Bank if the total amount of interest had been computed without giving effect to
this paragraph.
To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is
relevant to any Bank for the purpose of determining the highest lawful rate,
each such Bank hereby elects to determine the applicable rate ceiling under such
Article by the indicated (weekly) rate ceiling from time to time in effect.
10.8. Governing Law; Consent to Jurisdiction. This Assignment is intended
--------------------------------------
to take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts. THE ASSIGNOR
AGREES THAT ANY PROCEEDING FOR THE ENFORCEMENT OF THIS ASSIGNMENT MAY BE BROUGHT
IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND TO
SERVICE OF PROCESS IN ANY SUCH PROCEEDING BEING MADE UPON THE ASSIGNOR BY MAIL
AT THE ADDRESS SPECIFIED IN (S)9.6. THE ASSIGNOR HEREBY WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH PROCEEDING OR ANY
SUCH COURT OR THAT SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT COURT.
10.9. Waiver of Jury Trial. EACH OF THE ASSIGNOR AND THE ASSIGNEE HEREBY
--------------------
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH
<PAGE>
-15-
THIS ASSIGNMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF ANY
SUCH RIGHTS OR OBLIGATIONS.
10.10. Limitation of Liability. Except as prohibited by applicable law,
-----------------------
each of the Assignor and Assignee waives any right which it may have to claim or
recover in any proceeding referred to in the preceding sentence any special,
exemplary, or punitive damages or any damages other than, or in addition to,
actual or consequential damages. The Assignor (a) certifies that neither the
Assignee nor any representative, agent, or attorney of the Assignee has
represented, expressly or otherwise, that the Assignee would not, in the event
of any proceeding, seek to enforce the foregoing waivers and (b) acknowledges
that, in entering into the Credit Agreement and the other Loan Documents to
which the Assignee is a party, the Assignee is relying upon, among other things,
the waivers and certifications contained in this (S)11.10.
10.11. Severability and Enforceability. All provisions hereof are severable
-------------------------------
and the invalidity or unenforceability of any of such provisions shall in no
manner affect or impair the validity and enforceability of the remaining
provisions hereof.
10.12. Successors and Assigns. This Assignment shall be binding upon the
----------------------
Assignor and upon the legal representatives, successors and assigns of the
Assignor and shall inure to the benefit of the Assignee and its successors and
assigns.
10.13. Counterparts. This Assignment may be executed in any number of
------------
counterparts, each constituting an original, but all together one and the same
instrument.
10.14. Entire Agreement. This Assignment and the Loan Documents and any
----------------
other document executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Assignment nor any terms hereof may be changed, waived or
terminated except by a writing signed by each party hereto.
10.0. Limited Recourse. Notwithstanding anything to the contrary
----------------
contained herein, this Assignment shall be a nonrecourse obligation of the
Assignor and shall not give rise to a general obligation or personal liability
of the Assignor. The Assignee's remedies hereunder shall be recourse only to
the Assigned Interests. In the event that the proceeds from the sale of the
Assigned Interests are insufficient to satisfy the Obligations in full, the
Assignor shall not be liable for any deficiency. In addition, no director,
officer, employee, stockholder, general or limited partner or incorporator,
past, present or future, of the Assignor, as such or in such capacity, shall
have any personal liability for any Obligations under any of the Loan Documents
by reason of his, her or its status as such director, officer, employee,
stockholder, general or limited partner or incorporator.
[ Remainder of Page Intentionally Left Blank ]
<PAGE>
-16-
IN WITNESS WHEREOF, the Assignor and the Assignee have executed this
Assignment as of the date first above written, as an instrument under seal.
ASSIGNOR: PETRO STOPPING CENTERS
HOLDINGS, L.P.
By: _______________________________
Name:
Title:
ASSIGNEE: BANKBOSTON, N.A., as Agent
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.28
HOLDINGS GUARANTY
-----------------
GUARANTY, dated as of July 23, 1999, by PETRO STOPPING CENTERS HOLDINGS,
L.P., a Delaware limited partnership (the "Guarantor") in favor of (a)
BANKBOSTON, N.A. (f/k/a The First National Bank of Boston), a national banking
association, as agent (hereinafter, in such capacity, the "Agent") for itself
and the other banking institutions (hereinafter, collectively, the "Banks")
which are or may become parties to a Second Amended and Restated Revolving
Credit and Term Loan Agreement dated as of July 23, 1999 (as amended and in
effect from time to time, the "Credit Agreement"), among PETRO STOPPING CENTERS,
L.P., a Delaware limited partnership (the "Company"), the Agent, UNION BANK OF
CALIFORNIA, N.A., as Co-Agent, FIRST UNION NATIONAL BANK, as Documentation
Agent, and the Banks, and (b) the Banks.
