<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
NOTE EXCHANGE OFFER
ON
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
WAINOCO OIL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WYOMING 2911 74-1895085
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
10000 MEMORIAL DRIVE, SUITE 600
HOUSTON, TEXAS 77024-3411
(713) 688-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JULIE H. EDWARDS
CHIEF FINANCIAL OFFICER
10000 MEMORIAL DRIVE, SUITE 600
HOUSTON, TEXAS 77024-3411
(713) 688-9600
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
Copies to:
ROBERT V. JEWELL
CHRISTOPHER S. COLLINS
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If 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. [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(2) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/8% Senior Notes due
2006, Series A......... $70,000,000 $100.8125 $70,568,750 $20,818
- -----------------------------------------------------------------------------------
</TABLE>
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(1) Based on average of the bid price of $100.625 and ask price of $101.00 per
$100.00 principal amount of the Old Notes at the close of business on
March 9, 1998.
(2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933 as the
market value of the securities to be cancelled in the exchange.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 11, 1998
PROSPECTUS
WAINOCO OIL CORPORATION
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 9 1/8% SENIOR NOTES DUE 2006, SERIES A
FOR EACH $1,000 PRINCIPAL AMOUNT OF OUTSTANDING
9 1/8% SENIOR NOTES DUE 2006
($70,000,000 IN AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
-----------
Wainoco Oil Corporation, a Wyoming corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal, to exchange $1,000
principal amount of its 9 1/8% Senior Notes Due 2006, Series A (the "Exchange
Notes"), in a transaction registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of the outstanding 9 1/8% Senior Notes due 2006 (the "Old
Notes"), of which $70,000,000 aggregate principal amount is outstanding (the
"Exchange Offer"). The Exchange Notes and the Old Notes are sometimes referred
to herein collectively as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the date
the Exchange Offer expires, which will be , 1998 unless the Exchange Offer
is extended (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
certain conditions that may be waived by the Company and to the terms and
provisions of the Registration Rights Agreement (as defined herein). See "The
Exchange Offer." Old Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The Company has agreed to pay the expenses of the
Exchange Offer. There will be no cash proceeds to the Company from the Exchange
Offer. See "Use of Proceeds."
The Exchange Notes will be obligations of the Company entitled to the
benefits of the indenture relating to the Notes (the "Indenture"). The form and
terms of the Exchange Notes are identical in all material respects to the form
and terms of the Old Notes, except that (i) the offering of the Exchange Notes
has been registered under the Securities Act, (ii) the Exchange Notes will not
be subject to transfer restrictions and (iii) the Exchange Notes will not be
entitled to registration or other rights under the Registration Rights
Agreement including the provision in the Registration Rights Agreement for
payment of Liquidated Damages (as defined in the Registration Rights Agreement)
upon failure by the Company to consummate the Exchange Offer or the occurrence
of certain other events. Following the Exchange Offer, any holders of Old Notes
will continue to be subject to the existing restrictions on transfer thereof
and, as a general matter, the Company will not have any further obligation to
such holders to provide for registration under the Securities Act of transfers
of the Old Notes held by them. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered and
tendered but unaccepted Old Notes could be adversely affected. See "Risk
Factors" and "The Exchange Offer--Purpose and Effect of the Exchange Offer."
(continued on next page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998.
<PAGE>
The Old Notes were sold by the Company on February 9, 1998, to Bear, Stearns
& Co., Inc. (the "Initial Purchaser") in transactions not registered under the
Securities Act in reliance upon the exemption provided in Section 4(2) of the
Securities Act (the "Offering"). The Initial Purchaser subsequently resold the
Old Notes to qualified institutional buyers (as defined in Rule 144A under the
Securities Act) ("Qualified Institutional Buyers" or "QIBs") or outside the
United States within the meaning of Regulation S under the Securities Act, the
purchasers of which agreed to comply with certain transfer restrictions and
other restrictions. Accordingly, the Old Notes may not be reoffered, resold or
otherwise transferred in the United States unless such transaction is
registered under the Securities Act or an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange
Notes are being offered hereby in order to satisfy the obligations of the
Company under a registration rights agreement among the Company and the
Initial Purchaser relating to the Old Notes (the "Registration Rights
Agreement").
The Exchange Notes will bear interest at a rate of 9 1/8% per annum, payable
semiannually on February 15 and August 15 of each year, commencing August 15,
1998. Holders of Exchanges Notes of record on August 1, 1998, will receive on
August 15, 1998, an interest payment in an amount equal to (x) the accrued
interest on such Exchange Notes from the date of issuance thereof to August
15, 1998, plus (y) the accrued interest on the previously held Old Notes from
the date of issuance of such Old Notes (February 9, 1998) to the date of
exchange thereof. Interest will not be paid on Old Notes that are accepted for
exchange. The Notes mature on February 15, 2006.
The Old Notes were initially represented by two global Old Notes (the "Old
Global Notes") in registered form, registered in the name of Cede & Co., as a
nominee for The Depository Trust Company ("DTC" or the "Depositary"), as
depositary. The Exchange Notes exchanged for Old Notes represented by the Old
Global Notes will be initially represented by one global Exchange Note (the
"Exchange Global Note") in registered form, registered in the name of the
Depositary. References herein to "Global Notes" shall be references to the Old
Global Notes and the Exchange Global Note.
Based on an interpretation of the Securities Act by the staff of the
Securities and Exchange Commission (the "SEC"), Exchange Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than (i) a broker-
dealer who purchased such Old Notes directly from the Company for resale
pursuant to Rule 144A or any other available exemption under the Securities
Act or (ii) a person that is an "affiliate" (within the meaning of Rule 405 of
the Securities Act) of the Company), without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that the
holder is acquiring the Exchange Notes in its ordinary course of business and
is not participating, and has no arrangement or understanding with any person
to participate, in the distribution of the Exchange Notes. Holders of Old
Notes wishing to accept the Exchange Offer must represent to the Company that
such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must agree that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of one year after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The Exchange Notes will be a new issue of securities for which there
currently is no market. Although the Initial Purchaser has informed the
Company that it currently intends to make a market in the Exchange Notes, it
is not obligated to do so, and any such market making may be discontinued at
any time without notice. As the Old Notes were issued and the Exchange Notes
are being issued to a limited number of institutions who typically hold
similar securities for investment, the Company does not expect that an active
public market for the
i
<PAGE>
Exchange Notes will develop. Accordingly, there can be no assurance as to the
development, liquidity or maintenance of any market for the Exchange Notes on
any securities exchange or for quotation through the Nasdaq Stock Market. See
"Risk Factors."
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER THE RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the detailed information and consolidated financial statements
and notes thereto appearing elsewhere in this Prospectus. Prospective investors
should carefully consider the matters discussed under the caption "Risk
Factors." Unless the context otherwise requires, all references in this
Prospectus to "Wainoco" or the "Company" are to Wainoco Oil Corporation and its
subsidiaries. As used herein, "Rocky Mountain region" refers to the five states
in the fourth Petroleum Allocation Defense District ("PADD IV"): Colorado,
Wyoming, Utah, Montana and Idaho. The Financial Data of the Company included
herein have been restated to reflect the disposition of the Company's United
States and Canadian oil and gas operations.
THE COMPANY
GENERAL
Wainoco is an independent energy company engaged in crude oil refining and
the wholesale marketing of refined petroleum products, primarily in the Rocky
Mountain region of the United States. The Company operates a complex refinery
(the "Frontier Refinery") in Cheyenne, Wyoming with a permitted crude oil
capacity of 41,000 barrels per day ("bpd"). Since its acquisition of the
Frontier Refinery in 1991, the Company spent approximately $60 million in a
capital improvement program from 1992 through 1993 which, among other things,
(i) increased the Frontier Refinery's capability to process heavy crude oil,
(ii) enabled the Frontier Refinery to meet federally-mandated low sulfur
standards with respect to all of its diesel fuel production and (iii) improved
the Frontier Refinery's general reliability. An important feature of the
Frontier Refinery is its ability to process up to 100% heavy crude oil, which
is less expensive than sweet crude oil. As a result, the Company is well
positioned to benefit from an increase in the differential between the price of
lower cost heavy crude oil and the price of more expensive sweet crude oil
feedstocks (the "light/heavy spread"), which is currently estimated to be $4.55
per barrel ("bbl"). See "Business--Refining Operations--Varieties of Crude
Oil." For the year ended December 31, 1997, the Company achieved consolidated
revenues of $376.4 million and EBITDA (as defined herein) of $30.9 million.
The Company markets refined products primarily in eastern Colorado (including
the Denver metropolitan area) and eastern Wyoming, or the "Eastern Slope area"
of the Rocky Mountain region. The Company also markets refined products in
western Nebraska and, through exchange agreements with other refiners, in the
Dakotas and Utah. Of the 15 crude oil refineries in the Rocky Mountain region,
the Company only considers the four other refineries (two in Denver and two in
Wyoming) located within the Eastern Slope area to be competitors, although
additional competition comes from refineries outside the Eastern Slope area
that supply refined products to the area via pipeline. The Company believes it
has an advantage over (i) its four refinery competitors because only the
Company operates a coking unit, which enables it to produce a higher yield of
gasoline and diesel fuel from heavy crude oil, and (ii) the pipeline
competitors that ship product into the Eastern Slope area because they must
incur a transportation cost, which for Gulf Coast refiners equates to
approximately $1.60 per bbl. Furthermore, while it has in the past generally
marketed unbranded products, in the second half of 1997, the Company entered
into a marketing agreement with CITGO Petroleum Corporation ("CITGO") to market
branded products to independent and other branded retail operators in its
market area. For the year ended December 31, 1997, the Frontier Refinery's
product mix included various grades of gasoline (51%), diesel fuel (30%) and
asphalt and other refined petroleum products (19%).
The Company prefers to process locally produced heavy crude oil. In the year
ended December 31, 1997, the Company obtained approximately 84% of its crude
oil supply, or charge, from Wyoming producers while Canadian heavy crude oil
made up a majority of the Frontier Refinery's remaining feedstocks. During the
same period, heavy crude oil constituted approximately 91% of the Frontier
Refinery's total crude oil charge. The Company believes it is able to obtain
favorable pricing terms for the heavy crude oil it uses as feedstock because
1
<PAGE>
available supply currently outstrips demand. None of the Company's direct
competitors, and only three other refineries in the entire Rocky Mountain
region, operate coking units necessary to process high volumes of heavy crude
oil. In addition, while Wyoming crude oil production is declining, the
completion of the 785-mile Express Pipeline from Hardisty, Alberta to Casper,
Wyoming in April 1997 immediately doubled available pipeline capacity for
Canadian crude oil to the Wyoming market. The Express Pipeline has benefitted
the Company by (i) holding down prices of Wyoming heavy crude oil and (ii)
providing the Company with the flexibility to significantly increase the
Frontier Refinery's Canadian heavy crude oil charge if favorable supply and
pricing conditions arise. The Company also receives a supply cost advantage on
up to 25,000 bpd from its partial ownership interest in a crude oil pipeline
(the "Centennial Pipeline") that runs from the regional hub at Guernsey,
Wyoming to the Frontier Refinery.
BUSINESS STRATEGY AND STRENGTHS
The Company's business strategy includes the following major objectives: (i)
focus solely on refining operations, (ii) capitalize on improvements in the
light/heavy spread, (iii) concentrate marketing efforts in the Rocky Mountain
region, which has experienced high demand growth, and (iv) selectively pursue
acquisitions of refining and related transportation assets as attractive
opportunities arise. The Company believes it is well-positioned to execute its
strategy as a result of the following factors:
Refinery with Ability to Process 100% Heavy Crude Oil. The Company is able to
exploit the light/heavy spread because the Frontier Refinery's coking unit
provides significant "upgrading" capability, or the ability to produce a higher
yield of higher margin refined products, such as gasoline and diesel fuel, than
would otherwise be possible in refining heavy crude oil feedstocks. A capital
improvements program at the Frontier Refinery expanded the capacity of its
coking unit from 8,200 bpd to 10,000 bpd giving it the capability to process
100% heavy crude oil. At the same time, the Company retains the flexibility to
process sweet crude oil should heavy crude oil become less economically
advantageous to process. In the two-year period ended December 31, 1997, the
Frontier Refinery's average crude oil charge was 90% heavy crude oil, and in
1997, the Frontier Refinery processed approximately 11.7 million barrels
("mmbbls") of heavy crude oil. Accordingly, a widening in the Company's
light/heavy spread has a direct impact on the Company's profitability. The
Company has recently benefitted from an increase in its light/heavy spread; for
the year ended December 31, 1997 the Company's light/heavy spread improved to
$3.54 per bbl from $2.56 per bbl for the same period in 1996. In the quarter
ended December 31, 1997, the Company's light/heavy spread was $3.82 per bbl.
Favorable Crude Oil Supply Conditions. While Wyoming crude oil production is
declining, expanding Canadian heavy crude oil production combined with local
pipeline access to such production has produced crude oil supply conditions
favorable to the Frontier Refinery. Canadian heavy crude oil production
increased 24% from 1990 through 1995 without a corresponding increase in
Canadian refining capacity. With the opening of the Express Pipeline in April
1997, the Frontier Refinery now has more direct pipeline access to Canadian
production in substantial volumes. The current capacity of the Express Pipeline
is 172,000 bpd. The Express Pipeline has reduced transportation costs incurred
by the Company by approximately $0.75 per bbl, and the Company believes that
the Express Pipeline has reduced transportation time from approximately 30 days
to 15 days. The expansion of the available supply of heavy crude oil from the
Express Pipeline has also put downward pressure on the price of locally
produced heavy crude oil. In addition, while the Company favors heavy crude
oil, the Express Pipeline provides the Frontier Refinery with access to a
greater variety of crude oil types. The Company has entered into a 15-year
commitment with the Express Pipeline for the delivery of approximately 13,800
bpd, subject to an assignment of a portion of the capacity in early years for
additional capacity in later years.
Attractive Market Region. The Company believes that the Rocky Mountain
region, particularly the Eastern Slope area, offers a favorable refining market
in which to operate, featuring strong demand for refined products and abundant
supply of crude oil feedstocks. Gasoline consumption in Colorado, where the
Company markets
2
<PAGE>
71.0% of its gasoline sales volumes, has increased at a rate of 5.4% per year
from 1992 through 1996, compared to the national average of 1.9%. Similarly,
diesel consumption in Wyoming is strong, where the Company markets 54.0% of its
diesel sales volumes, because Wyoming state motor fuel taxes are approximately
13c per gallon lower than the neighboring states of Nebraska and Utah. East-
west traffic therefore prefers to refuel in Wyoming, frequently near the
Frontier Refinery. As regional refining capacity is insufficient to meet the
high demand for refined petroleum products in the Eastern Slope area, three
pipelines also transport refined product into the area from outside the Rocky
Mountain region. As a local refiner, however, the Company believes that it has
a competitive advantage over these imports due to their associated
transportation costs.
As a result of these favorable supply-demand dynamics, the margin between
refined product sales prices and the cost of sweet crude oil feedstocks, or the
"crack spreads," in the Rocky Mountain region have been consistently higher
than those experienced by refiners in the Gulf Coast or Mid-Continent areas. On
average, for the years 1992 through 1997, the crack spreads for unleaded
gasoline and diesel fuel were $3.13 per bbl and $3.37 per bbl higher,
respectively, in the Rocky Mountain region as compared to the Gulf Coast
region. With respect to heavy crude oil, the Company's refining margins include
not only the crack spread (which is calculated with respect to sweet crude
oil), but also the associated light/heavy spread.
Marketing Alliance with CITGO. In the second half of 1997, the Company
entered into a seven-year marketing agreement with CITGO, its largest customer,
to become a branded representative for CITGO. The Company believes the CITGO
agreement offers potential to increase its market share in the Eastern Slope
area because CITGO currently has only a small share of the Eastern Slope
market. The agreement allows the Company to produce gasoline and diesel to
CITGO's specifications, sign up independent and other branded retail operators
as CITGO branded locations and sell its own refined products to these
operators. The agreement also allows the Company to offer additional benefits
to its customers such as access to CITGO's proprietary credit card and pay-at-
the-pump systems. Moreover, the Company believes that its affiliation with the
nationally-recognized CITGO brand will allow it to continue to effectively
compete in its market area as more independent regional retailers seek
relationships with suppliers of branded products.
Improved Financial Condition. During 1997, the Company made the strategic
decision to focus on its refining operations and to divest its remaining
exploration and production operations. On June 16, 1997, the Company completed
the sale of all of its Canadian oil and gas properties (the "Canadian
Disposition"), which generated net proceeds to the Company of $91.3 million and
a net gain to the Company of $23.3 million. The Company previously had sold all
of its domestic exploration and production operations in late 1995 (the "U.S.
Disposition"). The Company used proceeds of the Canadian Disposition to repay
$79.9 million principal amount of its outstanding indebtedness. The Company
will use the proceeds of the Offering together with existing working capital to
repay all of its remaining outstanding indebtedness ($70.6 million as of
December 31, 1997). In addition, the Company has the ability to reduce tax
liability with respect to future income through the use of net operating loss
tax carryforwards ("NOLs"). At December 31, 1997, the Company had NOLs of
$145.6 million, which will be used by the Company to reduce future taxable
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Net Operating Loss Carryforwards." The Canadian
Disposition, the Offering and the subsequent retirement of outstanding debt
will allow the Company to improve its capital structure and to reduce ongoing
debt service requirements. As a result, the Company will possess an improved
financial position and believes it is well-positioned to execute its operating
strategy.
3
<PAGE>
SUMMARY OF TERMS OF EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $70,000,000 aggregate
principal amount of Exchange Notes for up to an equal aggregate principal
amount of Old Notes. The Exchange Notes will be obligations of the Company
entitled to the benefits of the Indenture. The form and terms of the Exchange
Notes are identical in all material respects to the form and terms of the Old
Notes, except that (i) the offering of the Exchange Notes has been registered
under the Securities Act, (ii) the Exchange Notes will not be subject to
transfer restrictions and (iii) the Exchange Notes will not be entitled to
registration or other rights under the Registration Rights Agreement including
the provision in the Registration Rights Agreement for payment of Liquidated
Damages upon failure by the Company to consummate the Exchange Offer or the
occurrence of certain other events. See "Description of the Notes." Capitalized
terms followed by the parenthetical "(as defined)" and not defined herein will
have the meanings given them in the Indenture.
Registration Rights
Agreement.................. The Old Notes were sold by the Company on
February 9, 1998 to the Initial Purchaser
pursuant to a Purchase Agreement, dated February
4, 1998 (the "Purchase Agreement"). Pursuant to
the Purchase Agreement, the Company and the
Initial Purchaser entered into the Registration
Rights Agreement which, among other things,
grants the holders of the Old Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy certain obligations
of the Company under the Registration Rights
Agreement.
The Exchange Offer.......... $1,000 principal amount of Exchange Notes will be
issued in exchange for each $1,000 principal
amount of Old Notes validly tendered and accepted
pursuant to the Exchange Offer. As of the date
hereof, $70,000,000 in aggregate principal amount
of Old Notes are outstanding. The Company will
issue the Exchange Notes to tendering holders of
Old Notes promptly following the Expiration Date.
The terms of the Exchange Notes are identical in
all material respects to the Old Notes except for
certain transfer restrictions and registration
rights relating to the Old Notes.
No federal or state regulatory requirements must
be complied with or approval obtained in
connection with the Exchange Offer, other than
the registration requirements under the
Securities Act.
Resale...................... Based on existing interpretations of the
Securities Act by the staff of the SEC set forth
in several no-action letters to third parties,
and subject to the immediately following
sentence, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by a holder
thereof (other than (i) a broker-dealer who
purchased such Old Notes directly from the
Company for resale pursuant to Rule 144A or any
other available exemption under the Securities
Act or (ii) a person that is an "affiliate"
(within the meaning of Rule 405 of the Securities
Act) of the Company), without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that the holder
is acquiring the Exchange Notes in its ordinary
course of business and is not participating, and
has no arrangement or understanding with
4
<PAGE>
any person to participate, in the distribution of
the Exchange Notes. However, any purchaser of
Notes who is an affiliate of the Company or who
intends to participate in the Exchange Offer for
the purpose of distributing the Exchange Notes,
or any broker-dealer who purchased the Old Notes
from the Company to resell pursuant to Rule 144A
or any other available exemption under the
Securities Act, (i) will not be able to rely on
the interpretations by the staff of the SEC set
forth in the above-mentioned no-action letters,
(ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any sale
or transfer of the Notes unless such sale or
transfer is made pursuant to an exemption from
such requirements. The Company does not intend to
seek its own no-action letter and there is no
assurance that the staff of the SEC would make a
similar determination with respect to the
Exchange Notes as it has in such no-action
letters to third parties. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer"
and "Plan of Distribution." Each broker-dealer
that receives Exchanges Notes for its own account
pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with
resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired
by such broker-dealer as a result of market-
making activities or other trading activities.
The Company has agreed that, for a period of one
year after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of
Distribution."
Expiration Date............. 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer--Expiration
Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the Old
Notes...................... The Exchange Notes will bear interest at a rate
of 9 1/8% per annum, payable semiannually on
February 15 and August 15 of each year,
commencing August 15, 1998. Holders of Exchange
Notes of record on August 1, 1998, will receive
on August 15, 1998, an interest payment in an
amount equal to (i) the accrued interest on such
Exchange Notes from the date of issuance thereof
to August 15, 1998, plus (ii) the accrued
interest on the previously held Old Notes from
the date of issuance of such Old Notes (February
9, 1998) to the date of exchange thereof.
Interest will not be paid on Old Notes that are
accepted for exchange. The Notes mature on
February 15, 2006.
5
<PAGE>
Conditions to the Exchange
Offer...................... The Company may terminate the Exchange Offer if
it determines that its ability to proceed with
the Exchange Offer could be materially impaired
due to the occurrence of certain conditions. The
Company does not expect any of such conditions to
occur, although there can be no assurance that
such conditions will not occur. Holders of Old
Notes will have certain rights under the
Registration Rights Agreement should the Company
fail to consummate the Exchange Offer. See "The
Exchange Offer--Conditions to the Exchange
Offer."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes to be exchanged and
any other required documentation, to Chase Bank
of Texas, National Association, as Exchange
Agent, at the address set forth herein and
therein or effect a tender of Old Notes pursuant
to the procedures for book-entry transfer as
provided for herein and therein. By executing the
Letter of Transmittal, each holder will represent
to the Company that, among other things, the
Exchange Notes acquired pursuant to the Exchange
Offer are being acquired in the ordinary course
of business of the person receiving such Exchange
Notes, whether or not such person is the holder,
that neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act, of
the Company. See "The Exchange Offer--Procedures
for Tendering."
Following consummation of the Exchange Offer,
holders of Old Notes not tendered as a general
matter will not have any further registration
rights, and the Old Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the
Old Notes could be adversely affected. See "Risk
Factors--Absence of Public Market for the Notes"
and "--Consequences of Exchange and Failure to
Exchange" and "The Exchange Offer--Consequences
of Failure to Exchange."
Special Procedures for
Beneficial Owners.......... Any 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 in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender on
his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner
must, prior to completing and executing the
Letter of Transmittal and delivering his Old
Notes, either (a) make appropriate arrangements
to register
6
<PAGE>
ownership of the Old Notes in such holder's name
or (b) obtain a properly completed bond power
from the registered holder or endorsed
certificates representing the Old Notes to be
tendered. The transfer of record ownership may
take considerable time, and completion of such
transfer prior to the Expiration Date may not be
possible. See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available, or who cannot deliver their Old Notes
(or complete the procedure for book-entry
transfer) and deliver a properly completed Letter
of Transmittal and any other documents required
by the Letter of Transmittal to the Exchange
Agent prior to the Expiration Date may tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders of Old Notes may be withdrawn at any time
prior to the Expiration Date by furnishing a
written or facsimile transmission notice of
withdrawal to the Exchange Agent containing the
information set forth in "The Exchange Offer--
Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of Exchange
Notes...................... Subject to certain conditions (as summarized
above in "Conditions to the Exchange Offer" and
described more fully in "The Exchange Offer--
Conditions to the Exchange Offer"), the Company
will accept for exchange any and all Old Notes
that are properly tendered in the Exchange Offer
prior to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering." The Exchange
Notes issued pursuant to the Exchange Offer will
be delivered promptly following the Expiration
Date.
Exchange Agent.............. Chase Bank of Texas, National Association, the
Trustee under the Indenture, is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. The mailing
address of the Exchange Agent is Chase Bank of
Texas, National Association, P.O. Box 2320,
Dallas, Texas 75221-2320, Attention: Frank Ivins,
Registered Bond Events. The overnight courier and
hand delivery address for the Exchange Agent is
Chase Bank of Texas, National Association, One
Main Place, 1201 Main Street, 18th Floor, Dallas,
Texas 75202, Attention: Frank Ivins, Registered
Bond Events. For assistance and request for
additional copies of this Prospectus, the Letter
of Transmittal or the Notice of Guaranteed
Delivery, the telephone number for the Exchange
Agent is (214) 672-5678, and the facsimile number
for the Exchange Agent is (214) 672-5932.
Effect on Holders of Old
Notes...................... Holders of Old Notes who do not tender their Old
Notes in the Exchange Offer will continue to hold
their Old Notes and will be entitled to all the
rights and limitations applicable thereto under
the
7
<PAGE>
Indenture. All untendered, and tendered but
unaccepted, Old Notes will continue to be subject
to the restrictions on transfer provided for in
the Old Notes and the Indenture. To the extent
that Old Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for
the Old Notes could be adversely affected. See
"Risk Factors--Consequences of Exchange and
Failure to Exchange."
SEE "THE EXCHANGE OFFER" FOR MORE DETAILED INFORMATION CONCERNING THE TERMS OF
THE EXCHANGE OFFER.
8
<PAGE>
SUMMARY OF TERMS OF EXCHANGE NOTES
SECURITIES OFFERED.......... $70.0 million aggregate principal amount of
9 1/8% Senior Notes due 2006, Series A.
MATURITY DATE............... February 15, 2006.
INTEREST PAYMENT DATES...... Interest on the Exchange Notes will be payable
semi-annually in arrears on February 15 and
August 15 of each year, commencing August 15,
1998.
OPTIONAL REDEMPTION......... The Exchange Notes are redeemable for cash, in
whole or in part, at the option of the Company at
any time on or after February 15, 2002, at the
redemption prices set forth herein plus accrued
and unpaid interest and Liquidated Damages, if
any, thereon, to the redemption date.
Notwithstanding the foregoing, on or prior to
February 15, 2002, the Company may redeem the
Exchange Notes at its option, in whole or in
part, at the Make-Whole Price (as defined
herein), plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the
redemption date. In addition, for a period of
three years following the date of this Offering
Memorandum, the Company may redeem up to 35% of
the aggregate principal amount of the Exchange
Notes originally issued at a redemption price of
109 1/8% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the redemption date,
with the net cash proceeds of one or more
Qualified Equity Offerings, provided at least 65%
of the aggregate principal amount of Exchange
Notes originally issued remains outstanding
following each such redemption. See "Description
of the Notes--Optional Redemption."
RANKING..................... The Exchange Notes will be general unsecured
obligations of the Company and will rank pari
passu in right of payment with all future senior
indebtedness of the Company and senior in right
of payment to all future subordinated
indebtedness of the Company. The Exchange Notes
will be effectively subordinated, however, to (i)
all future secured obligations of the Company to
the extent of the assets securing such
obligations and (ii) all current and future
obligations of the Subsidiaries of the Company,
including borrowings under the Frontier Credit
Facility and trade obligations. As of December
31, 1997, on a pro forma basis after giving
effect to the Offering and the application of the
estimated net proceeds therefrom, the Company and
its Subsidiaries would have had no outstanding
indebtedness (excluding $50.0 million of
potential availability under the Frontier Credit
Facility, of which cash advances are currently
limited to $20.0 million, with the remainder
available to support letters of credit) other
than the Notes. The Indenture will permit the
Company and its Subsidiaries to incur additional
indebtedness, including additional secured
indebtedness, subject to certain conditions. See
"Capitalization," "Description of Indebtedness"
and "Description of the Notes--General."
FUTURE SUBSIDIARY
GUARANTEES.................. Under certain circumstances, the Company's
payment obligations under the Exchange Notes may
be in the future jointly and severally
9
<PAGE>
guaranteed on an unsecured basis by one or more
of the Subsidiaries of the Company. See
"Description of the Notes--Subsidiary Guarantees"
and "--Certain Covenants--Future Subsidiary
Guarantors."
CHANGE OF CONTROL........... Upon the occurrence of a Change of Control, each
holder of the Exchange Notes may require the
Company to repurchase all or any part of the
Exchange Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon,
to the date of repurchase. See "Risk Factors--
Potential Inability to Fund a Change of Control
Offer" and "Description of the Notes--Repurchase
at the Option of Holders--Change of Control."
CERTAIN COVENANTS........... The Indenture pursuant to which the Exchange
Notes will be issued (the "Indenture") will
contain certain covenants that, among other
things, restrict the ability of the Company and
its Subsidiaries to incur Indebtedness (as
defined herein) to pay dividends or make other
distributions, repurchase Equity Interests (as
defined herein) or subordinated indebtedness,
create certain liens, enter into certain
transactions with affiliates, issue or sell
capital stock of subsidiaries, engage in sale-
and-leaseback transactions, sell assets or enter
into certain mergers or consolidations. See
"Description of the Notes--Certain Covenants."
TRANSFER RESTRICTIONS....... For a description of restrictions on transfer of
the Exchange Notes, see "The Exchange Offer--
Purpose and Effect of the Exchange Offer."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN EVALUATING AN INVESTMENT IN THE NOTES, SEE "RISK FACTORS."
10
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The summary historical financial information presented below for each of the
five years in the period ended December 31, 1997 has been derived from the
historical audited consolidated financial statements of the Company, which have
been audited by Arthur Andersen LLP, independent public accountants.
The unaudited summary pro forma data is based on the Company's historical
financial statements, adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom as described under "Use of
Proceeds." The unaudited summary pro forma statement of operations data assumes
the Offering and the application of the proceeds therefrom occurred January 1,
1997. The unaudited summary pro forma balance sheet data assumes the Offering
and the application of the proceeds therefrom occurred as of December 31, 1997.
The unaudited summary pro forma data is not necessarily indicative of the
results that actually would have occurred if the Offering and the application
of the estimated proceeds therefrom had been in effect on the dates indicated
or which may be obtained in the future.
The information presented below should be read in conjunction with the
Consolidated Financial Statements and related notes thereto, the Unaudited Pro
Forma Consolidated Financial Information, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and other financial
information included elsewhere in this Prospectus. The historical financial
information presented below has been restated for the Company's discontinued
oil and gas operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
PRO
FORMA
1993 1994 1995(1) 1996(1) 1997(1) 1997
------ ------ ------- ------- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................ $326.1 $313.2 $331.8 $383.4 $376.4 $376.4
Refining operating
costs.................. 296.2 277.9 317.3 362.5 337.4 337.4
Selling and general
expenses............... 7.3 7.2 7.2 6.3 8.1 8.1
Depreciation............ 6.9 7.7 8.4 9.0 9.2 9.2
------ ------ ------ ------ ------ ------
Operating income (loss). 15.7 20.4 (1.1) 5.6 21.7 21.7
Interest expense, net
(2).................... 17.9 18.6 18.2 17.2 13.9 6.6
------ ------ ------ ------ ------ ------
Income (loss) from
continuing operations
before income taxes.... (2.2) 1.8 (19.3) (11.6) 7.8 15.1
Provision for income
taxes.................. -- 0.1 -- -- -- --
------ ------ ------ ------ ------ ------
Income (loss) from
continuing operations... $ (2.2) $ 1.7 $(19.3) $(11.6) $ 7.8 $ 15.1
====== ====== ====== ====== ====== ======
OTHER FINANCIAL DATA:
EBITDA(3)............... $ 22.6 $ 28.1 $ 7.3 $ 14.6 $ 30.9 $ 30.9
Capital expenditures
from continuing
operations............. 28.7 8.0 5.2 4.8 5.7 5.7
Ratio of earnings to
fixed charges(4)....... NM 1.1 NM NM 1.5 2.9
Ratio of EBITDA to
interest expense(5).... 4.0
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995(1) 1996(1) 1997(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Raw material input (bpd)
Light crude oil...................... 6,581 6,165 8,098 4,322 3,162
Heavy crude oil...................... 25,909 27,025 27,174 31,677 31,967
Other feed and blend stock........... 2,957 4,105 5,072 5,192 6,154
------- ------- ------- ------- -------
Total.............................. 35,447 37,295 40,344 41,191 41,283
======= ======= ======= ======= =======
Total product sales (bpd)
Gasoline............................. 19,837 19,437 20,767 20,311 20,499
Distillates.......................... 11,819 12,628 13,265 12,561 12,110
Asphalt and other.................... 7,682 6,724 6,781 7,306 7,949
------- ------- ------- ------- -------
Total.............................. 39,338 38,789 40,813 40,178 40,558
======= ======= ======= ======= =======
Operating margin information (dollars
per sales bbl)
Product spread....................... $ 5.51 $ 5.88 $ 4.03 $ 4.48 $ 5.78
Operating expenses, excluding
depreciation........................ 3.55 3.45 3.19 3.15 3.30
Depreciation......................... 0.42 0.53 0.55 0.59 .61
------- ------- ------- ------- -------
Operating margin..................... $ 1.54 $ 1.90 $ 0.29 $ 0.74 $ 1.87
======= ======= ======= ======= =======
Light/heavy crude oil spread
(dollars per bbl)................... $ 4.48 $ 3.61 $ 2.94 $ 2.56 $ 3.54
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------
HISTORICAL PRO FORMA
------------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, including cash equivalents.................. $ 21.7 $ 15.4
Total assets...................................... 177.9 172.8
Total debt, including current maturities.......... 70.6 70.0
Shareholders' equity.............................. 55.9 52.9
</TABLE>
- --------
(1) For a discussion of the significant items affecting comparability of
financial information for 1997, 1996 and 1995, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Offering Memorandum.
(2) No attempt has been made to adjust historical interest expense for
corporate debt obligations which, although used to fund subsidiary
operations, was not allocated among operating subsidiaries and portions of
which have been redeemed from proceeds of the Canadian Disposition. Since
the Canadian Disposition, the Company has redeemed $72.4 million principal
amount of its 12% Senior Notes due 2002 and $7.5 million of its 10 3/4%
Subordinated Debentures due 1998 with such proceeds. The annual interest
expense on the debt redeemed was approximately $9.5 million in the years
1993-1996.
(3) EBITDA represents income from continuing operations before interest
expense, income tax and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles ("GAAP");
however, the amounts included in the EBITDA calculation are derived from
amounts included in the Consolidated Historical Statements of Operations of
the Company. In addition, EBITDA should not be considered as an alternative
to net income or operating income, as an indication of the operating
performance of the Company or as an alternative to operating cash flow as a
measure of liquidity.
(4) Earnings were inadequate to cover fixed charges for the years ended
December 31, 1993, 1995 and 1996 by $2.9 million, $19.3 million and $11.6
million, respectively.
(5) Pro forma interest expense assumes that the issuance of the Notes and the
repayment of all existing debt (other than the Frontier Credit Facility)
had occurred at the beginning of 1997.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including, without limitation,
statements that include the words "anticipates," "believes," "could,"
"estimates," "expects," "intends," "may," "plan," "predict," "project,"
"should," and similar expressions, and statements relating to the Company's
strategic plans, capital expenditures, industry trends and prospects and the
Company's financial position. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of the Company to differ materially from
those expressed or implied by such forward-looking statements. Although the
Company believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that
could cause actual results to differ materially from the Company's
expectations ("Cautionary Statements") are set forth under the captions
"Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," and elsewhere in this Prospectus. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the Cautionary
Statements.
RISK FACTORS
Holders of Old Notes should carefully consider the information set forth
below, as well as other information appearing in this Prospectus, before
tendering any Old Notes for exchange into Exchange Notes. Certain matters set
forth below also apply to the Old Notes and will continue to apply to any Old
Notes remaining outstanding after the Exchange Offer.
RANKING OF THE NOTES; EFFECTIVE SUBORDINATION
The Notes will be general unsecured obligations of the Company ranking pari
passu with all future unsecured senior indebtedness of the Company and senior
to all future subordinated indebtedness of the Company. The Notes will be
effectively subordinated, however, to (i) all future secured obligations of
the Company to the extent of the assets securing such obligations and (ii) all
current and future obligations of the Subsidiaries of the Company (including
borrowings under the Frontier Credit Facility and claims of trade creditors
and tort claimants). In the event of liquidation or insolvency of the Company
or if any secured indebtedness is accelerated, the secured assets of the
Company will be available to pay obligations on the Notes only after such
secured indebtedness has been paid in full. At December 31, 1997, on a pro
forma basis after giving effect to the Offering and the application of the
estimated net proceeds therefrom, the Company and its Subsidiaries would have
had no outstanding indebtedness (excluding $50.0 million of potential
availability under the Frontier Credit Facility, of which cash advances are
currently limited to $20.0 million with the remainder available to support
letters of credit) other than the Notes. See "Description of the Notes."
HOLDING COMPANY STRUCTURE
The Company is a holding company that conducts all of its operations
exclusively through subsidiaries. The Company's only significant assets are
the capital stock of its wholly owned subsidiaries. As a holding company, the
Company is dependent on dividends or other distributions of funds from its
subsidiaries to meet the Company's debt service and other obligations,
including the payment of principal and interest on the Notes. The Indenture,
subject to certain restrictions, permits the Company or its Subsidiaries to
incur additional secured indebtedness, which would in effect be senior to the
Notes. The Indenture also permits such Subsidiaries to pledge assets in order
to secure indebtedness of the Company and to agree with lenders under any
secured indebtedness, including the Frontier Credit Facility, to restrictions
on repurchases of the Notes and on the ability of such Subsidiaries to make
distributions, loans, other payments or asset transfers to the Company. Under
the terms of the Frontier Credit Facility and related guarantees, the
Subsidiaries of the Company are prohibited from transferring cash in the form
of dividends, loans or advances in certain circumstances, including to the
extent any loans are outstanding to the borrower or upon a default or event of
default under the Frontier Credit Facility. The Frontier Credit Facility
includes certain financial covenant requirements relating to Frontier's
working capital, cash earnings, tangible net worth and fixed charge coverage.
Borrowings under the Frontier Credit
13
<PAGE>
Facility also must be reduced to zero for at least five consecutive business
days each calendar quarter, the failure of which represents an event of
default. Accordingly, the existence of borrowings or a default or event of
default under the Frontier Credit Facility could adversely affect the
Company's ability to have sufficient cash to pay its obligations, including
the Notes. See "Description of Indebtedness."
ABILITY TO SERVICE DEBT
At December 31, 1997, as adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom, the Company's total debt
was $70.0 million and shareholders' equity was $52.9 million. The degree to
which the Company is leveraged has important consequences to holders of the
Notes, including the following: (i) the Company's ability to obtain additional
financing in the future, whether for working capital, capital expenditures,
acquisitions or other purposes, may be impaired; (ii) a portion of the
Company's cash flow from operations is required to be dedicated to the payment
of interest on its debt, thereby reducing funds available to the Company for
other purposes; (iii) the Company's flexibility in planning for or reacting to
changes in market conditions may be limited; (iv) the Company may be more
vulnerable in the event of a downturn in its business; and (v) to the extent
of any amounts outstanding under the Frontier Credit Facility, the Company
will be vulnerable to increases in interest rates.
The ability of the Company to meet its debt service obligations, including
with respect to the Notes, will depend on the future operating performance and
financial results of the Company, which will be subject in part to factors
beyond the control of the Company. Although the Company believes that its cash
flow will be adequate to meet its interest payments, there can be no assurance
that the Company will continue to generate earnings in the future sufficient
to cover its fixed charges. If the Company is unable to generate earnings in
the future sufficient to cover its fixed charges and is unable to borrow
sufficient funds to cover such charges, it may be required to refinance all or
a portion of its debt or to sell all or a portion of its assets. There can be
no assurance that a refinancing would be possible, nor can there be any
assurance as to the timing of any asset sales or the proceeds that the Company
could realize therefrom. In addition, certain terms of the Frontier Credit
Facility restrict its ability to sell assets and the Company's use of the
proceeds therefrom.
VOLATILITY OF CRUDE OIL PRICES AND REFINING MARGINS
The Company's cash flow from operations is primarily dependent upon
producing and selling quantities of refined products at margins sufficient to
cover fixed and variable expenses. In recent years, crude oil costs and prices
of refined products have fluctuated substantially. These costs and prices
depend on numerous factors, including the demand for crude oil, gasoline and
other refined products, which in turn depend on, among other factors, changes
in the economy, the level of foreign and domestic production of crude oil and
refined products, the availability of imports of crude oil and refined
products, the marketing of alternative and competing fuels and the extent of
government regulation.
The Company's crude oil requirements are supplied from sources that include
major oil companies, crude oil marketing companies, large independent
producers and smaller local producers. Crude oil supply contracts are
generally short-term contracts with market-responsive pricing provisions. The
prices received by the Company for its refined products are affected by global
market dynamics as well as local factors such as product pipeline capacity,
local market conditions and the level of operations of other refineries in the
Rocky Mountain region. A large rapid increase in crude oil prices would
adversely affect the Company's operating margins if the increased cost of raw
materials could not be passed along to the Company's customers. The Company
generally does not hedge its refined product prices.
The price at which the Company can sell gasoline and its other refined
products will be strongly influenced by the commodity price of crude oil.
Generally, an increase or decrease in the price of crude oil results in a
corresponding increase or decrease in the price of gasoline and other refined
products. However, the Frontier Refinery maintains inventories of crude oil,
intermediate products and refined products, the value of each of which is
subject to rapid fluctuations in market prices. Inventories are recorded at
the lower of cost on a first in, first out ("FIFO") basis or market. As a
result, a rapid and significant increase or decrease in the market prices for
crude oil or refined products could have a significant short-term impact on
the Company's earnings and cash flow.
14
<PAGE>
LIGHT/HEAVY CRUDE OIL SPREAD
The Company's profitability is linked to the light/heavy spread. The Company
prefers to refine heavy crude oil because it provides a wider refining margin
than does light crude. Accordingly, any tightening of the spread will impact
adversely on the Company's profitability. While the spread has widened since
early 1996, there can be no assurance that this trend will continue. In
addition, a substantial drop in crude oil prices could depress the spread by
making it uneconomical for production companies to produce heavy crude oil,
which sells at a discount to light crude. Because of the historical volatility
of crude oil prices, there can be no assurance that such a situation will not
arise.