WHEREAS, the Company and the Guarantor are members of a group of related
entities, the success of either one of which is dependent in part on the success
of the other members of such group;
WHEREAS, the Guarantor expects to receive substantial direct and indirect
benefits from the extensions of credit to the Company by the Banks pursuant to
the Credit Agreement (which benefits are hereby acknowledged);
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit to the Company under the Credit Agreement that the
Guarantor execute and deliver to the Agent, for the benefit of the Banks and the
Agent, a guaranty substantially in the form hereof; and
WHEREAS, the Guarantor wishes to guaranty the Company's obligations to the
Banks and the Agent under or in respect of the Credit Agreement as provided
herein;
NOW, THEREFORE, the Guarantor hereby agrees with the Banks and the Agent as
follows:
1. Definitions. The term "Obligations" and all other capitalized terms
-----------
used herein without definition shall have the respective meanings provided
therefor in the Credit Agreement.
2. Guaranty of Payment and Performance. The Guarantor hereby guarantees
-----------------------------------
to the Banks and the Agent the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise), as well
as the performance, of all of the Obligations including all such which would
become due but for the operation of the automatic stay pursuant to (S)362(a) of
the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the
Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectibility only and is in no way
conditioned upon any requirement that the Agent or any Bank first attempt to
collect any of the
<PAGE>
-2-
Obligations from the Company or resort to any collateral security or other means
of obtaining payment. Should the Company default in the payment or performance
of any of the Obligations, the obligations of the Guarantor hereunder with
respect to such Obligations in default shall, upon demand by the Agent, become
immediately due and payable to the Agent, for the benefit of the Banks and the
Agent, without demand or notice of any nature, all of which are expressly waived
by the Guarantor. Payments by the Guarantor hereunder may be required by the
Agent on any number of occasions. All payments by the Guarantor hereunder shall
be made to the Agent, in the manner and at the place of payment specified
therefor in the Credit Agreement, for the account of the Banks and the Agent.
3. Guarantor's Agreement to Pay Enforcement Costs, etc. The Guarantor
----------------------------------------------------
further agrees, as the principal obligor and not as a guarantor only, to pay to
the Agent, on demand, all reasonable out-of-pocket expenses (including, without
limitation, reasonable attorneys' fees and costs) incurred or expended by the
Agent or any Bank in connection with the Obligations, this Guaranty and the
enforcement thereof, together with interest on amounts recoverable under this
(S)3 from the time when such amounts become due until payment, whether before or
after judgment, at the rate of interest for overdue principal set forth in the
Credit Agreement, provided that if such interest exceeds the maximum amount
--------
permitted to be paid under applicable law, then such interest shall be reduced
to such maximum permitted amount.
It is the intention of the parties hereto that each Bank shall conform strictly
to usury laws applicable to it. Accordingly, if the transactions contemplated
hereby would be usurious as to any Bank under laws applicable to it (including
the laws of the United States of America or any other jurisdictions whose laws
may be mandatorily applicable to such Bank), then, in that event,
notwithstanding anything to the contrary in the Loan Documents, the Credit
Agreement or any other agreements entered into in connection with or as security
for the Obligations, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to any Bank that
is contracted for, taken, reserved, charged or received by such Bank under the
Loan Documents, the Credit Agreement or any other agreements entered into in
connection with or as security for the Obligations or otherwise in connection
with the Obligations shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be cancelled automatically
and if theretofore paid shall be credited by such Bank
<PAGE>
-3-
on the principal amount of the indebtedness (or, to the extent that the
principal amount of the indebtedness shall have been or would thereby be paid in
full, refunded by such Bank to the Company); and (b) in the event that the
maturity of the Loans is accelerated by reason of an election of the holder
thereof resulting from any Event of Default under the Credit Agreement, or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Bank may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in the Credit Agreement or otherwise shall be cancelled
automatically by such Bank as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Bank on the principal amount
of the indebtedness (or, to the extent that the principal amount of the
indebtedness shall have been or would thereby be paid in full, refunded by such
Bank to the Company). All sums paid or agreed to be paid to any Bank for the
use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Bank, be amortized, prorated, allocated and
spread throughout the term of the Loan evidenced by the Credit Agreement until
payment in full so that the rate or amount of interest on account of any Loans
does not exceed the maximum amount allowed by such applicable law. If at any
time and from time to time (a) the amount of interest payable to any Bank on any
date shall be computed at the highest lawful rate applicable to such Bank
pursuant to this paragraph and (b) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Bank would
be less that the amount of interest payable to such Bank computed at the highest
lawful rate applicable to such Bank, then the amount of interest payable to such
Bank computed at the highest lawful rate applicable to such Bank, then the
amount of interest payable to such Bank in respect of such subsequent interest
computation period shall continue to be computed at the highest lawful rate
applicable to such Bank until the total amount of interest payable to such Bank
shall equal the total amount of interest which would have been payable to such
Bank if the total amount of interest had been computed without giving effect to
this paragraph.
To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is
relevant to any Bank for the purpose of determining the highest lawful rate,
each such Bank hereby elects to determine the applicable rate ceiling under such
Article by the indicated (weekly) rate ceiling from time to time in effect.
4. Waivers by Guarantor; Bank's Freedom to Act. To the fullest extent
-------------------------------------------
permitted under applicable laws, the Guarantor agrees that the Obligations will
be paid and performed strictly in accordance with their respective terms,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Agent or any Bank
with respect thereto. The Guarantor waives promptness, diligences, presentment,
demand, protest, notice of acceptance, notice of any Obligations incurred and
all other notices of any kind, all defenses which may be available by virtue of
any valuation, stay, moratorium law or other similar law now or hereafter in
effect, any right to require the marshalling of assets of the Company or any
other entity or other person primarily or secondarily liable with respect to any
of the Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (a) the
failure of the Agent or any Bank to assert any claim or demand or to enforce any
right or remedy against the Company or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations; (b) any
extensions, compromise, refinancing, consolidation or renewals of any
Obligation; (c) any change in the time, place or manner of payment of any of the
Obligations or any rescissions, waivers, compromise, refinancing, consolidation
or other
<PAGE>
-4-
amendments or modifications of any of the terms or provisions of the Credit
Agreement, the other Loan Documents or any other agreement evidencing, securing
or otherwise executed in connection with any of the Obligations, (d) the
addition, substitution or release of any entity or other person primarily or
secondarily liable for any Obligation; (e) the adequacy of any rights which the
Agent or any Bank may have against any collateral security or other means of
obtaining repayment of any of the Obligations; (f) the impairment of any
collateral securing any of the Obligations (other than due to the negligence of
the Agent in failing to make any filings required to be made by the Agent),
including without limitation the failure to perfect or preserve any rights which
the Agent or any Bank might have in such collateral security or the
substitution, exchange, surrender, release, loss or destruction of any such
collateral security; or (g) any other act or omission which might in any manner
or to any extent vary the risk of the Guarantor or otherwise operate as a
release or discharge of the Guarantor, all of which may be done without notice
to the Guarantor. To the fullest extent permitted by law, the Guarantor hereby
expressly waives any and all rights or defenses arising by reason of (i) any
"one action" or "anti-deficiency" law which would otherwise prevent the Agent or
any Bank from bringing any action, including any claim for a deficiency, or
exercising any other right or remedy (including any right of set-off), against
the Guarantor before or after the Agent's or such Bank's commencement or
completion of any foreclosure action, whether judicially, by exercise of power
of sale or otherwise, or (ii) any other law which in any other way would
otherwise require any election of remedies by the Agent or any Bank.
5. Unenforceability of Obligations Against Company. If for any reason the
-----------------------------------------------
Company has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Company by reason of the Company's insolvency, bankruptcy or reorganization
or by other operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the Guarantor
at all times had been the principal obligor on all such Obligations. In the
event that acceleration of the time for payment of any of the Obligations is
stayed upon the insolvency, bankruptcy or reorganization of the Company, or for
any other reason, all such amounts otherwise subject to acceleration under the
terms of the Credit Agreement, the other Loan Documents or any other agreement
evidencing, securing or otherwise executed in connection with any Obligation
shall be immediately due and payable by the Guarantor.
<PAGE>
-5-
6. Subrogation; Subordination.
--------------------------
6.1 Waiver of Rights Against Company. Until the final payment and
---------------------------------
performance in full of all of the Obligations, to the fullest extent
permitted under applicable law, the Guarantor shall not exercise and hereby
waives any rights against the Company arising as a result of payment by the
Guarantor hereunder, by way of subrogation, reimbursement, restitution,
contribution or otherwise, and will not prove any claim in competition with
the Agent or any Bank in respect of any payment hereunder in any
bankruptcy, insolvency or reorganization case or proceedings of any nature;
the Guarantor will not claim any setoff, recoupment or counterclaim against
the Company in respect of any liability of the Guarantor to the Company;
and the Guarantor waives any benefit of and any right to participate in any
collateral security which may be held by the Agent or any Bank.
6.2 Subordination. The payment of any amounts due with respect to
-------------
any indebtedness of the Company for money borrowed or credit received now
or hereafter owed to the Guarantor is hereby subordinated to the prior
payment in full of all of the Obligations. The Guarantor agrees that, after
the occurrence of any default in the payment or performance of any of the
Obligations, the Guarantor will not demand, sue for or otherwise attempt to
collect any such indebtedness of the Company to the Guarantor until all of
the Obligations shall have been paid in full. If, after the occurrence of
any default in the payment or performance of any of the Obligations, the
Guarantor shall collect, enforce or receive any amounts in respect of such
indebtedness while any Obligations are still outstanding, such amounts
shall be collected, enforced and received by the Guarantor as trustee for
the Banks and the Agent and be paid over to the Agent, for the benefit of
the Banks and the Agent, on account of the Obligations without affecting in
any manner the liability of the Guarantor under the other provisions of
this Guaranty.
6.3 Provisions Supplemental. The provisions of this (S)6 shall be
-----------------------
supplemental to and not in derogation of any rights and remedies of the
Banks and the Agent under any separate subordination agreement which the
Agent may at any time and from time to time enter into with the Guarantor
for the benefit of the Banks and the Agent.