OPERATING HAZARDS; SINGLE REFINERY
All of the Company's refining activities currently are conducted at the
Frontier Refinery, which is the Company's principal operating asset. As a
result, the operations of the Company, and its ability to service the Notes,
are subject to significant interruption if the Frontier Refinery were to
experience a major accident or fire, be damaged by severe weather or other
natural disaster, or otherwise be forced to curtail its operations or shut
down. Should the Centennial Pipeline, which runs from the Guernsey Station hub
to the Frontier Refinery, become inoperative, crude oil would have to be
supplied to the Frontier Refinery through an alternative pipeline or from
additional tank trucks, the economic impact of which could be adverse to the
Company. In addition, despite safety procedures put in place by the Company, a
major accident, fire or other event could damage the Frontier Refinery or the
environment or cause personal injuries. Although the Company maintains
business interruption, property and other insurance against certain of these
risks in amounts which it believes to be economically prudent, if the Frontier
Refinery were to experience a major accident or fire or an interruption in
supply or operations, the Company's business could be materially adversely
affected. In addition, the Frontier Refinery consists of many processing
units, a number of which have been in operation for a long time. Although the
Company schedules down time for repair, or "turnaround," for each unit every
one to three years, there can be no assurance that one or more of such units
will not require additional, unscheduled turnarounds for unanticipated
maintenance or repairs. During the first half of 1998, the Company has
scheduled a turnaround on two of the major units of the Frontier Refinery.
RAW MATERIAL SUPPLY
The Company believes an adequate supply of crude oil and other feedstocks
will be available to the Frontier Refinery from local producers, crude oil
sourced through common carrier pipelines and other sources to sustain the
Company's operations for the foreseeable future at substantially the levels
currently being experienced. However, there is no assurance that this
situation will continue. If additional supplemental crude oil becomes
necessary, the Company intends to implement available alternatives that are
most advantageous under then prevailing conditions. Implementation of some
supply alternatives requires the consent or cooperation of third parties and
other considerations beyond the control of the Company. See "Business--
Refining Operations--Crude Oil Supply."
COMPETITION
The refining industry in which the Company is engaged is highly competitive.
Many of the Company's competitors are large, integrated, major or independent
oil companies which, because of their more diverse operations, larger
refineries and stronger capitalization, may be better able than the Company to
withstand volatile industry conditions, including shortages or excesses of
crude oil or refined products or intense price competition at the wholesale
level. Many of these competitors have financial and other resources
substantially greater than those of the Company. In addition, the Company is
aware of several proposals or industry discussions regarding refined products
pipeline projects that if or when undertaken and completed could impact
portions of its marketing areas. The various proposed projects involve both
new pipeline construction and expansions of existing pipelines. Although the
Company believes that it could continue to compete favorably against imported
refined products because of associated transportation costs, the completion of
any of these projects would increase competition by increasing the available
capacity to transport refined products to the Rocky Mountain region. See
"Business--Refining Operations--Competition."
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SEASONALITY
Demand for gasoline and asphalt products is higher during the summer months
than during the winter months due to seasonal increases in highway traffic and
road construction work. As a result, the Company's operating results for the
first and fourth calendar quarters are generally lower than those for the
second and third quarters. Diesel demand has historically been more stable
because two major east-west truck routes and two major railroads cross the
Company's principal marketing area. However, reduced road construction and
agricultural work during the winter months does somewhat depress demand for
diesel in the winter months.
GOVERNMENT REGULATIONS, ENVIRONMENTAL RISKS AND TAXES
The Company's operations are subject to a variety of federal, state and
local environmental laws and regulations governing the discharge of pollutants
into the air and water, product specifications and the generation, treatment,
storage, transportation and disposal of solid and hazardous waste and
materials. Environmental laws and regulations that affect the Company's
operations, processes and margins have become and are becoming increasingly
stringent. Examples are the Clean Air Act Amendments of 1990 (the "Clean Air
Act Amendments") and the additional environmental regulations adopted by the
United States Environmental Protection Agency ("EPA") and state and local
environmental agencies to implement the Clean Air Act Amendments. Although the
Company believes the Frontier Refinery is able to process currently used
feedstocks at full capacity in substantial compliance with existing
environmental laws and regulations, the Company cannot predict the nature,
scope or effect of legislation or regulatory requirements that could be
imposed or how existing or future laws or regulations will be administered or
interpreted with respect to products or activities to which they have not been
previously applied. Compliance with more stringent laws or regulations, as
well as more vigorous enforcement policies of the regulatory agencies, could
adversely affect the financial position and the results of operations of the
Company and could require substantial expenditures by the Company. See
"Business--Government Regulation--Environmental Matters."
Also, the Company's operations are inherently subject to accidental spills,
discharges or other releases of petroleum or hazardous substances which may
give rise to liability to governmental entities or private parties under
federal, state or local environmental laws, as well as under common law. The
Company has undertaken all investigative or remedial work to date that has
been requested by governmental agencies to address potential contamination by
the Company. Although the Company has invested substantial resources to
prevent future accidental discharges and to remediate contamination resulting
from prior discharges, there can be no assurance that accidental discharges
will not occur in the future, that future action will not be taken in
connection with past discharges, that governmental agencies will not assess
penalties against the Company in connection with any past or future
contamination, or that third parties will not assert claims against the
Company for damages allegedly arising out of any past or future contamination.
See "Business--Government Regulation--Environmental Matters."
The Company and its operations and products are subject to taxes imposed by
federal, state or local governments. These taxes have generally increased over
time. There can be no certainty of the effect that increases in these taxes,
or the imposition of new taxes, could have on the Company, or whether such
taxes could be passed on to customers. See "Business--Government Regulation--
Environmental Matters."
LABOR RELATIONS
The Frontier Refinery currently employs 168 union members represented by the
Oil, Chemical and Atomic Workers Union ("OCAW") and six AFL-CIO affiliated
unions. The Company's current three-year contract with OCAW expires in July
1999, while its current six-year contract with the AFL-CIO affiliated unions
expires in June 2002. On May 8, 1996, approximately 150 union employees of the
Company commenced a strike which settled July 29, 1996. The 1996 strike did
not have a material effect on the Company's operations, and the Company
believes that its current relations with its employees are good. However,
there can be no assurance
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that the Company's employees will not strike again at some time in the future
or that such a strike would not adversely affect the Company's operations. See
"Business--Employees."
FRAUDULENT CONVEYANCE CONSIDERATIONS RELATING TO FUTURE SUBSIDIARY GUARANTEES
Although there are currently no Subsidiary Guarantees with respect to the
Notes, the Company's obligations under the Notes may under certain
circumstances be guaranteed on a general unsecured basis in the future.
Various preference or fraudulent conveyance laws have been enacted for the
protection of creditors and may be utilized by a court of competent
jurisdiction to subordinate or avoid any Subsidiary Guarantee issued by a
Guarantor. It is also possible that under certain circumstances a court could
hold that the direct obligations of a Guarantor could be superior to the
obligations under the Subsidiary Guarantee. See "Description of the Notes--
Subsidiary Guarantees."
To the extent that a court were to find that at the time a Guarantor entered
into a Subsidiary Guarantee either (x) the Subsidiary Guarantee was incurred
by a Guarantor with the intent to hinder, delay or defraud any present or
future creditor or that a Guarantor contemplated insolvency with a design to
favor one or more creditors to the exclusion in whole or in part of others or
(y) the Guarantor did not receive fair consideration or reasonably equivalent
value for issuing the Subsidiary Guarantee and, at the time it issued the
Subsidiary Guarantee, the Guarantor (i) was insolvent or rendered insolvent by
reason of the issuance of the Subsidiary Guarantee, (ii) was engaged or about
to engage in a business or transaction for which the remaining assets of the
Guarantor constituted unreasonably small capital or (iii) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they matured, the court could avoid or subordinate the Subsidiary Guarantee in
favor of the Guarantor's other creditors. Among other things, a legal
challenge of a Subsidiary Guarantee issued by a Guarantor on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the
Guarantor as a result of the issuance by the Company of the Notes. To the
extent a Subsidiary Guarantee is avoided as a fraudulent conveyance or held
unenforceable for any other reason, the holders of the Notes would cease to
have any claim in respect of such Guarantor and would be creditors solely of
the Company.
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
In the event of a Change of Control (as defined in the Indenture), if the
Company does not exercise its right to purchase the Notes, each Holder will
have the right to require the Company to repurchase all or any portion of its
Notes then outstanding at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon, to the date of repurchase. See "Description of the Notes--
Repurchase at the Option of Holders--Change of Control."
The Events that constitute a Change of Control under the Indenture may also
be events of default under other indebtedness of the Company. Such events may
prohibit the Company from repurchasing the Notes, permit the lenders under
such debt instruments to accelerate the debt and, if the debt is not paid, to
enforce security interests on, or commence litigation that could ultimately
result in a sale of, substantially all the assets of the Company. If the
Company is unable to repay all of such indebtedness or is unable to obtain any
necessary consents, then the Company will be unable to offer to repurchase the
Notes and such failure will constitute an Event of Default under the
Indenture. There can be no assurance that the Company will have sufficient
funds available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) as described above. See "Description of
Indebtedness."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Old Notes are currently owned by a relatively small number of beneficial
owners. The Old Notes have not been registered under the Securities Act or any
state securities laws and, unless so registered and to the extent not
exchanged for the Exchange Notes, may not be offered or sold except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
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Any Old Notes tendered and exchanged in the Exchange Offer will reduce the
aggregate principal amount of Old Notes outstanding. Following the
consummation of the Exchange Offer, holders who did not tender their Old Notes
generally will not have any further registration rights under the Registration
Rights Agreement, and such Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for such
Old Notes could be adversely affected. The Old Notes are currently eligible
for sale pursuant to Rule 144A through The Portal Market of the National
Association of Securities Dealers, Inc. ("Portal"). Because the Company
anticipates that most holders will elect to exchange their Old Notes for
Exchange Notes due to the restrictions on the resale of Old Notes under the
Securities Act, the Company anticipates that the liquidity of the market for
any Old Notes remaining after the consummation of the Exchange Offer may be
substantially limited.
The Exchange Notes will constitute a new issue of securities for which there
is currently no active trading market. If the Exchange Notes are traded after
their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for
similar securities and other factors including general economic conditions and
the current financial condition, results of operations and business prospects
of the Company. Although the Exchange Notes will generally be permitted to be
resold or otherwise transferred by non-affiliates of the Company without
compliance with the registration and prospectus delivery requirements of the
Securities Act, the Company does not intend to apply for a listing or
quotation of the Exchange Notes on any securities exchange or stock market.
The Initial Purchaser has informed the Company that it currently intends to
make a market in the Exchange Notes. However, the Initial Purchaser is not
obligated to do so, and any such market-making may be discontinued at any time
without notice. In addition, such market-making activity will be subject to
the limits imposed under the Exchange Act. Accordingly, there can be no
assurance as to the development, liquidity or maintenance of any market for
the Exchange Notes (or in the case of non-tendering holders of Old Notes, the
trading market for the Old Notes following the Exchange Offer). If no trading
market develops or is maintained for the Exchange Notes, holders may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them.
The liquidity of, and trading market for, the Old Notes or the Exchange
Notes also may be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects
for, the Company.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. In addition, upon the consummation of the Exchange Offer, holders of Old
Notes which remain outstanding will not be entitled to any rights to have such
Old Notes registered under the Securities Act or to any similar rights under
the Registration Rights Agreement, subject to certain exceptions. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered, or tendered but unaccepted, Old Notes
could be adversely affected.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on February 9, 1998, to the Initial
Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently resold all of the Old Notes (i) to Qualified Institutional Buyers
(as defined in Rule 144A) or (ii) outside the United States within the meaning
of Regulation S under the Securities Act, the purchasers of which agreed to
comply with certain transfer restrictions and other conditions. As a condition
to the purchase of the Old Notes by the Initial Purchaser, the Company entered
into the Registration Rights Agreement with the Initial Purchaser, which
requires, among other things, that promptly following the issuance and sale of
the Old Notes, the Company file with the SEC the Registration Statement with
respect to the Exchange Notes, use its best efforts to cause the Registration
Statement to become effective under the Securities Act and, upon the
effectiveness of the Registration Statement, offer to the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount
of Exchange Notes, which will be issued without a restrictive legend and may
be reoffered and resold by the holder without restrictions or limitations
under the Securities Act subject to certain exceptions described below. A copy
of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The term "holder"
with respect to the Exchange Offer means any person in whose name Old Notes
are registered on the Company's books or any other person who has obtained a
properly completed bond power from the registered holder or any person whose
Old Notes are held of record by the Depositary who desires to deliver such Old
Notes by book-entry transfer of the Depositary.
Based on existing interpretations of the Securities Act by the staff of the
SEC set froth in several no-action letters to third parties, and subject to
the immediately following sentence, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than
(i) a broker-dealer who purchased such Old Notes directly from the Company for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" (within the meaning of
Rule 405 of the Securities Act) of the Company), without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that the holder is acquiring the Exchange Notes in its ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes. However, any purchaser of Old Notes who is an affiliate of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes, or any broker-dealer who purchased the Old
Notes from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (i) will not be able to rely on the
interpretations by the staff of the SEC set forth in such no-action letters,
(ii) will not be able to tender its Old Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Old Notes unless
such sale or transfer is made pursuant to an exemption from such requirements.
Accordingly, any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. See "Plan of Distribution."
As a result of the filing and effectiveness of the Registration Statement of
which this Prospectus is a part, the Company will not be required to pay an
increased interest rate on the Old Notes. Following the consummation of the
Exchange Offer, holders of Old Notes not tendered will not have any further
registration rights except in certain limited circumstances requiring the
filing of a Shelf Registration Statement (as defined in the Registration
Rights Agreement), and the Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept all Old Notes
properly tendered and not withdrawn prior to 5:00 p.m. New York City
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time, on the Expiration Date. After authentication of the Exchange Notes by
the Trustee or an authenticating agent, the Company will issue and deliver
$1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of outstanding Old Notes accepted in the Exchange Offer.
Holders may tender some or all of their Old Notes pursuant to the Exchange
Offer in denominations of $1,000 and integral multiples thereof.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Company, (ii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
Each broker-dealer that receives Exchange 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 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."
The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Old Notes, except that (i) the offering
of the Exchange Notes has been registered under the Securities Act, (ii) the
Exchange Notes will not be subject to transfer restrictions and (iii) the
holders of the Exchange Notes will not be entitled to registration or other
rights under the Registration Rights Agreement including the provision for
payment of Liquidated Damages upon failure by the Company to consummate the
Exchange Offer or the occurrence of certain other events. The Exchange Notes
will evidence the same debt as the Old Notes. The Exchange Notes will be
issued under and entitled to the benefits of the Indenture.
As of the date of this Prospectus, $70,000,000 aggregate principal amount of
the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be issued and transferable in
book-entry form through the facilities of the Depositary, acting as
depositary. The Exchange Notes will also be issuable and transferable in book-
entry form through the Depositary.
This Prospectus, together with the accompanying Letter of Transmittal, is
initially being sent to all registered holders of the Old Notes as of the
close of business on , 1998. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act, and
the rules and regulations of the SEC thereunder, including Rule 14e-1, to the
extent applicable. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered, and holders of the Old
Notes do not have any appraisal or dissenters' rights under the Wyoming
Business Corporation Act or under the Indenture in connection with the
Exchange Offer. The Company shall be deemed to have accepted validly tendered
Old Notes when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. See "--Exchange Agent." The Exchange Agent will act as
agent for the tendering holders for the purpose of receiving Exchange Notes
from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, at the
Company's cost, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Solicitation of Tenders; Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE
OFFER. MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
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RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD
NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL
POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date to
which the Exchange Offer is extended. The Company may extend the Exchange
Offer at any time and from time to time by giving oral or written notice to
the Exchange Agent and by timely public announcement.
The Company expressly reserves the right, in its sole discretion (i) to
delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "--Conditions of the
Exchange Offer" shall have occurred and shall not have been waived by the
Company (if permitted to be waived by the Company), by giving oral or written
notice of such delay, extension or termination to the Exchange Agent and (ii)
to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof by the Company to the
registered holders of the Old Notes. If the Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment in a manner reasonably calculated to
inform the holders of such amendment and the Company will extend the Exchange
Offer to the extent required by law.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Company shall have no obligation to publish, advise
or otherwise communicate any such public announcement, other than by making a
timely release thereof to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate of 9 1/8% per annum, payable
semiannually on February 15 and August 15 of each year, commencing August 15,
1998. Holders of Exchange Notes of record on August 1, 1998, will receive on
August 15, 1998, an interest payment in an amount equal to (i) the accrued
interest on such Exchange Notes from the date of issuance thereof to August
15, 1998, plus (ii) the accrued interest on the previously held Old Notes from
the date of issuance of such Old Notes (February 9, 1998) to the date of
exchange thereof. Interest will not be paid on Old Notes that are accepted for
exchange. The Notes mature on February 15, 2006.
PROCEDURES FOR TENDERING
Each holder of Old Notes wishing to accept the Exchange Offer must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such facsimile, together with the Old
Notes to be exchanged and any other required documentation, to Chase Bank of
Texas, National Association, as Exchange Agent, at the address set forth
herein and in the Letter of Transmittal or effect a tender of Old Notes
pursuant to the procedures for book-entry transfer as provided for herein and
therein. By executing the Letter of Transmittal, each holder will represent to
the Company, that, among other things, the Exchange Notes acquired pursuant to
the Exchange Offer are being acquired in the ordinary course of business of
the person receiving such Exchange Notes, whether or not such person is the
holder, that neither the holder nor any such other person has any arrangement
or
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understanding with any person to participate in the distribution of such
Exchange Notes and that neither the holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company.
Any financial institution that is a participant in the Depositary's Book-
entry Transfer Facility system may make book-entry delivery of the Old Notes
by causing the Depositary to transfer such Old Notes into the Exchange Agent's
account in accordance with the Depositary's procedure for such transfer.
Although delivery of Old Notes may be effected through book-entry transfer
into the Exchange Agent's account at the Depositary, the Letter of Transmittal
(or facsimile thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at its address set forth herein under "--Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF
DOCUMENTS TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. See "--Book Entry Transfer."
Only a holder may tender its Old Notes in the Exchange Offer. To tender in
the Exchange Offer, a holder must complete, sign and date the Letter of
Transmittal or a facsimile thereof, have the signatures thereof guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Old Notes (unless
such tender is being effected pursuant to the procedure for book-entry
transfer) and any other required documents, to the Exchange Agent for receipt,
prior to 5:00 p.m., New York City time, on the Expiration Date.
The Tender by a holder will constitute an agreement between such holder, the
Company and the Exchange Agent in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. If less than all
of the Old Notes are tendered, a tendering holder should fill in the amount of
Old Notes being tendered in the appropriate box on the Letter of Transmittal.
The entire amount of Old Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO THE COMPANY THAT,
AMONG OTHER THINGS, (1) THE EXCHANGE NOTES ACQUIRED PURSUANT TO THE EXCHANGE
OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (2)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS ENGAGED IN, INTENDS TO ENGAGE
IN OR HAS ANY ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN
THE DISTRIBUTION OF SUCH EXCHANGE NOTES, (3) NEITHER THE HOLDER NOR ANY SUCH
OTHER PERSON IS AN "AFFILIATE" (AS DEFINED IN RULE 405 UNDER THE SECURITIES
ACT), OF THE COMPANY AND (4) IF THE TENDERING HOLDER IS A BROKER OR DEALER (AS
DEFINED IN THE EXCHANGE ACT) (A) IT ACQUIRED THE OLD NOTES FOR ITS OWN ACCOUNT
AS A A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND (B)
IT HAS NOT ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH THE COMPANY OR
ANY "AFFILIATE" THEREOF TO DISTRIBUTE THE EXCHANGE NOTES TO BE RECEIVED IN THE
EXCHANGE OFFER. IN THE CASE OF A BROKER-DEALER THAT RECEIVES EXCHANGE NOTES
FOR ITS OWN ACCOUNT IN EXCHANGE FOR OLD NOTES WHICH WERE ACQUIRED BY IT AS A
RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, THE LETTER OF TRANSMITTAL
WILL ALSO INCLUDE AN ACKNOWLEDGMENT THAT THE BROKER-DEALER WILL DELIVER A COPY
OF THIS PROSPECTUS IN CONNECTION WITH THE RESALE BY IT OF EXCHANGE NOTES
RECEIVED PURSUANT TO THE EXCHANGE OFFER; HOWEVER, BY SO ACKNOWLEDGING AND BY
DELIVERING A PROSPECTUS, SUCH HOLDER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT. SEE "PLAN OF
DISTRIBUTION."
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR HOLDERS, IN EACH CASE AS
SET FORTH HEREIN AND IN THE LETTER OF TRANSMITTAL.
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Any beneficial owner whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
owner's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution"), unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" of the Letter of Transmittal
or (ii) for the account of an Eligible Institution. If the Letter of
Transmittal is signed by a person other than the registered holder listed
therein, such Old Notes must be endorsed or accompanied by appropriate bond
powers which authorize such person to tender the Old Notes on behalf of the
registered holder, in either case signed as the name of the registered holder
or holders appears on the Old Notes. If the Letter of Transmittal or any Old
Notes or bond powers are signed or endorsed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such person should so
indicate when signing, and unless waived by the Company, evidence satisfactory
to the Company of their authority to so act must be submitted with the Letter
of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance
of which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the absolute right to waive irregularities or conditions
of tender as to particular Old Notes. The Company's interpretation of the
terms, and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Company shall determine. Although the
Company intends to notify holders of defects or irregularities with respect to
tenders of Old Notes, neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them
incur any liability for failure to give such notification. Tenders of Old
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered or the tender of which is otherwise
rejected by the Company, and as to which the defects or irregularities have
not been cured or waived by the Company, will be returned by the Exchange
Agent to the tendering holder unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion (i) to
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "--Conditions of the Exchange
Offer," terminate the Exchange Offer and (ii) to the extent permitted by
applicable law, to purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or
offers may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the DTC (the "Book-Entry Transfer Facility") for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial
23
<PAGE>
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. ALTHOUGH DELIVERY OF OLD NOTES MAY BE EFFECTED
THROUGH BOOK-ENTRY TRANSFER INTO THE EXCHANGE AGENT'S ACCOUNT AT THE BOOK-ENTRY
TRANSFER FACILITY, AN APPROPRIATE LETTER OF TRANSMITTAL PROPERLY COMPLETED AND
DULY EXECUTED WITH ANY REQUIRED SIGNATURE GUARANTEE AND ALL OTHER REQUIRED
DOCUMENTS MUST IN EACH CASE BE TRANSMITTED TO AND RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT AT ITS ADDRESS SET FORTH BELOW ON OR PRIOR TO THE EXPIRATION
DATE, OR, IF THE GUARANTEED DELIVERY PROCEDURES DESCRIBED BELOW ARE COMPLIED
WITH, WITHIN THE TIME PERIOD PROVIDED UNDER SUCH PROCEDURES. DELIVERY OF
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, or who cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such holder's Old Notes and the principal amount of such Old
Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within three New York Stock Exchange ("NYSE") trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the Old Notes to be
tendered in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at the Depositary of Old Notes
delivered electronically) and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a book-
entry transfer into the Exchange Agent's account at the Depositary of Old
Notes delivered electronically) and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the
Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes or, in the case of Old Notes transferred by
book-entry transfer, the name and number of the account at the Depositary to
be credited), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantee) or be accompanied by
documents of transfer sufficient to permit the Trustee with respect to the Old
Notes to register the transfer of such Old Notes into the name of the
Depositor
24
<PAGE>
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
withdrawal notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer,
and no Exchange Notes will be issued with respect thereto unless the Old Notes
so withdrawn are validly retendered. Any Old Notes that have been tendered but
are not accepted for exchange will be returned to the holder thereof without
cost to such holder as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes if, in the Company's judgment, any of the
following conditions has occurred or exists or has not been satisfied: (i)
that the Exchange Offer, or the making of any exchange by a holder, violates
applicable law or any applicable interpretation of the staff of the SEC, (ii)
that any action or proceeding shall have been instituted or threatened in any
court or by or before any governmental agency or body with respect to the
Exchange Offer, (iii) that there has been adopted or enacted any law, statute,
rule or regulation that can reasonably be expected to impair the ability of
the Company to proceed with the Exchange Offer, (iv) that there has been
declared by United States federal or New York state authorities a banking
moratorium; or (v) that trading on the American Stock Exchange or the New York
Stock Exchange or generally in the United States over-the-counter market has
been suspended by order of the SEC or any other governmental agency, in each
of clauses (i) through (iv) which, in the Company's judgment, would reasonably
be expected to impair the ability of the Company to proceed with the Exchange
Offer.
If the Company determines that it may terminate the Exchange Offer for any
of the reasons set forth above, the Company may (i) refuse to accept any Old
Notes and return any Old Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Old Notes tendered prior to the
Expiration Date of the Exchange Offer, subject to the rights of such holders
of tendered Old Notes to withdraw their tendered Old Notes or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Old Notes that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Company will disclose such change
by means of a supplement to this Prospectus that will be distributed to each
registered holder, and the Company will extend the Exchange Offer for a period
of five to ten business days, depending upon the significance of the waiver
and the manner of disclosure to the registered holders, if the Exchange Offer
would otherwise expire during such period.
25
<PAGE>
EXCHANGE AGENT
Chase of Bank of Texas, National Association, the Trustee under the
Indenture, has been appointed as Exchange Agent for the Exchange Offer. In
such capacity, the Exchange Agent has no fiduciary duties and will be acting
solely on the basis of directions of the Company. Requests for assistance and
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
Chase Bank of Texas, National Association
By Hand or Overnight By Facsimile By Mail:
Courier: Transmission
(for Eligible
Institutions Only):
Chase Bank of Texas,
Chase Bank of Texas, (214) 762-5932 National Association
National Association P.O. Box 2320
One Main Place For Information Dallas, Texas 75221-2320
1201 Main Street, 18th Floor Telephone: Attention: Frank Ivins
Dallas, Texas 75202 Registered Bond
Attention: Frank Ivins (214) 672-5678 Events
Registered Bond Events
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation pursuant to the Exchange
Offer is being made by mail. Additional solicitations may be made by officers
and regular employees of the Company and its affiliates in person, by
telegraph, telephone or telecopier.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company will,
however, pay the Exchange Agent reasonable and customary fees for its
services, reimburse the Exchange Agent for its reasonable out-of-pocket costs
and expenses in connection therewith and indemnify the Exchange Agent for all
losses and claims incurred by it as a result of the Exchange Offer. The
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Prospectus, the Letter of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees and printing costs, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if 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 therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed by the Company directly to
such tendering holder.
26
<PAGE>
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company as a result of the consummation of the Exchange
Offer. The expenses of the Exchange Offer will be amortized by the Company
over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Old Notes
are urged to consult their financial and tax advisors in making their own
decisions as to what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of the Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to
all the rights, and subject to the limitations applicable thereto, under the
Indenture and the Registration Rights Agreement, except for any such rights
under the Registration Rights Agreement that by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of the Notes." All untendered Old Notes will continue to be
subject to the restrictions on transfer set forth in the Indenture. The Old
Notes may not be offered, resold, pledged or otherwise transferred, prior to
the date that is two years after the later of February 9, 1998 and the last
date on which the Company or any "affiliate" (within the meaning of Rule 144
of the Securities Act) of the Company was the owner of such Old Note except
(i) to the Company, (ii) pursuant to a registration statement which has been
declared effective under the Securities Act, (iii) to Qualified Institutional
Buyers in reliance upon the exemption from the registration requirements of
the Securities Act provided by Rule 144A, (iv) in a transaction occurring
outside the United States to a foreign person, which transaction meets the
requirements of Rule 904 under the Securities Act, (v) in transactions
complying with the provisions of Regulation S under the Securities Act or (vi)
in accordance with another exemption from the registration requirements under
the Securities Act (and based upon an opinion of counsel if the Company so
requests), and, in each case, in accordance with any applicable securities
laws of any State of the United States or any other applicable jurisdiction.
To the extent that Old Notes are tendered and accepted in the Exchange Offer,
the liquidity of the trading market for untendered Old Notes could be
adversely affected.
The Company may in the future seek to acquire untendered Old Notes in the
open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company intends to make any such
acquisitions of Old Notes in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the SEC thereunder,
including Rule 14e-1, to the extent applicable. The Company has no present
plan to acquire any Old Notes that are not tendered in the Exchange Offer or
to file a registration statement to permit resales of any Old Notes that are
not tendered in the Exchange Offer.
27
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange Old
Notes in like principal amount. The form and terms of the Exchange Notes are
identical in all material respects to the form and terms of the Old Notes,
except that (i) the offering of the Exchange Notes has been registered under
the Securities Act, (ii) the Exchange Notes will not be subject to transfer
restrictions and (iii) the holders of the Exchange Notes will not be entitled
to registration or other rights under the Registration Rights Agreement
including the payment of Liquidated Damages upon failure by the Company to
consummate the Exchange Offer or the occurrence of certain other events. The
Old Notes surrendered in exchange for Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in a change in the indebtedness of the Company.
CAPITALIZATION
The following table sets forth the historical unaudited consolidated
capitalization of the Company as of December 31, 1997, and the as adjusted
consolidated capitalization which gives effect to the Offering and the
application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------
ACTUAL AS ADJUSTED(1)(2)
------ -----------------
(IN MILLIONS)
<S> <C> <C>
Cash, including cash equivalents.................. $ 21.7 $ 15.4
====== ======
Total debt, including current maturities:
Frontier Credit Facility(3)..................... $ -- $ --
9 1/8% Senior Notes due 2006.................... -- 70.0
12% Senior Notes due 2002(4).................... 24.6 --
7 3/4% Convertible Subordinated Debentures due
2014(4)........................................ 46.0 --
------ ------
Total debt.................................... 70.6 70.0
------ ------
Total shareholders' equity........................ 55.9 52.9
------ ------
Total capitalization.............................. $126.5 $122.9
====== ======
</TABLE>
- --------
(1) Assumes net proceeds of $67.3 million from the Offering, the redemption of
the remaining $24.6 million principal amount of the Company's 12% Senior
Notes due 2002 at a price of 103.43% and the redemption of all of the
$46.0 million of the Convertible Debentures at a price of 101.55%.
(2) If all of the holders of the $46.0 million principal amount of the
Convertible Debentures are assumed to have elected to convert such
debentures into the common stock of the Company, the Company's cash
balance would have been $62.1 million, total debt would have consisted
entirely of the $70.0 million of 9 1/8% Senior Notes due 2006,
shareholders' equity would have been $99.6 million and total
capitalization would have been $169.6 million.
(3) The maximum amount available under the Frontier Credit Facility is $50.0
million, of which maximum cash borrowings are currently $20.0 million. Any
unutilized capacity after cash borrowings is available for letters of
credit. See "Description of Indebtedness."
(4) On February 10, 1998 the Company called for redemption of the outstanding
principal amounts with a call date of March 12, 1998.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial information presented below for each of
the five years in the period ended December 31, 1997 has been derived from the
historical audited consolidated financial statements of the Company, which
have been audited by Arthur Andersen LLP, independent public accountants. The
information presented below should be read in conjunction with the
Consolidated Financial Statements and related notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
other financial information included elsewhere in this Prospectus. The
historical financial information presented below has been restated for the
Company's discontinued oil and gas operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995(1) 1996(1) 1997(1)
------ ------ ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Revenues............................. $326.1 $313.2 $331.8 $383.4 $376.4
Refining operating costs............. 296.2 277.9 317.3 362.5 337.4
Selling and general expenses......... 7.3 7.2 7.2 6.3 8.1
Depreciation......................... 6.9 7.7 8.4 9.0 9.2
------ ------ ------ ------ ------
Operating income (loss).............. 15.7 20.4 (1.1) 5.6 21.7
Interest expense, net(2)............. 17.9 18.6 18.2 17.2 13.9
------ ------ ------ ------ ------
Income (loss) from continuing
operations before income taxes...... (2.2) 1.8 (19.3) (11.6) 7.8
Provision for income taxes........... -- 0.1 -- -- --
------ ------ ------ ------ ------
Income (loss) from continuing
operations.......................... (2.2) 1.7 (19.3) (11.6) 7.8
Income (loss) from discontinued
operations(3)....................... 4.7 (14.3) 0.2 4.8 15.2
------ ------ ------ ------ ------
Income (loss) before extraordinary
items............................... 2.5 (12.6) (19.1) (6.8) 23.0
Extraordinary loss on retirement of
debt................................ -- -- -- -- 3.9
------ ------ ------ ------ ------
Net income (loss).................... $ 2.5 $(12.6) $(19.1) $ (6.8) $ 19.1
====== ====== ====== ====== ======
BASIC AND DILUTED EARNINGS (LOSS) PER
AVERAGE SHARE OF COMMON STOCK:
Continuing operations................ $ (.09) $ .06 $ (.71) $ (.43) $ .28
Discontinued operations.............. .19 (.52) .01 .18 .55
Extraordinary loss................... -- -- -- -- (.14)
------ ------ ------ ------ ------
Net income (loss).................... $ .10 $ (.46) $ (.70) $ (.25) $ .69
====== ====== ====== ====== ======
OTHER FINANCIAL DATA:
EBITDA(4)............................ $ 22.6 $ 28.1 $ 7.3 $ 14.6 $ 30.9
Capital expenditures from continuing
operations.......................... 28.7 8.0 5.2 5.0 5.7
Ratio of earnings to fixed
charges(5).......................... NM 1.1 NM NM 1.5
BALANCE SHEET DATA(6):
Cash, including cash equivalents..... $ 3.8 $ 5.8 $ 6.0 $ 5.2 $ 21.7
Total assets......................... 296.8 277.5 238.4 239.9 177.9
Total debt, including current
maturities.......................... 176.9 170.8 145.4 148.4 70.6
Shareholders' equity................. 66.0 49.4 32.5 25.3 55.9
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995(1) 1996(1) 1997(1)
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Raw material input (bpd)
Light crude oil................ 6,581 6,165 8,098 4,322 3,162
Heavy crude oil................ 25,909 27,025 27,174 31,677 31,967
Other feed and blend stocks.... 2,957 4,105 5,072 5,192 6,154
------- ------- ------- ------- -------
Total........................ 35,447 37,295 40,344 41,191 41,283
======= ======= ======= ======= =======
Heavy crude oil percentage of
crude oil charges............... 80% 81% 77% 88% 91%
Manufactured product yields
(bpd)
Gasoline....................... 15,129 16,106 17,263 16,825 17,060
Distillates.................... 11,777 13,094 13,744 13,712 12,856
Asphalt and other.............. 7,128 6,575 7,951 9,215 10,200
------- ------- ------- ------- -------
Total........................ 34,034 35,775 38,958 39,752 40,116
======= ======= ======= ======= =======
Total product sales (bpd)
Gasoline....................... 19,837 19,437 20,767 20,311 20,499
Distillates.................... 11,819 12,628 13,265 12,561 12,110
Asphalt and other.............. 7,682 6,724 6,781 7,306 7,949
------- ------- ------- ------- -------
Total........................ 39,338 38,789 40,813 40,178 40,558
======= ======= ======= ======= =======
Operating margin information
(Dollars per sales bbl)
Average sales price............ $ 22.60 $ 22.06 $ 22.14 $ 25.98 $ 25.27
Material costs................. 17.09 16.18 18.11 21.50 19.49
------- ------- ------- ------- -------
Product spread............... 5.51 5.88 4.03 4.48 5.78
Operating expenses excluding
depreciation.................. 3.55 3.45 3.19 3.15 3.30
Depreciation................... 0.42 0.53 0.55 0.59 0.61
------- ------- ------- ------- -------
Operating margin............. $ 1.54 $ 1.90 $ 0.29 $ 0.74 $ 1.87
======= ======= ======= ======= =======
Light/heavy crude oil spread
(dollars per bbl)............... $ 4.48 $ 3.61 $ 2.94 $ 2.56 $ 3.54
</TABLE>
- --------
(1) For a discussion of the significant items affecting comparability of
financial information for 1997, 1996 and 1995, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Offering Memorandum.
(2) No attempt has been made to adjust historical interest expense for
corporate debt obligations which, although used to fund subsidiary
operations, was not allocated among operating subsidiaries and portions of
which have been redeemed from proceeds of the Canadian Disposition. Since
the Canadian Disposition, the Company has redeemed $72.4 million principal
amount of its 12% Senior Notes due 2002 and $7.5 million of its 10 3/4%
Subordinated Debentures due 1998 with such proceeds. The annual interest
expense on the debt redeemed was approximately $9.5 million in the years
1993-1996.
(3) Discontinued operations reflected in the above periods represent the
Company's oil and gas operating segment, comprising the Canadian and
United States oil and gas properties. On June 16, 1997, the Company
completed the Canadian Disposition. The Company completed the U.S.
Disposition during 1995.
(4) EBITDA represents income from continuing operations before interest
expense, income tax and depreciation and amortization. EBITDA is not a
calculation based upon GAAP; however, the amounts included in the EBITDA
calculation are derived from amounts included in the Consolidated
Historical Statements of Operations of the Company. In addition, EBITDA
should not be considered as an alternative to net income or operating
income, as an indication of the operating performance of the Company or as
an alternative to operating cash flow as a measure of liquidity.
(5) Earnings were inadequate to cover fixed charges for the years ended
December 31, 1993, 1995 and 1996 by $2.9 million, $19.3 million and $11.6
million, respectively.
(6) Balance sheet data has not been restated to reflect the disposition of the
Company's oil and gas operations.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
In 1997 the Company decided to focus entirely on its refining business and
to divest its remaining exploration and production operations. The Company had
previously completed the sale of its domestic oil and gas properties (the
"U.S. Disposition") in 1995, and in June 1997, it closed the sale of all of
its Canadian oil and gas properties (the "Canadian Disposition"). After such
dispositions, the Company's primary continuing operation is the Frontier
Refinery. Accordingly, the Company's operating results for its oil and gas
operations segment, comprising the oil and gas properties divested in the U.S.
Disposition and the Canadian Disposition, are presented as discontinued
operations in the consolidated financial statements.
The Company experiences stronger demand for its refined products,
particularly gasoline and asphalt, during the summer months due to seasonal
increases in highway traffic and road construction work. As a result, the
Company's operating results for the first and fourth calendar quarters are
generally lower than those for the second and third quarters. Demand for
diesel is more stable, but reduced road construction and agricultural work
during the winter months does have an impact on demand for diesel. Consistent
with the seasonality of its business, the Company invests in working capital
during the first half of the year and recovers working capital investment in
the second half of the year.
RESULTS OF OPERATIONS
1997 Compared with 1996. The Company had net income for the year ended
December 31, 1997 of $19.1 million or $0.69 per share, compared to a loss of
$6.9 million or ($0.25) per share for 1996. The 1997 results include a $23.3
million gain resulting from the Canadian Disposition which closed on June 16,
1997, a $9.9 million reduction to income in recognition of the cumulative
translation adjustment and a $3.9 million extraordinary loss on early
retirement of debt.
Operating income increased by $16.1 million in the year ended December 31,
1997 as compared to 1996 due to an increase in the refined product spread
(revenues less material costs) of $19.5 million and an increase in other
income of $1.1 million, offset by an increase in refining operating expenses
of $2.6 million and selling and general costs of $1.8 million.
Refined product revenues and refining operating costs are impacted by
changes in the price of crude oil. The price of crude oil was lower in 1997
than in 1996. The refined product spread for 1997 was $5.78 per bbl compared
to $4.48 per bbl for 1996. The refined product spread increased due to better
light product margins, primarily gasoline, and an improved light/heavy spread
which more than offset inventory losses in the first quarter of 1997 of
approximately $4.0 million from a decline in crude oil prices of more than
$6.00 per bbl. Inventories are recorded at the lower of cost on a FIFO basis
or market. Refined product revenues decreased $8.0 million, or 2%, in 1997 as
compared to 1996. The decrease in refined product revenues resulted primarily
from $1.67 per bbl decrease in average diesel sales prices offset by a $0.05
per bbl increase in average gasoline sales prices. Refined product sales
volumes were nearly the same for the 1997 and 1996 periods.
Other income increased $1.1 million to $2.3 million for the year ended
December 31, 1997 as compared to 1996 mostly due to foreign currency
transaction gains of $522,000 related to the Canadian sales proceeds and
higher processing fees.
Refining operating costs decreased $25.0 million, or 7%, in the year ended
December 31, 1997 from 1996 due to a $27.6 million decrease in material costs
partially offset by an increase in refining operating expenses of $2.6
million. Material costs per bbl decreased 9%, or $2.01 per bbl in 1997 due to
lower oil prices, lower crude oil charges, increased use of heavy crude oil
and an increase in the light/heavy spread. The crude oil charge rate declined
by 870 bpd in 1997 due to turnaround work conducted on the crude unit in the
fourth quarter of 1997. During 1997, Frontier increased its use of heavy crude
oil by 1% and the heavy crude oil utilization rate
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expressed as a percent of total crude oil increased to 91% in 1997 from 88% in
1996. In addition, the light/heavy spread increased 38% to average $3.54 per
bbl for the year ended December 31, 1997 because the Company contracted for
approximately 30,000 bpd of Wyoming and Canadian heavy crude oil for much of
1997 at a light/heavy spread substantially better than it obtained for the
same period in 1996. For 1998, the Company has contracted for an average of
29,000 bpd of Wyoming and Canadian heavy crudes at a light/heavy spread
ranging from $4.80 to $5.25 per bbl. Refining operating expenses increased by
$0.15 per bbl to $3.30 due to higher maintenance and turnaround costs and
leased equipment costs offset by decreased natural gas and utility costs.
Prior year operating expenses were reduced by a $1.3 million settlement of
repair costs related to a 1995 pipeline gas explosion. Although efforts to
reduce refining operating expenses will continue, maintenance problems may
arise in the future, resulting in downtime of certain processing units and
reduced yields which may increase operating expenses and negatively impact
profitability. A major turnaround is scheduled in the spring of 1998 on the
fluid catalytic cracking unit and alkylation and related units. These units
are scheduled to be down for 28 days, which will decrease average yields
during that time. Other turnaround work is scheduled for several Refinery
units during 1998, but this work should not materially impact yields.
Selling and general expenses increased $1.8 million, or 28%, for the year
ended December 31, 1997 reflecting increases in salaries and benefits.
Included in 1996 is $0.2 million of salary and salary-related expenses of
certain employees who were not retained after March 31, 1996, in connection
with the U.S. Disposition in late 1995 and a corporate reorganization in early
1996.
Depreciation increased $152,000 or 2% for the year ended December 31, 1997
as compared to 1996. Such increase was attributable to ongoing capital
investment in the Frontier Refinery.
Net interest expense decreased by $3.3 million, or 19%, in the year ended
December 31, 1997 as compared to 1996. Such decrease was attributable to
interest income of $2.0 million earned primarily on the sale proceeds of the
Canadian Disposition and reduced interest expense of $1.3 million due to early
retirement of debt. On October 1, 1997, the Company retired $7.5 million of
its 10 3/4% Subordinated Debentures, and by the end of 1997, $72.4 million
principal amount of its 12% Senior Notes was retired. Average debt decreased
from $154 million for the year ended December 31, 1996 to $138 million in
1997.
Income from discontinued oil and gas operations includes the Company's
Canadian oil and gas operations through May 5, 1997. Income from discontinued
operations was $1.7 million for the year ended December 31, 1997 as compared
to $4.8 million for 1996.
1996 Compared with 1995. Operating income increased $6.7 million in 1996
compared to 1995. Such increase was attributable to improved refined product
spread of $5.9 million, reduced operating costs of $1.2 million and reduced
selling and general costs of $0.9 million, offset by a decrease in other
income of $0.8 million and an increased depreciation expense of $0.5 million.
The 1995 other income was related to a settlement of a contract dispute.
Refined products revenues and refining operating costs are impacted by
changes in the price of crude oil. Generally, the price of crude oil remained
strong throughout 1996 compared to a lower average price in 1995. The refined
product spread increased 11%, to $4.48 per bbl, in 1996. Lower national
distillate inventory levels in 1996 contributed to the improved diesel
margins; however, a continued decline in the light/heavy spread in 1996
compared to 1995 increased material costs. The adverse impact of higher crude
oil prices significantly reduced margins for by-products, such as asphalt, in
1996 compared to 1995 levels. In 1996, refined product revenues increased 16%
from 1995 due to a $3.84 per bbl increase in average sales price, offset by a
2% decrease in sales volumes.
Refining operating costs increased $45.2 million, or 14%, in 1996 compared
to 1995 due to a 17% increase in material costs associated with the strong
worldwide crude oil market, offset by a reduction in the refining operating
expenses of $1.2 million. During 1996, Frontier increased its use of heavy
crude oil by 17% which favorably impacted material costs. The heavy crude oil
utilization rate expressed as a percent of total crude oil
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increased to 88% in 1996 from 77% in 1995. The favorable impact of the
increased use of heavy crude oil in 1996 was offset somewhat by the continued
decline in the light/heavy spread during 1996. In 1996, the light/heavy spread
declined 13% from 1995 to average $2.56 per bbl as a result of increased
competition for Wyoming heavy crude oil and other sources of heavy crude oil
in the Company's market area. However, in the fourth quarter of 1996, the
Frontier Refinery experienced an increase in the light/heavy spread when it
contracted for delivery in 1997 of approximately 25,000 bpd of Wyoming heavy
crude oil at a light/heavy spread of $3.25 to $3.75 per bbl. The $1.2 million
decrease in refinery operating expenses in 1996 was primarily attributable to
recovery in the first quarter of 1996 of approximately $1.3 million of repair
costs related to a pipeline gas explosion in 1995. The repair costs
approximating $1.3 million in 1995, and related recovery in 1996, were both
included in refinery operating expense. During 1996, refinery operating
expenses were reduced in various categories including insurance and turnaround
expense; however, these savings were offset by cost increases associated with
higher natural gas prices and general maintenance costs. The strike by
approximately 150 union employees which commenced May 8, 1996 and settled July
29, 1996 did not adversely impact operating costs or throughput. The increase
in depreciation expense reflected in 1996 of $500,000, or 6%, from 1995 was
primarily attributable to ongoing capital investment in the Frontier Refinery.
Selling and general expenses decreased $0.9 million, or 12%, to $6.3 million
in 1996 compared to 1995 due to a reduction in corporate staff after the U.S.
Disposition. Additionally, 1996 included approximately $0.2 million in
expenses for corporate staff who were retained until March 31, 1996.
Net interest expense decreased $1.0 million, or 5%, in 1996 compared to 1995
as a result of lower average debt balance outstanding throughout 1996 with
proceeds from the U.S. Disposition applied to reduce debt primarily in
December 1995.
Discontinued oil and gas operations includes both Canadian and United States
oil and gas operations. Income from discontinued operations was $4.8 million
in 1996 compared to $211,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
On June 16, 1997, the Company completed the Canadian Disposition. Net
proceeds after purchase price adjustments, transaction expenses and severance
costs were approximately $91.3 million (C$126.7 million). With proceeds from
the sale, the Company redeemed $49.2 million of its 12% Senior Notes,
including redemption premium, during the third quarter of 1997, and on October
1, 1997, redeemed the remaining $7.5 million outstanding of 10 3/4%
Subordinated Debentures at par. In addition, on December 30, 1997, the Company
redeemed $25.6 million of its 12% Senior Notes, including redemption premium.
In total, $79.9 million principal amount of debt was retired with sales
proceeds. As of December 31, 1997, the Company had a debt to capitalization
ratio of 56% compared to the highly leveraged percentage of 85% as of year-end
1996.
On February 9, 1998, the Company issued $70 million of 9 1/8% Senior Notes
(the "New Senior Notes") due 2006. On February 10, 1998, the Company called
for redemption the remaining $24.6 million of its Senior Notes and $46 million
of its Convertible Subordinated Debentures outstanding at December 31, 1997
(together, the "Redemptions"). The Company will use the net proceeds from the
issuance of the New Senior Notes and available cash to fund the Redemptions.
To the extent the holders of the Convertible Subordinated Debentures elect to
convert their Convertible Subordinated Debentures into shares of the Company's
common stock prior to redemption, a portion of the net proceeds will not be
needed to effect such redemption. Depending on market conditions, the Company
may use any such excess proceeds to repurchase shares of its common stock in
the open market. Any remaining unused proceeds will be used for general
corporate purposes.
At December 31, 1997, the Company had $21.7 million available in cash, $20
million available under the Frontier Credit Facility and $250,000 of 12%
Senior Notes held by Wainoco. The Company had working capital of $20.9 million
at December 31, 1997, including the portion of the sales proceeds from the
Canadian Disposition remaining after debt retirement.
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Net cash provided by operating activities was $12.5 million, $8.5 million
and $9.9 million for 1997, 1996 and 1995, respectively. Working capital
changes required $9.9 million and $2.6 million of cash flows for 1997 and
1996, respectively. Consistent with the seasonality of its business, the
Company invests in working capital during the first half of the year and
recovers working capital investment in the second half of the year.
Investing activities in 1997 included capital expenditures of $9.0 million,
a decrease of $4.4 million from 1996, primarily due to a $5.4 million decrease
in oil and gas operations investment. Investing activities include proceeds
from the Canadian Disposition of $91.3 million for the year ended December 31,
1997. Capital expenditures were $13.4 for the year ended December 31, 1996
compared to $17.2 million in 1995. Refinery capital expenditures of $13
million are planned in 1998. It is anticipated that cash generated from
operating activities will be sufficient to meet its 1998 investing
requirements.
The Company's 12% Senior Notes currently restrict it from the payment of
dividends. Additionally, under certain conditions, the Frontier credit
facility restricts the transfer of cash in the form of dividends, loans or
advances to the Company from Frontier. Wainoco does not believe these
restrictions limit its current operating plans.
OTHER MATTERS
Impact of Changing Prices/Hedging. The Company's revenues and cash flows, as
well as estimates of future cash flows are very sensitive to changes in energy
prices. Major shifts in the cost of crude and the price of refined products
can result in large changes in operating margin from refining operations.
Energy prices also determine the carrying value of the Frontier Refinery's
inventory.
The Company, at times, engages in futures transactions in its refining
operations for the purpose of hedging its refining position. To date, the use
of future transactions has been limited to protect against price declines for
excess inventory volumes. Futures contracts and options may also, in the
future, be used to fix margins in its refining and marketing operations. In
addition, the Company, at times, engages in futures transactions for the
purchase of natural gas at fixed prices. Natural gas is consumed by the
Frontier Refinery for energy purposes.
Year 2000. Many of the computer systems used by the Company today were
designed and developed using two digits, rather than four, to specify the
year. As a result, such systems will recognize the year 2000 as "00". This
could cause many computer applications to fail completely or to create
erroneous results unless corrective measures are taken. The Company utilizes
software and related computer technology essential to its operations that may
be affected by the Year 2000 issue. A review of the Company's primary computer
accounting system indicated only minor modifications will be required to make
it Year 2000 compliant. Reviews are being done to determine what actions will
be necessary to make its remaining computer systems Year 2000 compliant. The
Company expects to complete its remaining reviews and prepare cost estimates
by mid-1998.
Net Operating Loss Carryforwards. Realization of deferred tax assets is
dependent on the Company's ability to generate taxable income within the life
of the NOLs. As a result of the Company's history of operating losses, a
valuation allowance has been provided for deferred tax assets that are not
offset by scheduled future reversals of deferred tax liabilities.
During 1997, the Company completed an assessment of certain of its tax
strategies adopted in prior years to maximize the benefit for U.S. tax
reporting purposes of its Canadian operations. Accordingly, the Company has
elected to reflect the amounts and positions taken for U.S. federal income tax
purposes. Therefore, the aggregate (and corresponding yearly components)
regular NOLs disclosed previously in the Company's 1996 annual report on Form
10-K for financial reporting purposes have been increased by $89.7 million in
total, of which a portion was used to offset estimated taxable income
generated during the period January 1, 1997 through December 31, 1997.
At December 31, 1997, the Company had regular NOLs of $145.6 million
available to reduce future taxable income. The regular NOLs will expire as
follows: $32.2 million in 2002, $7.7 million in 2003, $11.3 million in 2004,
$29.5 million in 2005, $17.2 million in 2006, $13.7 million in 2007, $11.3
million in 2008, $2.2 million in 2009, $16.1 million in 2010 and $4.4 million
in 2011.
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Also at December 31, 1997, the Company had alternative minimum tax net
operating loss carryforwards ("AMT NOLs") for United States reporting of $98.4
million to reduce future taxable income. The AMT NOLs will expire as follows:
$2.8 million in 2002, $5.4 million in 2003, $9.0 million in 2004, $27.0
million in 2005, $13.1 million in 2006, $11.6 million in 2007, $8.6 million in
2008, $1.4 million in 2009, $16.8 million in 2010 and $2.7 million in 2011.
The Company has tax depletion carryforwards of $8.7 million which are
indefinitely available to reduce future United States income taxes payable.
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BUSINESS
GENERAL
Wainoco is an independent energy company engaged in crude oil refining and
the wholesale marketing of refined petroleum products, primarily in the Rocky
Mountain region of the United States. The Company operates the Frontier
Refinery in Cheyenne, Wyoming with a permitted crude oil capacity of 41,000
bpd. Since its acquisition of the Frontier Refinery in 1991, the Company spent
approximately $60 million in a capital improvement program from 1992 through
1993 which, among other things, (i) increased the Frontier Refinery's
capability to process heavy crude oil, (ii) enabled the Frontier Refinery to
meet federally-mandated low sulfur standards with respect to all of its diesel
fuel production and (iii) improved the Frontier Refinery's general
reliability. An important feature of the Frontier Refinery is its ability to
process up to 100% heavy crude oil, which is less expensive than sweet crude
oil. As a result, the Company is well positioned to benefit from an increase
in the light/heavy spread, which is currently estimated to be $4.55 per bbl.
See "--Refining Operations--Varieties of Crude Oil." For the year ended
December 31, 1997, the Company achieved consolidated revenues of $376.4
million and EBITDA (as defined herein) of $30.9 million.
The Company markets refined products in the Eastern Slope area of the Rocky
Mountain region. The Company also markets refined products in western Nebraska
and, through exchange agreements with other refiners, in the Dakotas and Utah.
Of the 15 crude oil refineries in the Rocky Mountain region, the Company only
considers the four other refineries (two in Denver and two in Wyoming) located
within the Eastern Slope area to be refinery competitors, although additional
competition comes from refineries outside the Eastern Slope area that supply
refined products to the area via pipeline. The Company believes it has an
advantage over (i) its four refinery competitors because only the Company
operates a coking unit, which enables it to produce a higher yield of gasoline
and diesel fuel from heavy crude oil, and (ii) the pipeline competitors that
ship product into the Eastern Slope area because they must incur a
transportation cost, which for Gulf Coast refiners equates to approximately
$1.60 per bbl. Furthermore, while it has in the past generally marketed
unbranded products, in the second half of 1997, the Company entered into a
marketing agreement with CITGO to market branded products to independent and
other branded retail operators in its market area. For the year ended December
31 1997, the Frontier Refinery's product mix included various grades of
gasoline (51%), diesel fuel (30%) and asphalt and other refined petroleum
products (19%).
The Company prefers to process locally produced heavy crude oil. In the year
ended December 31, 1997, the Company obtained approximately 84% of its crude
oil supply, or charge, from Wyoming producers while Canadian heavy crude oil
made up a majority of the Frontier Refinery's remaining feedstocks. During the
same period, heavy crude oil constituted approximately 91% of the Frontier
Refinery's total crude oil charge. The Company believes it is able to obtain
favorable pricing terms for the heavy crude oil it uses as feedstock because
available supply currently outstrips demand. None of the Company's direct
competitors, and only three other refineries in the entire Rocky Mountain
region, operate coking units necessary to process high volumes of heavy crude
oil. In addition, while Wyoming crude oil production is declining, the
completion of the 785-mile Express Pipeline from Hardisty, Alberta to Casper,
Wyoming in April 1997 immediately doubled available pipeline capacity for
Canadian crude oil to the Wyoming market. The Express Pipeline has benefitted
the Company by (i) holding down prices of Wyoming heavy crude oil and (ii)
providing the Company with the flexibility to significantly increase the
Frontier Refinery's Canadian heavy crude oil charge if favorable supply and
pricing conditions arise. The Company also receives a supply cost advantage on
up to 25,000 bpd from its partial ownership interest in the Centennial
Pipeline that runs from the regional hub at Guernsey, Wyoming to the Frontier
Refinery.
BUSINESS STRATEGY AND STRENGTHS
The Company's business strategy includes the following major objectives: (i)
focus solely on refining operations, (ii) capitalize on improvements in the
light/heavy spread, (iii) concentrate marketing efforts in the Rocky Mountain
region, which has experienced high demand growth, and (iv) selectively pursue
acquisitions of
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refining and related transportation assets as attractive opportunities arise.
The Company believes it is well-positioned to execute its strategy as a result
of the following factors:
Refinery with Ability to Process 100% Heavy Crude Oil. The Company is able
to exploit the light/heavy spread because the Frontier Refinery's coking unit
provides significant upgrading capability. A capital improvements program at
the Frontier Refinery expanded the capacity of its coking unit from 8,200 bpd
to 10,000 bpd giving it the capability to process 100% heavy crude oil. At the
same time, the Company retains the flexibility to process sweet crude oil
should heavy crude oil become less economically advantageous to process. In
the two-year period ended December 31, 1997, the Frontier Refinery's average
crude oil charge was 89% heavy crude oil, and in 1997, the Frontier Refinery
processed approximately 11.7 mmbbls of heavy crude oil. Accordingly, a
widening in the Company's light/heavy spread has a direct impact on the
Company's profitability. The Company has recently benefitted from an increase
in its light/heavy spread; for the year ended December 31, 1997 the Company's
light/heavy spread improved to $3.54 per bbl from $2.54 per bbl for the same
period in 1996. In the quarter ended December 31, 1997, the Company's
light/heavy spread was $3.82 per bbl.
Favorable Crude Oil Supply Conditions. While Wyoming crude oil production is
declining, expanding Canadian heavy crude oil production combined with local
pipeline access to such production has produced crude oil supply conditions
favorable to the Frontier Refinery. Canadian heavy crude oil production
increased 24% from 1990 through 1995 without a corresponding increase in
Canadian refining capacity. With the opening of the Express Pipeline in April
1997, the Frontier Refinery now has more direct pipeline access to Canadian
production in substantial volumes. The current capacity of the Express
Pipeline is 172,000 bpd. The Express Pipeline has reduced transportation costs
incurred by the Company by approximately $0.75 per bbl, and the Company
believes that the Express Pipeline has reduced transportation time from
approximately 30 days to 15 days. The expansion of the available supply of
heavy crude oil from the Express Pipeline has also put downward pressure on
the price of locally produced heavy crude oil. In addition, while the Company
favors heavy crude oil, the Express Pipeline provides the Frontier Refinery
with access to a greater variety of crude oil types. The Company has entered
into a 15-year commitment with the Express Pipeline for the delivery of
approximately 13,800 bpd, subject to an assignment of a portion of the
capacity in early years for additional capacity in later years.
Attractive Market Region. The Company believes that the Rocky Mountain
region, particularly the Eastern Slope area, offers a favorable refining
market in which to operate, featuring strong demand for refined products and
abundant supply of crude oil feedstocks. Gasoline consumption in Colorado,
where the Company markets 71.0% of its gasoline sales volumes, has increased
at a rate of 5.4% per year from 1992 through 1996, compared to the national
average of 1.9%. Similarly, diesel consumption in Wyoming is strong, where the
Company markets 54.0% of its diesel sales volumes, because Wyoming state motor
fuel taxes are approximately 13c per gallon lower than the neighboring states
of Nebraska and Utah. East-west traffic therefore prefers to refuel in
Wyoming, frequently near the Frontier Refinery. As regional refining capacity
is insufficient to meet the high demand for refined petroleum products in the
Eastern Slope area, three pipelines also transport refined product into the
area from outside the Rocky Mountain region. As a local refiner, however, the
Company believes that it has a competitive advantage over these imports due to
their associated transportation costs.
As a result of these favorable supply-demand dynamics, the crack spreads in
the Rocky Mountain region have been consistently higher than those experienced
by refiners in the Gulf Coast or Mid-Continent areas. On average, for the
years 1992 through 1997, the crack spreads for unleaded gasoline and diesel
fuel were $3.13 per bbl and $3.37 per bbl higher, respectively, in the Rocky
Mountain region as compared to the Gulf Coast region. With respect to heavy
crude oil, the Company's refining margins include not only the crack spread
(which is calculated with respect to sweet crude oil), but also the associated
light/heavy spread.
Marketing Alliance with CITGO. In the second half of 1997, the Company
entered into a seven-year marketing agreement with CITGO, its largest
customer, to become a branded representative for CITGO. The Company believes
the CITGO agreement offers potential to increase its market share in the
Eastern Slope area because CITGO currently has only a small share of the
Eastern Slope market. The agreement allows the
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Company to produce gasoline and diesel to CITGO's specifications, sign up
independent and other branded retail operators as CITGO branded locations and
sell its own refined products to these operators. The agreement also allows
the Company to offer additional benefits to its customers such as access to
CITGO's proprietary credit card and pay-at-the-pump systems. Moreover, the
Company believes that its affiliation with the nationally-recognized CITGO
brand will allow it to continue to effectively compete in its market area as
more independent regional retailers seek relationships with suppliers of
branded products.
Improved Financial Condition. During 1997, the Company made the strategic
decision to focus on its refining operations and to divest its remaining
exploration and production operations. On June 16, 1997, the Company completed
the Canadian Disposition, which generated net proceeds to the Company of $91.3
million and a net gain to the Company of $23.3 million. The Company previously
completed the U.S. Disposition in late 1995. The Company used proceeds of the
Canadian Disposition to repay $79.9 million principal amount of its
outstanding indebtedness. The Company will use the proceeds of the Offering
together with existing working capital to repay all of its remaining
outstanding indebtedness ($70.6 million as of December 31, 1997). In addition,
the Company has the ability to reduce tax liability with respect to future
income through the use of NOLs. At December 31, 1997, the Company had NOLs of
$145.6 million, which will be used by the Company to reduce future taxable
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Net Operating Loss Carryforwards." The Canadian
Disposition, the Offering and the subsequent retirement of outstanding debt
will allow the Company to improve its capital structure and to reduce ongoing
debt service requirements. As a result, the Company will possess an improved
financial position and believes it is well-positioned to execute its operating
strategy.
REFINING OPERATIONS
Industry Overview. The refining industry is highly competitive, as refined
products are chiefly treated as commodities. Refining margins vary according
to product demand and crude oil supply costs. During the 1980s and early
1990s, there were refinery closures in the United States due to flat product
demand and high capital requirements, and in 1990, the Clean Air Act
Amendments required refineries to install facilities to modify the qualities
of gasoline and diesel. In addition, in the early 1990s many refineries also
increased their gasoline and diesel production capacity. The increase in
production capacity, coupled with modest demand growth, led to low refining
margins. During 1996 and 1997 gasoline and diesel demand increased to the
point that refinery utilization rates have become very high, and refinery
margins have substantially increased.
Varieties of Crude Oil. Traditionally, crude oil has been classified as (i)
sweet (if sulfur content is low) or sour (if sulfur content is high) and (ii)
light (if gravity is high) or heavy (if gravity is low). For the most part,
heavy crude oil tends to be sour and light crude oil tends to be sweet.
However, it is current industry practice to use the term "sweet" in referring
to sweet or light crude oil and to use the term "heavy" in referring to heavy
or sour crude oil. When refined, sweet crude oil produces a higher yield of
higher margin refined products such as gasoline and diesel, and as a result,
is more expensive than heavy crude oil. In contrast, heavy crude oil produces
more low margin by-products and heavy residual oils. The discount at which
heavy crude oil sells compared to the sales price of sweet crude oil is known
in the industry as the light/heavy spread. A coking unit, such as the one used
by the Frontier Refinery, can process certain by-products and heavy residual
oils to produce additional volumes of gasoline and diesel, thus increasing a
refinery's aggregate yield of higher margin refined products from the same
initial volume of crude oil.
Light/Heavy Spread. The light/heavy spread generally declined from 1992
through the end of 1995. The narrowing of the light/heavy spread resulted in
large part from capacity upgrades and capital improvement programs undertaken
by refiners in response to economic demand and the requirements of the Clean
Air Act Amendments and other environmental regulations. As a part of such
improvement programs many refiners also added upgrading capacity to process
heavy crude oil. The additional upgrading capacity among refiners dramatically
increased the demand for heavy crude oil causing the light/heavy spread to
narrow over such period. By 1996, however, the additional upgrading capacity
was absorbed, and the spread began to improve. Subsequent
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Canadian heavy crude oil development coupled with the opening of the Express
Pipeline have increased the supply of heavy crude oil in Wyoming and further
widened the Company's light/heavy spread. The following chart presents the
Company's average quarterly light/heavy spread for the period from January 1,
1992 through December 31, 1997:
[LIGHT/HEAVY CRUDE OIL SPREAD GRAPH APPEARS HERE]
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Products. The Frontier Refinery is a complex heavy crude coking refinery.
Refineries are frequently classified according to their complexity. Complex
refineries have the conversion capability to produce high yields of high
margin refined products despite processing significant volumes of heavy crude
oil. In contrast, in order to produce high yields of gasoline and diesel,
simple refineries must process primarily sweet crude oil. Some simple
refineries may be capable of processing heavy crude oil, but they will produce
large volumes of by-products and heavy residual oils. The Frontier Refinery
has one of the highest conversion capabilities to produce transportation fuels
relative to other refineries in the Rocky Mountain region. Because gasoline
and diesel sales generally achieve higher margins than are available on other
refined products, the Company expects that they will continue to make up the
bulk of its production. The following is a description of the Company's
products:
Gasoline. Gasoline accounted for 51% of the Company's total refined
product sales volumes for the year ended December 31, 1997. The Frontier
Refinery produces gasoline in various grades, or octane levels. In the year
ended December 31, 1997, the Company sold 71% of its gasoline sales volumes
in the Colorado market which has experienced above-average demand growth
over the past five years. The Company's gasoline sales are always stronger
in the summer months due to heavier automobile traffic in the region.
Diesel. Diesel accounted for 30% of the Company's total refined product
sales volumes for the year ended December 31, 1997. The Frontier Refinery
benefits from a strong local market for diesel fuel. Cheyenne is located
along Interstate 80, which is the principal east-west thoroughfare for
trucks because of its low-grade crossing over the Continental Divide. The
heavy truck traffic coupled with a motor fuel tax in the State of Wyoming
that is 15c per gallon less than the neighboring states of Utah and
Nebraska produces consistently strong demand for diesel fuel in the
Cheyenne area. In addition, two major railroads pass through Cheyenne
creating additional demand for diesel fuel. As a result, the Company is
able to sell a significant portion of its diesel product at the Frontier
Refinery, eliminating any transportation costs. The Company believes that
all of its diesel product meets the low sulfur requirements imposed by the
Clean Air Act Amendments of 1990.
Asphalt and Other Refined Products. Asphalt and other refined products
accounted for 19% of the Company's total refined product sales volumes for
the year ended December 31, 1997. The Company believes that the Frontier
Refinery produces especially high-quality asphalt due to the high
percentage of heavy crude oil feedstocks used. The Company believes that it
has benefitted from the population growth and accompanying construction in
the Denver metropolitan area as a substantial portion of its asphalt sales
go to Colorado. Asphalt sales are much stronger in the summer months due to
reduced construction work in the Rocky Mountain region during the winter.
The Company sells other refined products, including petroleum coke, which
is primarily burned as a fuel component in industrial power plants.
40
<PAGE>
The following table sets forth the Frontier Refinery's charges and yield
achieved since 1993:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Raw material input (bpd)
Light crude oil...................... 6,581 6,165 8,098 4,322 3,162
Heavy crude oil...................... 25,909 27,025 27,174 31,677 31,967
Other feed and blend stocks.......... 2,957 4,105 5,072 5,192 6,154
------ ------ ------ ------ ------
Total.............................. 35,447 37,295 40,344 41,191 41,283
====== ====== ====== ====== ======
Heavy crude oil percentage of crude oil
charges............................... 80% 81% 77% 88% 91%
Manufactured product yields (bpd)
Gasoline............................. 15,129 16,106 17,263 16,825 17,060
Diesel............................... 11,777 13,094 13,744 13,712 12,856
Asphalt and other.................... 7,128 6,575 7,951 9,215 10,200
------ ------ ------ ------ ------
Total.............................. 34,034 35,775 38,958 39,752 40,116
====== ====== ====== ====== ======
Total product sales (bpd)
Gasoline............................. 19,837 19,437 20,767 20,311 20,499
Diesel............................... 11,819 12,628 13,265 12,561 12,110
Asphalt and other.................... 7,682 6,724 6,781 7,306 7,949
------ ------ ------ ------ ------
Total.............................. 39,338 38,789 40,813 40,178 40,558
====== ====== ====== ====== ======
</TABLE>
Marketing and Distribution. The Company's primary market for its refined
products is the Eastern Slope area of the Rocky Mountain region, which
includes Colorado and Wyoming. For the year ended December 31, 1997,
approximately 71% and 14%, respectively, of the Frontier Refinery's gasoline
sales volumes were sold in Colorado and Wyoming. For the same period, 25% and
54%, respectively, of the Frontier Refinery's diesel sales volumes were sold
in Colorado and Wyoming. In 1996, the Company had an 11% and 12% share,
respectively, of the gasoline market in Colorado and Wyoming. In the same
year, the Company had a 16% and 36% share, respectively, of the diesel market
in Colorado and Wyoming, respectively. The gasoline and diesel produced by the
Frontier Refinery is primarily shipped via pipeline to terminals for
distribution by truck or rail. In the year ended December 31, 1997,
approximately 10% of gasoline sales volumes and approximately 52% of diesel
sales volumes were sold at the Frontier Refinery. Pipeline shipments are
handled mainly by the Kaneb pipeline, serving Denver and Colorado Springs,
Colorado, and the Continental pipeline, serving Sidney and North Platte,
Nebraska.
41
<PAGE>
The Company sells refined products to a broad base of independent retailers,
jobbers and major oil companies. Prices are determined by local market
conditions at the "terminal rack," and the customer typically supplies his own
truck transportation. In 1997, approximately 66% of Frontier's sales were made
to its 25 largest customers. Occasionally, marketing volumes exceed the
Frontier Refinery's production capabilities. In such instances, the Company
purchase product in the spot market as needed. In addition to Denver and
Cheyenne, its largest markets, the Company also markets its products at third
party terminals in Colorado Springs, Colorado; Casper, Wyoming; Evanston,
Wyoming; Salt Lake City, Utah; Sidney, Nebraska; Rapid City, South Dakota and
Mandan, North Dakota.
[PRODUCT PIPELINE MAP APPEARS HERE]
42
<PAGE>
CITGO Marketing Agreement. In the second half of 1997, the Company entered
into a seven-year marketing agreement with CITGO to become a CITGO branded
representative. The agreement allows the Company to produce gasoline and
diesel to CITGO's specification, sign up independent and other branded retail
operators as CITGO branded locations and sell its own refined products to
these operators. The agreement also allows the Company to offer additional
benefits to its customers such as access to CITGO's proprietary credit card
and pay-at-the-pump systems. The Company believes the CITGO agreement offers
potential to grow its market share in the Eastern Slope area because CITGO,
which has the largest number of branded retail outlets in the United States,
currently has only a small share of the Eastern Slope market. Moreover, the
Company believes that its affiliation with the nationally-recognized CITGO
brand will allow it to continue to effectively compete in its market area as
more independent regional retailers seek relationships with suppliers of
branded products.
Exchange Agreements. The Company has entered into agreements with other
refiners pursuant to which it supplies these exchange partners with refined
product at specified locations in exchange for receiving refined product from
the partners at other locations. A current aggregate monthly volume of 100,000
bbls of gasoline and 90,000 bbls of diesel is subject to such exchange
agreements. The exchange agreements are designed to reduce the Company's
exposure in any given market area.
Competition. The Company's most competitive market is the Denver
metropolitan area. Four principal refineries serve the Denver market: Sinclair
Oil Company ("Sinclair"), which has a 54,000 bpd refinery near Rawlins,
Wyoming and a 22,000 bpd refinery in Casper, Wyoming; Ultramar Diamond
Shamrock Corporation ("UDS"), which has a 28,000 bpd refinery in Denver, and
Conoco Inc. ("Conoco"), which has a 57,500 bpd refinery in Denver. Denver is
also supplied by five product pipelines, including three from outside the
region that enable refined products from other regions to be sold in the
Denver market. The Company is aware of several proposals or industry
discussions involving the expansion of existing pipelines or the construction
of new pipelines to serve the Denver market. However, the Company believes
that any additional product shipped as a result of such expansions would be
burdened by the same transportation costs that add to the current expense of
shipping refined product to Denver via pipelines from outside the region.
The UDS and Conoco refineries located in Denver incur lower product
transportation costs in servicing the Denver market than the Company. However,
the Company has lower crude oil transportation costs due to (i) its proximity
to the Guernsey, Wyoming hub, the major crude oil pipeline hub in the Rocky
Mountain region and (ii) its ownership interest in the Centennial Pipeline.
Moreover, unlike Sinclair, UDS and Conoco, the Company sells its products
exclusively wholesale. The Company believes that this commitment to the
wholesale market gives it a customer relations advantage over its principal
competitors in the Eastern Slope area, all of which also have retail outlets,
because the Company is not in direct competition with independent retailers of
gasoline and diesel. The other markets served by the Company are less
competitive than the Denver market.
Crude Oil Supply. In the year ended December 31, 1997, the Company obtained
approximately 84% of its refinery charge from Wyoming, 4% from Montana and 12%
from Canada. During the same period, heavy crude oil constituted approximately
91% of the Frontier Refinery's total crude oil charge. Cheyenne is 80 miles
southwest of Guernsey, Wyoming, the main hub and crude oil trading center for
the Rocky Mountain region. The Company transports approximately 60% of the
crude oil purchased at Guernsey to the Frontier Refinery through the
Centennial Pipeline. Additional crude oil volumes are transported on an
alternative pipeline. Ample quantities of heavy crude oil, both locally
produced Wyoming General Sour and imported Canadian heavy crude oil are
available at Guernsey. The Company's ability to process up to 100% heavy crude
oil feedstocks gives it a distinct advantage over the four other Eastern Slope
refineries, none of which has the necessary upgrading capability to process
high volumes of heavy crude oil. Similarly, only three of the other 15
refineries in the entire Rocky Mountain region have the coking units necessary
to process substantial volumes of heavy crude oil. The Company has 27% of the
heavy residual oil upgrading capacity in the entire Rocky Mountain region.
The supply of crude oil in the Rocky Mountain region exceeds refining
capacity. Canadian crude oil production increased 17% from 1990 through 1995
without a corresponding increase in Canadian refining capacity. The Company
believes that heavy crude oil refining capacity will continue to be
constrained in the
43
<PAGE>
Rocky Mountain region because of stringent environmental permitting
requirements and the high cost of requisite plant modifications. As a result,
the Company believes it will continue to have access to an ample supply of
regional and Canadian heavy crude oil at attractive prices.
The Company purchases crude oil from a number of suppliers, including major
oil companies, marketing companies and large and small independent producers,
under arrangements which contain market-responsive pricing provisions. Many of
these arrangements are subject to cancellation by either party or have terms
that are not in excess of one year and are subject to periodic renegotiation.
The Company also enters into forward contracts to lock in crude oil supply at
an attractive light/heavy spread. Generally, these forward contracts secure
delivery for no more than 12 months in advance. Currently, the Company has
committed to purchase an average of 29,000 bpd of crude oil in 1998 through
forward contracts at light/heavy spreads ranging from $4.80 per bbl to $5.25
per bbl.
[CRUDE OIL PIPELINE MAP APPEARS HERE]
44
<PAGE>
Refinery Units. The following is a flow chart of the refining process and a
summary description of the Frontier Refinery's processing units and their
respective functions.
[FRONTIER REFINERY FLOW CHART APPEARS HERE]
Atmospheric Crude Distillation Unit ("Crude Unit"). The hydrocarbon
compounds which make up crude oil will separate, or "fractionate," when
subjected to high temperatures. The Crude Unit, installed in 1979, can charge
41,000 bpd of crude oil and fractionate it into several products which are
then typically fed into other units of the Frontier Refinery. A small amount
of product from the Crude Unit can be blended directly into gasoline. Another
product, called heavy naphtha, has some characteristics of gasoline, except
that its octane is too low and is therefore fed into other processing units in
order to increase its octane. The next product is diesel material, which is
treated in another processing unit to lower the sulfur content. Atmospheric
gas oil is next produced from the Crude Unit and fed to another process unit
which makes diesel and gasoline from the gas oil. The final product from the
Crude Unit is atmospheric tower bottoms, which is charged directly to the
Vacuum Crude Distillation Unit.
Vacuum Crude Distillation Unit. The Vacuum Unit, installed in 1979, is fully
integrated with the Crude Unit and allows further separation of the crude oil
into intermediate products. The capacity of the Vacuum Unit is 27,000 bpd. The
first product from this unit is vacuum gas oil, which is combined with the
atmospheric gas oil, to be charged to the FCCU (as defined herein). The
remaining heavy residual oil is either produced as asphalt or charged to the
coker.
Delayed Coking Unit. Delayed coking is a thermal cracking process in which
the heavy residual oil from the Crude Unit is heated to high temperatures and
separates into hydrocarbon vapors and a solid residue coke product. The vapors
produced by the coking process are condensed and fractionated into lighter,
more valuable intermediate products which are then charged to other Frontier
Refinery units. The coker produces streams which
45
<PAGE>
are ultimately converted into finished gasoline and finished diesel products
by these other Frontier Refinery units. The solid residue coke product is
primarily sold as a fuel for heavy industrial boilers. The coker was installed
in 1979 and upgraded and expanded in 1992. In 1992 and 1993, the Company spent
$6.8 million to expand the capacity of the coker from 8,200 bpd to 10,000 bpd.
Catalytic Reforming Unit. The Catalytic Reformer, constructed in 1972, has a
demonstrated capacity of 7,500 bpd. This unit upgrades the octane of the
naphtha produced in the Crude Unit and the coker. It is capable of producing
product with an octane of 98 Research Octane Number ("RON"). The product of
the Catalytic Reformer is reformate, a high gasoline blending octane stock.
Naphtha Hydrotreater. The Naphtha Hydrotreater desulfurizes all naphtha
produced in the refinery, taking feedstocks from both the coker and the Crude
Unit. The Naphtha Hydrotreater provides low sulfur (1 part per million)
feedstocks for the Catalytic Reformer. Constructed in 1972, the unit has a
capacity of up to 8,000 bpd.
Fluid Catalytic Cracking Unit ("FCCU"). Catalytic cracking greatly enhances
the efficiency of a refinery by converting the heavier gas oil streams from
the Crude Unit and the coker primarily into gasoline, diesel, and other
intermediate products which are converted to gasoline in the Alkylation Unit.
The FCCU, originally constructed in 1943, has a permitted and rated capacity
of 12,000 bpd.
Alkylation Unit. The Alkylation Unit chemically combines isobutane with
propylene and butylene from the FCCU into high octane gasoline. The unit has
demonstrated capacity in excess of 4,000 bpd of alkylate. Propane, a by-
product, is sold or used as refinery fuel, depending on economics. The normal
butane produced is processed in the Butane Isomerization Unit, with any excess
used in gasoline blending. The Alkylation Unit was installed in 1972.
Butane Isomerization Unit. This unit uses an isomerization catalyst to
process normal butane produced in the refinery, along with normal butane
contained in purchased field grade butane, converting a portion of the butane
to isobutane. Isobutane is a necessary feedstock for the Alkylation Unit. This
unit has a capacity of 1,400 bpd and was constructed in 1972 at the same time
the Alkylation Unit was constructed.
Diesel Desulfurization Unit ("Diesel Hydrotreater"). The Diesel Hydrotreater
was expanded and modernized in 1993, as part of the Frontier Refinery's major
capital project to make low-sulfur diesel, which was required by the Clean Air
Act Amendments. This unit makes a finished diesel product with less than 0.05%
sulfur, as required by the Clean Air Act Amendments. It has a demonstrated
capacity of 17,000 bpd and is permitted for 21,000 bpd. The Diesel
Hydrotreater was installed in 1951 and upgraded and expanded in 1993.
Sulfur Recovery Units. The Frontier Refinery has two parallel trains of
Sulfur Recovery Units. These units do not produce fuel product but treat the
product to remove sulfur in order to maintain compliance with environmental
regulations. The older unit was constructed in 1984 and has a capacity of 30
long tons/day. The newer unit was installed in 1993 and has a capacity of 75
long tons/day. The treated streams from these units then combine and are
charged to the final cleanup process unit (Scott Unit) which limits the total
sulfur recovery capacity to 90 long tons/day.
Hydrogen Unit. The Hydrogen Unit converts purchased natural gas into
hydrogen, which is a necessary feedstock to the two hydrotreating units
(Naphtha and Diesel Hydrotreaters). The Hydrogen Unit was built in 1993 and
has a capacity of 5.5 million standard cubic feet per day of hydrogen
production.
Central Control Room with Advanced Computer Controls. Beginning in 1993, the
Frontier Refinery started a conversion program to the latest state-of-the-art
computer control systems for refinery process units. The Crude Unit was the
first process unit placed on the Honeywell TDC-3000 system (the "TDC-3000
system"), which utilizes advanced computer controls to optimize the unit's
operation. Other process units were placed on the TDC-3000 system in 1994
through 1996. In 1996, all control systems were brought into a new centralized
control room. The coker is the only remaining unit not on the centralized
control system. This final unit has been contracted for TDC-3000
implementation in 1998.
46
<PAGE>
Residual Oil Processing Agreement. The Company has an agreement with Conoco
which expires in 2002 whereby it uses a portion of the coking unit's capacity
to process heavy residual oils received from Conoco's Denver refinery. In
return, the Company ships coker gasoil produced by the coker (in volumes of
equivalent value to the heavy residual oils received) back to the Conoco
refinery. The Company also receives a processing fee and a pro rata
reimbursement of operating expenses from Conoco. As the Frontier Refinery does
not currently have the capacity to process the excess volumes of coker gasoil
shipped to the Conoco refinery, the agreement allows the Company to avoid
processing "bottlenecks" that would otherwise occur at the Frontier Refinery.
Express Pipeline. The 785-mile Express Pipeline, which opened in April 1997,
runs from Hardisty, Alberta to Casper, Wyoming with a capacity of 172,000 bpd.
The new pipeline immediately doubled available capacity of Canadian crude oil
to the Frontier Refinery. While the Company did have prior limited access to
Canadian crude oil, the Express Pipeline has cut transportation costs by $0.75
per bbl, and the Company believes that the Express Pipeline has accelerated
transportation time from 30 days to 15 days. The Express Pipeline has
benefitted the Company by (i) holding down prices of Wyoming heavy crude oil
and (ii) providing the Company with the flexibility to significantly increase
the Frontier Refinery's Canadian heavy crude oil charge if favorable supply
and pricing conditions arise. In addition, while the Company favors heavy
crude oil, the Express Pipeline provides the Frontier Refinery with greater
access to a wide variety of crude oil types. The Company also believes the
Express Pipeline will facilitate its ability to form alliances with Canadian
heavy crude oil producers. The Company has entered into a 15-year commitment
with the Express Pipeline for the delivery of approximately 13,800 bpd,
subject to an assignment of a portion of the capacity in early years for
additional capacity in later years.
Refining Margins. The Company's income and cash flow depend principally on
the margin between the cost to obtain and refine crude oil and the price
received for refined products. With respect to gasoline and diesel production,
the margin includes the crack spread plus the additional light/heavy spread to
the extent heavy crude oil is refined. However, the Company's aggregate margin
is reduced by (i) the "cost" of by-products, or the lower margin received for
volumes of refined products other than gasoline and diesel, (ii) costs
associated with crude oil and intermediate product inventories, (iii) the cost
of spot market purchases to supplement its own production and (iv) operating
expenses.
Crude Oil and Refined Product Prices. The price at which the Company can
sell gasoline and its other refined products will be strongly influenced by
the commodity price of crude oil. Generally, an increase or decrease in the
price of crude oil results in a corresponding increase or decrease in the
price of gasoline and other refined products. However, the Frontier Refinery
maintains inventories of crude oil, intermediate products and refined
products, the value of each of which is subject to rapid fluctuations in
market prices. As a result, a rapid and significant movement in the market
prices for crude oil or refined products could have an adverse short-term
impact on earning and cash flow. Inventories are recorded at the lower of cost
on a FIFO basis or market. Crude oil prices, in general, are affected by a
number of factors including domestic and international demand, domestic and
foreign energy legislation, production guidelines established by the
Organization of Petroleum Exporting Countries, relative supplies of other
fuels, such as natural gas, and changing international economic and political
conditions.
Refinery Maintenance. Each of the Frontier Refinery's operating units
requires regular maintenance and repair shutdowns (referred to as
"turnarounds") during which it is not in operation. Turnaround cycles vary for
different units but are generally required every one to three years. In
general, turnarounds at the Frontier Refinery are managed so that some units
continue to operate while others are down for scheduled maintenance.
Maintenance turnarounds are implemented using Company personnel as well as
some additional contract labor. Turnaround work typically proceeds on a
continuous 24-hour basis to minimize unit downtime. The Company accrues for
its turnaround costs. The Company normally schedules its maintenance
turnaround work during the spring or fall of each year. During the second
quarter of 1998, the Company has scheduled turnarounds on its FCCU and
Alkylation Unit. The Company plans to build up product inventories to minimize
the impact of such planned turnarounds.
47
<PAGE>
Safety and Lost Time Accidents. The Company is subject to the requirements
of the federal Occupational Safety and Health Act ("OSHA") and comparable
state occupational safety statutes. The Company believes that it has operated
in substantial compliance with OSHA requirements, including general industry
standards, recordkeeping and reporting, hazard communication, and process
safety management. The nature of the Company's business may result from time
to time in industrial accidents. The reportable incident rate for the Frontier
Refinery for 1995 and 1996 (the most recent two years with complete data
reported) has been below the average incident rates published by the National
Petroleum Refiners Association for the U.S. refining sector and the Rocky
Mountain region. It is possible that changes in safety and health regulations
or a finding of non-compliance with current regulations could result in
additional capital expenditures or operating expenses.