7. Representations and Warranties. The Guarantor represents and warrants
------------------------------
to the Banks and the Agent as follows:
7.1. Existence; Good Standing. (a) The Guarantor (i) is a limited
------------------------
partnership duly organized, validly existing and in good standing under the
laws of its state of organization, (ii) has all requisite partnership power
to own its property and conduct its business as now conducted and presently
contemplated and (iii) is duly authorized to do business in each
jurisdiction where such qualification is necessary except where failure to
be so qualified would not have a materially adverse effect on the business,
assets or
<PAGE>
-6-
financial condition of the Guarantor, the Company and the Subsidiaries of
the Company, considered as a whole;
(b) Each of the general partners of the Guarantor (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, (ii) has all requisite corporate power
to own its property and conduct its business as now conducted and as
presently contemplated, including, without limitation, with respect to the
general partners of the Guarantor, to act as general partner of the
Guarantor, as the case may be, and (iii) is in good standing as a foreign
corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where a failure to be so
qualified would not have a materially adverse effect on the business,
assets or financial condition of the Guarantor, the Company and the
Subsidiaries of the Company, considered as a whole.
7.2. Authorization. The execution, delivery and performance of this
-------------
Guranty and the other Loan Documents to which the Guarantor is or is to
become a party and the transactions contemplated hereby and thereby by the
Guarantor (a) are within the partnership authority of the Guarantor, (b)
have been duly authorized by all necessary partnership proceedings, (c) do
not conflict with or result in any breach or contravention of any provision
of law, statute, rule or regulation to which the Guarantor is subject or
any judgment, order, writ, injunction, license or permit applicable to the
Guarantor and (d) do not conflict with any provision of the partnership
certificate, the partnership agreement or any agreement or other instrument
binding upon the Guarantor.
7.3. Enforceability. The execution and delivery of this Guaranty and
--------------
the other Loan Documents to which the Guarantor is or is to become a party
will result in valid and legally binding obligations of the Guarantor
enforceable against it in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating
to or affecting generally the enforcement of creditors' rights and by
general principles of equity.
7.4. Governmental Approvals. The execution, delivery and performance
----------------------
by the Guarantor of this Guaranty and the other Loan Documents to which the
Guarantor is or is to become a party and the transactions contemplated
hereby and thereby by such party do not require the approval or consent of,
or filing (except as set forth in Schedule 8.18 to the Credit Agreement)
with, any governmental agency or authority other than those already
obtained, other than any consent to this Guaranty required to be given by
the other partners under the Operating Partnership Agreement, which
consents, if any, have been duly received, and other than any approval,
consent or filing which would not reasonably be expected to have a material
adverse effect on the financial condition, properties or
<PAGE>
-7-
business of the Guarantor, the Company and the Subsidiaries of the Company,
considered as a whole or the rights and obligations arising under the
transactions contemplated in the Loan Documents, or, in the case of any
filing, approval or consent which may need to be obtained in connection
with (a) maintaining the perfected security interest of the Agent under the
Loan Documents, (b) any partnership filings necessary in the ordinary
course of business (including, without limitation, necessary filings to
maintain good standing and legal existence of such Person and any necessary
securities law filings), and (c) the maintenance of any existing or after
acquired licenses or permits, will be obtained as required by such
governmental agency or authority.
7.5. Litigation. There are no actions, suits, proceedings or
----------
investigations of any kind pending or, to its knowledge, threatened against
the Guarantor before any court, tribunal or administrative agency or board
as to which there is any reasonable possibility of an adverse determination
which would reasonably be expected to have, either in any case or in the
aggregate, a material adverse effect on the properties, assets, financial
condition or business of the Guarantor, the Company and the Subsidiaries of
the Company, considered as a whole, to carry on business substantially as
now conducted by them, or result in any substantial liability not
adequately covered by insurance, or for which adequate reserves are not
maintained on the consolidated balance sheet of the Company and its
Subsidiaries, or which question the validity of this Guaranty or any of the
other Loan Documents, or any action taken or to be taken pursuant hereto or
thereto.
7.6. Compliance with Other Instruments, Laws, etc. The Guarantor is
--------------------------------------------
not in violation of any provision of its charter documents, bylaws,
partnership certificate, partnership agreement or any agreement or
instrument to which it may be subject or by which it or any of its
properties may be bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could
reasonably be expected to result in the imposition of substantial penalties
or materially and adversely affect the financial condition, properties or
business of the Guarantor, the Company and the Subsidiaries of the Company,
considered as a whole. The Guarantor is not subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule
or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of the
Guarantor, the Company and the Subsidiaries of the Company, considered as a
whole.