GOVERNMENT REGULATION
Environmental Matters. The Company's refining and marketing operations are
subject to a variety of federal, state and local health and environmental laws
and regulations governing product specifications, the discharge of pollutants
into the air and water, and the generation, treatment, storage, transportation
and disposal of solid and hazardous waste and materials. Permits are required
for the operation of the Frontier Refinery, and these permits are subject to
revocation, modification and renewal. Governmental authorities have the power
to enforce compliance with these regulations and permits, and violators are
subject to injunctions, civil fines and even criminal penalties. The Company
believes the Frontier Refinery is in substantial compliance with existing
environmental laws, regulations and permits.
Among these requirements are regulations recently promulgated by the EPA
under the authority of Title III of the Clean Air Act Amendments. The Company
estimates that the Title III regulations will require the Company to expend
approximately $600,000 by the regulatory compliance deadline of August 1, 1998
to improve the Frontier Refinery's control of emissions of hazardous air
pollutants. Subsequent rulemaking authorized by this or other titles of the
Clean Air Act Amendments or similar laws may necessitate additional
expenditures in future years. Because other refineries will be required to
make similar expenditures, the Company does not expect such expenditures to
materially adversely impact its competitive position.
Nevertheless, rules and regulations implementing federal, state and local
laws relating to health and the environment will continue to affect operations
of the Company, and the Company cannot predict what additional health and
environmental legislation or regulations will be enacted or become effective
in the future or how existing or future laws or regulations will be
administered or interpreted with respect to products or activities to which
they have not been applied previously. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of regulatory
agencies, could have a materially adverse effect on the financial position and
the results of operations of the Company as well as the refining industry in
general, and may result in substantial expenditures for the installation and
operation of pollution control or other environmental systems and equipment.
The Company is party to an agreement with the State of Wyoming requiring the
investigation and possible eventual remediation of certain areas of the
Frontier Refinery's property which may have been impacted by past operational
activities. Prior to this agreement, the Company addressed tasks required
under a consent decree ("Consent Decree") entered by the Wyoming State
District Court on November 28, 1984 and involving the State of Wyoming, the
Wyoming Department of Environmental Quality, and the predecessor owners of the
Frontier Refinery. This action primarily addressed the threat of groundwater
and surface water contamination at the Frontier Refinery. As a result of these
investigative efforts, substantial capital expenditures and remediation of
conditions found to exist have already taken place or are in progress.
Additionally, the EPA issued an administrative order on consent ("Federal
Order") with respect to the Frontier Refinery on September 24, 1990 pursuant
to the Resource Conservation and Recovery Act ("RCRA"). The Federal Order
requires the technical investigation of the Frontier Refinery to determine if
certain areas have been adversely impacted by past operational activities.
Based upon the results of the investigation, additional remedial action could
be required by a subsequent administrative order or permit. Both the state
Consent Decree and the Federal Order are now vacated.
48
<PAGE>
On March 21, 1995, the Company and the Wyoming Department of Environmental
Quality entered into an administrative consent order ("State Order") that
generally parallels the Federal Order and replaces the Consent Decree.
Accordingly, the Consent Decree was dismissed in an Order entered March 21,
1995. The State Order eliminates certain of the Consent Decree requirements,
unifies state and federal regulatory expectations regarding site investigation
and remediation and, consequently, helps to streamline certain of the
Company's current environmental obligations. The EPA withdrew the Federal
Order on March 19, 1997 in recognition of the State Order and Wyoming's
assumption of RCRA corrective action authority. The ultimate cost of any
environmental remediation projects that may be identified by the site
investigation required by the State Order cannot be reasonably estimated at
this time. However, the continuation of the present investigative process,
other more extensive investigations over time or changes in regulatory
requirements could result in future liabilities.
The Company has a 34.72% undivided ownership interest in the Centennial
Pipeline. Conoco Pipe Line Company is the sole operator of the Centennial
Pipeline as well as the holder of the remaining ownership interest. The
Centennial Pipeline runs approximately 88 miles from Guernsey to Cheyenne,
Wyoming. The Frontier Refinery receives up to 25,000 bpd of crude oil
feedstock through the Centennial Pipeline. Under the terms of the operating
agreement for the Centennial Pipeline, the costs and expenses incurred to
operate and maintain the Centennial Pipeline are allocated to the Company on
the basis of either its throughput or ownership interest. The Centennial
Pipeline is subject to numerous federal, state and local laws and regulations
relating to the protection of health, safety and the environment. The Company
believes the Centennial Pipeline is operated in accordance with all applicable
laws and regulations. The Company is not aware of any material pending legal
proceedings to which the Centennial Pipeline is a party.
In 1997, the Company completed divesting itself of its former oil and gas
properties and assets. While the transactions that conveyed these properties
and assets to new owners were intended to transfer any attendant environmental
liabilities to the new owners, there can be no assurances that the Company
will never be subject to liability for any former activity respecting the
divested oil and gas properties. The Company has been named as a potentially
responsible party ("PRP") under CERCLA (as defined herein) at the Gulf Coast
Vacuum Services Superfund Site located in Vermilion Parish, Louisiana, one of
the divested properties. The Company has entered into a consent decree
resolving its liabilities as a PRP at this Superfund site. The Company
believes that any future liabilities related to this site will not have a
material adverse effect on the financial condition of the Company. The Company
also believes that any liability relating to its historical practices
respecting the oil and gas properties will not have a material adverse effect
on the financial condition of the Company.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as "Superfund," imposes liability, without regard to
fault or the legality of the original conduct, on certain classes of persons
who are considered to be responsible for the release of a "hazardous
substance" into the environment. These persons include the owner or operator
of the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances. Under
CERCLA, such persons may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been released into the
environment, for damages to natural resources, and for the costs of certain
health studies. It is not uncommon for neighboring landowners and other third
parties to file claims for personal injury and property damage allegedly
caused by hazardous substances or other pollutants released into the
environment. Analogous state laws impose similar responsibilites and
liabilities on responsible parties. In the course of its historical
operations, as well as in its current ordinary operations, the Company has
generated waste, some of which falls within the statutory definition of a
"hazardous substance" and some of which may have been disposed of at sites
that may require cleanup under Superfund.
As is the case with all companies engaged in similar industries, the Company
faces potential exposure from future claims and lawsuits involving
environmental matters. These matters include soil and water contamination, air
pollution, and personal injuries or property damage allegedly caused by
substances manufactured, handled, used, released or disposed of by the
Company.
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<PAGE>
EMPLOYEES
At December 31, 1997, the Company employed 291 full-time employees in the
refining operations, 42 at the Houston and Denver offices and 249 at the
Frontier Refinery. The Frontier Refinery employees include 81 administrative
and technical personnel and 168 union members. The union members are
represented by seven bargaining units, the largest being the Oil, Chemical and
Atomic Workers International Union ("OCAW"). The Company's current three-year
contract with OCAW expires in July 1999 while its current six-year contract
with the AFL-CIO affiliated union expires in June 2002. On May 8, 1996,
approximately 150 union employees of the Company commenced a strike which was
settled on July 29, 1996. The 1996 strike did not have a material effect on
the Company's operations, and the Company believes that its current relations
with its employees are good. However, there can be no assurance that the
Company's employees will not strike again at some time in the future or that
such a strike would not adversely effect the Company's operations.
PROPERTIES
The Company owns the 125-acre site of the Frontier Refinery in Cheyenne and
rents office space in Englewood, Colorado and Houston, Texas.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings. The
Company is a party to ordinary routine litigation incidental to its business.
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MANAGEMENT
DIRECTORS AND SENIOR OFFICERS
The following table sets forth names, ages and titles of the directors and
senior officers of the Company. Their respective backgrounds are described
following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James R. Gibbs.......... 53 President, Chief Executive Officer and Director
Julie H. Edwards........ 39 Senior Vice President--Finance and Chief Financial Officer
S. Clark Johnson........ 52 Senior Vice President--Refining Operations
J. Currie Bechtol....... 56 Vice President--General Counsel
Gerald B. Faudel........ 48 Vice President--Safety and Environmental Affairs
Jon D. Galvin........... 44 Vice President--Controller
Douglas Y. Bech......... 52 Director
Paul B. Loyd, Jr........ 51 Director
James S. Palmer......... 69 Director
Derek A. Price.......... 65 Director
Carl W. Schafer......... 62 Director
</TABLE>
James R. Gibbs joined the Company in February 1982 and has been President
and Chief Operating Officer since January 1987. He assumed the additional
position of Chief Executive Officer on April 1, 1992. Mr. Gibbs has been a
director of the Company since 1985. Mr. Gibbs is a member of the Board of
Directors of Smith International, Inc., an oil field service company; an
advisory director of Frost National Bank, N.A.; and a director of Veritas DGC
Inc., a seismic service company.
Julie H. Edwards joined the Company in March 1991 and has been Senior Vice
President--Finance and Chief Financial Officer since 1994. From 1985 to
February 1991, she was employed by Smith Barney, Harris Upham & Co. Inc. in
the Corporate Finance Department. Prior to 1985, she was employed as a
geologist of two oil companies, Amerada Hess Corporation and American
Ultramar, Ltd. Ms. Edwards is a member of the Board of Directors of Evans
Systems, Inc., a fuel distribution, convenience store and diversified company.
S. Clark Johnson is Senior Vice President--Refining Operations and serves as
President of the refining subsidiaries of the Company. He has over 25 years of
experience in refining and marketing. Prior to joining the Company in 1992,
Mr. Johnson was Senior Vice President--Marketing, Supply & Terminals at Kerr-
McGee Refining Corporation for approximately two years. In 1989, Mr. Johnson
served as President of Coast Mart, Inc., a retail subsidiary of Coastal
Corporation. Prior to 1989, Mr. Johnson was with Tenneco Oil Company for 20
years where he held numerous positions, including Vice President--Retail
Marketing from 1987 to 1988. Mr. Johnson is a member of the Board of Directors
of Pride Refining, Inc., the general partner of Pride Companies, L.P., a
products pipeline and crude oil gathering company.
J. Currie Bechtol is Vice-President--General Counsel of the Company. He was
appointed to this position in January 1998. Prior to joining the Company, Mr.
Bechtol was a partner in the law firm Hutcheson & Grundy, L.L.P., a position
he had held since 1984.
Gerald B. Faudel is Vice President--Safety and Environmental Affairs and has
held that position with the Company since November 1993. He holds a similar
position with the refining subsidiaries. From October 1991 through November
1993, Mr. Faudel was Director of Safety, Environmental and External Affairs of
the refining subsidiaries of the Company. Mr. Faudel was employed by Frontier
Oil Corporation from October 1989 through October 1991 as Director of Safety,
Environmental and External Affairs. Prior to October 1989, Mr. Faudel was
employed with Tosco Corporation's Avon Refinery as Manager of Hazardous Waste
and Wastewater Program.
Jon D. Galvin is Vice President--Controller of the Company. He was appointed
to this position in September 1997. Mr. Galvin has been the Chief Financial
Officer of the Company's Frontier refining subsidiaries since February 1992.
Previously, he had spent 15 years with Arthur Andersen, ultimately as Audit
Principal.
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Douglas Y. Bech has been Chairman of Club Regina Resorts, Inc. since August
1997. From October 1994 to October 1997, Mr. Bech was a partner in the law
firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. of Houston, Texas. Since
August 1994, he has also been a managing director of Raintree Capital Company,
L.L.C., a merchant banking firm. From May 1993 to July 1994, Mr. Bech was a
partner of Gardere & Wynne, L.L.P. of Houston, Texas. From 1977 until May
1993, Mr. Bech was a partner of Andrews & Kurth L.L.P. Mr. Bech is a member of
the Board of Directors of Pride Refining, Inc., the general partner of Pride
Companies, L.P., a products pipeline and crude gathering company; and JetFax,
Inc., a multifunctional peripheral office equipment company. He has been a
director of the Company since 1993.
Paul B. Loyd, Jr. has been Chairman and director of R&B Falcon Corporation
since December 1997. Mr. Loyd was Chairman and Chief Executive Officer of
Reading & Bates Corporation, an offshore contract drilling company, from June
1991 until December 1997 and was a director of Reading & Bates from April 1991
until December 1997. Mr. Loyd was Chief Executive Officer and a director of
Chiles-Alexander International, Inc. from 1987 to 1989, President and a
director of Griffin-Alexander Drilling Company from 1984 to 1987, and prior to
that, a director and Chief Financial Officer of Houston Offshore
International, all of which are companies in the offshore drilling industry.
Mr. Loyd is a member of the Board of Directors of Carrizo Oil & Gas, Inc. He
has been a director of the Company since 1994.
James S. Palmer is Chairman of the law firm of Burnet, Duckworth & Palmer of
Calgary, Alberta, Canada, where he has been a partner since 1956. Burnet,
Duckworth & Palmer has been retained by the Company as its counsel regarding
certain Canadian legal matters. Mr. Palmer is Chairman of the Board of Telus
Corporation, a telecommunications company. Mr. Palmer is also a member of the
Board of Directors of Bank of Canada; Chancellor Energy Resources Inc.; Crown
Life Insurance Company; Fleet Aerospace Corporation; Remington Resources Ltd.,
an oil and gas company; Sceptre Resources Limited, an oil and gas company;
Tombill Mines Limited, a diversified Canadian public holding company; and
Westcoast Energy Inc., a pipeline and transmission company. Mr. Palmer has
been a director of the Company since 1975.
Derek A. Price is a trustee of The J.W. McConnell Family Foundation, a
charitable foundation. Prior to April 1991, Mr. Price was Chairman of the
Board of Directors and Chief Executive Officer of Starlaw Holdings Limited, a
private investment company with holdings principally in the areas of financial
services, real estate and manufacturing. Mr. Price has been a director of the
Company since 1987.
Carl W. Schafer has been the President of the Atlantic Foundation, a
charitable foundation which mainly supports oceanographic research, since
1990. From 1987 until 1990, Mr. Schafer was a principal of the investment
management firm of Rockefeller & Co., Inc. Mr. Schafer presently serves on the
Board of Directors of Roadway Express, Inc., a transportation company; the
PaineWebber and Guardian Groups of Mutual Funds, registered investment
companies; Electronic Clearing House, Inc., an electronic financial
transactions processing company; Evans Systems, Inc., a fuel distribution,
convenience store and diversified company; and Nutraceutix Inc., a
biotechnology company. Mr. Schafer has been a director of the Company since
1984.
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DESCRIPTION OF INDEBTEDNESS
As of December 31, 1997, on a pro forma basis after giving effect to the
Offering and the application of the net proceeds therefrom, the Company and
its subsidiaries would have had no outstanding indebtedness (excluding
availability under the Frontier Credit Facility) other than the Notes.
Frontier Oil and Refining Company, an indirect, wholly owned subsidiary of the
Company ("FORC"), is a party to a working capital facility (the "Frontier
Credit Facility") with a group of three banks, for which Union Bank of
California, N.A. ("Union Bank") is agent. The Frontier Credit Facility
provides working capital for operations, generally by issuing standby letters
of credit in support of purchases of crude oil and petroleum products and by
making short term working capital loans. Letters of credit and advances under
the Frontier Credit Facility are secured by certain accounts receivable,
inventory, intercompany notes and the common stock of the borrower. The
obligations of FORC under the Frontier Credit Facility are guaranteed by its
direct parent, Frontier Oil Corporation, which is also an indirect, wholly
owned subsidiary of the Company.
The amount of available capacity under the Frontier Credit Facility is
determined by a bi-weekly borrowing base calculation to a maximum capacity of
$50.0 million, of which cash advances are currently limited to $20.0 million.
Advances under the Frontier Credit Facility bear interest, at the borrower's
option, at Union Bank's prime rate plus .50% or reserve-adjusted LIBOR for
certain interest periods plus 1.75%. The Frontier Credit Facility provides for
a quarterly commitment fee of .375 of 1%. Standby letters of credit issued
bear a fee of 1.25% annually, plus standard issuance and renewal fees. The
Frontier Credit Facility includes certain financial covenant requirements
relating to Frontier's working capital (at least 1.08 to 1.0 at the end of
each quarter), cash earnings (EBITDA of at least $10.0 million on a rolling
four quarter basis), tangible net worth (as defined therein) and fixed charge
coverage (rolling four quarter EBITDA minus $4.0 million must be equal to at
least 2.5 times fixed charges).
Under the terms of the Frontier Credit Facility and related guarantees, the
Subsidiaries of the Company are prohibited from transferring cash in the form
of dividends, loans or advances in certain circumstances, including to the
extent any loans are outstanding to the borrower or upon a default or event of
default under the Frontier Credit Facility. Borrowings under the Frontier
Credit Facility also must be reduced to zero for at least five consecutive
business days each calendar quarter, the failure of which represents an event
of default. Accordingly, the existence of borrowings or a default or event of
default under the Frontier Credit Facility could adversely effect the
Company's ability to have sufficient cash to pay its obligations, including
the Notes.
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DESCRIPTION OF THE NOTES
GENERAL
The Exchange Notes will be issued, and the Old Notes were issued, pursuant
to the Indenture (the "Indenture") between the Company and Chase Bank of
Texas, National Association, as trustee (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, as amended (the
"Trust Indenture Act"). The Notes will be subject to all such terms, and
prospective investors are referred to the Indenture and the Trust Indenture
Act for a statement thereof. The following summary of certain provisions of
the Indenture does not purport to be complete and is qualified in its entirety
by reference to the Indenture. Copies of the Indenture and the Registration
Rights Agreement are available as set forth under "--Additional Information."
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions." As used in this "Description of the
Notes," the "Company" means Wainoco Oil Corporation, but not any of its
Subsidiaries.
The Exchange Notes will be issued solely in exchange for an equal principal
amount of Old Notes pursuant to the Exchange Offer. The form and terms of the
Exchange Notes will be identical in all material respects to the form and
terms of the Old Notes except that the offering of the Exchange Notes has been
registered under the Securities Act, and the Exchange Notes will therefore not
be subject to transfer restrictions, registration rights and certain
provisions relating to the payment of Liquidated Damages under certain
circumstances. The Notes are subject to the terms stated in the Indenture, a
copy of which has been filed as an exhibit to the Registration Statement, and
holders of the Notes are referred thereto for a statement of those terms.
The Old Notes and the Exchange Notes will constitute a single series of debt
securities under the Indenture. If the Exchange Offer is consummated, holders
of Old Notes who do not exchange their Old Notes for Exchange Notes will vote
together with holders of the Exchange Notes for all relevant purposes under
the Indenture. In that regard, the Indenture requires that certain actions by
the holders thereunder (including following an Event of Default) must be
taken, and certain rights must be exercised, by specified minimum percentages
of the aggregate principal amount of the outstanding securities issued under
the Indenture. In determining whether holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the Indenture, any Old Notes that remain outstanding
after the Exchange Offer will be aggregated with the Exchange Notes, and the
holders of such Old Notes and the Exchange Notes will vote together as a
single series for all such purposes. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Notes
shall be deemed to mean, at any time after the Exchange Offer is consummated,
such percentages in aggregate principal amount of the Old Notes and the
Exchange Notes then outstanding.
The Notes will be general unsecured obligations of the Company, ranking pari
passu in right of payment with all future senior indebtedness of the Company
and senior in right of payment to all future subordinated indebtedness of the
Company. The Notes will be effectively subordinated, however, to all future
secured obligations of the Company to the extent of the assets securing such
obligations. In addition, because of the holding company structure of the
Company, the Notes will be effectively subordinated to all current and future
obligations of the Subsidiaries of the Company, including without limitation,
claims of trade creditors, tort claimants, secured creditors, taxing
authorities and creditors holding guarantees. On a pro forma basis giving
effect to the Offering, at December 31, 1997, the Company would have had no
Indebtedness (other than the Notes), and the Company's Subsidiaries would have
had no outstanding Indebtedness (excluding $50 million of availability under
the Frontier Credit Facility, of which cash advances are currently limited to
$20 million with the remainder available to support letters of credit). The
Indenture will permit the Company and its Subsidiaries to incur additional
Indebtedness, including secured Indebtedness, under certain circumstances. See
"Risk Factors--Ranking of the Notes; Effective Subordination," "--Ability to
Service Debt," "Capitalization" and "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock."
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Any Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
As of the date of the Indenture, all of the Company's principal operating
Subsidiaries will be Restricted Subsidiaries. Under certain circumstances, the
Company will be able to designate current or future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $75.0 million, $70
million of which were issued in the Offering. Up to $5 million of additional
Notes may be issued from time to time in the future, subject to the
limitations set forth under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock." The Notes will mature on
February 15, 2006. Interest on the Notes will accrue at the rate of 9 1/8% per
annum and will be payable semi-annually in arrears on February 15 and August
15 of each year, commencing, on August 15, 1998, to holders of record on the
immediately preceding February 1 and August 1. 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 the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and premium, interest and Liquidated Damages, if any, on the
Notes will be payable at the office or agency of the Company maintained for
such purpose in the City of New York, New York or, at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to holders of the Notes at their respective addresses set forth
in the register of holders; subject to the right of any holders of Notes in
the principal amount of $1.0 million or more to request payment by wire
transfer. Until otherwise designated by the Company, the Company's office or
agency will be the office of the Trustee maintained for such purpose in the
City of New York, New York. The Notes will be issued in denominations of
$1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
Under the circumstances described below under "--Certain Covenants--Future
Subsidiary Guarantors," the Company's payment obligations under the Notes may
in the future be jointly and severally guaranteed (the "Subsidiary
Guarantees") by one or more of the Company's Subsidiaries (the "Guarantors").
The obligations of each Guarantor under its Subsidiary Guarantee will be a
general unsecured obligation of such Guarantor, ranking pari passu in right of
payment with all other current or future senior borrowings of such Guarantor
and senior in right of payment to any subordinated indebtedness, if any,
incurred by such Guarantor in the future. The Subsidiary Guarantees will be
effectively subordinated, however, to all current and future secured
obligations of the Guarantors, including borrowings under the Frontier Credit
Facility. See "Offering Memorandum Summary--The Offering--Ranking."
The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee
will be limited to such maximum amount as will, after giving effect to all
other contingent and fixed liabilities of such Subsidiary Guarantor and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Subsidiary Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal, state or foreign law. Each
Subsidiary Guarantor that makes a payment or distribution under a Subsidiary
Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
The Indenture will provide that, subject to the provisions of the following
paragraph, no Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another Person (other than the
Company or another Guarantor), whether or not affiliated with such Guarantor,
unless (i) the
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Person formed by or surviving any such consolidation or merger (if other than
such Guarantor) shall execute a Guarantee and deliver an opinion of counsel in
accordance with the terms of the Indenture; (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction), equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) the Company would be
permitted by virtue of the Company's pro forma Consolidated Interest Coverage
Ratio, immediately after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Consolidated Interest
Coverage Ratio test set forth in the covenant described below the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock."
The Indenture will provide that, in the event of a sale or other disposition
(including by way of merger, consolidation or otherwise) of all of the assets
or Capital Stock of any Guarantor, that such Guarantor will be released and
relieved of any obligations under its Subsidiary Guarantee; provided, however,
that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase
at the Option of Holders--Asset Sales"; and provided, further, that upon such
release the obligations of such Guarantor in respect of any and all other
guarantees of Indebtedness of the Company or a Guarantor are similarly
released. In addition, the Indenture will provide that, in the event the Board
of Directors designates a Guarantor to be an Unrestricted Subsidiary, then
such Guarantor will be released and relieved of any obligations under its
Subsidiary Guarantee, provided that such designation is conducted in
accordance with the applicable provisions of the Indenture.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to February
15, 2002. Thereafter, the Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
February 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002............................................. 104.563%
2003............................................. 103.042
2004............................................. 101.521
2005 and thereafter.............................. 100.000
</TABLE>
Notwithstanding the foregoing, the Company may at any time prior to February
15, 2002, at its option, redeem the Notes, in whole or in part, at the Make-
Whole Price, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date. In addition, for a period of three years
following the date of this Offering Memorandum, the Company may redeem up to
35% of the aggregate principal amount of Notes originally issued at the
redemption price of 109 1/8% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption
date, with the net cash proceeds of one or more Qualified Equity Offerings,
provided that (a) at least 65% in aggregate principal amount of Notes
originally issued remains outstanding immediately after the occurrence of each
such redemption and (b) each such redemption occurs within 60 days of the date
of the closing of each such Qualified Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to
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be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Note. Notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest ceases to accrue on Notes or
portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders", the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The Indenture provides that, upon the occurrence of a Change of Control, the
Company will be required to make an offer (a "Change of Control Offer") to
repurchase all or any part (equal to $1,000 or an integral multiple thereof)
of each holder's Notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of repurchase (the "Change of
Control Payment"). Within 30 days following a Change of Control, the Company
will mail a notice to each holder of Notes and the Trustee describing the
transaction that constitutes the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed
(the "Change of Control Payment Date"), pursuant to the procedures required by
the Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes as a result of a Change
of Control.
On or before the Change of Control Payment Date, the Company will, to the
extent lawful, (a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (b) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (c) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each holder
of Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided, however, that
each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the Notes to require
that the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. In addition, the Company could enter
into certain transactions, including acquisitions, refinancing or other
recapitalizations, that could affect the Company's capital structure or the
value of the Notes, but that would not constitute a Change of Control. The
occurrence of a Change of Control may result in a default under the Credit
Facility and give the lenders thereunder the right to require the Company to
repay all outstanding obligations thereunder. The Company's ability to
repurchase Notes following a Change of Control may also be limited by the
Company's then existing financial resources.
The Company will not be required to make a Change of Control Offer following
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
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A "Change of Control" will be deemed to have occurred upon the occurrence of
any of the following: (a) the sale, lease, transfer, conveyance or other
disposition (other than by merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of the Company
and its Subsidiaries, taken as a whole, (b) the adoption of a plan relating to
the liquidation or dissolution of the Company, (c) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as such term is used in Section 13(d)
(3) of the Exchange Act) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of more than 50% of the voting
power of the outstanding voting stock of the Company or (d) the first day on
which more than a majority of the members of the Board of Directors are not
Continuing Directors (as such term is defined below); provided, however, that
a transaction in which the Company becomes a Subsidiary of another Person
(other than a Person that is an individual) shall not constitute a Change of
Control if (i) the shareholders of the Company immediately prior to such
transaction "beneficially own" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly through one or more
intermediaries, at least a majority of the voting power of the outstanding
voting stock of the Company immediately following the consummation of such
transaction and (ii) immediately following the consummation of such
transaction, no "person" (as such term is defined above), other than such
other Person (but including the holders of the Equity Interests of such other
Person), "beneficially owns" (as such term is defined above), directly or
indirectly through one or more intermediaries, more than 50% of the voting
power of the outstanding voting stock of the Company. "Continuing Directors"
means, as of any date of determination, any member of the Board of Directors,
who (a) was a member of the Board of Directors on the Issue Date or (b) was
nominated for election to the Board of Directors with the approval of, or
whose election to the Board of Directors was ratified by, at least a majority
of the Continuing Directors who were members of the Board of Directors at the
time of such nomination or election.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (a) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in accordance with the definition of such term) of the
assets or Equity Interests issued or sold or otherwise disposed of and (b) at
least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash or Cash Equivalents; provided,
however, that the amount of (i) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or such
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary
from further liability and (ii) any securities, notes or other obligations
received by the Company or such Restricted Subsidiary from such transferee
that are immediately converted by the Company or such Restricted Subsidiary
into cash (to the extent of the cash received) shall be deemed to be cash for
purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or any such Restricted Subsidiary may apply such Net Proceeds to
(a) permanently repay the principal of any secured Indebtedness (to the extent
of the fair value of the assets securing such Indebtedness, as determined by
the Board of Directors) or (b) to acquire (including by way of a purchase of
assets or stock, merger, consolidation or otherwise) assets used in the
Principal Business. Any Net Proceeds that are applied to the acquisition of
assets in the Principal Business pursuant to any binding agreement shall be
deemed to have been applied for such purpose within such 365-day period so
long as they are so applied within two years after the date of receipt of such
Net Proceeds. Pending the final application of any such Net Proceeds, the
Company or any such Restricted Subsidiary may temporarily reduce outstanding
revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds."
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<PAGE>
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company will be required to make an offer to all holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase, in
accordance with the procedures set forth in the Indenture; provided, however,
that, if the Company is required to apply such Excess Proceeds to repurchase,
or to offer to repurchase, any Pari Passu Indebtedness, the Company shall only
be required to offer to repurchase the maximum principal amount of Notes that
may be purchased out of the amount of such Excess Proceeds multiplied by a
fraction, the numerator of which is the aggregate principal amount of Notes
outstanding and the denominator of which is the aggregate principal amount of
Notes outstanding plus the aggregate principal amount of Pari Passu
Indebtedness outstanding. To the extent that the aggregate principal amount of
Notes tendered pursuant to an Asset Sale Offer is less than the amount that
the Company is required to repurchase, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Notes surrendered by holders thereof exceeds the amount that the
Company is required to repurchase, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any such payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (b) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company); (c) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value, any Indebtedness that is
subordinated to the Notes, except a payment of interest or principal at Stated
Maturity (or within one year thereof); or (d) make any Restricted Investment
(all such payments and other actions set forth in clauses (a) through (d)
above being collectively referred to as "Restricted Payments"), unless, at the
time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(ii) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in the first paragraph
of the covenant described under the caption "--Incurrence of Indebtedness
and Issuance of Disqualified Stock"; and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (b), (c), (d) and (f), but including, without duplication,
Restricted Payments permitted by clauses (a) and (e), of the next
succeeding paragraph), is less than the sum of (A) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from January 1, 1998 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (B) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
since the Issue Date of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the
Company that have been converted
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into such Equity Interests (other than any such Equity Interests,
Disqualified Stock or convertible debt securities sold to a Restricted
Subsidiary of the Company and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock), plus (C)
the aggregate principal amount of any Convertible Debentures converted into
Equity Interests since the Issue Date, plus (D) to the extent that any
Restricted Investment that was made after the Issue Date is sold for cash
or otherwise liquidated or repaid for cash, the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) plus (E) in the event that any Unrestricted Subsidiary is redesignated
as a Restricted Subsidiary, the lesser of (1) an amount equal to the fair
market value of the Company's Investments in such Restricted Subsidiary and
(2) the amount of Restricted Investments previously made by the Company and
its Restricted Subsidiaries in such Unrestricted Subsidiary, plus (F) $10.0
million.
The foregoing provisions will not prohibit (a) the payment of any dividend
within 60 days after the date of declaration thereof if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (b) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock), provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (iii) (B) of the preceding paragraph; (c) the defeasance,
redemption, repurchase, retirement or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of, or in exchange
for, Permitted Refinancing Indebtedness; (d) the payment of any dividend or
distribution by a Restricted Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; (e) so long as no Default or
Event of Default shall have occurred and be continuing, the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the Company held by any employee of the Company's or any of its
Restricted Subsidiaries, provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$1.0 million in any calendar year; and (f) the acquisition of Equity Interests
by the Company in connection with the exercise of stock options or stock
appreciation rights by way of cashless exercise or in connection with the
satisfaction of withholding tax obligations.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation. All such outstanding Investments will be deemed
to constitute Investments in an amount equal to the greater of (a) the net
book value of such Investments at the time of such designation and (b) the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined
in the manner contemplated by the definition of the term "fair market value."
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur" or an
"incurrence") any Indebtedness other than Permitted Indebtedness and that the
Company will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of Disqualified Stock; provided,
however, that the Company or any Guarantor may incur Indebtedness, and the
Company may issue Disqualified Stock, if the Consolidated Interest Coverage
Ratio for the Company's most recently ended four full fiscal quarters for
which internal
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financial statements are available immediately preceding the date on which
such additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness or Disqualified Stock had been issued or incurred at the
beginning of such four-quarter period.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired, or
any income or profits therefrom or assign or convey any right to receive
income therefrom, except Permitted Liens, to secure (a) any Indebtedness of
the Company or such Restricted Subsidiary (if it is not also a Guarantor),
unless prior to, or contemporaneously therewith, the Notes are equally and
ratably secured, or (b) any Indebtedness of any Guarantor unless prior to, or
contemporaneously therewith, the Subsidiary Guarantees are equally and ratably
secured; provided, however, that if such Indebtedness is expressly
subordinated to the Notes or the Subsidiary Guarantees, the Lien securing such
Indebtedness will be subordinated and junior to the Lien securing the Notes or
the Subsidiary Guarantees, as the case may be, with the same relative priority
as such Indebtedness has with respect to the Notes or the Subsidiary
Guarantees.
Sale-and-Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale-and-leaseback transaction;
provided, however, that the Company or any Restricted Subsidiary, as
applicable, may enter into a sale-and-leaseback transaction if (i) the Company
or such Restricted Subsidiary could have (a) incurred Indebtedness in an
amount equal to the Attributable Indebtedness relating to such sale-and-
leaseback transaction pursuant to the Consolidated Interest Coverage Ratio
test set forth in the first paragraph of the covenant described above under
the caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock"
and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described under the caption "--Liens," (ii) the gross cash proceeds of such
sale-and-leaseback transaction are at least equal to the fair market value (as
determined in accordance with the definition of such term, the results of
which determination shall be set forth in an Officers' Certificate delivered
to the Trustee) of the property that is the subject of such sale-and-leaseback
transaction and (iii) the transfer of assets in such sale-and-leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales."
Issuances and Sales of Capital Stock of Wholly Owned Restricted Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, or otherwise dispose of any Capital Stock of any Wholly Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the Net Proceeds from such
transfer, conveyance, sale, or other disposition are applied in accordance
with the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales," and (ii) will not permit any Wholly Owned
Restricted Subsidiary of the Company to issue any of its Equity Interests to
any Person other than to the Company or a Wholly Owned Restricted Subsidiary
of the Company; except, in the case of both clauses (i) and (ii) above, with
respect to dispositions or issuances by a Wholly Owned Restricted Subsidiary
of the Company as contemplated in clauses (a) and (b) of the definition of
"Wholly Owned Restricted Subsidiary."
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) (i) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries on
its Capital Stock or with respect to any other interest or
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participation in, or measured by, its profits, or (ii) pay any Indebtedness
owed to the Company or any of its Restricted Subsidiaries, (b) make loans or
advances to the Company or any of its Restricted Subsidiaries or (c) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or
by reason of (1) the Credit Facility or Existing Indebtedness, each as in
effect on the Issue Date, (2) the Indenture, the Notes and Subsidiary
Guarantees, if any, (3) applicable law, (4) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of
its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided
that, in the case of Indebtedness, such Indebtedness was permitted by the
terms of the Indenture to be incurred, (5) by reason of customary non-
assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (6) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (c) above on the property so
acquired, (7) customary provisions in bona fide contracts for the sale of
property or assets or (8) Permitted Refinancing Indebtedness with respect to
any Indebtedness referred to in clauses (1) and (2) above, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced.
Future Subsidiary Guarantors
The Company shall cause each Restricted Subsidiary that (i) incurs
Indebtedness (other than Permitted Indebtedness and Purchase Money
Indebtedness) following the Issue Date or (ii) has Indebtedness (other than
Permitted Indebtedness and Purchase Money Indebtedness) or Disqualified Stock
outstanding on the date on which such Restricted Subsidiary becomes a
Restricted Subsidiary, to execute and deliver to the Trustee a Subsidiary
Guarantee at the time such Restricted Subsidiary incurs such Indebtedness or
becomes a Restricted Subsidiary.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another Person unless (a) the Company is the surviving corporation or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia, (b) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, (c) immediately after such transaction no Default
or Event of Default exists and (d) except in the case of a merger of the
Company with or into a Wholly Owned Restricted Subsidiary of the Company, the
Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio
test set forth in the covenant described above under the caption "--Incurrence
of Indebtedness and Issuance of Disqualified Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase
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any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person or, if there is no such
comparable transaction, on terms that are fair and reasonable to the Company
or such Restricted Subsidiary, and (b) the Company delivers to the Trustee (i)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (ii) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Company or the relevant Subsidiary of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm that is, in the judgment of the Board of Directors,
qualified to render such opinion and is independent with respect to the
Company; provided, however, that the following shall be deemed not to be
Affiliate Transactions: (A) any employment agreement or other employee
compensation plan or arrangement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of the Company or
such Restricted Subsidiary; (B) transactions between or among the Company and
its Restricted Subsidiaries; (C) Permitted Investments and Restricted Payments
that are permitted by the provisions of the Indenture; (D) loans or advances
to officers, directors and employees of the Company or any Restricted
Subsidiary made in the ordinary course of business of the Company and its
Restricted Subsidiaries in an aggregate amount not to exceed $500,000
outstanding at any one time; (E) indemnities of officers, directors and
employees of the Company or any Restricted Subsidiary permitted by bylaw or
statutory provisions; and (F) the payment of reasonable and customary regular
fees to directors of the Company or any of its Restricted Subsidiaries.
Line of Business
For so long as any Notes are outstanding, the Company shall not, and shall
not permit any of its Restricted Subsidiaries to, engage in any business or
activity other than the Principal Business.
Reports
Whether or not the Company is required to do so by the rules and regulations
of the Commission, the Company will file with the Commission (unless the
Commission will not accept such a filing) and, within 15 days of filing, or
attempting to file, the same with the Commission, furnish to the holders of
the Notes (a) all quarterly and annual financial and other information with
respect to the Company and its Subsidiaries that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the Company's
certified independent accountants, and (b) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, the Company and any Guarantors
will furnish to the holders of the Notes, prospective purchasers of the Notes
and securities analysts, upon their request, the information, if any, required
to be delivered pursuant to Rule 144A(d) (4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (a) default for 30 days in the payment when due of interest or
Liquidated Damages on the Notes; (b) default in payment when due of the
principal of or premium, if any, on the Notes; (c) failure by the Company to
comply with the provisions described under the caption "--Repurchase at the
Option of Holders" or "--Certain Covenants--Merger, Consolidation, or Sale of
Assets"; (d) failure by the Company for 60 days after notice to comply with
any of its other agreements in the Indenture or the Notes; (e) default under
any mortgage, indenture or instrument under which
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there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists or is created after the Issue Date, which default (i) is caused by a
failure to pay principal of or premium or interest on such Indebtedness prior
to the expiration of any grace period provided in such Indebtedness (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more and provided,
further, that if any such default is cured or waived or any such acceleration
rescinded, or such Indebtedness is repaid, within a period of 10 days from the
continuation of such default beyond the applicable grace period or the
occurrence of such acceleration, as the case may be, such Event of Default and
any consequential acceleration of the Notes shall be automatically rescinded,
so long as such rescission does not conflict with any judgment or decree; (f)
failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million (net of applicable insurance
coverage which is acknowledged in writing by the insurer), which judgments are
not paid, discharged or stayed for a period of 60 days; (g) failure by any
Guarantor to perform any covenant set forth in its Subsidiary Guarantee, or
the repudiation by any Guarantor of its obligations under its Subsidiary
Guarantee or the unenforceability of any Subsidiary Guarantee against a
Guarantor for any reason and (h) certain events of bankruptcy or insolvency
with respect to the Company or any Guarantor.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company or any Guarantor, all
outstanding Notes will become due and payable without further action or
notice. The holders of a majority in principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest, premium or Liquidated Damages that
have become due solely because of the acceleration) have been cured or waived.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
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 Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company 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.
The holders of a majority in principal amount of the Notes then outstanding
by notice to the Trustee may on behalf of the holders of all of the Notes
waive any existing Default or Event of Default and its consequences under the
Indenture except a continuing Default or Event of Default in the payment of
the principal of or interest or Liquidated Damages on the Notes.
The Company will be required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company will be required,
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or any Guarantor under the Notes, the Subsidiary
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Guarantees or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws
and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of the
obligations of itself and any Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (a) the rights of holders of
outstanding Notes to receive payments in respect of the principal of and
premium, interest and Liquidated Damages on such Notes when such payments are
due from the trust referred to below, (b) the Company's obligations with
respect to the 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,
(c) the rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (d) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default and Remedies" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium, interest and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date, (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the Issue Date, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred, (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred, (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit), (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or any
of its Restricted Subsidiaries is a party or by which the Company or any of
its Restricted Subsidiaries is bound, (vi) the Company must have delivered to
the Trustee an opinion of counsel to the effect that the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (vii)
the Company must deliver to the Trustee an Officers' Certificate stating that
the deposit was not made by the Company with the intent of preferring the
holders of Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or
others and (viii) the Company must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
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TRANSFER AND EXCHANGE
A holder of Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company will not be required to transfer or
exchange any Note selected for redemption. Also, the Company will not be
required to transfer or exchange any Note for a period of 15 days before a
selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes, and all references to "holders" in this "Description of the Notes"
are to registered holders unless otherwise indicated.
AMENDMENT AND WAIVER
Except as provided below, the Indenture or the Notes may be amended with the
consent of the holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (a) reduce the
principal amount of Notes whose holders must consent to an amendment or
waiver, (b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (c) reduce the rate of or change the
time for payment of interest on any Note, (d) waive a Default or Event of
Default in the payment of principal of or premium, interest or Liquidated
Damages on the Notes (except a rescission of acceleration of the Notes by the
holders of at least a majority in principal amount of the Notes and a waiver
of the payment default that resulted from such acceleration), (e) make any
Note payable in money other than that stated in the Notes, (f) make any change
in the provisions of the Indenture relating to waivers of past defaults or the
rights of holders of Notes to receive payments of principal of or premium,
interest or Liquidated Damages on the Notes (except as permitted in clause (g)
hereof), (g) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the caption "--
Repurchase at the Option of Holders"), (h) alter the ranking of the Notes
relative to other Indebtedness of the Company or (i) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company, any Guarantor and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to holders
of Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the holders of Notes or
that does not adversely affect the legal rights under the Indenture of any
such holder, to secure the Notes pursuant to the requirements of the "Liens"
covenant, to add any additional Guarantor or to release any Guarantor from its
Subsidiary Guarantee, in each case as provided in the Indenture, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
Neither the Company nor any of its 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 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 which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
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CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, 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 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 then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Notes, unless such holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees will provide that
they will be governed by the laws of the State of New York.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Wainoco Oil
Corporation, 10000 Memorial Drive, Suite 600, Houston, Texas 77024-3411,
Attention: Secretary.
FORM, DENOMINATION AND REGISTRATION
Global Notes; Book Entry Form
The Old Notes were offered and sold (a) to Qualified Institutional Buyers in
reliance on the exemption from the registration requirements of the Securities
Act provided by Rule 144A ("Rule 144A Notes") and (b) outside the United
States in reliance on Regulation S under the Securities Act ("Regulation S
Notes"). Except as set forth below, Notes will be issued in registered, global
form without interest coupons in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof.
Rule 144A Notes are represented by one Note in registered, global form
without interest coupons (the "Rule 144A Global Note"). The Rule 144A Global
Note was deposited upon issuance with the Trustee as custodian for DTC, in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as
described below.
Regulation S Notes initially are represented by one temporary Note in
registered, global form without interest coupons (the "Regulation S Temporary
Global Note"). The Regulation S Temporary Global Note was deposited on behalf
of the subscribers thereof with a custodian for DTC. The Regulation S
Temporary Global Note was registered in the name of a nominee of DTC for
credit to the subscribers' respective accounts at the Euroclear and Cedel
Bank. Beneficial interests in the Regulation S Temporary Global Note may be
held only through Euroclear or Cedel Bank.
After the occurrence of (i) the expiration of a 40-day restricted period, as
defined under Regulation S (the "Restricted Period"), or (ii) the exchange of
a beneficial interest in the Regulation S Global Notes for a beneficial
interest in a global note representing Exchange Notes upon consummation of the
Exchange Offer and
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upon delivery of certification that the beneficial owners thereof are not U.S.
persons (as defined in Rule 902(o) under the Securities Act) or that such
beneficial owners purchased such Notes in a transaction that did not require
registration under the Securities Act and are in the process of obtaining a
beneficial interest in the Rule 144A Global Note in exchange for their
beneficial interest in the Regulation S Temporary Global Note, a beneficial
interest in the Regulation S Temporary Global Note may be exchanged for an
interest in one or more permanent Notes in registered, global form without
interest coupons (collectively, the "Regulation S Permanent Global Notes" and,
together with the Regulation S Temporary Global Notes, the "Regulation S
Global Note") (the Regulation S Global Note and the 144A Global Note
collectively, the "Global Notes") which is expected to be deposited with the
Trustee as custodian for, and registered in the name of, a nominee of DTC.
Investors may hold beneficial interests in the Regulation S Permanent Global
Note through organizations other than Euroclear and Cedel Bank that are
Participants in DTC's system. Euroclear and Cedel Bank will hold interests in
the Regulation S Global Note on behalf of their Participants through
customers' securities accounts in their respective names on the books of their
respective depositaries, which are Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear, and Citibank, N.A., as operator of
Cedel Bank. In turn, each of Euroclear and Cedel Bank will hold such interests
in the Regulation S Global Note in customers' securities accounts in its name
on the books of DTC.
The Notes that are issued as described below under the caption "--
Certificated Notes" will be issued in the form of registered definitive
certificates (the "Certificated Notes"). Such Certificated Securities may,
unless the Global Notes have previously been exchanged for Certificated Notes,
be exchanged for an interest in a Global Note representing the principal
amount of Notes being transferred.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, the "Participants" or
"DTC's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic book-
entry changes in accounts of its Participants. DTC's Participants include
securities brokers and dealers (including the Initial Purchaser), banks and
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or
"DTC's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who
are not Participants may beneficially own securities held by or on behalf of
DTC only through DTC's Participants or DTC's Indirect Participants.
The Company expects that, pursuant to procedures established by DTC, (i)
upon deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchaser with portions of the principal amount of
the Global Notes and (ii) ownership of the Notes evidenced by the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the interests of DTC's
Participants), DTC's Participants and DTC's Indirect Participants. Prospective
purchasers are advised that the laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer Notes evidenced by the Global Notes will
be limited to such extent.
Beneficial interests in one Global Note may be transferred to a person who
takes delivery in the form of a beneficial interest in another Global Note
only upon receipt by the Trustee of a written certification (in the form
provided in the Indenture) to the effect that such transfer is being made in
accordance with the Indenture and with the Securities Act and any applicable
securities laws of any state of the United States or any other jurisdiction.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of a beneficial interest in another
Global Note will, upon transfer, cease to be a beneficial interest in such
Global Note and become a beneficial interest in the other Global Note and
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Note for as long as it remains such a beneficial interest.
So long as the Global Note holder is the registered owner of any Notes, the
Global Note holder will be considered the sole holder under the Indenture of
any Notes evidenced by the Global Notes. Beneficial owners
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of Notes evidenced by the Global Notes will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records of DTC or for maintaining,
supervising or reviewing any records of DTC relating to the Notes.
Payments in respect of the principal of and premium, interest and Liquidated
Damages, if any, on any Notes registered in the name of the Global Note holder
on the applicable record date will be payable by the Trustee to or at the
direction of the Global Note holder in its capacity as the registered holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Notes. The Company believes, however, that it is currently the
policy of DTC to immediately credit the accounts of the relevant Participants
with such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of DTC.
Payments by DTC's Participants and DTC's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of DTC's Participants or
DTC's Indirect Participants.
Additional Information Concerning Euroclear and Cedel Bank
Euroclear and Cedel Bank hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between
their respective participants through electronic book-entry changes in
accounts of such participants. Euroclear and Cedel Bank provide to their
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Euroclear and Cedel Bank interface with domestic
securities markets. Euroclear and Cedel Bank participants are financial
institutions such as underwriters, securities brokers and dealers, banks,
trust companies and certain other organizations. Indirect access to Euroclear
and Cedel Bank is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodian relationship with a
Euroclear or Cedel Bank participant, either directly or indirectly.
When beneficial interests are to be transferred from the account of a
Participant (other than Morgan Guaranty Trust Company of New York and
Citibank, N.A., as depositaries for Euroclear and Cedel Bank, respectively) to
the account of a Euroclear participant or a Cedel Bank participant, the
purchaser must send instructions to Euroclear or Cedel Bank through a
participant at least one business day prior to settlement. Euroclear or Cedel
Bank, as the case may be, will instruct Morgan Guaranty Trust Company of New
York or Citibank, N.A. to receive the beneficial interests against payment.
Payment will include interest attributable to the beneficial interest from and
including the last payment date to and excluding the settlement date, on the
basis of a calendar year consisting of twelve 30-day calendar months. For
transactions settling on the 31st day of the month, payment will include
interest accrued to and excluding the first day of the following month.
Payment will then be made by Morgan Guaranty Trust Company of New York or
Citibank, N.A., as the case may be, to the Participant's account against
delivery of the beneficial interests. After settlement has been completed, the
beneficial interests will be credited to the respective clearing systems and
by the clearing system, in accordance with its usual procedures, to the
Euroclear participants' or Cedel Bank participants' account. Credit for the
beneficial interests will appear on the next business day (European time) and
the cash debit will be back-valued to, and interest attributable to the
beneficial interests will accrue from, the value date (which would be the
preceding business day when settlement occurs in New York). If settlement is
not completed on the intended value date (i.e., if the trade fails), the
Euroclear or Cedel Bank cash debit will instead be valued as of the actual
settlement date.
Euroclear participants and Cedel Bank participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Euroclear or Cedel Bank. Under
this approach, such participants may take on credit
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exposure to Euroclear or Cedel Bank until the beneficial interests are
credited to their accounts one day later. Finally, day traders that use
Euroclear or Cedel Bank and that purchase beneficial interests from
Participants for credit to Euroclear participants or Cedel Bank participants
should note that these trades would automatically fall on the sale side unless
affirmative action were taken to avoid these potential problems.
Due to time zone differences in their favor, Euroclear participants and
Cedel Bank participants may employ their customary procedures for transactions
in which beneficial interests are to be transferred by the respective clearing
system, through Morgan Guaranty Trust Company of New York or Citibank, N.A.,
to another Participant. The seller must send instructions to Euroclear or
Cedel Bank through a participant at least one business day prior to
settlement. In these cases, Euroclear or Cedel Bank will instruct Morgan
Guaranty Trust Company of New York or Citibank, N.A., as the case may be, to
credit the beneficial interests to the Participant's account against payment.
Payment will include interest attributable to the beneficial interest from and
including the last payment date to and excluding the settlement date on the
basis of a calendar year consisting of twelve 30-day calendar months. For
transactions settling on the 31st day of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Euroclear participant or
Cedel Bank participant the following business day, and receipt of the cash
proceeds in the Euroclear or Cedel Bank participant's account will be back-
valued to the value date (which would be the preceding business day, when
settlement occurs in New York). If the Euroclear participant or Cedel Bank
participant has a line of credit with its representative clearing system and
elects to draw on such line of credit in anticipation of receipt of the sale
proceeds in its account, the back-valuation may substantially reduce or offset
any overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., if the trade fails), receipt of
the cash proceeds in the Euroclear or Cedel Bank participant's account would
instead be valued as of the actual settlement date.
Certificated Notes
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of,
and cause the same to be delivered to, such person or persons (or the nominee
of any thereof). In addition, if (i) the Company notifies the Trustee in
writing that DTC is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in the form of Certificated Notes under the
Indenture, then, upon surrender by the Global Note holder of the Global Notes,
Notes in such form will be issued to each person that the Global Note holder
and DTC identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note holder or DTC in identifying the beneficial owners of Notes and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note holder or DTC for all purposes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Adjusted Net Assets" of a Guarantor at any date shall mean the amount by
which the fair value of the properties and assets of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under its
Subsidiary Guarantee, of such Guarantor at such date.
"Affiliate" of any specified Person means an "affiliate" of such Person, as
such term is defined for purposes of Rule 144 under the Securities Act.
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"Asset Sale" means (a) the sale, lease, conveyance or other disposition (a
"disposition") of any assets or rights (including, without limitation, by way
of a sale and leaseback), excluding dispositions in the ordinary course of
business (provided that the disposition of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole will be governed
by the provisions of the Indenture described above under the caption "--
Repurchase at the Option of Holders--Change of Control" and the provisions
described above under the caption "--Certain Covenants--Merger, Consolidation,
or Sale of Assets" and not by the provisions of the Asset Sales covenant), (b)
the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of any of the Company's Subsidiaries, and (c) any Event of
Loss, whether, in the case of clause (a), (b) or (c), in a single transaction
or a series of related transactions, provided that such transaction or series
of transactions (i) has a fair market value in excess of $1.0 million or (ii)
results in the payment of net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following transactions will be deemed not
to be Asset Sales: (A) a disposition of obsolete or excess equipment or other
assets; (B) a disposition of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary; (C) a disposition of
Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary; (D) a Permitted Investment or
Restricted Payment that is permitted by the Indenture; (E) any lease of any
equipment or other assets entered into in the ordinary course of business and
with respect to which the Company or any Restricted Subsidiary thereof is the
lessor, except any such lease that provides for the acquisition of such assets
by the lessee during or at the end of the term thereof for an amount that is
less than the fair market value thereof at the time the right to acquire such
assets occurs; (F) any sale of inventory or hydrocarbons or other products
(including crude oil and refined products), in each case in the ordinary
course of business of the Company's operations; and (G) any trade or exchange
by the Company or any Restricted Subsidiary of any inventory or hydrocarbons
or other products (including crude oil and refined products) for similar
products held by another Person; provided that the fair market value of the
properties traded or exchanged by the Company or such Restricted Subsidiary is
reasonably equivalent to the fair market value of the properties to be
received by the Company or such Restricted Subsidiary.
"Attributable Indebtedness" in respect of a sale-and-leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale-and-lease-back transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended). As used in the preceding sentence, the "net rental
payments" under any lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on
account of maintenance and repairs, insurance, taxes, assessments, water rates
or similar charges. In the case of any lease that is terminable by the lessee
upon payment of penalty, such net rental payment shall also include the amount
of such penalty, but no rent shall be considered as required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
"Board of Directors" means the board of directors of the Company or any
committee thereof duly authorized to act on behalf of such board.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (a) in the case of a corporation, corporate stock, (b)
in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(d) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (a) United States dollars or up to $2.0 million of
Canadian dollars, (b) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or
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instrumentality thereof having maturities of not more than six months from the
date of acquisition, (c) certificates of deposit and Eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank organized under the laws of
any country that is a member of the Organization for Economic Cooperation and
Development having capital and surplus in excess of $500 million, (d)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (b) and (c) above entered into
with any financial institution meeting the qualifications specified in clause
(c) above, (e) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Rating Service and in
each case maturing within 180 days after the date of acquisition, (f) deposits
available for withdrawal on demand with any commercial bank not meeting the
qualifications specified in clause (c) above, provided all such deposits do
not exceed $2.0 million in the aggregate at any one time, and (g) money market
mutual funds substantially all of the assets of which are of the type
described in the foregoing clauses (a) through (e).
"Common Stock" means the Common Stock of the Company, no par value.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted or excluded in calculating Consolidated Net Income for such period,
(a) an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale, (b) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries, (c) Consolidated
Interest Expense of such Person and its Restricted Subsidiaries, and (d)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries, in each
case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Consolidated Interest Expense of such Person for such period;
provided, however, that the Consolidated Interest Coverage Ratio shall be
calculated giving pro forma effect to each of the following transactions as if
each such transaction had occurred at the beginning of the applicable four-
quarter reference period: (a) any incurrence, assumption, guarantee or
redemption by the Company or any of its Restricted Subsidiaries of any
Indebtedness (other than revolving credit borrowings) subsequent to the
commencement of the period for which the Consolidated Interest Coverage Ratio
is being calculated but prior to the date on which the event for which the
calculation of the Consolidated Interest Coverage Ratio is made (the
"Calculation Date"); (b) any acquisition that has been made by the Company or
any of its Restricted Subsidiaries, or approved and expected to be consummated
within 30 days of the Calculation Date, including, in each case, through a
merger or consolidation, and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference
period and on or prior to the Calculation Date (in which case Consolidated
Cash Flow for such reference period shall be calculated without giving effect
to clause (c) of the proviso set forth in the definition of Consolidated Net
Income); and (c) any other transaction that may be given pro forma effect in
accordance with Article 11 of Regulation S-X as in effect from time to time;
provided further, however, that (i) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded and
(ii) the Consolidated Interest Expense attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Consolidated
Interest Expense will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of (a) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid
or accrued (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging
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Obligations but excluding amortization of debt issuance costs) and (b) the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, in each case determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
provided that (a) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (b) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
shareholders, (c) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded and (d) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Tangible Assets" means, with respect to any Person as of
any date, the sum of the amounts that would appear on a consolidated balance
sheet of such Person and its consolidated Restricted Subsidiaries as the total
assets of such Person and its consolidated Restricted Subsidiaries, determined
on a consolidated basis in accordance with GAAP and after deducting therefrom,
(a) to the extent otherwise included, unamortized debt discount and expenses
and other unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or development expenses
and other intangible items and (b) the aggregate amount of liabilities of the
Company and its Restricted Subsidiaries which may be properly classified as
current liabilities (including tax accrued as estimated), determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common shareholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (b)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the Issue Date in
the book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (ii) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Restricted
Subsidiaries and (iii) all unamortized debt discount and expense and
unamortized deferred charges as of such date, in each case determined in
accordance with GAAP.
"Credit Facility" means that certain Amended and Restated Revolving Credit
and Letter of Credit Agreement, dated June 30, 1997, among Frontier Oil and
Refining Company, certain banks and Union Bank of California, N.A., including
any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended,
restated, modified, supplemented, extended, renewed, replaced, refinanced or
restructured from time to time, whether by the same or any other agent or
agents, lender or group of lenders, whether represented by one or more
agreements and whether one or more Subsidiaries are borrowers or guarantors
thereunder or parties thereto.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as a result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a
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sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature or are redeemed or retired in full;
provided, however, that any Capital Stock that would constitute Disqualified
Stock solely because the holders thereof (or of any security into which it is
convertible or for which it is exchangeable) have the right to require the
issuer to repurchase such Capital Stock (or such security into which it is
convertible or for which it is exchangeable) upon the occurrence of any of the
events constituting an Asset Sale or a Change of Control shall not constitute
Disqualified Stock if such Capital Stock (and all such securities into which
it is convertible or for which it is exchangeable) provides that the issuer
thereof will not repurchase or redeem any such Capital Stock (or any such
security into which it is convertible or for which it is exchangeable)
pursuant to such provisions prior to compliance by the Company with the
provisions of the Indenture described under the caption "Repurchase at the
Option of Holders--Change of Control" or "Repurchase at the Option of
Holders--Asset Sales," as the case may be.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Loss" means, with respect to any property or asset of the Company
or any Restricted Subsidiary, (a) any damage to such property or asset that
results in an insurance settlement with respect thereto on the basis of a
total loss or a constructive or compromised total loss or (b) the
confiscation, condemnation or requisition of title to such property or asset
by any government or instrumentality or agency thereof. An Event of Loss shall
be deemed to occur as of the date of the insurance settlement, confiscation,
condemnation or requisition of title, as applicable.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Credit Facility) in existence
on the Issue Date, until such amounts are repaid.
The term "fair market value" means, with respect to any asset or Investment,
the fair market value of such asset or Investment at the time of the event
requiring such determination, as determined in good faith by the Board of
Directors of the Company or, with respect to any asset or Investment in excess
of $10.0 million (other than cash or Cash Equivalents), as determined by a
reputable appraisal firm that is, in the judgment of such Board of Directors,
qualified to perform the task for which such firm has been engaged and
independent with respect to the Company.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, but only to the extent that
the notional amounts of such agreements do not exceed 105% of the aggregate
principal amount of such Indebtedness to which such agreement relates, (b)
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates, (c) any hedging agreement or other
arrangement, in each case that is designed to provide protection against
fluctuations in the price of crude oil and gasoline and other refined products
(in the ordinary course of business and not for speculative purposes) and (d)
any foreign currency futures contract, option or similar agreement or
arrangement designed to protect such Person against fluctuations in foreign
currency rates, in each case to the extent such obligations are incurred in
the ordinary course of business of such Person.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any
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Hedging Obligations, except any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP. The amount of any Indebtedness outstanding as of any
date shall be (a) the accreted value thereof, in the case of any Indebtedness
that does not require current payments of interest, and (b) the principal
amount thereof, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees by the referent Person of, and Liens on
any assets of the referent Person securing, Indebtedness or other obligations
of other Persons), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP; provided, however, that the following shall not
constitute Investments: (i) extensions of trade credit or other advances to
customers on commercially reasonable terms in accordance with normal trade
practices or otherwise in the ordinary course of business, (ii) Hedging
Obligations and (iii) endorsements of negotiable instruments and documents in
the ordinary course of business. If the Company or any Restricted Subsidiary
of the Company sells or otherwise disposes of any Equity Interests of any
direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of the Company, the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction
other than a precautionary financing statement respecting a lease not intended
as a security agreement).
"Make-Whole Amount" with respect to a Note means an amount equal to the
excess, if any, of (i) the present value of the remaining interest, premium
and principal payments due on such Note as if such Note were redeemed on
February 15, 2002, computed using a discount rate equal to the Treasury Rate
plus 50 basis points, over (ii) the outstanding principal amount of such Note.
"Treasury Rate" is defined as the yield to maturity at the time of the
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical
Release H.15(519), which has become publicly available at least two business
days prior to the date of the redemption notice or, if such Statistical
Release is no longer published, any publicly available source of similar
market date) most nearly equal to the then remaining maturity of the Notes
assuming redemption of the Notes on February 15, 2002; provided, however, that
if the Make-Whole Average Life of such Note is not equal to the constant
maturity of the United States 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 a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the Make-Whole Average Life of such Notes is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used. "Make-
Whole Average Life" means the number of years (calculated to the nearest one-
twelfth) between the date of redemption and February 15, 2002.
"Make-Whole Price" with respect to a Note means the greater of (i) the sum
of the outstanding principal amount and Make-Whole Amount of such Note, and
(ii) the redemption price of such Note on February 15, 2002, determined
pursuant to the Indenture (104.563% of the principal amount).
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"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale-and-leaseback transactions) or (ii)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (b) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of (without
duplication) (a) the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, sales
commissions, recording fees, title transfer fees, title insurance premiums,
appraiser fees and costs incurred in connection with preparing such asset for
sale) and any relocation expenses incurred as a result thereof, (b) taxes paid
or estimated to be payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), (c)
amounts required to be applied to the repayment of Indebtedness (other than
under the Credit Facility) secured by a Lien on the asset or assets that were
the subject of such Asset Sale and (d) any reserve established in accordance
with GAAP or any amount placed in escrow, in either case for adjustment in
respect of the sale price of such asset or assets, until such time as such
reserve is reversed or such escrow arrangement is terminated, in which case
Net Proceeds shall include only the amount of the reserve so reversed or the
amount returned to the Company or its Restricted Subsidiaries from such escrow
arrangement, as the case may be.
"Non-Recourse Debt" means Indebtedness (a) as to which neither the Company
nor any of its Restricted Subsidiaries (i) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness) or is otherwise directly or indirectly liable (as a guarantor or
otherwise) or (ii) constitutes the lender, (b) no default with respect to
which (including any rights the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) the holders of other Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity and (c) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of the Company or any
of its Restricted Subsidiaries, except to the extent of any Indebtedness
incurred by the Company or any of its Restricted Subsidiaries in accordance
with clause (a) (i) above.
"Pari Passu Indebtedness" means, with respect to any Net Proceeds from Asset
Sales, Indebtedness of the Company and its Restricted Subsidiaries the terms
of which require the Company or such Restricted Subsidiary to apply such Net
Proceeds to offer to repurchase such Indebtedness.
"Permitted Indebtedness" means:
(a) the incurrence by the Company or a Restricted Subsidiary of
Indebtedness under any Working Capital Facility in an aggregate principal
amount at any one time outstanding not to exceed the greater of (a) $50.0
million and (b) an amount equal to the sum of 85% of the book value of
accounts receivable (less allowance for doubtful accounts) and 60% of the
inventory (less applicable reserves) of the Company and its Restricted
Subsidiaries, calculated on a consolidated basis and in accordance with
GAAP, plus any fees, premiums, expenses (including costs of collection),
indemnities and similar amounts payable in connection with such
Indebtedness, and less any amounts repaid permanently in accordance with
the covenant described under the caption "--Repurchase at the Option of
Holders--Asset Sales";
(b) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(c) the incurrence by the Company and its Restricted Subsidiaries of
Hedging Obligations;
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(d) the incurrence by the Company of Indebtedness represented by the
Offered Notes and Exchange Notes;
(e) the incurrence of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries, provided that (i) if the
Company or any Guarantor is the obligor on such Indebtedness, such
Indebtedness is expressly subordinate to the payment in full of all
obligations with respect to the Notes and (ii) (A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted Subsidiary of the
Company, or (B) any sale or other transfer of any such Indebtedness to a
Person that is neither the Company nor a Restricted Subsidiary of the
Company, shall be deemed to constitute an incurrence of such Indebtedness
by the Company or such Restricted Subsidiary, as the case may be;
(f) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company or any Restricted Subsidiary thereof in the
ordinary course of business, including guarantees or obligations of the
Company or any Restricted Subsidiary thereof with respect to letters of
credit supporting such bid, performance or surety obligations (in each case
other than for an obligation for money borrowed);
(g) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund
Indebtedness that was permitted by the Indenture to be incurred (other than
pursuant to clause (a) or (e) of this definition);
(h) incurrence by any Subsidiary of the Company of a Subsidiary
Guarantee;
(i) incurrence of Non-Recourse Debt; or
(j) incurrence by the Company or any Restricted Subsidiary of any
additional Indebtedness not to exceed $5.0 million at any time outstanding.
In the event that the incurrence of any Indebtedness would be permitted
under the covenant "Incurrence of Indebtedness and Issuance of Disqualified
Stock" or one or more of the provisions of this definition, the Company may
designate (in the form of an Officers' Certificate delivered to the Trustee)
the particular provision of the Indenture pursuant to which it is incurring
such Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company, (b) any Investment in Cash Equivalents,
(c) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person if as a result of such Investment (i) such Person becomes a
Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company, (d) any Investment made as a result of
the receipt of non-cash consideration from (i) an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales" or (ii) a
disposition of assets that does not constitute an Asset Sale, (e) acquisition
of assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company, and (f) Investments in a Person engaged in
the Principal Business, provided that the aggregate amount of such Investments
pursuant to this clause (f) in Persons that are not Restricted Subsidiaries of
the Company shall not exceed $20.0 million at any one time.
"Permitted Liens" means (a) Liens securing Indebtedness incurred pursuant to
clause (a) of the definition of "Permitted Indebtedness," (b) Liens in favor
of the Company or any of its Restricted Subsidiaries, (c) Liens on property of
a Person existing at the time such Person is merged into or consolidated with
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to its contemplation of such merger or
consolidation and do not extend to any property other than those of the Person
merged into or consolidated with the Company or any of its Restricted
Subsidiaries, (d) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company, provided
that such Liens were in existence prior to its contemplation of such
acquisition and do not extend to any other property, (e) Liens to secure the
performance of statutory obligations, surety or appeal bonds, bid or
performance bonds, insurance
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obligations or other obligations of a like nature incurred in the ordinary
course of business, (f) Liens securing Hedging Obligations, (g) Liens existing
on the Issue Date, (h) Liens securing Non-Recourse Debt, (i) any interest or
title of a lessor under a Capital Lease Obligation or an operating lease, (j)
Liens arising by reason of deposits necessary to obtain standby letters of
credit in the ordinary course of business, (including deposits necessary to
obtain standby letters of credit), (k) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security and related
benefits, (l) easements, rights of way restrictions and other similar charges
or encumbrances not interfering in any material respect with the business of
the Company or any Restricted Subsidiary, (m) any other Liens imposed by
operation of law which do not materially affect the Company's or any
Guarantor's ability to perform its obligations under the Notes or any
Subsidiary Guarantee, (n) any attachment or judgment Lien, unless the judgment
it secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such stay, (o) Liens to
secure Purchase Money Indebtedness, which Liens shall not extend to any other
property or assets of the Company or a Restricted Subsidiary (other than any
associated accounts, contracts and insurance proceeds), (p) Liens securing
Permitted Refinancing Indebtedness with respect to any Indebtedness referred
to in clause (o) above, and (q) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (i) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (ii) do not in the aggregate materially
detract from the value of the property or materially impair the use thereof in
the operation of business by the Company or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted
Subsidiaries; provided, however, that (a) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount of (or accreted value, if applicable), plus
premium, if any, and accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith), (b) such Permitted
Refinancing Indebtedness has a final maturity date no earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, (c) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness is subordinated in right of payment to the Notes on
terms at least as favorable, taken as a whole, to the holders of Notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded and (d) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
that is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; provided, however, that a Restricted
Subsidiary that is also a Guarantor may guarantee Permitted Refinancing
Indebtedness incurred by the Company, whether or not such Restricted
Subsidiary was an obligor or guarantor of the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; provided further,
however, that if such Permitted Refinancing Indebtedness is subordinated to
the Notes, such guarantee shall be subordinated to such Restricted
Subsidiary's Subsidiary Guarantee to at least the same extent.
"Principal Business" means (i) the business of the exploration for, and
development, acquisition, production, processing, marketing, refining, storage
and transportation of, hydrocarbons, (ii) any related energy and natural
resource business, (iii) any business currently engaged in by the Company or
its Subsidiaries, (iv) convenience stores, retail service stations, truck
stops and other public accommodations in connection therewith and (iv) any
activity or business that is a reasonable extension, development or expansion
of any of the foregoing.
"Purchase Money Indebtedness" means Indebtedness incurred for the purpose of
(i) financing all or any part of the purchase price of any real or personal
property or assets incurred prior to, at the time of, or within 120 days
after, the acquisition of such property or assets or (ii) financing all or any
part of the cost of construction
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of any such property or assets, provided that the amount of any such financing
shall not exceed the amount expended in the acquisition of, or the
construction of, such property or assets.
"Qualified Equity Offering" means (a) any sale of Equity Interests (other
than Disqualified Stock) of the Company pursuant to an underwritten offering
registered under the Securities Act or (b) any sale of Equity Interests (other
than Disqualified Stock) of the Company so long as, at the time of
consummation of such sale, the Company has a class of common equity securities
registered pursuant to Section 12(b) or Section 12(g) under the Exchange Act.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (b) any partnership (i) the sole general
partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (ii) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary at the time of such
designation (a) has no Indebtedness other than Non-Recourse Debt, (b) is not
party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless such agreement,
contract, arrangement or understanding does not violate the terms of the
Indenture described under the caption "--Certain Covenants--Transactions with
Affiliates," and (c) is a Person with respect to which neither the Company nor
any of its Restricted Subsidiaries has any direct or indirect obligation (i)
to subscribe for additional Equity Interests or (ii) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results, in each case, except to the extent
otherwise permitted by the Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under
the caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Disqualified Stock," the Company
shall be in default of such covenant). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only
be permitted if (A) such Indebtedness is permitted under the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock," calculated on a pro forma basis as if such designation
had occurred at the beginning of the four-quarter reference period, and (B) no
Default or Event of Default would be in existence following such designation.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person to the extent (a) all of the outstanding Capital
Stock or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned directly or indirectly by such Person or
(b) such Restricted Subsidiary is organized in a foreign jurisdiction and is
required by the applicable laws and regulations of such foreign jurisdiction
to be partially owned by the government of such foreign jurisdiction or
individual or corporate citizens of such foreign jurisdiction in order for
such Restricted Subsidiary to transact business in such foreign jurisdiction,
provided that such Person, directly or indirectly, owns the remaining Capital
Stock or ownership interests in such Restricted Subsidiary and, by contract or
otherwise, controls the management and business of such Restricted Subsidiary
and derives the economic benefits of ownership of such Restricted Subsidiary
to substantially the same extent as if such Restricted Subsidiary were a
wholly owned Restricted Subsidiary.
"Working Capital Facility" includes the Credit Facility and any other
working capital facilities entered into by the Company or any of its
Restricted Subsidiaries, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in
each case as amended, restated, modified, supplemented, extended, renewed,
replaced, refinanced or restructured from time to time, whether by the same or
any other agent or agents, lender or group of lenders, whether represented by
one or more agreements and whether one or more Subsidiaries are borrowers, or
guarantors thereunder or parties thereto.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax consequences resulting from the acquisition, ownership and
disposition of Notes by an initial beneficial owner of Notes. The tax
treatment of the holders of the Notes may vary depending upon their particular
situations. The legal conclusions expressed in this summary are based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations, judicial authority and
administrative rulings, all as in effect as of the date of this Offering
Memorandum, and all of which are subject to change, either prospectively or
retroactively. These authorities are subject to various interpretations and it
is therefore possible that the tax treatment of the Notes may differ from the
treatment described below. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to holders.
This discussion deals only with persons who will hold the Notes as capital
assets. In addition, certain other holders (including insurance companies, tax
exempt organizations, financial institutions and broker-dealers) may be
subject to special rules not discussed below. For purposes of this discussion,
a "United States person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in the United
States or under the laws of the United States or of any political subdivision
thereof, an estate whose income is includible in gross income for United
States federal income tax purposes regardless of its source or a trust, if a
U.S. court is able to exercise primary supervision over the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust. PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL TAX
CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF NOTES, AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR
OTHER TAXING JURISDICTION.
INTEREST
Interest on the Notes generally will be includable in the income of a United
States person as ordinary income at the time such interest is received or
accrued, in accordance with such United States person's method of accounting
for United States federal income tax purposes. The Company expects that the
Notes will not be issued with original issue discount within the meaning of
the Code.
EFFECT OF OPTIONAL REDEMPTION
The Company, at its option, may redeem part or all of the Notes at the times
and for the amounts described in "Description of the Notes--Optional
Redemption" herein. The Treasury regulations provide that for purposes of
calculating the yield to maturity of a debt instrument, an issuer will be
treated as exercising any option if its exercise would lower the yield of the
debt instrument. However, in this case a redemption of the Notes at the
optional redemption prices would increase the effective yield of such Notes as
calculated from the date of issuance.
THE EXCHANGE OFFER
Pursuant to the Treasury regulations, the exchange of Notes for Exchange
Notes pursuant to the Exchange Offer should not constitute a significant
modification of the terms of the Notes, and, accordingly, such exchange should
be treated as a "non-event" for federal income tax purposes. Therefore, such
exchange should have no federal income tax consequences to United States
persons. The holding period of an Exchange Note will include the holding
period of the Note for which it was exchanged; the basis of an Exchange Note
will be the same as the basis of the Note for which it was exchanged; and each
United States person holding the Notes would continue to be required to
include interest on the Notes in its gross income in accordance with its
method of accounting for United States federal income tax purposes.
81
<PAGE>
SALES, EXCHANGE OR RETIREMENT OF NOTES
Upon the sale, exchange, redemption or other disposition of a Note, other
than the exchange of a Note for an Exchange Note (see "--The Exchange Offer"
above), a holder of a Note generally will recognize gain or loss in an amount
equal to the difference between the amount of cash and the fair market value
of any property received on the sale, exchange, redemption or other
disposition of the Note (other than in respect of accrued and unpaid interest
on the Note, which such amounts are treated as ordinary interest income) and
such holder's adjusted tax basis in the Note. Such gain or loss will be
capital gain or loss, and will generally be long-term capital gain taxable at
a rate of 20% if the Note is held for more than 18 months, mid-term capital
gain taxable at a rate of 28% if the Note is held for 18 months or less but
more than 12 months, and short-term capital gain taxable at ordinary income
tax rates if the Note is held for 12 months or less. Subsequent to December
31, 2000, the capital gain rate would be reduced to 18% if a Note has been
held for more than five years. The deductibility of capital losses is subject
to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to interest
payments on the Notes made to United States persons, other than certain exempt
recipients (such as corporations), and to proceeds realized by such United
States persons on dispositions of Notes. A 31% backup withholding tax will
apply to such amounts only if the United States person: (i) fails to furnish
its social security or other taxpayer identification number ("TIN") within a
reasonable time after request therefor, (ii) furnishes an incorrect TIN, (iii)
fails to report properly interest or dividend income, or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalty
of perjury, that the TIN provided is its correct number and that it is not
subject to backup withholding. Any amount withheld under the backup
withholding rules may be refunded or credited against the United States
persons' United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES APPLICABLE TO NON-UNITED
STATES HOLDERS
For purposes of this discussion, a "Non-United States Holder" is an initial
beneficial owner of a Note that for United States federal income tax purposes
is not a United States person.
INTEREST
Interest paid by the Company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and such Non-United States
Holder: (i) does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company; (ii) is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; (iii) is not a bank whose receipt of
interest on a Note is described in section 881(c)(3)(A) of the Code; and (iv)
certifies, under penalties of perjury, that such holder is not a United States
person and provides such holder's name and address.
SALE, EXCHANGE OR RETIREMENT OF NOTES
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, exchange, retirement
(including redemption) or other disposition of a Note unless: (i) the gain is
effectively connected with the conduct of a trade or business within the
United States by the Non-United States Holder; or (ii) in the case of a Non-
United States Holder who is a nonresident alien individual and holds the Note
as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year and certain other requirements are met.
82
<PAGE>
FEDERAL ESTATE TAXES
If interest on the Notes is exempt from withholding of United States federal
income tax under the rules described above, the Notes will not be included in
the estate of a deceased Non-United States Holder for United States federal
estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the holders of Notes and the
Internal Revenue Service the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or
an exemption has otherwise been established; provided that neither the Company
nor its payment agent has actual knowledge that the holder is a United States
person or that the conditions of any other exemption are not in fact
satisfied. Under temporary Treasury regulations, these information reporting
and backup withholding requirements will apply, however, to the gross proceeds
paid to a Non-United States Holder on the disposition of the Notes by or
through a United States office of a United States or foreign broker, unless
the holder certifies to the broker under penalties of perjury as to its name,
address and status as a foreign person or the holder otherwise establishes an
exemption. Information reporting requirements, but not backup withholding,
will also apply to a payment of the proceeds of a disposition of the Notes by
or through a foreign office of a United States broker or foreign brokers with
certain types of relationships to the United States unless such broker has
documentary evidence in its file that the holder of the Notes is not a United
States person, and such broker has no actual knowledge to the contrary, or the
holder establishes an exception. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the Notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.
United States Treasury regulations, which generally are effective for
payments made after December 31, 1998, subject to certain transition rules,
alter the foregoing rules in certain respects. Among other things, such
regulations provide presumptions under which a Non-United States Holder is
subject to information reporting and backup withholding at the rate of 31%
unless the Company receives certification from the holder of non-U.S. status.
Depending on the circumstances, this certification will need to be provided
(i) directly by the Non-United States Holder, (ii) in the case of a Non-United
States Holder that is treated as a partnership or other fiscally transparent
entity, by the partners, shareholders or other beneficiaries of such entity,
or (iii) certain qualified financial institutions or other qualified entities
on behalf of the Non-United States Holder.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
83
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and
disposition of Notes by an initial beneficial owner of Notes that, for United
States federal income tax purposes, is not a "United States person" (a "Non-
United States Holder"). This discussion is based upon the United States
federal tax law now in effect, which is subject to change, possibly
retroactively. For purposes of this discussion, a "United States person" means
a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in the United States or under the laws of
the United States or of any political subdivision thereof, an estate whose
income is includible in gross income for United States federal income tax
purposes regardless of its source or a trust, (A) for taxable years beginning
after December 31, 1996 (or ending after August 20, 1996, if the trustee has
made an applicable election) if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the trust or (B)
for taxable years not described in clause (A), if the income of the trust is
includible in gross income for United States federal income tax purposes
regardless of its source. The tax treatment of the Holders of the Notes may
vary depending upon their particular situations. U.S. persons acquiring the
Notes are subject to different rules than those discussed below. In addition,
certain other holders (including insurance companies, tax exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below.
INTEREST
Interest paid by the Company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and such Non-United States
Holder: (i) does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company; (ii) is not a
controlled foreign corporation with respect to which the Company is a "related
person" within the meaning of the Code; and (iii) certifies, under penalties
of perjury, that such holder is not a United States person and provides such
holder's name and address.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other
disposition of a Note unless: (i) the gain is effectively connected with the
conduct of a trade or business within the United States by the Non-United
States Holder; or (ii) in the case of a Non-United States Holder who is a
nonresident alien individual and holds the Note as a capital asset, such
holder is present in the United States for 183 or more days in the taxable
year and certain other requirements are met.
FEDERAL ESTATE TAXES
If interest on the Notes is exempt from withholding of United States federal
income tax under the rules described above, the Notes will not be included in
the estate of a deceased Non-United States Holder for United States federal
estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will, where required, report to the Holders of Notes and the
Internal Revenue Service the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with
84
<PAGE>
respect to which either the requisite certification, as described above, has
been received or an exemption has otherwise been established; provided that
neither the Company nor its payment agent has actual knowledge that the Holder
is a United States person or that the conditions of any other exemption are
not in fact satisfied. Under temporary Treasury regulations, these information
reporting and backup withholding requirements will apply, however, to the
gross proceeds paid to a Non-United States Holder on the disposition of the
Notes by or through a United States office of a United States or foreign
broker, unless the Holder certifies to the broker under penalties of perjury
as to its name, address and status as a foreign person or the Holder otherwise
establishes an exemption. Information reporting requirements, but not backup
withholding, will also apply to a payment of the proceeds of a disposition of
the Notes by or through a foreign office of a United States broker or foreign
brokers with certain types of relationships to the United States unless such
broker has documentary evidence in its file that the Holder of the Notes is
not a United States person, and such broker has no actual knowledge to the
contrary, or the Holder establishes an exception. Neither information
reporting nor backup withholding generally will apply to a payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
foreign broker not subject to the preceding sentence.
Recently, the Treasury Department has issued proposed regulations regarding
the withholding and information reporting rules discussed above. In general,
the proposed regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. If finalized in their current form,
the proposed regulations would generally be effective for payments made after
December 31, 1997, subject to certain transition rules.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES FOR
UNITED STATES AND NON-UNITED STATES HOLDERS IS FOR GENERAL INFORMATION ONLY
AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF THE OLD NOTES AND EACH
PROSPECTIVE HOLDER AND, SUBSEQUENT TO THE EXCHANGE OFFER, EACH HOLDER, OF
EXCHANGE NOTES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE EXCHANGE NOTES INCLUDING THE APPLICABILITY AND EFFECT OF
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
85
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that it will
make this Prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transaction,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by
any such person 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.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer, other than commissions or concessions
of any broker-dealer, and will indemnify the holders of the Notes (including
any broker-dealers) against certain liabilities including liabilities under
the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed on for the Company
by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31,
1997, included in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports.
86
<PAGE>
AVAILABLE INFORMATION
Each purchaser of the Notes from the Initial Purchaser will be furnished
with a copy of this Offering Memorandum and any related amendments or
supplements. Each person receiving this Offering Memorandum acknowledges that
(i) such person has been afforded an opportunity to request from the Company
and to review, and has received, all additional information considered by it
to be necessary to verify the accuracy and completeness of the information
herein, (ii) such person has not relied on the Initial Purchaser or any person
affiliated with the Initial Purchaser in connection with its investigation of
the accuracy of such information or its investment decision, and (iii) except
as provided pursuant to (i) above, no person has been authorized to give any
information or to make any representation concerning the Notes offered hereby
other than those contained herein and, if given or made, such other
information or representation should not be relied upon as having been
authorized by the Company or the Initial Purchaser. While any Notes remain
outstanding, the Company will make available, upon request, to any holder and
any prospective purchaser thereof the information required by Rule 144A(d)(4)
under the Securities Act during any period in which the Company is not subject
to Section 13 or 15(d) of the Exchange Act. Any such request should be
directed to Wainoco Oil Corporation, 10000 Memorial Drive, Suite 600, Houston,
Texas 77024-3411.
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission. Reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, 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
Suite 1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and such
information may also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. The Commission maintains
a Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. Such reports, proxy and information statements and other
information may be found on the Commission's Web site address,
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents
previously filed by the Company pursuant to the Exchange Act:
(a) Annual Report of Wainoco Oil Corporation on Form 10-K for the year
ended December 31, 1997.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
REQUESTS SHOULD BE ADDRESSED TO CORPORATE SECRETARY, WAINOCO OIL CORPORATION,
10000 MEMORIAL DRIVE, SUITE 600, HOUSTON, TEXAS 77024-3411.
87
<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
Unaudited Pro Forma Consolidated Financial Information
Introduction to Unaudited Pro Forma Consolidated Financial Information... F-2
Unaudited Pro Forma Consolidated Balance Sheet........................... F-3
Unaudited Pro Forma Consolidated Statements of Operations................ F-4
Notes to Unaudited Pro Forma Consolidated Financial Statements........... F-5
Consolidated Financial Statements
Report of Independent Public Accountants................................. F-6
Consolidated Statements of Operations.................................... F-7
Consolidated Balance Sheets.............................................. F-8
Consolidated Statements of Cash Flows.................................... F-9
Consolidated Statements of Shareholders' Equity.......................... F-10
Notes to Consolidated Financial Statements............................... F-11
Selected Quarterly Financial Data (Unaudited).............................. F-22
</TABLE>
F-1
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Pro Forma Financial Statements") of Wainoco Oil Corporation (the "Company")
is based on the Company's historical financial statements, adjusted to give
effect to the issuance of the 9 1/8% Senior Notes due 2006 in the Offering and
the redemption of all existing debt obligations consisting of the 12% Senior
Notes due 2002, 10 3/4% Subordinated Debentures due 1998 and the 7 3/4%
Convertible Subordinated Debentures due 2014. The Pro Forma Financial
Statements are not necessarily indicative of the results that actually would
have occurred if the debt issuance and debt redemptions had been in effect on
the dates indicated or which may be obtained in the future. The Pro Forma
Financial Statements should be read in conjunction with the historical
financial statements of the Company and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Registration Statement. The Pro Forma Balance Sheet as of December 31, 1997
assumes the debt issuance and debt redemptions occurred as of December 31,
1997. The Pro Forma Statement of Operations for the year ended December 31,
1997 assume the debt issuance and debt redemptions occurred January 1, 1997.