7.7. Holding Company and Investment Company Acts. The Guarantor is not
--------------------------------------------
a "holding company", or a "subsidiary company" of a "holding company", or
an affiliate" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935; nor is it an "investment
company", or an "affiliated company" or a "principal underwriter" of an
"investment company", as such terms are defined in the Investment Company
Act of 1940. The Guarantor has not engaged in any
<PAGE>
-8-
transaction with any "affiliated company" or "principal underwriter" of an
"investment company" in violation of the Investment Company Act of 1940.
7.8. Chief Executive Offices. The Guarantor's chief executive office
-----------------------
is at 6080 Surety Drive, El Paso, Texas 79905, at which location its books
and records are kept.
7.9. No Amendments to Certain Documents. Since the Closing Date the
----------------------------------
Guarantor has not amended the Operating Partnership Agreement, the Holdings
Partnership Agreement, the Consent Documents, the Chartwell Purchase
Agreement or the Kirschner Purchase Agreement in any material respect. Each
of the representations and warranties made by the Guarantor in any of the
Loan Documents, the Discount Notes Indenture, the Discount Notes, the
Operating Partnership Agreement, the Holdings Partnership Agreement, the
Consent Documents, the Chartwell Purchase Agreement or the Kirschner
Purchase Agreement was true and correct in all material respects when made
and remains true and correct in all material respects on the Closing Date,
except to the extent that any of such representations and warranties
relate, by the express terms thereof, solely to a date falling prior to the
Closing Date, and except to the extent that any of such representations and
warranties may have been affected by the consummation of the transactions
contemplated and permitted by the Loan Documents and the Recapitalization.
7.10. Disclosure. None of the Recapitalization Documents nor any
----------
representation or warranty made by the Guarantor in this Guaranty, the
Recapitalization Documents or in any agreement, instrument, document,
certificate, written statement or letter furnished to the Agent or the
Banks, by or on behalf of the Guarantor in connection with any of the
transactions contemplated by any of the Loan Documents or the
Recapitalization Documents contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained therein taken as a whole not misleading as of the time when made
or deemed to be made in light of the circumstances in which they are made.
8. Affirmative Covenants. The Guarantor covenants and agrees that, so
---------------------
long as any Loan, Unpaid Reimbursement Obligation or Letter of Credit is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue, extend or renew any Letters of Credit:
8.1. Maintenance of Office. The Guarantor will maintain its chief
---------------------
executive office in El Paso, Texas or at such other place in the United
States of America as the Guarantor shall designate upon written notice to
the Agent, where notices, presentations and demands to or upon the
Guarantor in respect of the Loan Documents to which the Guarantor is a
party may be given or made.
<PAGE>
-9-
8.2. Records and Accounts. The Guarantor will (a) keep true and
--------------------
accurate records and books of account in which full, true and correct
entries will be made in accordance with generally accepted accounting
principles and (b) maintain adequate accounts and reserves, to the extent
required by generally accepted accounting principles, for all taxes
(including income taxes), depreciation, depletion, obsolescence and
amortization of its properties, contingencies, and other reserves.
8.3. Notices. The Guarantor will give notice to the Agent and each of
-------
the Banks in writing within fifteen (15) days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation
and proceedings against the Guarantor or to which the Guarantor is or
becomes a party involving a claim against the Guarantor as to which there
is a reasonable probability of an adverse determination and which if
adversely determined would reasonably be expected to have a materially
adverse effect on the Guarantor, the Company and the Subsidiaries of the
Company, considered as a whole, and stating the nature and status of such
litigation or proceedings. The Guarantor will give notice to the Agent and
each of the Banks, in writing, in form and detail satisfactory to the
Agent, within ten (10) days of any judgment, final or otherwise, against
the Guarantor in an amount which exceeds applicable insurance coverage by
more than $500,000.
8.4. Existence; Maintenance of Properties. The Guarantor will do or
------------------------------------
cause to be done all things necessary to preserve and keep in full force
and effect its partnership existence, rights and franchises and to preserve
and keep in full force and effect the partnership or corporate existence of
its general partner. The Guarantor will continue to be a special purpose
holding company and will not have any significant liabilities (other than
liabilities arising under the Recapitalization Documents, the Discount
Notes, the Discount Notes Indenture or Indebtedness permitted under (S)9.1
hereof), own any significant assets (other than its partnership interests
in the Company and its ownership of any other Subsidiaries) or be engaged
in any other significant activity or business. The Guarantor will continue
to own ninety-nine percent (99%) of the Company at all times.
8.5 Taxes. The Guarantor will duly pay and discharge, or cause to be
-----
paid and discharged, before the same shall become delinquent, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the income
or profits therefrom, as well as all claims for labor, materials, or
supplies that if unpaid might by law become a lien or charge upon any of
its property; provided that any such tax, assessment, charge, levy or claim
--------
need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if the Guarantor
shall have set aside on its books adequate reserves, to the extent required
by generally accepted accounting principles, with respect thereto; and
provided further that the Guarantor will pay all such taxes, assessments,
-------- -------
charges, levies or claims
<PAGE>
-10-
forthwith upon the commencement of proceedings to foreclose any lien that
may have attached as security therefor.
8.6. Inspection of Properties and Books, etc. The Guarantor shall
---------------------------------------
permit the Banks, through the Agent or any of the Banks' other designated
representatives, to visit and inspect any of the properties of the
Guarantor, to examine the books of account of the Guarantor(and to make
copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Guarantor with, and to be advised as to the
same by, its officers, all at such reasonable times and intervals as the
Agent or any Bank may reasonably request; provided, that, for all Stopping
--------
Centers, at any time prior to a Default or an Event of Default, the Agent
or such Bank shall give the Borrower prior written notice of such
inspection, the inspection shall occur during daytime business hours, and
the Agent or such Bank shall be accompanied by a designated officer or
director of the Borrower (so long as the Borrower makes such designated
officer or director available at such time).
8.7. Compliance with Laws, Contracts, Licenses, and Permits. The
------------------------------------------------------
Guarantor will comply in all material respects with (a) the applicable laws
and regulations wherever its business is conducted, (b) the provisions of
its partnership certificate, partnership agreement, charter documents and
by-laws, (c) all material agreements and instruments by which it or any of
its properties may be bound except as would not reasonably be expected to
have a material adverse effect on the business, assets or financial
condition of the Guarantor, the Company and the Subsidiaries of the
Company, considered as a whole, and (d) all applicable decrees, orders, and
judgments. If any authorization, consent, approval, permit or license from
any officer, agency or instrumentality of any government shall become
necessary or required in order that the Guarantor may fulfill any of its
obligations hereunder or under any of the other Loan Documents to which the
Guarantor is a party, the Guarantor will immediately take or cause to be
taken all reasonable steps within the power of the Guarantor to obtain such
authorization, consent, approval, permit or license and furnish the Agent
and the Banks with evidence thereof.
9. Negative Covenants. The Guarantor covenants and agrees that, so long as
------------------
any Loan, Unpaid Reimbursement Obligation, Letter of Credit is outstanding or
any Bank has any obligation to make any Loans or the Agent has any obligations
to issue, extend or renew any Letters of Credit:
9.1. Restrictions on Indebtedness. The Guarantor will not create,
----------------------------
incur, assume, guarantee or be or remain liable, contingently or otherwise,
with respect to any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any
of the Loan Documents;
<PAGE>
-11-
(b) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be
made in accordance with the provisions of (S)8.5;
(c) Indebtedness in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal
so long as execution is not levied thereunder or in respect of which
the Guarantor shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
(d) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
(e) Indebtedness evidenced by the Discount Notes;
(f) Indebtedness existing on the date hereof and listed and
described on Schedule 9.1 hereto; and
-------- ---
(g) Indebtedness described under the definition of "Permitted
Indebtedness" contained in the Discount Notes Indenture, as in effect
on the Closing Date.
9.2. Restrictions on Liens. The Guarantor will not create or incur or
---------------------
suffer to be created or incurred or to exist any Lien; provided that the
Guarantor may create or incur or suffer to be created or incurred or to
exist:
(a) Liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by (S)9.1(c);
(b) Liens existing on the date hereof and listed on Schedule 9.2
-------- ---
hereto;
(c) Liens in favor of the Agent for the benefit of the Banks and
the Agent under the Loan Documents; and
(d) Liens described under subclauses (a) through (g), and (i)
through (k) of the definition of "Permitted Liens" contained in the
Discount Notes Indenture, as in effect on the Closing Date.
9.3. Distributions. The Guarantor will not make any Distributions
-------------
other than those Distributions permitted under Section 4.8 of the Discount
Notes Indenture, as in effect on the Closing Date:
9.4. Transactions with Affiliates. The Guarantor will not engage in
----------------------------
transactions with its Affiliates except for transactions with Affiliates
permitted under each of (a) the provisions of Section 4.10 of the Discount
<PAGE>
-12-
Note Indenture, as in effect on the Closing Date and (b) the provisions of
Section 10.8 of the Credit Agreement.
9.5. Inconsistent Agreements. The Guarantor will not enter into any
-----------------------
agreement containing any provision which would be violated or breached by
the performance by the Guarantor of its obligations hereunder or under any
of the Loan Documents.
10. Further Assurances. The Guarantor agrees that it will from time to
------------------
time, at the request of the Agent, do all such things and execute all such
documents as the Agent may consider necessary or desirable to give full effect
to this Guaranty and to perfect and preserve the rights and powers of the Banks
and the Agent hereunder. The Guarantor acknowledges and confirms that the
Guarantor itself has established its own adequate means of obtaining from the
Company on a continuing basis all information desired by the Guarantor
concerning the financial condition of the Company and that the Guarantor will
look to the Company and not to the Agent or any Bank in order for the Guarantor
to keep adequately informed of changes in the Company's financial condition.