F-2
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
ASSETS WAINOCO ADJUSTMENTS(F) WAINOCO
------ ---------- -------------- ---------
<S> <C> <C> <C>
Current Assets:
Cash, including cash equivalents........ $ 21,735 $ (6,358)(a) $ 15,377
Receivables............................. 17,204 -- 17,204
Inventory and other current assets...... 29,057 -- 29,057
-------- -------- --------
Total Current Assets.................. 67,996 (6,358) 61,638
-------- -------- --------
Property and Equipment, at cost:
Refinery and pipeline................... 149,201 -- 149,201
Furniture, fixtures and other equipment. 3,044 -- 3,044
-------- -------- --------
152,245 -- 152,245
Less--Accumulated depreciation.......... 45,586 -- 45,586
-------- -------- --------
106,659 -- 106,659
-------- -------- --------
Other Assets.............................. 3,260 1,202 (b) 4,462
-------- -------- --------
$177,915 $ (5,156) $172,759
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current Liabilities:
Payables................................ $ 33,527 $ -- $ 33,527
Accrued interest........................ 1,530 (1,530)(c) --
Other accrued liabilities............... 12,011 -- 12,011
Current maturities of long-term debt.... -- -- (c) --
-------- -------- --------
Total current liabilities............. 47,068 (1,530) 45,538
-------- -------- --------
Long-Term Debt, net of current maturities:
Frontier Credit Facility................ -- -- --
9 1/8% Senior Notes due 2006............ -- 70,000 (c) 70,000
12% Senior Notes due 2002............... 24,572 (24,572)(c) --
7 3/4% Convertible Subordinated
Debentures............................. 46,000 (46,000)(c) --
-------- -------- --------
70,572 (572) 70,000
-------- -------- --------
Other Liabilities......................... 4,341 -- 4,341
Shareholders' Equity:
Preferred stock......................... -- -- --
Common stock............................ 57,251 -- 57,251
Paid-in capital......................... 84,785 -- 84,785
Retained earnings (deficit)............. (85,866) (3,054)(d) (88,920)
Treasury stock.......................... (236) -- (236)
-------- -------- --------
Total Shareholders' Equity............ 55,934 (3,054) 52,880
-------- -------- --------
$177,915 $ (5,156) $172,759
======== ======== ========
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
F-3
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
WAINOCO ADJUSTMENTS(F) WAINOCO
---------- -------------- ---------
<S> <C> <C> <C>
Revenues:
Refined products......................... $374,091 $ $374,091
Other.................................... 2,327 2,327
-------- --------
376,418 376,418
Costs and Expenses:
Refining operating costs................. 337,495 337,495
Selling and general expenses............. 8,050 8,050
Depreciation............................. 9,170 9,170
-------- --------
354,715 354,715
Operating Income........................... 21,703 21,703
Interest Expense, net...................... 13,891 (7,301)(e) 6,590
-------- ------- --------
Income From Continuing Operations.......... 7,812 7,301 15,113
Provision for Income Taxes................. -- -- --
-------- ------- --------
Income From Continuing Operations.......... $ 7,812 $ 7,301 $ 15,113
======== ======= ========
Income per Share From Continuing
Operations................................ $ .28 $ 0.55
======== ========
Average number of common shares
outstanding............................... 27,457 27,457
======== ========
</TABLE>
See accompanying notes to Pro Forma Financial Statements.
F-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Reflects the redemption of all existing debt obligations and the related
accrued interest with the proceeds from the issuance of the Notes and
available cash. Following is a summary of the cash, including cash
equivalents, pro forma adjustments (in thousands):
<TABLE>
<S> <C>
Proceeds from issuance of the Notes, net of issuance costs......... $ 67,300
Redemptions:
12% Senior Notes at a redemption premium of 103.43%.............. (25,415)
7 3/4% Convertible Subordinated Debentures at a redemption
premium of 101.55%.............................................. (46,713)
Accrued interest on redeemed debt obligations.................... (1,530)
--------
Total redemptions.............................................. (73,658)
--------
Adjustment to cash, including cash equivalents............... $ (6,358)
========
</TABLE>
(b) The adjustment to other assets of $1.2 million consists of approximately
$2.7 million related to the costs to issue the Notes, offset by the write-
off of approximately $1.5 million representing unamortized debt issuance
costs associated with the debt to be redeemed.
(c) Reflects the redemption of all of the Company's existing debt, including
accrued interest and the issuance of the Notes.
(d) Reflects a nonrecurring charge of approximately $1.6 million related to
the redemption premium to be paid on the redemption of 12% Senior Notes
and 7 3/4% Convertible Subordinated Debentures and the write-off of
approximately $1.5 million of unamortized debt issuance costs associated
with the debt to be redeemed.
(e) Reflects (i) the reduction of interest expense as a result of the Offering
and redemption of existing outstanding indebtedness and (ii) the
elimination of interest income on available cash used for the redemption
of outstanding indebtedness. "Interest expense, net" adjustments include
the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Interest expense on redeemed debt*.......................... $14,644
Interest expense on the Senior Notes (assumed 9 1/8% annual
rate)*..................................................... (6,726)
Elimination of interest income.............................. (617)
-------
Adjustment to Interest Expense, net....................... $ 7,301
=======
</TABLE>
--------
* includes amortization of debt issuance costs
(f) The Pro Forma Financial Statements have been prepared assuming 100% of the
7 3/4% Convertible Subordinated Debentures are redeemed. Under the
assumption that 100% of the 7 3/4% Convertible Subordinated Debentures are
converted to common stock of the Company, pro forma cash, debt and
shareholders' equity as of December 31, 1997, would have been
approximately $62.1 million, $70.0 million and $99.6 million,
respectively, and pro forma income per share for the year ended December
31, 1997 would have been $.46.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Wainoco Oil Corporation:
We have audited the accompanying consolidated balance sheets of Wainoco Oil
Corporation (a Wyoming corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Wainoco Oil Corporation
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 10, 1998
F-6
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Refined products............................... $374,091 $382,098 $329,784
Other.......................................... 2,327 1,275 2,048
-------- -------- --------
376,418 383,373 331,832
-------- -------- --------
Costs and Expenses:
Refining operating costs....................... 337,495 362,485 317,311
Selling and general expenses................... 8,050 6,285 7,156
Depreciation................................... 9,170 9,018 8,471
-------- -------- --------
354,715 377,788 332,938
-------- -------- --------
Operating Income (loss).......................... 21,703 5,585 (1,106)
Interest expense, net............................ 13,891 17,229 18,230
-------- -------- --------
Income (loss) from continuing operations before
income taxes.................................... 7,812 (11,644) (19,336)
Provision for Income Taxes....................... -- -- --
-------- -------- --------
Income (loss) from continuing operations......... 7,812 (11,644) (19,336)
Discontinued operations:
Income from oil and gas operations, net of
taxes......................................... 1,721 4,752 211
Gain on disposal of Canadian oil and gas
properties, net of taxes...................... 23,301 -- --
Recognition of cumulative translation
adjustment.................................... (9,862) -- --
-------- -------- --------
Income (loss) before extraordinary item.......... 22,972 (6,892) (19,125)
Extraordinary loss on retirement of debt, net of
taxes........................................... 3,917 -- --
-------- -------- --------
Net income (loss)................................ $ 19,055 $ (6,892) $(19,125)
======== ======== ========
Basic and diluted earnings (loss) per share of
common stock:
Continuing operations.......................... $ .28 $ (.43) $ (.71)
Discontinued operations........................ .55 .18 .01
Extraordinary loss............................. (.14) -- --
-------- -------- --------
Net Income (Loss)................................ $ .69 $ (.25) $ (.70)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1997 1996
------ -------- --------
<S> <C> <C>
Current assets:
Cash, including cash equivalents of $19,981 and $609 at
December 31, 1997 and 1996, respectively................ $ 21,735 $ 5,183
Trade receivables........................................ 16,674 19,422
Other receivables........................................ 530 1,357
Inventory of crude oil, products and other............... 27,666 29,617
Other current assets..................................... 1,391 730
-------- --------
Total current assets................................... 67,996 56,309
-------- --------
Property, plant and equipment, at cost:
Refinery and pipeline.................................... 149,201 143,172
Furniture, fixtures and other equipment.................. 3,044 3,646
Oil and gas properties, on a full-cost basis............. -- 170,879
-------- --------
152,245 317,697
Less--accumulated depreciation, depletion and
amortization............................................ 45,586 139,091
-------- --------
106,659 178,606
Other assets............................................... 3,260 4,950
-------- --------
Total assets........................................... $177,915 $239,865
======== ========
<CAPTION>
LIAIBLITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable......................................... $ 33,527 $ 43,789
Accrued turnaround cost.................................. 6,771 3,490
Accrued liabilities and other............................ 5,240 5,033
Accrued interest......................................... 1,530 5,249
Current maturities of long-term debt..................... -- 2,500
-------- --------
Total current liabilities.............................. 47,068 60,061
-------- --------
Long-Term Debt, net of current maturities.................. 70,572 145,928
Deferred Credits and Other................................. 2,801 6,189
Deferred Income Taxes...................................... 1,540 2,418
Commitments and Contingencies..............................
Shareholders' Equity:
Preferred stock, $100 par value, 500,000 shares
authorized, no shares issued............................ -- --
Common stock, no par, 50,000,000 shares authorized,
28,111,289 shares and 27,313,502 shares issued in 1997
and 1996, respectively.................................. 57,251 57,172
Paid-in capital.......................................... 84,785 81,767
Retained earnings (deficit).............................. (85,866) (104,921)
Cumulative translation adjustment........................ -- (8,501)
Treasury stock, 52,500 shares and 55,000 shares at
December 31, 1997 and 1996, respectively................ (236) (248)
-------- --------
Total shareholders' equity............................. 55,934 25,269
-------- --------
Total liabilities and shareholders' equity............. $177,915 $239,865
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................... $ 19,055 $ (6,892) $ (19,125)
Gain on disposal of Canadian oil and gas
properties..................................... (23,301) -- --
Recognition of cumulative translation
adjustment..................................... 9,862 -- --
Extraordinary loss on retirement of debt........ 3,917 -- --
Depreciation, depletion and amortization........ 13,018 17,141 21,411
Other........................................... (202) 795 734
-------- -------- ---------
22,349 11,044 3,020
-------- -------- ---------
Changes in components of working capital from
operations
(Increase) decrease in receivables............ 905 765 (1,283)
(Increase) decrease in inventory.............. 1,856 (9,881) 3,884
(Increase) decrease in other current assets... (642) (35) 175
Increase (decrease) in accounts payable....... (8,617) 7,659 4,161
Increase (decrease) in accrued liabilities.... (3,353) (1,087) (79)
-------- -------- ---------
(9,851) (2,579) 6,858
-------- -------- ---------
Net cash provided by operating activities... 12,498 8,465 9,878
INVESTING ACTIVITIES
Additions to property, plant and equipment:
Continuing operations......................... (5,675) (4,760) (5,217)
Discontinued operations....................... (3,298) (8,654) (11,960)
Sales of oil and gas and other properties....... 91,307 990 34,145
Other........................................... (590) 429 (606)
-------- -------- ---------
Net cash provided by (used in) investing
activities................................. 81,744 (11,995) 16,362
FINANCING ACTIVITIES
Borrowings:
Senior notes.................................. 2,000 3,000 --
Payments of debt:
Bank debt, net................................ -- -- (15,000)
Senior notes, including redemption premium.... (74,932) -- (8,000)
Subordinated debentures....................... (7,500) -- (2,500)
Issuance of common stock........................ 3,109 -- --
Other........................................... (357) (345) (488)
-------- -------- ---------
Net cash provided by (used in) financing
activities................................. (77,680) 2,655 (25,988)
Effect of exchange rate changes on cash......... (10) 13 (38)
-------- -------- ---------
Increase (decrease) in cash and cash
equivalents.................................... 16,552 (862) 214
Cash and cash equivalents, beginning of period.. 5,183 6,045 5,831
-------- -------- ---------
Cash and cash equivalents, end of period........ $ 21,735 $ 5,183 $ 6,045
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
COMMON STOCK OTHER
------------------ -----------------------------
NUMBER OF RETAINED CUMULATIVE
SHARES PAID-IN EARNINGS TRANSLATION TREASURY
ISSUED AMOUNT CAPITAL (DEFICIT) ADJUSTMENT STOCK TOTAL
---------- ------- ------- --------- ----------- -------- --------
(IN THOUSANDS EXCEPT SHARES)
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1994: 27,310,842 $57,172 $81,758 $ (78,904) $(10,307) $(270) $ 49,449
Shares issued under:
Stock option plan..... 2,660 -- 9 -- -- -- 9
Directors' stock plan. -- -- -- -- -- 11 11
Translation adjustment.. -- -- -- -- 2,120 -- 2,120
Net loss................ -- -- -- (19,125) -- -- (19,125)
---------- ------- ------- --------- -------- ----- --------
DECEMBER 31, 1995: 27,313,502 57,172 81,767 (98,029) (8,187) (259) 32,464
Shares issued under:
Directors' stock plan. -- -- -- -- -- 11 11
Translation adjustment.. -- -- -- -- (314) -- (314)
Net loss................ -- -- -- (6,892) -- -- (6,892)
---------- ------- ------- --------- -------- ----- --------
DECEMBER 31, 1996: 27,313,502 57,172 81,767 (104,921) (8,501) (248) 25,269
Shares issued under:
Stock option plan..... 797,787 79 3,018 -- -- -- 3,097
Directors' stock plan. -- -- -- -- -- 12 12
Translation adjustment.. -- -- -- -- (1,361) -- (1,361)
Net income.............. -- -- -- 19,055 -- -- 19,055
Disposition of Canadian
assets................. -- -- -- -- 9,862 -- 9,862
---------- ------- ------- --------- -------- ----- --------
DECEMBER 31, 1997: 28,111,289 $57,251 $84,785 $ (85,866) $ -- $(236) $ 55,934
========== ======= ======= ========= ======== ===== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
The financial statements include the accounts of Wainoco Oil Corporation, a
Wyoming corporation, and its wholly-owned subsidiaries, including Frontier
Holdings Inc. ("Frontier"), collectively referred to as Wainoco or the
Company. Wainoco is engaged in the crude oil refining and wholesale marketing
of refined petroleum products business (the "refining operations").
Wainoco conducts its refining operations in the Rocky Mountain region of the
United States. The Company's Cheyenne, Wyoming Refinery purchases the crude
oil to be refined and markets the refined petroleum products produced,
including various grades of gasoline, diesel fuel, asphalt and petroleum coke.
Prior to the third quarter of 1997, Wainoco also explored for and produced
oil and gas in Canada and prior to the first quarter of 1996 in the United
States (together, the "oil and gas operations"). On June 16, 1997, Wainoco
completed the sale of all its Canadian oil and gas properties. During the
third quarter of 1994, the Company announced that it intended to cease all
exploration activities in the United States and during 1995 completed the sale
of its United States oil and gas assets. Operating results for Wainoco's oil
and gas operations segment are presented as discontinued operations in the
accompanying statements of operations and all previously reported results are
restated to this presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
Property, Plant and Equipment
Refinery plant and equipment is depreciated based on the straight-line
method over estimated useful lives of three to twenty years.
Maintenance and repairs are expensed as incurred except for major scheduled
repairs and maintenance ("turnaround") of the Refinery operating units. The
costs for turnarounds are ratably accrued over the period from the prior
turnaround to the next scheduled turnaround. Major improvements are
capitalized, and the assets replaced are retired.
New Accounting Statements
The Company adopted the Financial Accounting Standards Board's ("FASB")
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" in 1997 which establishes new standards for computing and presenting
earnings per share. SFAS No. 128 requires the presentation of basic and
diluted earnings per share for each period presented. Earnings (loss) per
share has been restated for periods presented to give effect for the adoption
of SFAS No. 128.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which establishes standards for reporting and displaying comprehensive income
and its components in the financial statements. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. The adoption of this statement
requires incremental financial statement disclosures and thus will have no
effect on the Company's financial position or results of operations.
Inventories
Inventories of crude oil, other unfinished oils and all finished products
are recorded at the lower of cost on a first-in, first-out (FIFO) basis or
market. Refined product exchange transactions are considered asset exchanges
with deliveries offset against receipts. The net exchange balance is included
in inventory. Inventories of materials and supplies are recorded at cost.
F-11
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SCHEDULE OF COMPONENTS OF INVENTORY
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
<S> <C> <C>
Crude oil.............................................. $ 3,904 $ 2,863
Unfinished products.................................... 6,338 7,024
Finished products...................................... 9,929 12,816
Chemicals.............................................. 1,534 851
Repairs and maintenance supplies and other............. 5,961 6,063
------- -------
$27,666 $29,617
======= =======
</TABLE>
Environmental Expenditures
Environmental expenditures are expensed or capitalized based upon their
future economic benefit. Costs which improve a property's pre-existing
condition and costs which prevent future environmental contamination are
capitalized. Costs related to environmental damage resulting from operating
activities subsequent to acquisition are expensed. Liabilities for these
expenditures are recorded when it is probable that obligations have been
incurred and the amounts can be reasonably estimated.
Hedging
The Company, at times, engages in futures transactions in its refining
operations for the purpose of hedging its inventory position and natural gas
prices. Gains and losses on futures contracts designated as hedges are
recognized in refining operating costs when the associated hedge transaction
is consummated. The Company does not enter into derivative contracts for
speculative purposes.
Interest
Interest is reported net of interest capitalized and interest income.
Interest income of $2.0 million, $109,000 and $140,000 was recorded in the
years ended December 31, 1997, 1996 and 1995, respectively. During 1996, the
Company capitalized interest of $24,000. Wainoco capitalizes interest on debt
incurred to fund the construction or acquisition of a significant asset.
Additionally, to manage its interest cost and exposure to interest rate
movements, the Company, at times, enters into interest rate swaps. Such
agreements effectively change the Company's interest rate exposure. At
December 31, 1997, the Company was not subject to any such agreements.
Stock Based Compensation
Compensation cost is measured using the intrinsic value method. Under this
method, compensation cost is the excess, if any, of the quoted market value of
the Company's common stock at the grant date over the amount the employee must
pay to acquire the stock. No compensation cost was recognized for the years
ended December 31, 1997, 1996 and 1995.
Currency Translation
The Canadian dollar financial statements of the Canadian oil and gas
operations have been translated to United States dollars. Gains and losses on
currency transactions are included in the consolidated statements of
F-12
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
operations currently, and translation adjustments are included in the
consolidated statements of shareholders' equity. See Note 3 for information
relating to the recognition of the cumulative translation adjustment in 1997.
Intercompany Transactions
Significant intercompany transactions are eliminated in consolidation.
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
disclosures 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.
Cash Flow Reporting
Highly liquid investments with a maturity, when purchased, of three months
or less are considered to be cash equivalents. Cash payments for interest
during 1997, 1996 and 1995 were $18.4 million, $16.3 million and $18.8
million, respectively. Cash payments for income taxes during 1997, 1996 and
1995 were $930,000, $187,000 and $133,000, respectively.
3. SALE OF OIL AND GAS OPERATIONS
On June 16, 1997, Wainoco completed the sale of all its Canadian oil and gas
properties. The transaction was initiated by the Company through a negotiated
bid process in order to maximize shareholder value. The oil and gas assets
were located in British Columbia and Alberta and included approximately 94
billion cubic feet of natural gas, 1.7 million barrels of oil, condensate and
natural gas liquids, 121,500 net undeveloped leasehold acres and a significant
amount of seismic data. Additionally, value was received for certain Canadian
income tax pools of the Company.
The contract purchase price of C$133.6 million was adjusted from the January
1, 1997 effective date of the sale to June 16, 1997. Net proceeds after these
adjustments, transaction expenses and severance costs were approximately
C$126.7 million (US$91.3 million) as of June 16, 1997. A net gain of $23.3
million was realized on the transaction. No Canadian taxes are estimated to be
payable due to available oil and gas deductions and net operating loss
carryforwards. For U.S. federal income taxes, available net operating loss
carryforwards will be utilized to offset the gain; however, alternative
minimum taxes of approximately $800,000 are estimated and have been paid.
The cumulative translation adjustment as of May 5, 1997 (the measurement
date of the sale) of $9.9 million was realized against income as a result of
the sale. In prior periods, Wainoco had recognized the currency translation
impact of its Canadian operations as a direct reduction to shareholders'
equity. Consequently, the recognition of the cumulative translation adjustment
in the accompanying statements of operations has no effect on shareholders'
equity.
A net loss of $54,000 from Canadian operations from the measurement date
until June 16, 1997 was included in the gain calculation. As of December 31,
1997, the assets and liabilities of the Canadian operations retained by
Wainoco were not material.
In the fourth quarter of 1995, Wainoco culminated the restructuring of
exploration activities in the United States and sold its last domestic oil and
gas assets.
F-13
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following schedule presents certain discontinued oil and gas operating
income (loss) information and capital expenditures for the three years ended
December 31, 1997, 1996 and 1995 and identifiable assets as of December 31,
1997, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996 1995
(IN THOUSANDS) ------ ------- -------
<S> <C> <C> <C>
OIL AND GAS SALES
Canada................................................ $7,280 $19,592 $21,096
United States......................................... -- 987 9,696
DEPRECIATION, DEPLETION AND AMORTIZATION
Canada................................................ 3,002 8,123 9,641
United States......................................... -- -- 3,299
OPERATING INCOME (LOSS)
Canada................................................ 1,954 4,129 2,737
United States......................................... -- 987 (623)
CAPITAL EXPENDITURES
Canada................................................ 2,815 7,917 10,865
United States......................................... -- -- 277
IDENTIFIABLE ASSETS
Canada................................................ -- 74,001 75,229
United States......................................... -- -- --
</TABLE>
4. LONG-TERM DEBT
SCHEDULE OF LONG-TERM DEBT
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- --------
<S> <C> <C>
Refining credit facility................................ $ -- $ --
12% Senior Notes........................................ 24,572 95,000
7 3/4% Convertible Subordinated Debentures.............. 46,000 46,000
10 3/4% Subordinated Debentures......................... -- 7,428
------- --------
70,572 148,428
Less current maturities................................. -- 2,500
------- --------
$70,572 $145,928
======= ========
</TABLE>
Refining Credit Facility
The refining operations has a working capital credit facility with a group
of three banks which expires on April 2, 1999. The facility is a collateral-
based facility with total capacity of up to $50 million, of which maximum cash
borrowings are $20 million. Any unutilized capacity after cash borrowings is
available for letters-of-credit. No debt was outstanding on this facility at
December 31, 1997 and 1996. Standby letters of credit outstanding were $4.5
million and $19.5 million at December 31, 1997 and 1996, respectively.
The facility provides working capital financing for operations, generally
the financing of crude and product supply. It is generally secured by
Frontier's current assets. The agreement provides for a quarterly commitment
F-14
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
fee of .375 of 1% per annum. Interest rates are based, at the Company's
option, on the agent bank's prime rate plus 1/2% or the reserve-adjusted LIBOR
plus 1 3/4%. Standby letters-of-credit issued bear a fee of 1 1/4% annually,
plus standard issuance and renewal fees. The facility agreement includes
certain financial covenant requirements relating to Frontier's working
capital, cash earnings, tangible net worth and fixed charge coverage.
Senior Notes
The $24.6 million of unsecured 12% Senior Notes ("Senior Notes") are due
2002. The notes are redeemable, at the option of the Company, at a premium of
103.43% after July 31, 1997, declining to 100% in 1999. Interest is payable
semiannually. See Note 9 for information related to the December 31, 1997 debt
balance and activity subsequent thereto.
Convertible Subordinated Debentures
The $46 million of 7 3/4% Convertible Subordinated Debentures ("Convertible
Subordinated Debentures") are due in 2014. The debentures are convertible into
the Company's common stock at $8.75 per share. Interest is payable
semiannually. The debentures are redeemable at a premium of 101.55% declining
to 100% in 1999. Sinking fund payments of 5% of the principal amount commence
in 2000, and are calculated to retire 70% of the principal amount prior to
maturity. See Note 9 for information related to the December 31, 1997 debt
balance and activity subsequent thereto.
Early Retirement of Debt
On July 21, 1997, the Company initiated a tender offer for $91.4 million of
its Senior Notes at a price of par as required by the Senior Notes Indenture
after a material sale of assets. The par tender offer expired on August 20,
1997 with approximately $2.2 million being acquired by the Company. On August
21, 1997, the Company called $48.0 million principal amount of its Senior
Notes (including approximately $2.5 million held by the Company) at a price of
103.43% and redeemed them on September 23, 1997. The Company called all $7.5
million principal amount of 10 3/4% Subordinated Debentures and redeemed them
on October 1, 1997. In addition, on November 25, 1997 the Company called $25.0
million principal amount of its Senior Notes (including approximately $.3
million held by the Company) at a price of 103.43% and redeemed them on
December 30, 1997. The debt redemptions were funded with proceeds from the
sale of the Canadian oil and gas operations as disclosed in Note 3. Based on
the redemptions, the Company has recognized an extraordinary loss, net of
taxes, of approximately $3.9 million due to the redemption premium of 103.43%
on the Senior Notes and reduction in debt issuance costs.
Restrictions on Loans, Transfer of Funds and Payment of Dividends
The Frontier credit facility restricts Frontier as to the distribution of
capital assets and the transfer of cash in the form of dividends, loans or
advances when there are any outstanding borrowings under the facility or when
a default exists or would occur.
Five-year Maturities
The estimated five-year maturities of long-term debt are none in 1998 and
1999, $2.3 million in 2000 and 2001, and $26.9 million in 2002.
F-15
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The following is the provision (benefit) for income taxes for the three years
ended December 31, 1997, 1996 and 1995.
PROVISION (BENEFIT) FOR INCOME TAXES
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current................................................... $194 $ -- $ --
Deferred.................................................. (194) -- --
---- ---- ----
$ -- $ -- $ --
==== ==== ====
</TABLE>
The following is a reconciliation of the provision (benefit) for income taxes
computed at the statutory United States income tax rates on pretax income
(loss) and the provision (benefit) for income taxes as reported for the three
years ended December 31, 1997, 1996 and 1995.
RECONCILIATION OF TAX PROVISION
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Provision (benefit) based on statutory rates... $2,656 $(4,242) $(6,563)
Increase (decrease) resulting from:
Net operating loss carryforward.............. (2,656) 4,242 6,563
------ ------- -------
Provision as reported........................ $ -- $ -- $ --
====== ======= =======
</TABLE>
F-16
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following are the significant components, by type of temporary
differences or carryforwards, of deferred tax liabilities and tax assets,
computed at the federal statutory rate as of December 31, 1997 and 1996.
COMPONENTS OF DEFERRED TAXES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES
Property, plant and equipment due to differences in
depreciation............................................ $14,189 $14,874
Installment sale......................................... 5,435 5,435
Other.................................................... 918 1,415
------- -------
DEFERRED TAX LIABILITIES................................. 20,542 21,724
------- -------
DEFERRED TAX ASSETS
Tax loss carryforwards................................... 50,960 34,944
Depletion carryforwards.................................. 3,045 3,045
Tax credit carryforwards................................. -- 1,209
Other.................................................... 3,069 3,151
------- -------
57,074 42,349
------- -------
LESS--VALUATION ALLOWANCE................................ 38,072 23,043
------- -------
NET DEFERRED TAX ASSETS.................................. 19,002 19,306
------- -------
NET DEFERRED TAX LIABILITIES............................. $ 1,540 $ 2,418
======= =======
</TABLE>
Realization of deferred tax assets is dependent on the Company's ability to
generate taxable income within the life of the tax loss carryforwards. As a
result of the Company's history of operating losses, a valuation allowance has
been provided for deferred tax assets that are not offset by scheduled future
reversals of deferred tax liabilities.
At December 31, 1997, the Company had regular net operating loss ("NOL")
carryforwards for United States tax reporting purposes of $145.6 million
available to reduce future federal taxable income. The regular NOL
carryforwards will expire as follows: $32.2 million in 2002, $7.7 million in
2003, $11.3 million in 2004, $29.5 million in 2005, $17.2 million in 2006,
$13.7 million in 2007, $11.3 million in 2008, $2.2 million in 2009, $16.1
million in 2010 and $4.4 million in 2011.
Also at December 31, 1997, the Company had alternative minimum tax net
operating loss ("AMT NOL") carryforwards for United States tax reporting of
$98.4 million to reduce future taxable income. The AMT NOL carryforwards will
expire as follows: $2.8 million in 2002, $5.4 million in 2003, $9.0 million in
2004, $27.0 million in 2005, $13.1 million in 2006, $11.6 million in 2007,
$8.6 million in 2008, $1.4 million in 2009, $16.8 million in 2010 and $2.7
million in 2011.
The Company has tax depletion carryforwards of $8.7 million which are
indefinitely available to reduce future United States income taxes payable.
As of December 31, 1996, the Company had net operating loss carryforwards
for Canadian tax reporting purposes of $2.1 million which expire in 2003. The
Company also had oil and gas deductions of $116.7 million and earned depletion
of $8.6 million which are available indefinitely to reduce future taxable
income. In June 1997, these tax benefits were acquired by the purchaser of the
Canadian oil and gas properties.
F-17
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. COMMON STOCK
Earnings per Share
The following is a reconciliation of the numerators and denominators used in
the calculation of basic and diluted earnings per share ("EPS") for income
(loss) from continuing operations for the years ended December 31, 1997, 1996
and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------- -------------------------------- --------------------------------
PER PER PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income (loss)
from continuing
operations...... $7,812 27,457 $ .28 $ (11,644) 27,257 $ (.43) $ (19,336) 27,256 $ (.71)
===== ====== ======
Dilutive
securities Stock
options......... -- 494 -- -- -- -- -- -- --
------ ------ --------- ------ --------- ------
Dilutive EPS
Income (loss)
from continuing
operations...... $7,812 27,951 $ .28 $ (11,644) 27,257 $ (.43) $ (19,336) 27,256 $ (.71)
====== ====== ===== ========= ====== ====== ========= ====== ======
</TABLE>
Non-employee Directors Stock Grant Plan
During 1995, the Company established a stock grant plan for non-employee
directors. The purpose of the plan is to provide a portion of non-employee
directors compensation in Company stock. The plan will be beneficial to the
Company and its stockholders by allowing non-employee directors to have a
personal financial stake in the Company through an ownership interest in the
Company's common stock. The plan may grant an aggregate of 60,000 shares of
the Company's common stock initially held in treasury. The Company made grants
to directors under this plan of 2,500 shares in 1997, 1996 and 1995.
Stock Option Plans
Wainoco has three stock option plans which authorize the granting of
restricted stock and options to purchase shares. The plans through December
31, 1997 have reserved for issuance a total of 4,282,700 shares of common
stock of which 2,364,675 shares were granted and exercised, 1,656,340 shares
were granted and were outstanding and 261,685 shares were available to be
granted. Options under the plans are granted at not less than fair market
value on the date of grant. No entries are made in the accounts until the
options are exercised, at which time the proceeds are credited to common stock
and paid-in capital. Generally, the options vest over their five-year terms.
F-18
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's plans as of December 31, 1997, 1996
and 1995, and changes during the years ended on those dates is presented
below.
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 2,331,904 $3.81 2,332,842 $4.32 1,858,447 $4.84
Granted................. 742,800 4.74 981,229 3.31 760,500 4.34
Exercised............... (797,787) 3.89 -- -- (2,660) 3.50
Reissued................ -- -- (669,229) 4.30 (129,400) 7.39
Expired................. (620,577) 3.48 (312,938) 4.53 (154,045) 5.55
--------- --------- ---------
Outstanding at end of
year................... 1,656,340 4.31 2,331,904 3.81 2,332,842 4.32
========= ========= =========
Exercisable at end of
year................... 940,850 4.14 1,526,561 4.04 1,707,312 4.41
========= ========= =========
Available for grant at
end of year............ 261,685 68,208 119,720
========= ========= =========
Weighted-average fair
value of options
granted during the
year................... 1.51 .65 1.04
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ---------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE
- ------------------------ ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$2.88 to $7.82.......... 1,656,340 3.23 $4.31 940,850 $4.14
</TABLE>
Had compensation costs been determined based on the fair value at the grant
dates for awards made in 1997, 1996 and 1995, the Company's net income (loss)
and income (loss) per share would have been the pro forma amounts indicated
below for the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
(IN THOUSANDS, EXCEPT
PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net income (loss):
As reported....................................... $19,055 $(6,892) $(19,125)
Pro forma......................................... 18,578 (7,263) (19,316)
Basic and diluted income (loss) per share:
As reported....................................... $ .69 $ (.25) $ (.70)
Pro forma......................................... .67 (.27) (.71)
</TABLE>
The fair value of grants was estimated on the date of grant using the Black-
Scholes option pricing model with the following weighted-average assumptions
used: risk-free interest rates of 5.91%, 5.33% and 6.54%, expected
volatilities of 41.07%, 32.95% and 38.11%, expected lives of 2.32, 1.59 and
1.93 years and no dividend yield in 1997, 1996 and 1995, respectively.
F-19
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
Lease and Other Commitments
Wainoco has noncapitalized building, equipment and vehicle lease agreements
which expire from 1998 through 2005 having minimum annual payments as of
December 31, 1997 of $2.5 million for 1998, $3.9 million for 1999, $489,000
for 2000, $396,000 for 2001, $202,000 for 2002, $42,000 each for 2003 and 2004
and $25,000 in 2005. Operating lease rental expense was $2.6 million, $1.7
million and $1.7 million for the three years ended December 31, 1997, 1996 and
1995, respectively.
The Company has contracted for pipeline capacity of approximately 13,800 bpd
on the Express Pipeline from Hardisty, Alberta to Guernsey, Wyoming commencing
in 1997 for a period of 15 years. The Company's commitment for pipeline
capacity is approximately $5.8 million per year. The agreement allows the
Company to assign a portion of its capacity in early years for additional
capacity in later years. The Company also has commitments to purchase crude
oil from various suppliers to meet its Refinery throughput requirements.
Concentration of Credit Risk
The Company has concentrations of credit risk with respect to sales within
the same or related industry and within limited geographic areas. The Refining
operation sells its products exclusively at wholesale, principally to
independent retailers and major oil companies located primarily in the Denver,
western Nebraska and eastern Wyoming regions, with 13% of its customers
accounting for approximately 66% of total refined product sales in 1997.
Wainoco extends credit to its customers based on ongoing credit evaluations.
An allowance for doubtful accounts is provided based on the current evaluation
of each customer's credit risk, past experience and other factors. During
1997, the Company made sales to CITGO Petroleum Products of approximately $72
million, which accounted for 19% of consolidated revenues.
Contribution Plans
Wainoco sponsors separate defined contribution plans for employees covered
by a collective bargaining agreement and employees not covered by such an
agreement. All employees may participate by contributing a portion of their
annual earnings to the plans. The Company makes basic and/or matching
contributions on behalf of participating employees. The cost of the plans for
the three years ended December 31, 1997, 1996 and 1995 was $1.3 million, $1.2
million and $1.4 million, respectively.
Environmental
Wainoco accrues for environmental costs as indicated in Note 1. Numerous
local, state and federal laws, rules and regulations relating to the
environment are applicable to the Company's operations. As a result, the
Company falls under the jurisdiction of numerous state and federal agencies
and is exposed to the possibility of judicial or administrative actions for
remediation and/or penalties brought by those agencies. Frontier is party to
one consent decree requiring the investigation and, in certain instances,
mitigation of environmental impacts resulting from past operational
activities. The Company has been and will be responsible for costs related to
compliance with or remediations resulting from environmental regulations.
There are currently no identified environmental remediation projects of which
the costs can be reasonably estimated. However, the continuation of the
present investigative process, other more extensive investigations over time
or changes in regulatory requirements could result in future liabilities.
F-20
<PAGE>
WAINOCO OIL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Litigation
The Company is involved in various lawsuits which are incidental to its
business. In management's opinion, the adverse determination of such lawsuits
would not have a material adverse effect on the Company's financial position
or results of operations.
Collective Bargaining Agreement Expiration
Wainoco's refining unit hourly employees are represented by seven bargaining
units, the largest being the Oil, Chemical and Atomic Workers International
Union ("OCAW"). Six AFL-CIO affiliated unions represent the craft workers. In
July 1996, the Company concluded new bargaining agreements, with the three-
year OCAW agreement to expire in July 1999, while the six-year AFL-CIO
contract expires in June 2002. The union employees represent approximately 58%
of the Company's work force at December 31, 1997.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's Senior Notes, Convertible Subordinated
Debentures and 10-3/4% Subordinated Debentures was estimated based on
quotations obtained from broker-dealers who make markets in these and similar
securities. The bank credit facilities are based on floating interest rates
and, as such, the carrying amount is a reasonable estimate of fair value. At
December 31, 1997 and 1996, the carrying amounts of long-term debt instruments
(including current maturities) were $70.6 million and $148.4 million,
respectively, and the estimated fair values were $72.0 million and $145.0
million.
As of December 31, 1997, the Company had entered into futures contracts to
hedge a portion of its natural gas consumption requirements. The futures
contracts are placed with a major financial institution the Company believes
is a minimum credit risk. The futures contracts mature each month through
April 1998. The fair value of the Company's open natural gas futures contract
at December 31, 1997 was $(281,000).
9. SUBSEQUENT EVENT
Debt Refinancing
February 9, 1998, the Company issued $70 million of 9-1/8% Senior Notes (the
"New Senior Notes") due 2006. On February 10, 1998, the Company called for
redemption the remaining $24.6 million of its Senior Notes and $46 million of
its Convertible Subordinated Debentures outstanding at December 31, 1997
(together, the "Redemptions"). The Company will use the net proceeds from the
issuance of the New Senior Notes and available cash to fund the Redemptions.
F-21
<PAGE>
SELECTED QUARTERLY FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
1997 1996
-------------------------------- ------------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
------- -------- ------- ------- -------- -------- -------- -------
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $82,410 $108,108 $96,330 $89,570 $100,448 $107,039 $100,320 $75,566
Operating income (loss). 3,489 14,743 9,045 (5,574) (513) 3,178 5,921 (3,001)
Income (loss) from
continuing operations.. 1,505 11,806 4,534 (10,033) (4,716) (1,262) 1,545 (7,211)
Income from discontinued
operations, net of
taxes (1).............. -- -- 13,606 1,554 2,497 294 192 1,769
Income (loss) before
extraordinary item..... 1,505 11,806 18,140 (8,479) (2,219) (968) 1,737 (5,442)
Extraordinary loss, net
of taxes............... 1,295 2,622 -- -- -- -- -- --
Net income (loss)....... 210 9,184 18,140 (8,479) (2,219) (968) 1,737 (5,442)
Basic and diluted
earnings (loss) per
share:
Continuing operations.. 0.05 0.42 0.17 (0.37) (0.17) (0.05) 0.06 (0.26)
Net income (loss)...... 0.01 0.33 0.66 (0.31) (0.08) (0.04) 0.06 (0.20)
EBITDA (2).............. 5,826 17,037 11,311 (3,301) 1,740 5,467 8,186 (790)
Net cash provided by
(used in) operating
activities............. 5,698 11,620 9,245 (14,065) 14,420 1,358 1,140 (8,453)
</TABLE>
- --------
(1) Discontinued operations reflected in the above periods represent the
Company's oil and gas operating segment, comprising the Canadian and
United States oil and gas properties. On June 16, 1997, the Company
completed the Canadian Disposition. The Company completed the U.S.
Disposition during 1995.
(2) EBITDA represents income from continuing operations before interest
expense, income tax and depreciation and amortization. EBITDA is not a
calculation based upon generally accepted accounting principles; however,
the amounts included in the EBITDA calculation are derived from amounts
included in the consolidated financial statements of the Company. In
addition, EBITDA should not be considered as an alternative to net income
or operating income, as an indication of operating performance of the
Company or as an alternative to operating cash flow as a measure of
liquidity.
F-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 Mail:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
P.O. Box 2320
Dallas, Texas
75221-2320
Attention: Frank Ivins
Registered Bond Events
By Overnight Courier or Hand Delivery:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
One Main Place
1201 Main Street, 18th Floor
Dallas, Texas 75202
Attention: Frank Ivins
Registered Bond Events
By Facsimile Transmission:
(for Eligible Institutions only)
(214) 672-5932
Attention: Frank Ivins
Confirm by Telephone:
(214) 672-5678
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight delivery, or registered or certified mail.)
------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS.
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE INITIAL PURCHASER OR ANY OF ITS
AFFILIATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION TO BUY, THE NOTES IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$70,000,000
EXCHANGE OFFER
WAINOCO OIL
CORPORATION
9 1/8% SENIOR NOTES
DUE 2006, SERIES A
------------------
PROSPECTUS
------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary......................................................... 1
Disclosure Regarding Forward-Looking Statements............................ 13
Risk Factors............................................................... 13
The Exchange Offer......................................................... 19
Use of Proceeds............................................................ 28
Capitalization............................................................. 28
Selected Historical Financial Data......................................... 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 31
Business................................................................... 36
Management................................................................. 51
Description of Indebtedness................................................ 53
Description of the Notes................................................... 54
Certain United States Federal Income Tax Considerations.................... 81
Certain United States Federal Income Tax Consideration for Non-United
States Holders............................................................ 84
Plan of Distribution....................................................... 86
Legal Matters.............................................................. 86
Experts.................................................................... 86
Available Information...................................................... 87
Incorporation of Certain Documents by Reference............................ 87
Index to Financial Statements.............................................. F-1
</TABLE>
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Sections 17-16-850 through 17-16-859 of the Wyoming Business Corporation Act
provide that a corporation may indemnify any person who was, is or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal, 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 corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other entity, against
judgments, settlements, penalties, fines, including an excise tax assessed
with respect to an employee benefit plan, and reasonable expenses, including
counsel fees, incurred in respect to such action, suit or proceeding if he
conducted himself in good faith and reasonably believed that his conduct was
in or at least not opposed to the corporation's best interests and, with
respect to any criminal action, suit or proceeding, he had no reasonable cause
to believe his conduct was unlawful.
Article Eight of the Registrant's Articles of Incorporation, as amended,
provides for the indemnification of directors, officers, employees and agents
of the Registrant. Specifically, said Article Eight provides in part that:
The corporation shall indemnify, in the manner and to the full extent
authorized by law (as now in effect or later amended), any person who was,
is or may be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, including 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 or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the action, suit, proceeding or investigation, and
judgments, fines and amounts paid in settlement 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, proceeding or investigation by
judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that such
person did not act in good faith and in a manner which is 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.
The Bylaws of the Registrant also contain indemnification provisions which
substantially conform to Article Eight of the Registrant's Articles of
Incorporation, as amended.
The Registrant maintains Directors and Officers' Liability Insurance and has
entered into indemnification agreements with its directors and certain of its
officers.
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1* --Articles of Domestication of the Company, as amended (filed as
Exhibit 2.3 to Registration Statement No. 2-62518 and Exhibit 2.2 to
Registration Statement No. 2-69149).
3.2* --Fourth restated By-Laws of the Company as amended through February
20, 1992 (filed as Exhibit 3.2 to Form 10-K dated December 31, 1992).
4.1* --Indenture dated as of October 1, 1978, between the Company and First
City National Bank of Houston, as Trustee relating to the Company's
10 3/4% Subordinated Debentures due 1998 (filed as Exhibit 2.5 to
Registration Statement No. 2-59649).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.2* --Agreement of Resignation, Appointment and Acceptance by and among
the Company, First City National Bank of Houston (Resigning Trustee)
and Texas Commerce Bank National Association, Houston, (Successor
Trustee) relating to the Company's 10 3/4% Subordinated Debentures
due 1998 (filed as Exhibit 4.2 to Form 10-K dated December 31, 1985).
4.3* --First Supplemental Indenture dated as of January 20, 1987 between
the Company and Texas Commerce Bank National Association,
supplementing and amending the Indenture dated as of October 1, 1978,
relating to the Company's 10 3/4% Subordinated Debentures due 1998
(filed as Exhibit 4.3 to Form 10-K dated December 31, 1986).
4.6* --Indenture dated as of June 1, 1989 between the Company and Texas
Commerce Trust Company of New York as Trustee relating to the
Company's 7 3/4% Convertible Subordinated Debentures due 2014 (filed
as Exhibit 4.6 to Form 10-K dated December 31, 1989).
4.7* --Indenture dated as of August 1, 1992 between the Company and Bank
One, N.A., as Trustee relating to the Company's 12% Senior Notes due
2002 (filed as Exhibit 4.7 to Form 10-K dated December 31, 1992).
4.8 --Indenture dated as of February 9, 1998 between the Company and Chase
Bank of Texas, National Association, as Trustee, relating to the
Company's 9 1/8% Senior Notes due 2006.
4.9 --Registration Rights Agreement, dated as of February 9, 1998, between
the Company and Bear, Stearns & Co. Inc.
5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the
Securities being registered.
10.1* --Amended and Restated Revolving Credit and Letter of Credit Agreement
dated June 30, 1997 among Frontier Oil and Refining Company, certain
banks and Union Bank of California (filed as Exhibit 10.1 to Form 10-
K dated June 30, 1997).
10.2* --Purchase and Sale Agreement, dated May 5, 1997, for the sale of
Canadian oil and gas properties (filed as an Exhibit to Form 8-K
filed June 30, 1997).
10.3* --The 1968 Incentive Stock Option Plan as amended and restated (filed
as Exhibit 10.1 to Form 10-K dated December 31, 1987).
10.4* --The 1977 Stock Option Plan as amended and restated (filed as Exhibit
10.2 to Form 10-K dated December 31, 1989).
10.5* --1995 Stock Grant Plan for Non-employee Directors (filed as Exhibit
10.14 to Form 10-Q dated June 30, 1995).
10.6* --Wainoco Deferred Compensation Plan dated October 29, 1993 (filed as
Exhibit 10.19 to Form 10-K dated December 31, 1994).
10.7* --Wainoco Deferred Compensation Plan for Directors dated May 1, 1994
(filed as Exhibit 10.20 to Form 10-K dated December 31, 1994).
10.8* --Executive Employment Agreement dated April 3, 1995 between the
Company and James R. Gibbs (filed as Exhibit 10.09 to Form 10-Q dated
June 30, 1995).
10.9* --Executive Employment Agreement dated April 3, 1995 between the
Company and Julie H. Edwards (filed as Exhibit 10.10 to Form 10-Q
dated June 30, 1995).
10.10* --Executive Employment Agreement dated April 3, 1995 between the
Company and S. Clark Johnson (filed as Exhibit 10.11 to Form 10-Q
dated June 30, 1995).
10.11* --Executive Employment Agreement dated April 3, 1995 between the
Company and Robert D. Jones (filed as Exhibit 10.12 to Form 10-Q
dated June 30, 1995).
10.12* --Executive Employment Agreement dated April 1, 1996 between the
Company and Joel M. Mann (filed as Exhibit 10.01 to Form 10-Q dated
June 30, 1996).
12.1 --Computation of ratio of earnings to fixed charges.
21.1* --Subsidiaries of the Registrant (filed as Exhibit 21.1 to Form 10-K
dated December 31, 1996).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.1 --Consent of Arthur Andersen LLP.
23.2 --Consent of Andrews and Kurth L.L.P. (included in Exhibit 5.1).
24.1 --Power of Attorney (set forth on the signature pages contained in
Part II of this Registration Statement).
25.1 --Statement of Eligibility and Qualification on Form T-1 of Chase Bank
of Texas, National Association.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Asterisk indicates exhibits incorporated by reference as shown.
FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In
II-3
<PAGE>
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 10th day of March, 1998.
WAINOCO OIL CORPORATION, a Wyoming
Corporation
By: /s/ James R. Gibbs
----------------------------------
JAMES R. GIBBS
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
Each of the undersigned officers and directors of Wainoco Oil Corporation
(the "Company") hereby constitutes and appoints James R. Gibbs and Julie H.
Edwards, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file this registration statement under the
Securities Act of 1933, as amended, and any or all amendments (including,
without limitation, post-effective amendments), with all exhibits and any and
all documents required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting unto such
attorneys-in-fact and agents, and each of them acting alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same,
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such attorneys-in-
fact and agents, or any of them, or their substitute or substitutes, may
lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and the dates indicated.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE DATE
/s/ James R. Gibbs President, Chief March 10, 1998
- ----------------------------------- Executive Officer
JAMES R. GIBBS and Director
(Principal
Executive Officer)
/s/ Julie H. Edwards Senior Vice March 10, 1998
- ----------------------------------- President--Finance
JULIE H. EDWARDS and Chief Financial
Officer (Principal
Financial Officer)
/s/ Jon D. Galvin Vice President-- March 10, 1998
- ----------------------------------- Controller (Principal
JON D. GALVIN Accounting Officer)
/s/ Douglas Y. Bech Director March 10, 1998
- -----------------------------------
DOUGLAS Y. BECH
/s/ Paul B. Loyd, Jr. Director March 10, 1998
- -----------------------------------
PAUL B. LOYD, JR.
/s/ James S. Palmer Director March 10, 1998
- -----------------------------------
JAMES S. PALMER
/s/ Derek A. Price Director March 10, 1998
- -----------------------------------
DEREK A. PRICE
/s/ Carl W. Schafer Director March 10, 1998
- -----------------------------------
CARL W. SCHAFER
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
<C> <S> <C>
3.1* --Articles of Domestication of the Company, as amended
(filed as Exhibit 2.3 to Registration Statement No. 2-
62518 and Exhibit 2.2 to Registration Statement
No. 2-69149).
3.2* --Fourth restated By-Laws of the Company as amended
through February 20, 1992 (filed as Exhibit 3.2 to
Form 10-K dated December 31, 1992).
4.1* --Indenture dated as of October 1, 1978, between the
Company and First City National Bank of Houston, as
Trustee relating to the Company's 10 3/4% Subordinated
Debentures due 1998 (filed as Exhibit 2.5 to
Registration Statement No. 2-59649).
4.2* --Agreement of Resignation, Appointment and Acceptance
by and among the Company, First City National Bank of
Houston (Resigning Trustee) and Texas Commerce Bank
National Association, Houston, (Successor Trustee)
relating to the Company's 10 3/4% Subordinated
Debentures due 1998 (filed as Exhibit 4.2 to Form 10-K
dated
December 31, 1985).
4.3* --First Supplemental Indenture dated as of January 20,
1987 between the Company and Texas Commerce Bank
National Association, supplementing and amending the
Indenture dated as of October 1, 1978, relating to the
Company's 10 3/4% Subordinated Debentures due 1998
(filed as Exhibit 4.3 to Form 10-K dated December 31,
1986).
4.6* --Indenture dated as of June 1, 1989 between the
Company and Texas Commerce Trust Company of New York
as Trustee relating to the Company's 7 3/4%
Convertible Subordinated Debentures due 2014 (filed as
Exhibit 4.6 to Form 10-K dated
December 31, 1989).
4.7* --Indenture dated as of August 1, 1992 between the
Company and Bank One, N.A., as Trustee relating to the
Company's 12% Senior Notes due 2002 (filed as Exhibit
4.7 to Form 10-K dated December 31, 1992).
4.8 --Indenture dated as of February 9, 1998 between the
Company and Chase Bank of Texas, National Association,
as Trustee, relating to the Company's 9 1/8% Senior
Notes due 2006.
4.9 --Registration Rights Agreement, dated as of February
9, 1998, between the Company and Bear, Stearns & Co.
Inc.
5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality
of the Securities being registered.
10.1* --Amended and Restated Revolving Credit and Letter of
Credit Agreement dated
June 30, 1997 among Frontier Oil and Refining Company,
certain banks and Union Bank of California (filed as
Exhibit 10.1 to Form 10-K dated June 30, 1997).
10.2* --Purchase and Sale Agreement, dated May 5, 1997, for
the sale of Canadian oil and gas properties (filed as
an Exhibit to Form 8-K filed June 30, 1997).
10.3* --The 1968 Incentive Stock Option Plan as amended and
restated (filed as Exhibit 10.1 to Form 10-K dated
December 31, 1987).
10.4* --The 1977 Stock Option Plan as amended and restated
(filed as Exhibit 10.2 to
Form 10-K dated December 31, 1989).
10.5* --1995 Stock Grant Plan for Non-employee Directors
(filed as Exhibit 10.14 to
Form 10-Q dated June 30, 1995).
10.6* --Wainoco Deferred Compensation Plan dated October 29,
1993 (filed as Exhibit 10.19 to Form 10-K dated
December 31, 1994).
10.7* --Wainoco Deferred Compensation Plan for Directors
dated May 1, 1994 (filed as Exhibit 10.20 to Form 10-K
dated December 31, 1994).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
------- ----------- ------------
<C> <S> <C>
10.8* --Executive Employment Agreement dated April 3, 1995
between the Company and James R. Gibbs (filed as
Exhibit 10.09 to Form 10-Q dated June 30, 1995).
10.9* --Executive Employment Agreement dated April 3, 1995
between the Company and Julie H. Edwards (filed as
Exhibit 10.10 to Form 10-Q dated June 30, 1995).
10.10* --Executive Employment Agreement dated April 3, 1995
between the Company and S. Clark Johnson (filed as
Exhibit 10.11 to Form 10-Q dated June 30, 1995).
10.11* --Executive Employment Agreement dated April 3, 1995
between the Company and Robert D. Jones (filed as
Exhibit 10.12 to Form 10-Q dated June 30, 1995).
10.12* --Executive Employment Agreement dated April 1, 1996
between the Company and Joel M. Mann (filed as Exhibit
10.01 to Form 10-Q dated June 30, 1996).
12.1 --Computation of ratio of earnings to fixed charges.
21.1* --Subsidiaries of the Registrant (filed as Exhibit 21.1
to Form 10-K dated December 31, 1996).
23.1 --Consent of Arthur Andersen LLP.
23.2 --Consent of Andrews and Kurth L.L.P. (included in
Exhibit 5.1).
24.1 --Power of Attorney (set forth on the signature pages
contained in Part II of this Registration Statement).
25.1 --Statement of Eligibility and Qualification on Form T-
1 of Chase Bank of Texas, National Association.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Asterisk indicates exhibits incorporated by reference as shown.
<PAGE>
EXHIBIT 4.8
Wainoco Oil Corporation
9-1/8% Senior Notes due 2006,
Series A and Series B
INDENTURE
Dated as of February 9, 1998
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act 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). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . .11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.06, 7.07
(c). . . . . . . . . . . . . . . . . . . . . . . . .7.06, 11.02
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . .4.03, 11.02
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . .11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . .11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . .11.05
(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b). . . . . . . . . . . . . . . . . . . . . . . . .7.05, 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . .11.01
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . .N/A
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . .11.01
- ------------
N/A means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions. . . . . . . . . . . . . . .1
Section 1.02. Other Definitions. . . . . . . . . . . 18
Section 1.03. Incorporation by Reference of
Trust Indenture Act. . . . . . . . . . 19
Section 1.04. Rules of Construction. . . . . . . . . 19
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating. . . . . . . . . . . . 19
Section 2.02. Execution and Authentication . . . . . 21
Section 2.03. Registrar and Paying Agent . . . . . . 22
Section 2.04. Paying Agent to Hold Money in Trust. . 22
Section 2.05. Holder Lists . . . . . . . . . . . . . 22
Section 2.06. Transfer and Exchange. . . . . . . . . 23
Section 2.07. Replacement Notes. . . . . . . . . . . 30
Section 2.08. Outstanding Notes. . . . . . . . . . . 31
Section 2.09. Treasury Notes . . . . . . . . . . . . 31
Section 2.10. Temporary Notes. . . . . . . . . . . . 31
Section 2.11. Cancellation . . . . . . . . . . . . . 32
Section 2.12. Defaulted Interest . . . . . . . . . . 32
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee . . . . . . . . . . 32
Section 3.02. Selection of Notes to Be Redeemed. . . 32
Section 3.03. Notice of Redemption . . . . . . . . . 33
Section 3.04. Effect of Notice of Redemption . . . . 34
Section 3.05. Deposit of Redemption Price. . . . . . 34
Section 3.06. Notes Redeemed in Part . . . . . . . . 34
Section 3.07. Optional Redemption. . . . . . . . . . 35
Section 3.08. Mandatory Redemption . . . . . . . . . 35
Section 3.09. Offer to Purchase by Application
of Excess Proceeds . . . . . . . . . . 35
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes . . . . . . . . . . . 37
Section 4.02. Maintenance of Office or Agency. . . . 38
- i -
<PAGE>
Section 4.03. Reports. . . . . . . . . . . . . . . . 38
Section 4.04. Compliance Certificate . . . . . . . . 38
Section 4.05. Taxes. . . . . . . . . . . . . . . . . 39
Section 4.06. Stay, Extension and Usury Laws . . . . 39
Section 4.07. Restricted Payments. . . . . . . . . . 40
Section 4.08. Dividend and Other Payment
Restrictions Affecting Subsidiaries. . 42
Section 4.09. Incurrence of Indebtedness and
Issuance of Disqualified Stock . . . . 43
Section 4.10. Asset Sales. . . . . . . . . . . . . . 43
Section 4.11. Transactions with Affiliates . . . . . 44
Section 4.12. Liens. . . . . . . . . . . . . . . . . 45
Section 4.13. Future Subsidiary Guarantees . . . . . 45
Section 4.14. Corporate Existence. . . . . . . . . . 45
Section 4.15. Offer to Repurchase Upon Change
of Control . . . . . . . . . . . . . . 46
Section 4.16. Issuances and Sales of Capital Stock
of Wholly Owned Restricted
Subsidiaries . . . . . . . . . . . . . 47
Section 4.17. Sale-and-leaseback Transactions. . . . 47
Section 4.18. No Inducements . . . . . . . . . . . . 47
Section 4.19. Line of Business . . . . . . . . . . . 48
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale
of Assets. . . . . . . . . . . . . . . 48
Section 5.02. Successor Corporation Substituted. . . 49
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default. . . . . . . . . . . 49
Section 6.02. Acceleration . . . . . . . . . . . . . 51
Section 6.03. Other Remedies . . . . . . . . . . . . 51
Section 6.04. Waiver of Past Defaults. . . . . . . . 51
Section 6.05. Control by Majority. . . . . . . . . . 52
Section 6.06. Limitation on Suits. . . . . . . . . . 52
Section 6.07. Rights of Holders of Notes to
Receive Payment. . . . . . . . . . . . 52
Section 6.08. Collection Suit by Trustee . . . . . . 52
Section 6.09. Trustee May File Proofs of Claim . . . 53
Section 6.10. Priorities . . . . . . . . . . . . . . 53
Section 6.11. Undertaking for Costs. . . . . . . . . 54
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee. . . . . . . . . . . 54
Section 7.02. Rights of Trustee. . . . . . . . . . . 55
Section 7.03. Individual Rights of Trustee . . . . . 56
- ii -
<PAGE>
Section 7.04. Trustee's Disclaimer . . . . . . . . . 56
Section 7.05. Notice of Defaults . . . . . . . . . . 56
Section 7.06. Reports by Trustee to Holders of
the Notes. . . . . . . . . . . . . . . 56
Section 7.07. Compensation and Indemnity . . . . . . 57
Section 7.08. Replacement of Trustee . . . . . . . . 57
Section 7.09. Successor Trustee by Merger, etc . . . 58
Section 7.10. Eligibility; Disqualification. . . . . 59
Section 7.11. Preferential Collection of Claims
Against Company. . . . . . . . . . . . 59
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or
Covenant Defeasance. . . . . . . . . . 59
Section 8.02. Legal Defeasance and Discharge . . . . 59
Section 8.03. Covenant Defeasance. . . . . . . . . . 60
Section 8.04. Conditions to Legal or Covenant
Defeasance . . . . . . . . . . . . . . 60
Section 8.05. Deposited Money and Government
Securities to be Held in Trust;
Other Miscellaneous Provisions . . . . 61
Section 8.06. Repayment to Company . . . . . . . . . 62
Section 8.07. Reinstatement. . . . . . . . . . . . . 62
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes. . 63
Section 9.02. With Consent of Holders of Notes . . . 63
Section 9.03. Compliance with Trust Indenture Act. . 65
Section 9.04. Revocation and Effect of Consents. . . 65
Section 9.05. Notation on or Exchange of Notes . . . 65
Section 9.06. Trustee to Sign Amendments, etc. . . . 65
ARTICLE 10
GUARANTEES OF NOTES
Section 10.01. Subsidiary Guarantees. . . . . . . . . 66
Section 10.02. Execution and Delivery of Subsidiary
Guarantee. . . . . . . . . . . . . . . 67
Section 10.03. Guarantors May Consolidate, etc.,
on Certain Terms . . . . . . . . . . . 67
Section 10.04. Releases Following Sale of Assets. . . 68
Section 10.05. Releases Following Designation as
an Unrestricted Subsidiary . . . . . . 69
Section 10.06. Limitation on Guarantor Liability. . . 69
Section 10.07. "Trustee" to Include Paying Agent. . . 69
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls . . . . . 69
- iii -
<PAGE>
Section 11.02. Notices. . . . . . . . . . . . . . . . 69
Section 11.03. Communication by Holders of Notes
with Other Holders of Notes. . . . . . 72
Section 11.04. Certificate and Opinion as to
Conditions Precedent. . . . . . . . . .72
Section 11.05. Statements Required in Certificate
or Opinion . . . . . . . . . . . . . . 72
Section 11.06. Rules by Trustee and Agents. . . . . . 72
Section 11.07. No Personal Liability of Directors,
Officers, Employees and Stockholders . 73
Section 11.08. Governing Law. . . . . . . . . . . . . 73
Section 11.09. No Adverse Interpretation of Other
Agreements . . . . . . . . . . . . . . 73
Section 11.10. Successors . . . . . . . . . . . . . . 73
Section 11.11. Severability . . . . . . . . . . . . . 73
Section 11.12. Counterpart Originals. . . . . . . . . 73
Section 11.13. Table of Contents, Headings, etc . . . 73
EXHIBITS
EXHIBIT A-1 Form of Note . . . . . . . . . . . . . . . . A-1-1
EXHIBIT A-2 Form Regulation S Temporary Global Note. . . A-2-1
EXHIBIT B-1 Certificate of Transferor from 144A Global
Note to Regulation S Global Note . . . . . . B-1-1
EXHIBIT B-2 Certificate of Transferor from Regulation S
Global Note to 144A Global Note . . . . . . B-2-1
EXHIBIT B-3 Certificate of Transferor of Definitive Notes B-3-1
EXHIBIT B-4 Certificate of Transferor from Global Note to
Definitive Note . . . . . . . . . . . . . . B-4-1
EXHIBIT C Certificate of Institutional Accredited Investor C-1
EXHIBIT D Form of Subsidiary Guarantee . . . . . . . . . . D-1
EXHIBIT E Form of Supplemental Indenture . . . . . . . . . E-1
- iv -
<PAGE>
This Indenture, dated as of February 9, 1998 is between Wainoco Oil
Corporation, a Wyoming corporation (the "Company"), and Chase Bank of Texas,
National Association, a national banking association, as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of the 9-1/8% Senior Notes
due 2006, Series A (the "Series A Notes") and the 9-1/8% Senior Notes due 2006,
Series B (the "Series B Notes" and, together with the Series A Notes, the
"Notes"), without preference of one series of Notes over the other:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a permanent global senior note that contains the
paragraph referred to in footnote 1 and the additional schedule referred to in
footnote 3 to the form of the Note attached hereto as Exhibit A-1, and that is
deposited with the Note Custodian and registered in the name of the Depository
or its nominee, representing a series of Notes sold in reliance on Rule 144A or
another exemption from the registration requirements of the Securities Act,
other than Regulation S.
"Adjusted Net Assets" of a Guarantor at any date shall mean the amount by
which the fair value of the properties and assets of such Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under its
Subsidiary Guarantee, of such Guarantor at such date.
"Affiliate" of any specified Person means an "affiliate" of such Person, as
such term is defined for purposes of Rule 144 under the Securities Act.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
beneficial interests in a Global Note, the rules and procedures of the
Depository that apply to such transfer and exchange.
"Asset Sale" means (a) the sale, lease, conveyance or other disposition (a
"disposition") of any assets or rights (including, without limitation, by way of
a sale and leaseback), excluding dispositions in the ordinary course of business
(provided that the disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by Sections 4.15
and/or 5.01 of this Indenture and not by the provisions of Section 4.10 hereof),
(b) the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of any of the Company's Subsidiaries, and (c) any Event of
Loss, whether in the case of clause (a), (b) or (c), in a single transaction or
a series of related transactions, provided that such transaction or series of
transactions (i) has a fair market value in excess of $1.0 million or (ii)
results in the payment of net proceeds in
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excess of $1.0 million. Notwithstanding the foregoing, the following
transactions will be deemed not to be Asset Sales: (A) a disposition of
obsolete or excess equipment or other assets; (B) a disposition of assets by the
Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary; (C)
a disposition of Equity Interests by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary; (D) a Permitted
Investment or Restricted Payment that is permitted by this Indenture; (E) any
lease of any equipment or other assets entered into in the ordinary course of
business and with respect to which the Company or any Restricted Subsidiary
thereof is the lessor, except any such lease that provides for the acquisition
of such assets by the lessee during or at the end of the term thereof for an
amount that is less than the fair market value thereof at the time the right to
acquire such assets occurs; (F) a disposition of assets by the Company or any of
its Restricted Subsidiaries to a Person that is an Affiliate of the Company or
such Restricted Subsidiary and is engaged in the business of providing marine
support vessels and related services to the oil and gas industry (or a business
that is reasonably complementary or related thereto as determined in good faith
by the Board of Directors), which Person is an Affiliate solely because the
Company or such Restricted Subsidiary has an Investment in such Person, provided
that such transaction complies with Section 4.11 hereof; and (G) any trade or
exchange by the Company or any Restricted Subsidiary of any inventory or
hydrocarbon or other products (including crude oil and refined products) or
similar products owned or held by another Person, provided that the fair market
value of the properties traded or exchanged by the Company or such Restricted
Subsidiary is reasonably equivalent to the fair market value of the properties
to be received by the Company or such Restricted Subsidiary. The fair market
value of any non-cash proceeds of a disposition of assets and of any assets
referred to in the foregoing clause (G) of this definition shall be determined
in the manner contemplated in the definition of the term "fair market value,"
and, in the event the fair market value so determined exceeds $2.0 million, the
results of such determination shall be set forth in an Officers' Certificate
delivered to the Trustee.
"Attributable Indebtedness" in respect of a sale-and-leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale-and-lease-back transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended). As used in the preceding sentence, the "net rental
payments" under any lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease that is terminable by the lessee upon
payment of penalty, such net rental payment shall also include the amount of
such penalty, but no rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so terminated.
"Bankruptcy Law" means Title 11, United States Code, or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company or any
committee thereof that is authorized to act on behalf of such board.
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"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (a) in the case of a corporation, corporate stock, (b)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (a) United States dollars or up to $2.0 million of
Canadian dollars, (b) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or instrumentality thereof
having maturities of not more than six months from the date of acquisition, (c)
certificates of deposit and Eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any commercial bank organized under the laws of any country that is a
member of the Organization for Economic Cooperation and Development having
capital and surplus in excess of $500 million, (d) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (b) and (c) above entered into with any financial
institution meeting the qualifications specified in clause (c) above, (e)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Rating Service and in each case maturing
within 180 days after the date of acquisition, (f) deposits available for
withdrawal on demand with any commercial bank not meeting the qualifications
specified in clause (c) above, provided all such deposits do not exceed $2.0
million in the aggregate at any one time, and (g) money market mutual funds
substantially all of the assets of which are of the type described in the
foregoing clauses (a) through (e).
"Cedel" means Cedel bank, societe anonyme.
"Change of Control" means the occurrence of any of the following: (a) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, (b) the adoption of a plan relating to the liquidation or dissolution of
the Company, (c) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly through one or more
intermediaries, of more than 50% of the voting power of the outstanding voting
stock of the Company or (d) the first day on which more than a majority of the
members of the Board of Directors are not Continuing Directors; provided,
however, that a transaction in which the Company becomes a Subsidiary of another
Person (other than a Person that is an individual) shall not constitute a Change
of Control if (i) the stockholders of the Company immediately prior to such
transaction "beneficially own" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly
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through one or more intermediaries, at least a majority of the voting power of
the outstanding voting stock of the Company immediately following the
consummation of such transaction and (ii) immediately following the consummation
of such transaction, no "person" (as such term is defined above), other than
such other Person (but including the holders of the Equity Interests of such
other Person), "beneficially owns" (as such term is defined above), directly or
indirectly through one or more intermediaries, more than 50% of the voting power
of the outstanding voting stock of the Company.
"Common Stock" means the common stock of the Company, no par value per
share.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted or excluded in calculating Consolidated Net Income for such period, (a)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale, (b) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries, (c) Consolidated
Interest Expense of such Person and its Restricted Subsidiaries, and (d)
depreciation and amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries, in each case,
on a consolidated basis and determined in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Consolidated Interest Expense of such Person for such period;
provided, however, that the Consolidated Interest Coverage Ratio shall be
calculated giving pro forma effect to each of the following transactions as if
each such transaction had occurred at the beginning of the applicable
four-quarter reference period: (a) any incurrence, assumption, guarantee or
redemption by the Company or any of its Restricted Subsidiaries of any
Indebtedness (other than revolving credit borrowings) subsequent to the
commencement of the period for which the Consolidated Interest Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Consolidated Interest Coverage Ratio is made (the
"Calculation Date"); (b) any acquisition that has been made by the Company or
any of its Restricted Subsidiaries, or approved and expected to be consummated
within 30 days of the Calculation Date, including, in each case, through a
merger or consolidation, and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date (in which case Consolidated Cash Flow
for such reference period shall be calculated without giving effect to clause
(c) of the proviso set forth in the definition of Consolidated Net Income); and
(c) any other transaction that may be given pro forma effect in accordance with
Article 11 of Regulation S-X as in effect from time to time; provided, further,
however, that (i) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded and (ii) the
Consolidated Interest Expense attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Consolidated Interest Expense will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
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"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of (a) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations but excluding amortization of debt
issuance costs) and (b) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, in each case
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
provided that (a) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (b) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (c)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (d) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Tangible Assets" means, with respect to any Person as of
any date, the sum of the amounts that would appear on a consolidated balance
sheet of such Person and its consolidated Restricted Subsidiaries as the total
assets of such Person and its consolidated Restricted Subsidiaries, determined
on a consolidated basis in accordance with GAAP and after deducting therefrom,
(a) to the extent otherwise included, unamortized debt discount and expenses and
other unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, licenses, organization or development expenses
and other intangible items and (b) the aggregate amount of liabilities of the
Company and its Restricted Subsidiaries which may be properly classified as
current liabilities (including tax accrued as estimated), determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (b) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (i) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such
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<PAGE>
business) subsequent to the Issue Date in the book value of any asset owned by
such Person or a consolidated Restricted Subsidiary of such Person, (ii) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Restricted Subsidiaries and (iii) all unamortized debt discount and
expense and unamortized deferred charges as of such date, in each case
determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors who (a) was a member of the Board of Directors on the
Issue Date or (b) was nominated for election to the Board of Directors with the
approval of, or whose election to the Board of Directors was ratified by, at
least two-thirds of the Continuing Directors who were members of the Board of
Directors at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facility" means that certain Amended and Restated Revolving Credit
and Letter of Credit Agreement dated June 30, 1997 among Frontier Oil and
Refining Company, certain banks and Union Bank of California, N.A., including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, in each case as amended, restated, modified,
supplemented, extended, renewed, replaced, refinanced or restructured from time
to time, whether by the same or any other agent or agents, lender or group of
lenders, whether represented by one or more agreements and whether one or more
Subsidiaries are added or removed as borrowers or guarantors thereunder or as
parties thereto.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of Exhibit A-1 attached
hereto (but without including the text referred to in footnotes 1 and 3
thereto).
"Depository" means, with respect to the Notes issuable or issued in whole or
in part in global form, the Person specified in Section 2.03 hereof as the
Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as a result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the Notes mature or are
redeemed or retired in full; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof (or of
any security into which it is convertible or for which it is exchangeable) have
the right to require the
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issuer to repurchase such Capital Stock (or such security into which it is
convertible or for which it is exchangeable) upon the occurrence of any of the
events constituting an Asset Sale or a Change of Control shall not constitute
Disqualified Stock if such Capital Stock (and all such securities into which it
is convertible or for which it is exchangeable) provides that the issuer thereof
will not repurchase or redeem any such Capital Stock (or any such security into
which it is convertible or for which it is exchangeable) pursuant to such
provisions prior to compliance by the Company with Section 4.10 or 4.15 of this
Indenture, as the case may be.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Loss" means, with respect to any property or asset of the Company
or any Restricted Subsidiary, (a) any damage to such property or asset that
results in an insurance settlement with respect thereto on the basis of a total
loss or a constructive or compromised total loss or (b) the confiscation,
condemnation or requisition of title to such property or asset by any government
or instrumentality or agency thereof. An Event of Loss shall be deemed to occur
as of the date of the insurance settlement, confiscation, condemnation or
requisition of title, as applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company pursuant to
a Registration Rights Agreement to exchange Series B Notes for Series A Notes.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Credit Facility) in existence on
the Issue Date, until such amounts are repaid.
The term "fair market value" means, with respect to any asset or Investment,
the fair market value of such asset or Investment at the time of the event
requiring such determination, as determined in good faith by the Board of
Directors of the Company, or, with respect to any asset or Investment in excess
of $10.0 million (other than cash or Cash Equivalents), as determined by a
reputable appraisal firm that is, in the judgment of such Board of Directors,
qualified to perform the task for which such firm has been engaged and
independent with respect to the Company.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Note" means, individually and collectively, the Regulation S
Temporary Global Note, the Regulation S Permanent Global Note and the 144A
Global Note.
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"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantor" means any Restricted Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with Sections 4.13 and 10.02 hereof and (c)
the respective successors and assigns of such Restricted Subsidiaries, as
required under Article 10 hereof, in each case until such time as any such
Restricted Subsidiary shall be released and relieved of its obligations pursuant
to Section 10.04 or 10.05 hereof.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, but only to the extent that the
notional amounts of such agreements do not exceed 105% of the aggregate
principal amount of such Indebtedness to which such agreement relates, (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates, (c) any hedging agreement or other arrangement, in each case
that is designed to provide protection against fluctuations in the price of
crude oil and gasoline and other refined products (in the ordinary course of
business and not for speculative purposes) and (d) any foreign currency futures
contract, option or similar agreement or arrangement designed to protect such
Person against fluctuations in foreign currency rates, in each case to the
extent such obligations are incurred in the ordinary course of business of such
Person.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, debentures, notes or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP. The amount of any Indebtedness
outstanding as of any date shall be (a) the accreted value thereof, in the case
of any Indebtedness that does not require current payments of interest, and (b)
the principal amount thereof, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds an interest through a
Participant.
"Initial Purchaser" means Bear, Stearns & Co. Inc.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
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"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees by the referent Person of, and Liens on any
assets of the referent Person securing, Indebtedness or other obligations of
other Persons), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP; provided, however, that the following shall not constitute Investments:
(i) extensions of trade credit or other advances to customers on commercially
reasonable terms in accordance with normal trade practices or otherwise in the
ordinary course of business, (ii) Hedging Obligations and (iii) endorsements of
negotiable instruments and documents in the ordinary course of business. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described in Section 4.07 of this Indenture.
"Issue Date" means the first date on which the Offered Notes are issued
hereunder.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of Houston, Texas, the City of New York or at a place
of payment are authorized by law, regulation or executive order to remain
closed. 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.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction other than a
precautionary financing statement respecting a lease not intended as a security
agreement).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Make-Whole Amount" with respect to a Note means an amount equal to the
excess, if any, of (i) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on February
15, 2002, computed using a discount rate equal to the Treasury Rate plus 50
basis points, over (ii) the outstanding principal amount of such Note. "Treasury
Rate" is defined as the yield to maturity at the time of the computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15(519),
which has become publicly available at least two Business Days prior to the date
of the redemption notice or, if such Statistical Release is no longer published,
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any publicly available source of similar market date) most nearly equal to the
then remaining maturity of the Notes assuming redemption of the Notes on
February 15, 2002; provided, however, that if the Make-Whole Average Life of
such Note is not equal to the constant maturity of the United States 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 a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the Make-Whole Average Life of such
Notes is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used. "Make-Whole Average Life" means the number of years (calculated to the
nearest one-twelfth) between the date of redemption and February 15, 2002.
"Make-Whole Price" with respect to a Note means the greater of (i) the sum
of the outstanding principal amount and Make-Whole Amount of such Note, and (ii)
the redemption price of such Note on February 15, 2002, determined pursuant to
the Indenture (104.563% of the principal amount).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale-and-leaseback transactions) or (ii)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (b) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of (without duplication)
(a) the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, sales commissions, recording
fees, title transfer fees, title insurance premiums, appraiser fees and costs
incurred in connection with preparing such asset for sale) and any relocation
expenses incurred as a result thereof, (b) taxes paid or estimated to be payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (c) amounts required to be applied
to the repayment of Indebtedness (other than under the Credit Facility) secured
by a Lien on the asset or assets that were the subject of such Asset Sale and
(d) any reserve established in accordance with GAAP or any amount placed in
escrow, in either case for adjustment in respect of the sale price of such asset
or assets, until such time as such reserve is reversed or such escrow
arrangement is terminated, in which case Net Proceeds shall include only the
amount of the reserve so reserved or the amount returned to the Company or its
Restricted Subsidiaries from such escrow arrangement, as the case may be.
"Non-Recourse Debt" means Indebtedness (a) as to which neither the Company
nor any of its Restricted Subsidiaries (i) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness) or is otherwise directly or indirectly liable (as a guarantor or
otherwise) or (ii) constitutes the lender, (b) no default with respect to which
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(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) the holders of Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity and
(c) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries, except to the extent of any Indebtedness incurred by the Company
or any of its Restricted Subsidiaries in accordance with clause (a)(i) above.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offered Notes" has the meaning set forth in Section 2.02 hereof.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Company, that meets the requirements of Section 11.05
hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Original Notes" has the meaning set forth in Section 2.02 hereof.
"Pari Passu Indebtedness" means, with respect to any Net Proceeds from Asset
Sales, Indebtedness of the Company and its Restricted Subsidiaries the terms of
which require the Company or such Restricted Subsidiary to apply such Net
Proceeds to offer to repurchase such Indebtedness.
"Participant" means with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and, with respect to
DTC, shall include Euroclear and Cedel).
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"Permitted Indebtedness" means:
(a) the incurrence by the Company or a Restricted Subsidiary of
Indebtedness under any Working Capital Facility in an aggregate principal
amount at any one time outstanding not to exceed the greater of (i) $50.0
million and (ii) an amount equal to the sum of 85% of the book value of
accounts receivable (less allowance for doubtful accounts) and 60% of the
inventory (less applicable reserves) of the Company and its Restricted
Subsidiaries, calculated on a consolidated basis and in accordance with
GAAP, plus any fees, premiums, expenses (including costs of collection),
indemnities and similar amounts payable in connection with such
Indebtedness, and less any amounts repaid permanently in accordance with
Section 4.10 hereof;
(b) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(c) the incurrence by the Company and its Restricted Subsidiaries of
Hedging Obligations;
(d) the incurrence by the Company of Indebtedness represented by the
Offered Notes and Exchange Notes;
(e) the incurrence of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries, provided that (i) if the
Company or any Guarantor is the obligor on such Indebtedness, such
Indebtedness is expressly subordinate to the payment in full of all
obligations with respect to the Notes and (ii) (A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted Subsidiary of the
Company, or (B) any sale or other transfer of any such Indebtedness to a
Person that is neither the Company nor a Restricted Subsidiary of the
Company, shall be deemed to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(f) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company or any Restricted Subsidiary thereof in the
ordinary course of business, including guarantees or obligations of the
Company or any Restricted Subsidiary thereof with respect to letters of
credit supporting such bid, performance or surety obligations (in each case
other than for an obligation for money borrowed);
(g) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness that was permitted by the Indenture to be incurred
(other than pursuant to clause (a) or (e) of this definition);
(h) incurrence by any Subsidiary of the Company of a Subsidiary
Guarantee;
(i) incurrence of Non-Recourse Debt; or
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(j) incurrence by the Company or any Restricted Subsidiary of any
additional Indebtedness not to exceed $5.0 million at any time outstanding.
In the event that the incurrence of any Indebtedness would be permitted
under Section 4.09 hereof or one or more of the provisions of this definition,
the Company may designate (in the form of an Officers' Certificate delivered to
the Trustee) the particular provision of the Indenture pursuant to which it is
incurring such Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company, (b) any Investment in Cash Equivalents,
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or a Restricted Subsidiary of
the Company, (d) any Investment made as a result of the receipt of non-cash
consideration from (i) an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof or (ii) a disposition of assets that does not
constitute an Asset Sale, (e) acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company and
(f) Investments in a Person engaged in the Principal Business, provided that the
aggregate amount of such Investments pursuant to this clause (f) in Persons that
are not Restricted Subsidiaries of the Company shall not exceed $20.0 million at
any one time.
"Permitted Liens" means (a) Liens securing Indebtedness incurred pursuant to
clause (a) of the definition of "Permitted Indebtedness," (b) Liens in favor of
the Company or any of its Restricted Subsidiaries, (c) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such merger or consolidation and
do not extend to any property other than those of the Person merged into or
consolidated with the Company or any of its Restricted Subsidiaries, (d) Liens
on property existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company, provided that such Liens were in existence
prior to the contemplation of such acquisition and do not extend to any other
property, (e) Liens to secure the performance of statutory obligations, surety
or appeal bonds, bid or performance bonds, insurance obligations or other
obligations of a like nature incurred in the ordinary course of business, (f)
Liens securing Hedging Obligations, (g) Liens existing on the Issue Date, (h)
Liens securing Non-Recourse Debt, (i) any interest or title of a lessor under a
Capital Lease Obligation or an operating lease, (j) Liens arising by reason of
deposits necessary to obtain standby letters of credit in the ordinary course of
business (including deposits necessary to obtain standby letters of credit), (k)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security and related benefits, (l) easements, rights of way restrictions and
other similar charges or encumbrances not interfering in any material respect
with the business of the Company or any Restricted Subsidiary, (m) any other
Liens imposed by operation of law which do not materially affect the Company's
or any Guarantor's ability to perform its obligations under the Notes or any
Subsidiary Guarantee, (n) any attachment or judgment Lien, unless the judgment
it secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such stay, (o) Liens to
secure Purchase Money
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Indebtedness, which Liens shall not extend to any other property or assets of
the Company or a Restricted Subsidiary (other than any associated accounts,
contracts and insurance proceeds), (p) Liens securing Permitted Refinancing
Indebtedness with respect to any Indebtedness referred to in clause (o) above,
and (q) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (i) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (ii) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided, however, that (a) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus premium, if any,
and accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith), (b) such Permitted Refinancing Indebtedness has a
final maturity date no earlier than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, (c) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in
right of payment to the Notes on terms at least as favorable, taken as a whole,
to the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
and (d) such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary that is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; provided, however, that a Restricted
Subsidiary that is also a Guarantor may guarantee Permitted Refinancing
Indebtedness incurred by the Company, whether or not such Restricted Subsidiary
was an obligor or guarantor of the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; provided, further, however, that if
such Permitted Refinancing Indebtedness is subordinated to the Notes, such
guarantee shall be subordinated to such Restricted Subsidiary's Subsidiary
Guarantee to at least the same extent.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof (including
any subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"Principal Business" means (a) the business of the exploration for, and
development, acquisition, production, processing, marketing, refining, storage
and transportation of, hydrocarbons, (b) any related energy and natural resource
business, (c) any business currently engaged in by the Company or its
Subsidiaries, (d) convenience stores, retails service stations, truck stops and
other public accommodations in connection therewith and (e) any activity or
business that is a reasonable extension, development or expansion of any of the
foregoing.
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<PAGE>
"Purchase Money Indebtedness" means Indebtedness incurred for the purpose of
(a) financing all or any part of the purchase price of any real or personal
property or assets incurred prior to, at the time of, or within 120 days after,
the acquisition of such property or (ii) financing all or any part of the cost
of construction of any such property or assets, provided that the amount of any
such financing shall not exceed the amount expended in the acquisition of, or
the construction of, such property or assets.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A under
the Securities Act.
"Qualified Equity Offering" means (a) any sale of Equity Interests (other
than Disqualified Stock) of the Company pursuant to an underwritten offering
registered under the Securities Act or (b) any sale of Equity Interests (other
than Disqualified Stock) of the Company so long as, at the time of consummation
of such sale, the Company has a class of common equity securities registered
pursuant to Section 12(b) or Section 12(g) under the Exchange Act.
"Registration Rights Agreement" means (a) the Registration Rights Agreement,
dated as of February 9, 1998, by and between the Company and the Initial
Purchaser relating to the Original Notes and (b) any similar agreement that the
Company may enter into in relation to any other Series A Notes, in each case as
such agreement may be amended, modified or supplemented from time to time.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global note that
contains the paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 3 to the form of the Note attached hereto as Exhibit
A-1, and that is deposited with the Note Custodian and registered in the name of
the Depository, representing a series of Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary global senior
note in the form of the Note attached hereto as Exhibit A-2 that is deposited
with the Note Custodian and registered in the name of the Depository,
representing a series of Notes sold in reliance on Regulation S.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Department of the Trustee (or any successor
department of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
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"Restricted Beneficial Interest" means any beneficial interest of a
Participant or Indirect Participant in a Restricted Global Note.
"Restricted Definitive Notes" means the Definitive Notes that are required
to bear the legend set forth in Section 2.06(f) hereof.
"Restricted Global Notes" means the 144A Global Note and the Regulation S
Global Note, each of which is required to bear the legend set forth in Section
2.06(f) hereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership (i) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (ii)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the joint and several guarantees that may be
issued by all of the Guarantors pursuant to Article 10 hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or are required
to bear the legend set forth in Section 2.06(f) hereof.