11. Termination; Reinstatement. This Guaranty shall remain in full force
--------------------------
and effect until the irrevocable payment in full in cash and performance of all
of the Obligations and the termination of all of the Commitments of the Banks
and the Agent. To the fullest extent permitted under applicable law, this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment made or value received with respect to any Obligation is
rescinded or must otherwise be returned by the Agent or any Bank upon the
insolvency, bankruptcy or reorganization of the Company, or otherwise, all as
though such payment had not been made or value received.
12. Successors and Assigns. This Guaranty shall be binding upon the
----------------------
Guarantor, its successors and assigns, and shall inure to the benefit of the
Agent and the Banks and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing sentence, each Bank may assign
or otherwise transfer the Credit Agreement, the other Loan Documents or any
other agreement or note held by it evidencing, securing or otherwise executed in
connection with the Obligations, or sell participations in any interest therein,
to any other entity or other person, and such other entity or other person shall
thereupon become vested, to the extent set forth in the agreement evidencing
such assignment, transfer or participation, with all the rights in respect
thereof granted to such Bank herein, all in accordance with (S)21 of the Credit
Agreement. The Guarantor may not assign any of its obligations hereunder.
13. Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Guaranty nor consent to any departure by the Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Agent with the
consent of the Majority Banks. No failure on the part of the Agent or any Bank
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver
<PAGE>
-13-
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
14. Notices. All notices and other communications called for hereunder
-------
shall be made in writing and, unless otherwise specifically provided herein,
shall be in writing and shall be delivered by hand, mailed by United States
registered or certified first class mail, postage prepaid, sent by overnight
courier, or sent by telegraph, telecopy, telex or facsimile and confirmed by
delivery via courier or postal service, addressed as follows: if to the
Guarantor, at the address set forth beneath its signature hereto, and if to the
Agent, at the address for notices to the Agent set forth in (S)22 of the Credit
Agreement, or at such address as either party may designate in writing to the
other. Any such notice or demand shall be deemed to have been duly made or given
and to have become effective (a) if delivered by hand, overnight courier,
telegraph, telecopy, telex or facsimile to a responsible officer of the party to
which it is directed, at the time of receipt thereof by such officer or the
receipt of such telegraph, telecopy telex or facsimile and (b) if sent by
registered or certified first class mail, postage prepaid, on the third Business
Day following the mailing thereof; provided, however, that telexed, telecopied
-------- -------
or facsimile notices received by any party after its normal business hours (or
on a day other than a Business Day) shall be effective on the next Business Day.
15. Governing Law; Consent to Jurisdiction. THE GUARANTY IS A CONTRACT
--------------------------------------
UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). The
Guarantor agrees that any suit for the enforcement of this Guaranty may be
brought in the courts of the Commonwealth of Massachusetts or any federal court
sitting therein and consents to the nonexclusive jurisdiction of such court and
to service of process in any such suit being made upon the Guarantor by mail at
the address specified by reference in (S)14. The Guarantor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit was brought in an inconvenient court.
16. Waiver of Jury Trial. EACH OF THE BANKS AND THE GUARANTOR HEREBY
--------------------
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as
prohibited by law, the Guarantor hereby waives any right which it may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive or consequential damages or any damages other than,
or in addition to, actual damages. The Guarantor (a) certifies that no
representative, agent or attorney of the Agent or any Bank has represented,
expressly or otherwise, that the Agent or such Bank would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledges that, in
entering into the Credit Agreement and the other Loan Documents to which the
<PAGE>
-14-
Agent or any Bank is a party, the Agent and the Banks are relying upon, among
other things, the waivers and certifications contained herein.
17. Miscellaneous. This Guaranty constitutes the entire agreement of the
-------------
Guarantor with respect to the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or any other agreement, and this Guaranty shall be in addition to any other
guaranty of or collateral security for any of the Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for the
ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
PETRO STOPPING CENTERS
HOLDINGS, L.P.
By:_________________________
Name:
Title:
Address:
____________________________
____________________________
____________________________
____________________________
Fax No.: ___________________
<PAGE>
Exhibit 12.1
PETRO STOPPING CENTERS HOLDINGS, L.P.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------ ------------------
1994 1995 1996 1997 1998 1998 1999
------------------------------------------------ ------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest expense 18,781 21,111 21,304 21,248 20,771 10,362 10,226
Operating lease rentals 789 668 734 678 880 460 384
--------------------------------------------------------------------
Total fixed costs 19,570 21,779 22,038 21,926 21,651 10,822 10,610
Pretax income from continuing operations 10,479 3,775 (8,760) 1,759 5,678 2,168 2,650
Fixed costs 19,570 21,779 22,038 21,926 21,651 10,822 10,610
--------------------------------------------------------------------
Total earnings 30,049 25,554 13,278 23,685 27,329 12,990 13,260
Ratio of earnings to fixed charges 1.54x 1.17x .60x 1.08x 1.26x 1.20x 1.25x
====================================================================
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings are
defined as pretax income from continuing operations plus fixed charges. Fixed
charges consist of interest expense (including amortization of debt issuance
costs) and the portion of rental expense that is representative of the interest
factor (deemed to be one-third of minimum operating lease rentals).
<PAGE>
Exhibit 21.1
Petro Stopping Centers Holdings, L.P. and Subsidiaries
<TABLE>
<CAPTION>
Jurisdiction of Percent
Name Incorporation Owned
<S> <C> <C>
Petro Stopping Centers Holdings, L.P.:
Petro Holdings Financial Corporation Delaware 100%
Petro Holdings GP, LLC Delaware 100%
Petro Stopping Centers, L.P. Delaware 99.5%
Petro Financial Corporation Delaware 100%
Petro Distributing, Inc. Delaware 100%
</TABLE>
<PAGE>
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
Arthur Andersen LLP
Dallas, TX
September 16, 1999
<PAGE>
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)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
PETRO STOPPING CENTERS HOLDINGS, L.P.
PETRO HOLDINGS FINANCIAL CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 74-2922482
DELAWARE 74-2922355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6080 Surety Drive
El Paso, Texas 79905
(Address of principal executive offices) (Zip Code)
15% Senior Discount Notes Due 2008
(Title of indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to
which it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No. 22-
17940) and is incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A copy of the authorization of the trustee to exercise
corporate trust powers, if such authorization is not contained in the
documents specified in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No. 22-
17940) and is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the September 15, 1999.
STATE STREET BANK AND TRUST COMPANY
By: _______________________________
RUTH SMITH
VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by Petro Stopping
Centers Holdings, L.P. and Petro Holdings Financial Corporation. of its 15%
Senior Discount Notes due 2008, we hereby consent that reports of examination
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: ______________________________
RUTH SMITH
VICE PRESIDENT
Dated: September 15, 1999
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.......................................................... 1,249,670
Interest-bearing balances................................................................................... 13,236,699
Securities....................................................................................................... 10,970,415
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary......................................................................... 9,561,556
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 7,053,580
Allowance for loan and lease losses.................. 85,416
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances..................................................... 6,968,164
Assets held in trading accounts.................................................................................. 1, 553,354
Premises and fixed assets........................................................................................ 536,535
Other real estate owned.......................................................................................... 0
Investments in unconsolidated subsidiaries....................................................................... 606
Customers' liability to this bank on acceptances outstanding..................................................... 71,273
Intangible assets................................................................................................ 207,323
Other assets..................................................................................................... 1,371,043
----------
Total assets..................................................................................................... 45,726,638
==========
LIABILITIES
Deposits:
In domestic offices......................................................................................... 10,101,297
Noninterest-bearing............................ 6,932,549
Interest-bearing............................... 3,168,748
In foreign offices and Edge subsidiary...................................................................... 18,061,721
Noninterest-bearing............................ 54,654
Interest-bearing............................... 18,007,067
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary......................................................................... 12,063,069
Demand notes issued to the U.S. Treasury......................................................................... 149,322
Trading liabilities......................................................................................... 1,140,080
Other borrowed money............................................................................................. 285,027
Subordinated notes and debentures................................................................................ 0
Bank's liability on acceptances executed and outstanding......................................................... 71,273
Other liabilities................................................................................................ 1,079,470
Total liabilities................................................................................................ 42,951,259
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus.................................................................... 0
Common stock..................................................................................................... 29,931
Surplus.......................................................................................................... 480,330
Undivided profits and capital reserves/Net unrealized holding gains (losses)..................................... 2,258,177
Net unrealized holding gains (losses) on available-for-sale securities...................................... 15,937
Cumulative foreign currency translation adjustments.............................................................. (8,996)
Total equity capital............................................................................................. 2,775,379
----------
Total liabilities and equity capital............................................................................. 45,726,638
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof .
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary, to
reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the September 15, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth Smith
--------------------------------
RUTH SMITH
VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance byPetro Stopping
Centers Holdings, L.P. and Petro Holdings Financial Corporation of its 15%
Senior Discount Notes due 2008, we hereby consent that reports of examination by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth Smith
--------------------------------
RUTH SMITH
VICE PRESIDENT
Dated: September 15, 1999
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001094067
<NAME> PETRO STOPPING CENTERS HOLDINGS LLP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 19,401
<SECURITIES> 0
<RECEIVABLES> 15,587
<ALLOWANCES> 789
<INVENTORY> 17,929
<CURRENT-ASSETS> 56,301
<PP&E> 222,572
<DEPRECIATION> 57,807
<TOTAL-ASSETS> 242,540
<CURRENT-LIABILITIES> 64,088
<BONDS> 0<F1>
24,207
0
<COMMON> 0
<OTHER-SE> (40,411)
<TOTAL-LIABILITY-AND-EQUITY> 242,540
<SALES> 0
<TOTAL-REVENUES> 322,013
<CGS> 245,115
<TOTAL-COSTS> 308,483
<OTHER-EXPENSES> 16,434
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 10,027
<INCOME-PRETAX> 2,650
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,242
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR
ACCOMPANYING NOTES THERETO.
</FN>
</TABLE>