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<PAGE>
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Notes" means one or more Global Notes that do not and
are not required to bear the legend set forth in Section 2.06(f) hereof.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the
Board of Directors, but only to the extent that such Subsidiary at the time of
such designation (a) has no Indebtedness other than Non-Recourse Debt, (b) is
not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless such agreement,
contract, arrangement or understanding does not violate the terms of this
Indenture described in Section 4.11 hereof, and (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (i) to subscribe for additional Equity Interests or (ii)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results, in each case,
except to the extent otherwise permitted by this Indenture. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date pursuant to Section
4.09 hereof, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary, provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (A) such Indebtedness is permitted by
Section 4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (B) no
Default or Event of Default would be in existence following such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person to the extent (a) all of the outstanding Capital Stock
or other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned directly or indirectly by such Person or (b) such
Restricted Subsidiary is organized in a foreign jurisdiction and is required by
the applicable laws and regulations of such foreign jurisdiction to be partially
owned by the government
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of such foreign jurisdiction or individual or corporate citizens of such foreign
jurisdiction in order for such Restricted Subsidiary to transact business in
such foreign jurisdiction, provided that such Person, directly or indirectly,
owns the remaining Capital Stock or ownership interests in such Restricted
Subsidiary and, by contract or otherwise, controls the management and business
of such Restricted Subsidiary and derives the economic benefits of ownership of
such Restricted Subsidiary to substantially the same extent as if such
Restricted Subsidiary were a wholly owned Restricted Subsidiary.
"Working Capital Facility" includes the Credit Facility and any other
working capital facilities entered into by the Company or any of its Restricted
Subsidiaries, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, in each case as
amended, restated, modified, supplemented, extended, renewed, replaced,
refinanced or restructured from time to time, whether by the same or any other
agent or agents, lender or group of lenders, whether represented by one or more
agreements and whether one or more Subsidiaries are borrowers, or guarantors
thereunder or parties thereto.
Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction". . . . . . . . . . . . . . 4.11
"Asset Sale Offer" . . . . . . . . . . . . . . . . 3.09
"Change of Control Offer". . . . . . . . . . . . . 4.15
"Change of Control Payment". . . . . . . . . . . . 4.15
"Change of Control Payment Date" . . . . . . . . . 4.15
"Covenant Defeasance". . . . . . . . . . . . . . . 8.03
"DTC". . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds". . . . . . . . . . . . . . . . . 4.10
"incur" or "incurrence". . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . 8.02
"Offer Amount" . . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . . 2.03
"Payment Default". . . . . . . . . . . . . . . . . 6.01
"Purchase Date". . . . . . . . . . . . . . . . . . 3.09
"Registrar". . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments". . . . . . . . . . . . . . . 4.07
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Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. Any terms
incorporated in this Indenture that are defined by the TIA, defined by TIA
reference to another statute or defined by SEC rule under the TIA have the
meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act or
the Exchange Act shall be deemed to include substitute, replacement or
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A-1 or Exhibit A-2 hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be issued in denominations of $1,000 and integral multiples thereof.
The Series A Notes and the Series B Notes shall be considered collectively
to be a single class for all purposes of this Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
(a) Global Notes. Except as provided in Section 2.01(c), Series A Notes
offered and sold to QIBs in reliance on Rule 144A shall be issued initially in
the form of one or more 144A Global
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Notes, which shall be deposited on behalf of the purchasers of the Series A
Notes represented thereby with the Note Custodian and registered in the name of
the Depository or a nominee of the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the 144A Global Notes may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depository or its
nominee, as the case may be, in connection with transfers of interests as
hereinafter provided.
Series A Notes offered and sold in reliance on Regulation S, if any, shall
be issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Series A Notes represented
thereby with the Note Custodian and registered in the name of the Depository or
the nominee of the Depository for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The "40-day restricted period" (as defined
in Regulation S) shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depository, together with copies of certificates
from Euroclear and Cedel certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal amount
of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein pursuant to another
exemption from registration under the Securities Act and who will take delivery
of a beneficial ownership interest in a 144A Global Note, all as contemplated by
Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the 40-day restricted period, beneficial interests
in the Regulation S Temporary Global Note shall be exchanged for beneficial
interests in one or more Regulation S Permanent Global Notes pursuant to the
Applicable Procedures. Simultaneously with the authentication of Regulation S
Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary
Global Note. The aggregate principal amount of the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes may from time to time be
increased or decreased by adjustments made on the records of the Trustee and the
Depository or its nominee, as the case may be, in connection with transfers of
interests as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges, redemptions and
transfers of interests. Any endorsement of a Global Note to reflect the amount
of any increase or decrease in the amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes, if any, that are held by Participants through Euroclear
or Cedel. The Trustee shall have no obligation to notify Holders of any such
procedures or to monitor or enforce compliance with the same.
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<PAGE>
(b) Book-Entry Provisions. Participants shall have no rights either under
this Indenture with respect to any Global Note held on their behalf by the
Depository or by the Note Custodian as custodian for the Depository or under
such Global Note, and the Depository may be treated by the Company, the Trustee
and any Agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Participants, the operation of customary practices of such Depository
governing the exercise of the rights of an owner of a beneficial interest in any
Global Note.
(c) Definitive Notes. Series A Notes offered and sold to Institutional
Accredited Investors who are not QIBs otherwise than in reliance on Regulation
S, if any, or to QIBs who elect to take their Series A Notes in definitive form
shall be issued initially in the form of Definitive Notes, duly executed by the
Company and authenticated by the Trustee as hereinafter provided.
Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of an
authorized signatory of the Trustee. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture. The form of
Trustee's certificate of authentication to be borne by the Notes shall be
substantially as set forth in Exhibit A-1 or Exhibit A-2 hereto.
Each Note shall be dated the date of its authentication.
The Trustee shall authenticate (i) the Series A Notes for original issue on
the Issue Date in the aggregate principal amount of $70,000,000 (the "Offered
Notes"), (ii) additional Series A Notes for original issue from time to time
after the Issue Date in such additional principal amounts not to exceed
$5,000,000 as may be set forth in a written order of the Company as described in
this sentence and (iii) the Series B Notes from time to time for issue only in
exchange for a like principal amount of Series A Notes, in each case upon a
written order of the Company signed by one Officer, which written order shall
specify (a) the amount of Notes to be authenticated and the date of original
issue thereof, (b) whether the Notes are Series A Notes or Series B Notes, and
(c) the amount of Notes to be issued in global form or definitive form. The
aggregate principal amount of Notes outstanding at any time may not exceed
$70,000,000 plus any additional principal amounts as may be issued and
authenticated pursuant to clause (ii) of this paragraph, except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent.
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An authenticating agent has the same rights as an Agent to deal with the
Company, any Guarantor or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency in the City of New York where Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Company
shall enter into an appropriate agency agreement with any Agent not a party to
this Indenture, and such agreement shall incorporate the TIA's provisions of
this Indenture that relate to such Agent. The Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
of or premium, interest or Liquidated Damages, if any, on the Notes, and will
notify the Trustee of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Company, the Trustee
shall serve as Paying Agent for the Notes.
Section 2.05. 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
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request
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in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Notes and the
Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the Applicable Procedures.
Beneficial interests in a Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Global Note in
accordance with the Applicable Procedures and, in the case of a Transfer
Restricted Security, transfer restrictions set forth in the legend in subsection
(f) of this Section 2.06. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) 144A Global Note to Regulation S Global Note. If, at any time,
an owner of a beneficial interest in a 144A Global Note deposited with the
Depository (or the Trustee as custodian for the Depository) wishes to
transfer its beneficial interest in such 144A Global Note to a Person who
is required or permitted to take delivery thereof in the form of an
interest in a Regulation S Global Note, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of such interest for
an equivalent beneficial interest in a Regulation S Global Note as provided
in this Section 2.06(a)(i). Upon receipt by the Trustee of (A) instructions
given in accordance with the Applicable Procedures from *a Participant
directing the Trustee to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal to the
beneficial interest in the 144A Global Note to be transferred, (B) a
written order given in accordance with the Applicable Procedures containing
information regarding the Participant account of the Depository and the
Euroclear or Cedel account to be credited with such increase and (C) in the
case of Global Notes that are Transfer Restricted Securities, a certificate
in the form of Exhibit B-1 hereto given by the owner of such beneficial
interest stating that the transfer of such interest has been made in
compliance with the transfer restrictions applicable to the Global Notes
and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation
S, then the Trustee, as Registrar, shall instruct the Depository to reduce
or cause to be reduced the aggregate principal amount of the applicable
144A Global Note and to increase or cause to be increased the aggregate
principal amount of the applicable Regulation S Global Note by the
principal amount of the beneficial interest in the 144A Global Note to be
transferred, to credit or cause to be credited to the account of the Person
specified in such instructions, a beneficial interest in the Regulation S
Global Note equal to the reduction in the aggregate principal amount of the
144A Global Note, and to debit, or cause to be debited, from the account of
the Person making such transfer the beneficial interest in the 144A Global
Note that is being transferred.
(ii) Regulation S Global Note to 144A Global Note. If, at any time,
after the expiration of the 40-day restricted period, an owner of a
beneficial interest in a Regulation S Global Note deposited with the
Depository (or with the Trustee as custodian for the Depository) wishes to
transfer its beneficial interest in such Regulation S Global Note to a
Person who is required or permitted to take delivery thereof in the form of
an interest in a 144A Global Note, such owner shall, subject to the
Applicable Procedures, exchange or
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cause the exchange of such interest for an equivalent beneficial interest
in a 144A Global Note as provided in this Section 2.06(a)(ii). Upon receipt
by the Trustee of (A) instructions from Euroclear or Cedel, if applicable,
and the Depository, directing the Trustee, as Registrar, to credit or cause
to be credited a beneficial interest in the 144A Global Note equal to the
beneficial interest in the Regulation S Global Note to be transferred, such
instructions to contain information regarding the Participant account with
the Depository to be credited with such increase, (B) a written order given
in accordance with the Applicable Procedures containing information
regarding the participant account of the Depository and (C) in the case of
Global Notes that are Transfer Restricted Securities, a certificate in the
form of Exhibit B-2 attached hereto given by the owner of such beneficial
interest stating (1) if the transfer is pursuant to Rule 144A, that the
Person transferring such interest in a Regulation S Global Note reasonably
believes that the Person acquiring such interest in a 144A Global Note is a
QIB and is obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A, (2) that the transfer complies with the
requirements of Rule 144 under the Securities Act, (3) if the transfer is
pursuant to any other exemption from the registration requirements of the
Securities Act, that the transfer of such interest has been made in
compliance with the transfer restrictions applicable to the Global Notes
and pursuant to and in accordance with the requirements of the exemption
claimed, such statement to be supported by an Opinion of Counsel from the
transferee or the transferor in form reasonably acceptable to the Company
and to the Registrar and in each case of clause (1), (2) or (3) above, in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction or (4) such transfer is being
effected pursuant to an effective registration statement under the
Securities Act, then the Trustee, as Registrar, shall instruct the
Depository to reduce or cause to be reduced the aggregate principal amount
of such Regulation S Global Note and to increase or cause to be increased
the aggregate principal amount of the applicable 144A Global Note by the
principal amount of the beneficial interest in the Regulation S Global Note
to be transferred, and the Trustee, as Registrar, shall instruct the
Depository, concurrently with such reduction, to credit or cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in the applicable 144A Global Note equal to the
reduction in the aggregate principal amount of such Regulation S Global
Note and to debit or cause to be debited from the account of the Person
making such transfer the beneficial interest in the Regulation S Global
Note that is being transferred.
(b) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request to register the transfer
of the Definitive Notes or to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested only if
the Definitive Notes are presented or surrendered for registration of transfer
or exchange, are endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Registrar duly executed by such Holder or by his
attorney, duly authorized in writing and the Registrar receives the following
documentation (all of which may be submitted by facsimile):
(i) in the case of Definitive Notes that are Transfer Restricted
Securities, such request shall be accompanied by the following additional
information and documents, as applicable:
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(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of such Holder,
without transfer, or such Transfer Restricted Security is being
transferred (1) to the Company or any of its Subsidiaries or (2)
pursuant to an effective registration statement under the Securities
Act, a certification to that effect from such Holder (in substantially
the form of Exhibit B-3 hereto);
(B) if such Transfer Restricted Security is being transferred to
a QIB in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with Rule 144
under the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that effect
from such Holder (in substantially the form of Exhibit B-3 hereto);
(C) if such Transfer Restricted Security is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
904 under the Securities Act, a certification to that effect from such
Holder (in substantially the form of Exhibit B-3 hereto but containing
the certification called for by clauses (1) through (4) of Exhibit B-1
hereto); or
(D) if such Transfer Restricted Security is being transferred to
an Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraph (B) or (C) above, a certification to that
effect from such Holder (in substantially the form of Exhibit B-3
hereto), and a certification substantially in the form of Exhibit C
hereto from the transferee, and, if such transfer is in respect of an
aggregate principal amount of Notes of less than $100,000, an Opinion
of Counsel acceptable to the Company that such transfer is in
compliance with the Securities Act and any applicable blue sky laws of
any state of the United States.
(c) Transfer of a Beneficial Interest in a 144A Global Note or Regulation
S Permanent Global Note for a Definitive Note.
(i) Any Person having a beneficial interest in a 144A Global Note or
Regulation S Permanent Global Note may upon request, subject to the
Applicable Procedures, exchange such beneficial interest for a Definitive
Note, upon receipt by the Trustee of written instructions or such other
form of instructions as is customary for the Depository (or Euroclear or
Cedel, if applicable), from the Depository or its nominee on behalf of any
Person having a beneficial interest in a 144A Global Note or Regulation S
Permanent Global Note, and, in the case of a Transfer Restricted Security,
the following additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner or
to the Company or any of its Subsidiaries, a certification to that
effect from such Person (in substantially the form of Exhibit B-4
hereto);
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(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 under the
Securities Act or pursuant to an effective registration statement
under the Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B-4 hereto);
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 904
under the Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B-4 hereto but
containing the certification called for by clauses (1) through (4) of
Exhibit B-1 hereto); or
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor, pursuant to a private placement
exemption from the registration requirements of the Securities Act
other than those listed in subparagraph (B) or (C) above, a
certification to that effect from such Holder (in substantially the
form of Exhibit B-4 hereto), a certification from the applicable
transferee (in substantially the form of Exhibit C hereto) and, if
such transfer is in respect of an aggregate principal amount of less
than $100,000, an Opinion of Counsel acceptable to the Company that
such transfer is in compliance with the Securities Act and any
applicable blue sky laws of any State of the United States;
in which case the Trustee or the Note Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and procedures
existing between the Depository and the Note Custodian, cause the aggregate
principal amount of 144A Global Notes or Regulation S Permanent Global
Notes, as applicable, to be reduced accordingly and, following such
reduction, the Company shall execute and, the Trustee shall authenticate
and deliver to the transferee a Definitive Note in the appropriate
principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest in
a 144A Global Note or Regulation S Permanent Global Note, as applicable,
pursuant to this Section 2.06(c) 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
Trustee. The Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Following any such issuance of
Definitive Notes, the Trustee, as Registrar, shall instruct the Depository
to reduce or cause to be reduced the aggregate principal amount of the
applicable Global Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
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(e) Authentication of Definitive Notes in Absence of Depository. If at
any time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Notes and a successor Depository for the Global Notes is not appointed by
the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes under this
Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(f) Legends.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Note certificate evidencing a Global Note or a Definitive Note
(and all Notes issued in exchange therefor or substitution thereof) shall
bear a legend in substantially the following form:
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. EACH PURCHASER OF THE NOTE EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. BY ITS ACQUISITION HEREOF, THE HOLDER:
REPRESENTS THAT (1) IT IS (A) A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C)
NOT A U.S. PERSON AND IS ACQUIRING THE NOTE EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION; (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE NOTE EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, AS TRUSTEE (OR
A SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION; AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE NOTE
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EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IF THE PROPOSED TRANSFER IS PURSUANT TO CLAUSE (C),
(D) OR (E) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS IT MAY REASONABLY REQUIRE 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 TRANSACTIONS," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Note that
does not bear the legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted Security upon
certification from the transferring holder substantially in the form
of Exhibit B-3 hereto; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue
to be subject to the provisions of Section 2.06(a) and (c) hereof;
provided, however, that with respect to any request for an exchange of
a Transfer Restricted Security that is represented by a Global Note
for a Definitive Note that does not bear the legend set forth in (i)
above, which request is made in reliance upon Rule 144 or pursuant to
an effective registration statement, the Holder thereof shall certify
in writing to the Registrar that such request is being made pursuant
to Rule 144 or pursuant to an effective registration statement (such
certification to be substantially in the form of Exhibit B-4 hereto).
(iii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Note)
in reliance on any exemption from the registration requirements of the
Securities Act (other than exemptions pursuant to Rule 144 under the
Securities Act) in which the Holder or the transferee provides an Opinion
of Counsel to the Company and the Registrar in form and substance
reasonably acceptable to the Company and the Registrar (which Opinion of
Counsel shall also state that the transfer restrictions contained in the
legend are no longer applicable):
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Note that
does not bear the legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
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(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue
to be subject to the provisions of Section 2.06(a) and (c) hereof.
(iv) Notwithstanding the foregoing, upon consummation of an Exchange
Offer, the Company shall issue and, upon receipt of an authentication order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one
or more Unrestricted Global Notes in aggregate principal amount equal to
the sum of (A) the principal amount of the Restricted Beneficial Interests
tendered for acceptance by Persons that are not (1) broker-dealers, (2)
Persons participating in the distribution of the Series F Notes or (3)
Persons who are Affiliates of the Company and accepted for exchange in the
Exchange Offer and (B) the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer, unless the Holders of
such Restricted Definitive Notes shall request the receipt of Definitive
Notes, in which case the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of such
Restricted Definitive Notes one or more Definitive Notes without the legend
set forth in Section 2.06(f) in the appropriate principal amount.
Concurrently with the issuance of such Unrestricted Global Notes, the
Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Note to be reduced accordingly.
(g) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or canceled, all Global Notes shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, subject to
this Section 2.06, the Company shall execute and, upon the written order of
the Company signed by one Officer of the Company, the Trustee shall
authenticate Definitive Notes and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections
3.07, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
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(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Definitive
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
(v) The Company and the Registrar shall not be required:
(A) to issue, to register the transfer of or to exchange Notes
during a period beginning at the opening of business 15 days before
the day of any selection of Notes for redemption under Section 3.02
hereof and ending at the close of business on the day of selection;
(B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part;
(C) to register the transfer of or to exchange a Note between a
record date and the next succeeding interest payment date; or
(D) to register the transfer of a Note other than in amounts of
$1,000 or multiple integrals thereof.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and Global
Notes in accordance with the provisions of Section 2.02 hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note. If, after the delivery of such replacement Note,
a bona fide purchaser of the original Note in lieu of which such replacement
Note was issued presents for payment or registration such original Note, the
Trustee shall be entitled to recover such replacement Note from the Person to
whom it was delivered or any Person taking therefrom, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided
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therefor to the extent of any loss, damage, cost or expense incurred by the
Company, the Trustee, any Agent and any authenticating agent in connection
therewith.
Subject to the provisions of the final sentence of the preceding paragraph
of this Section 2.07, every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company, any Subsidiary of the Company or an
Affiliate of the Company or any Subsidiary of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the entire principal of and premium, interest and Liquidated Damages, if
any, on any Note are considered paid under Section 4.01 hereof, it ceases to be
outstanding and interest and Liquidated Damages, if any, on it cease to accrue.
If the Paying Agent (other than the Company, a Subsidiary of the Company or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest and Liquidated Damages, if any.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, a Subsidiary of the Company or an Affiliate, shall be considered as
though 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 that a Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that the Company, a Subsidiary of the
Company or an Affiliate offers to purchase or acquires pursuant to an offer,
exchange offer, tender offer or otherwise shall not be deemed to be owned by the
Company, a Subsidiary of the Company or an Affiliate until legal title to such
Notes passes to the Company, such Subsidiary or such Affiliate as the case may
be.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
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acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes. Until such exchange, Holders of temporary Notes shall be
entitled to all of the benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and 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 all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and, at the request of
the Company, shall destroy canceled Notes (subject to the record retention
requirement of the Exchange Act). Certification of the destruction of all
canceled Notes shall be delivered to the Company. The Company may not issue new
Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation, other than as contemplated by the Exchange Offer.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided, however, that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes, on a pro
rata basis, by lot or in accordance with any other method the Trustee considers
fair and appropriate. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than
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30 days nor more than 60 days prior to the redemption date by the Trustee from
the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
The provisions of the two preceding paragraphs of this Section 3.02 shall
not apply with respect to any redemption affecting only a Global Note, whether
such Global Note is to be redeemed in whole or in part. In case of any such
redemption in part, the unredeemed portion of the principal amount of the Global
Note shall be in an authorized denomination.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) 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 upon surrender of such Note, a new Note or Notes in a principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest and Liquidated Damages, if any, on Notes called for
redemption cease to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
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If any of the Notes to be redeemed is in the form of a Global Note, then
the Company shall modify such notice to the extent necessary to accord with the
procedures of the Depository applicable to redemption.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days (unless the Company and
the Trustee agree to a shorter period) prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
Section 3.05. Deposit of Redemption Price.
At least one Business Day prior to the redemption date, the Company shall
deposit with the Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 2.04 hereof) money
sufficient to pay the redemption price of and accrued interest and Liquidated
Damages, if any, on all Notes to be redeemed on that date. The Paying Agent
shall promptly return to the Company any money deposited with the Paying Agent
by the Company in excess of the amounts necessary to pay the redemption price of
and accrued interest and Liquidated Damages, if any, on all Notes to be
redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest and Liquidated Damages, if any, shall
cease to accrue on the Notes or the portions of Notes called for redemption. If
a Note is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name such Note
was registered at the close of business on such record date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest and Liquidated Damages, if any,
not paid on such unpaid principal, in each case at the rate provided in the
Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and the Trustee shall authenticate for the Holder at the expense of the Company
a new Note equal in principal amount to the unredeemed portion of the Note
surrendered.
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Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to February 15, 2002. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon, to the applicable redemption
date, if redeemed during the twelve-month period beginning on February 15 of the
years indicated below:
Year Percentage
2002. . . . . . . . . . . . . . . . . . 104.563%
2003 . . . . . . . . . . . . . . . . . 103.042%
2004 . . . . . . . . . . . . . . . . . 101.521%
2005 and thereafter . . . . . . . . . . 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, the
Company may at any time prior to February 15, 2002, at its option, redeem the
Notes, in whole or in part, at the Make-Whole Price, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date. In
addition, at any time prior to February 9, 2001, the Company may redeem up to
35% of the aggregate principal amount of Notes originally issued at a redemption
price of 109% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the redemption date, with the net
cash proceeds of one or more Qualified Equity Offerings, provided that (i) at
least 65% of the aggregate principal amount of Notes originally issued remains
outstanding immediately after the occurrence of each such redemption and (ii)
each such redemption shall occur within 60 days of the date of the closing of
each such Qualified Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through Section 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
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purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes validly tendered in response to
the Asset Sale Offer. Payment for any Notes so purchased shall be made in the
same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest or Liquidated Damages, if any, shall be payable to Holders who tender
Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to each of the Holders, with a copy to the Trustee.
The notice shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer
shall be made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest and Liquidated Damages, if any after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company or the Paying Agent, as the case may be, receives, not later than
the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata
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basis (with such adjustments as may be deemed appropriate by the Trustee so
that only Notes in denominations of $1,000, or integral multiples thereof,
shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
If any of the Notes subject to an Asset Sale Offer is in the form of a
Global Note, then the Company shall modify such notice to the extent necessary
to accord with the procedures of the Depository applicable to repurchases.
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company or the Paying Agent, as the case may
be, shall promptly (but in any case not later than five days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new Note, and the Trustee shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Section 3.01 through Section 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of and premium,
interest and Liquidated Damages, if any, on the Notes on the dates and in the
manner provided in the Notes. Principal, premium, interest and Liquidated
Damages, if any, shall be considered paid on the date due if the Paying Agent,
if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New
York time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
interest and Liquidated Damages, if any, then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
the interest rate on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages, if any (without regard
to any applicable grace period), at the same rate to the extent lawful.
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Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company 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 Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time 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. Further, if at
any time there shall be no such office or agency in the City of New York where
the Notes may be presented or surrendered for payment, the Company shall
forthwith designate and maintain such an office or agency in the City of New
York, in order that the Notes shall at all times be payable in the City of New
York. The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not the Company is required to do so by the rules and
regulations of the SEC, the Company will file with the SEC (unless the SEC will
not accept such a filing) and, within 15 days of filing, or attempting to file,
the same with the SEC, furnish to the holders of the Notes (i) all quarterly and
annual financial and other information with respect to the Company and its
Subsidiaries that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. The Company shall at all times comply with
TIA (S) 314(a).
(b) The Company and the Guarantors shall furnish to the holders of the
Notes, prospective purchasers of the Notes and securities analysts, upon their
request, the information, if any, required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Restricted Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing
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Officers with a view to determining whether the Company 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 the Company 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 of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes 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 of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company'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 that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof 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 to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, 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 Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
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Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
such payment in connection with any merger or consolidation involving the
Company) or to the direct or indirect holders of the Company's Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase,
redeem or otherwise acquire or retire for value (including without limitation,
in connection with any merger or consolidation involving the Company) any Equity
Interests of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company); (iii) make any payment on
or with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value, any Indebtedness that is subordinated to the Notes, except a payment
of interest or principal at Stated Maturity (or within one year thereof); or
(iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Consolidated Interest Coverage Ratio test set forth in Section 4.09
hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (b), (c), (d) and (f), but including, without duplication,
Restricted Payments permitted by clauses (a) and (e), of the next
succeeding paragraph), is less than the sum of (A) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from January 1, 1998 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (B) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
since the Issue Date of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than any
such Equity Interests, Disqualified Stock or convertible debt securities
sold to a Restricted Subsidiary of the Company and other than Disqualified
Stock or convertible debt securities that have been converted into
Disqualified Stock), plus (C) the aggregate principal amount of any
Convertible Debentures converted into Equity Interests since the Issue
Date, plus (D) to the extent that any Restricted Investment that was made
after the Issue Date is or was sold for cash or otherwise liquidated or
repaid for cash, the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any), plus (E) in the event
that
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any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary, the
lesser of (1) an amount equal to the fair value of the Company's
Investments in such Restricted Subsidiary and (2) the amount of Restricted
Investments previously made by the Company and its Restricted Subsidiaries
in such Unrestricted Subsidiary, plus (F) $10.0 million.
The foregoing provisions will not prohibit any of the following: (a) the
payment of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the provisions
of this Indenture; (b) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock), provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (iii)(B) of the preceding paragraph; (c) the defeasance, redemption,
repurchase, retirement or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of, or in exchange for, Permitted
Refinancing Indebtedness; (d) the payment of any dividend or distribution by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (e) so long as no Default or Event of Default
shall have occurred and be continuing, the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company held
by any employee of the Company's or any of its Restricted Subsidiaries, provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any calendar year; and
(f) the acquisition of Equity Interests of the Company in connection with the
exercise of stock options or stock appreciation rights by way of cashless
exercise or in connection with the satisfaction of withholding tax obligations.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greater of (a) the net book
value of such Investments at the time of such designation and (b) the fair
market value of such Investments at the time of such designation. Such
designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary, provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (a) such Indebtedness
is permitted under Section 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the four-quarter reference
period, and (b) no Default or Event of Default would be in existence following
such designation.
Any designation of a Subsidiary as an Unrestricted Subsidiary shall be
evidenced to the Trustee by filing with the Trustee a certified copy of a
resolution of the Board of Directors giving
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effect to such designation and an Officers' Certificate certifying that such
designation complied with the terms of the definition of Unrestricted Subsidiary
set forth in this Indenture and with this Section 4.07.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined in the
manner contemplated by the definition of the term "fair market value," and the
results of such determination shall be evidenced by an Officers' Certificate
delivered to the Trustee. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed;
provided, however, with respect to any planned purchase or redemption by the
Company of its Equity Interests, the Company may, in advance of any such
purchase or redemption, deliver to the Trustee a single Officers' Certificate
that otherwise complies with requirements set forth above stating (i) the
maximum aggregate amount of Equity Interests to be purchased or redeemed and
(ii) the period over which such purchases or redemptions will occur.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries on its Capital Stock or with
respect to any other interest or participation in, or measured by, its profits,
or (ii) pay any Indebtedness owed to the Company or any of its Restricted
Subsidiaries, (b) make loans or advances to the Company or any of its Restricted
Subsidiaries or (c) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (1) the Credit Facility or Existing Indebtedness,
each as in effect on the Issue Date, (2) this Indenture, the Notes and the
Subsidiary Guarantees, if any, (3) applicable law, (4) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (5) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(c) above on the property so acquired, (7) customary provisions in bona fide
contracts for the sale of property or assets or (8) Permitted Refinancing
Indebtedness with respect to any Indebtedness referred to in clauses (1) and (2)
above, provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are not materially more restrictive, taken as
a whole, than those contained in the agreements governing the Indebtedness being
refinanced.
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Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur" or an "incurrence") any Indebtedness
other than Permitted Indebtedness and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of Disqualified Stock; provided, however, that the Company or
a Guarantor may incur Indebtedness, and the Company may issue Disqualified
Stock, if the Consolidated Interest Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness or
Disqualified Stock had been issued or incurred at the beginning of such
four-quarter period.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (as determined in
accordance with the definition of such term, the results of which determination
shall be set forth in an Officers' Certificate delivered to the Trustee) of the
assets or Equity Interests issued or sold or otherwise disposed of and (b) at
least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash or Cash Equivalents; provided,
however, that the amount of (i) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or such
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (ii) any securities, notes or other obligations received by the
Company or such Restricted Subsidiary from such transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received) shall be deemed to be cash for purposes of this Section
4.10.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or any such Restricted Subsidiary may apply such Net Proceeds to (a)
permanently repay the principal of any secured Indebtedness (to the extent of
the fair value of the assets securing such Indebtedness, as determined by the
Board of Directors) or (b) to acquire (including by way of a purchase of assets
or stock, merger, consolidation or otherwise) assets used in the Principal
Business. (Any such Net Proceeds that are applied to the acquisition of assets
used in the Principal Business pursuant to any binding agreement shall be deemed
to have been applied for such purpose within such 365-day period so long as they
are so applied within two years after the date of receipt of such Net Proceeds.)
Pending the final application of any such Net Proceeds, the Company or any such
Restricted Subsidiary may temporarily reduce outstanding revolving credit
borrowings, or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph shall be
deemed to constitute "Excess Proceeds." Within 30 days of each date on which
the aggregate
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amount of Excess Proceeds exceeds $10.0 million, the Company shall commence a
Asset Sale Offer pursuant to Section 3.09 hereof to purchase the maximum
principal amount of Notes that may be purchased out of Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
date of purchase, in accordance with the procedures set forth in Section 3.09
hereof; provided, however, that, if the Company is required to apply such Excess
Proceeds to repurchase, or to offer to repurchase, any Pari Passu Indebtedness,
the Company shall only be required to offer to repurchase the maximum principal
amount of Notes that may be purchased out of the amount of such Excess Proceeds
multiplied by a fraction, the numerator of which is the aggregate principal
amount of Notes outstanding and the denominator of which is the aggregate
principal amount of Notes outstanding plus the aggregate principal amount of
Pari Passu Indebtedness outstanding. To the extent that the aggregate principal
amount of Notes tendered pursuant to an Asset Sale Offer is less than the amount
that the Company is required to repurchase, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Notes surrendered by holders thereof exceeds the amount that the
Company is required to repurchase, the Trustee shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Trustee so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased). Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(a) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person or, if there is no such comparable
transaction, on terms that are fair and reasonable to the Company or such
Restricted Subsidiary, and (b) the Company delivers to the Trustee (i) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (a) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (ii) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Company or the relevant
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal or investment banking firm that is, in the judgment
of the Board of Directors, qualified to render such opinion and is independent
with respect to the Company; provided, however, that the following shall be
deemed not to be Affiliate Transactions: (A) any employment agreement or other
employee compensation plan or arrangement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business of the Company or
such Restricted Subsidiary; (B) transactions between or among the Company and
its Restricted Subsidiaries; (C) Permitted Investments and Restricted Payments
that are permitted by the provisions of this Indenture; (D) loans or advances to
officers, directors and employees of the
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Company or any Restricted Subsidiary made in the ordinary course of business and
consistent with past practices of the Company and its Restricted Subsidiaries in
an aggregate amount not to exceed $500,000 outstanding at any one time; (E)
indemnities of officers, directors and employees of the Company or any
Restricted Subsidiary permitted by bylaw or statutory provisions; and (F) the
payment of reasonable and customary regular fees to directors of the Company or
any of its Restricted Subsidiaries.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens, to secure (a) any Indebtedness of the Company or such
Restricted Subsidiary (if it is not also a Guarantor), unless prior to, or
contemporaneously therewith, the Notes are equally and ratably secured, or (b)
any Indebtedness of any Guarantor, unless prior to, or contemporaneously
therewith, the Subsidiary Guarantees are equally and ratably secured; provided,
however, that if such Indebtedness is expressly subordinated to the Notes or the
Subsidiary Guarantees, the Lien securing such Indebtedness will be subordinated
and junior to the Lien securing the Notes or the Subsidiary Guarantees, as the
case may be, with the same relative priority as such Indebtedness has with
respect to the Notes or the Subsidiary Guarantees.
Section 4.13. Future Subsidiary Guarantees.
1. The Company shall cause each Restricted Subsidiary that (i) incurs
Indebtedness (other than Permitted Indebtedness and Purchase Money
Indebtedness) following the Issue Date or (ii) has Indebtedness (other than
Permitted Indebtedness and Purchase Money Indebtedness) or Disqualified
Stock outstanding on the date on which such Restricted Subsidiary becomes a
Restricted Subsidiary, to execute a Subsidiary Guarantee at the time such
Restricted Subsidiary incurs such Indebtedness or becomes a Restricted
Subsidiary and deliver an Opinion of Counsel and an Officers' Certificate
in accordance with the terms of Section 10.02 of this Indenture.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and, subject to Article 10 hereof, the corporate, partnership or
other existence of each of its Restricted Subsidiaries, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of the Company or any such Restricted Subsidiary; provided, however, that
the Company shall not be required to preserve the existence of any of its
Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries, taken as a whole.
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Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make an
offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at an offer price
in cash equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment"). Within 30 days following a Change
of Control, the Company shall mail a notice to each Holder and the Trustee
stating: (1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes validly tendered and not withdrawn will be
accepted for payment; (2) the purchase price and the purchase date, which shall
be no earlier than 30 days but no later than 60 days from the date such notice
is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered
will continue to accrue interest and Liquidated Damages, if any; (4) that,
unless the Company defaults in the payment of the Change of Control Payment, all
Notes accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest and Liquidated Damages, if any, after the Change of Control
Payment Date; (5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer will be required to surrender the Notes, properly
endorsed for transfer, together with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed and such customary
documents as the Company may reasonably request, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders will
be entitled to withdraw their election if the Paying Agent receives, not later
than the close of business on the second Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have the Notes purchased; and (7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. If any of
the Notes subject to a Change of Control Offer is in the form of a Global Note,
then the Company shall modify such notice to the extent necessary to accord with
the procedures of the Depository applicable to repurchases. Further, the
Company shall comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of Notes as a
result of a Change of Control.
(b) On or before 10:00 a.m. New York time on the Change of Control Payment
Date, the Company shall, to the extent lawful, (a) accept for payment all Notes
or portions thereof properly tendered pursuant to the Change of Control Offer,
(b) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered and (c) deliver
or cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to each holder of Notes so tendered the Change of Control Payment for such
Notes, and the Trustee shall promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided, however,
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly
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announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(c) The Change of Control provisions described above shall be applicable
whether or nor any other provisions of this Indenture are applicable.
(d) The Company shall not be required to make a Change of Control Offer
following a Change of Control if a third party makes the Change of Control
Offer in the manner, at the time and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
Section 4.16. Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly Owned Restricted
Subsidiary of the Company to, transfer, convey, sell, or otherwise dispose of
any Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, or other disposition
is of all the Capital Stock of such Wholly Owned Restricted Subsidiary and (b)
the Net Proceeds from such transfer, conveyance, sale, or other disposition are
applied in accordance with Section 4.10 hereof, and (ii) shall not permit any
Wholly Owned Restricted Subsidiary of the Company to issue any of its Equity
Interests to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company; except, in the case of both clauses (i) and (ii)
above, with respect to dispositions or issuances by a Wholly Owned Restricted
Subsidiary of the Company as contemplated in clauses (a) and (b) of the
definition of "Wholly Owned Restricted Subsidiary."
Section 4.17. Sale-and-leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale-and-leaseback transaction; provided,
however, that the Company or any Restricted Subsidiary, as applicable, may enter
into a sale-and-leaseback transaction if (i) the Company or such Restricted
Subsidiary could have (a) incurred Indebtedness in an amount equal to the
Attributable Indebtedness relating to such sale-and-leaseback transaction
pursuant to the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof and (b) incurred a Lien to secure such
Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of
such sale-and-leaseback transaction are at least equal to the fair market value
(as determined in accordance with the definition of such term, the results of
which determination shall be set forth in an Officers' Certificate delivered to
the Trustee) of the property that is the subject of such sale-and-leaseback
transaction and (iii) the transfer of assets in such sale-and-leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
Section 4.18. No Inducements.
The Company shall not, and the Company shall not permit any of its
Subsidiaries, either directly or indirectly, to pay (or cause to be paid) any
consideration, whether by way of interest, fee
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or otherwise, to any Holder for or as an inducement to any consent, waiver,
amendment or supplement of any 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 which so consent, waive or agree to amend or supplement in the time
frame set forth on solicitation documents relating to such consent, waiver or
agreement.
Section 4.19. Line of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business or activity other than the Principal
Business.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another Person unless (a) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (b) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Notes and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee, (c) immediately after such
transaction no Default or Event of Default exists and (d) except in the case of
a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the Person formed by or surviving any such consolidation
or merger (if other than the Company), or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made (A) will
have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio
test set forth in Section 4.09 hereof.
In connection with any consolidation, merger or disposition contemplated by
this provision, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, (i) an
Officers' Certificate stating that such consolidation, merger or disposition and
any supplemental indenture in respect thereto comply with this provision and
that all conditions precedent in the Indenture provided for relating to such
transaction or transactions have been complied with and (ii) an Opinion of
Counsel stating that the requirements of Section 5.01(a) and (b) have been
satisfied.
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Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the properties or
assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition, the provisions of this Indenture referring to
the "Company" shall refer instead to the successor corporation and not to the
Company), and may exercise every right and power of the Company under this
Indenture with the same effect as if such successor corporation had been named
as the Company herein; provided, however, that the predecessor Company shall not
be relieved from its obligations under this Indenture or the Notes in the case
of any such lease.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes, and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes;
(c) the Company fails to comply with any of the provisions of Section
4.10, 4.15 or 5.01 hereof;
(d) the Company fails to observe or perform any other covenant or
other agreement in this Indenture or the Notes for 60 days after notice to
the Company by the Trustee or the Holders of at least 25% in principal
amount of the Notes then outstanding of such failure;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness
or guarantee now exists, or is created after the Issue Date, which default
(i) is caused by a failure to pay principal of or premium or interest on
such Indebtedness prior to the expiration of any grace period provided in
such Indebtedness (a "Payment Default") or (ii) results in the acceleration
of such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity
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of which has been so accelerated, aggregates $5.0 million or more; and
provided, further, that if such default is cured or waived or any such
acceleration rescinded, or such Indebtedness is repaid, within a period of
10 days from the continuation of such default beyond the applicable grace
period or the occurrence of such acceleration, as the case may be, an Event
of Default and any consequential acceleration of the Notes shall be
automatically rescinded, so long as such rescission does not conflict with
any judgment or decree;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Restricted Subsidiaries and such judgment or judgments are
not paid or discharged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5.0 million;
(g) the failure of any Guarantor to perform any covenant set forth in
its Subsidiary Guarantee or the repudiation by any Guarantor of its
obligations under its Subsidiary Guarantee or the unenforceability of any
Subsidiary Guarantee for any reason;
(h) the Company or any Guarantor pursuant to or within the meaning of
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Guarantor in an
involuntary case,
(ii) appoints a Custodian of the Company or any Guarantor or for
all or substantially all of the property of the Company or any
Guarantor, or
(iii) orders the liquidation of the Company or any Guarantor,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
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Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon any such
declaration, the Notes shall become due and payable immediately. Notwithstanding
the foregoing, if an Event of Default specified in clause (h) or (i) of Section
6.01 hereof occurs with respect to the Company or any Guarantor, all outstanding
Notes shall be due and payable immediately without further action or notice.
The Holders of a majority in principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest, premium or Liquidated Damages, if any, that have become due
solely because of the acceleration) have been cured or waived.
If an Event of Default occurs by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Notes pursuant to Section 3.07 hereof,
then, upon acceleration of the Notes, an equivalent premium shall also become
and be immediately due and payable, to the extent permitted by law, anything in
this Indenture or in the Notes to the contrary notwithstanding.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal of and premium, interest
and Liquidated Damages, if any, on the Notes or to enforce the performance of
any provision of the Notes or this Indenture.
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 Holder of a Note 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. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of a majority in principal amount of the then outstanding Notes by
notice to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences hereunder, except a
continuing Default or Event of Default in the payment of the principal of or
premium, interest or Liquidated Damages, if any, on the Notes (including in
connection with an offer to purchase). 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 impair any right consequent
thereon.
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Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee 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 other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of and premium, interest and
Liquidated Damages, if any, on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium, interest and Liquidated Damages, if any, remaining unpaid
on the Notes and interest on overdue principal and, to the extent lawful,
interest and Liquidated Damages, if any, and such further amount as shall be
sufficient to cover the costs and
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expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to 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
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay 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 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the
Trustee's costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, interest and Liquidated Damages, if any, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Notes for principal, premium, interest and Liquidated
Damages, if any, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
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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 a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to
Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. 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 its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and 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; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
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(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(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 law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document 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 the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) The Trustee shall have no duty to inquire as to the performance of the
Company's covenants in Article 4 hereof. In addition, the Trustee shall not be
deemed to have knowledge of any Default or Event of Default except: (1) any
Event of Default occurring pursuant to Section 6.01(a) or 6.01(b) hereof; or (2)
any Default or Event of Default of which is Responsible Officer shall have
received written notification or obtained actual knowledge.
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Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company, any Guarantor or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail
to the Holders of the Notes a brief report dated as of such reporting date that
complies with TIA (S)313(a) (but if no event described in TIA (S) 313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA (S) 313(b)(2) and (S)
313(b)(1). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA(S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
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Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company and the Guarantors shall indemnify the Trustee against any and
all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company (including this Section 7.07) and defending itself against any claim
(whether asserted by the Company, any Guarantor or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence, bad faith or willful misconduct.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company or the Guarantors of their obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company shall pay the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Guarantors under this Section 7.07
shall survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then
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outstanding Notes may remove the Trustee by so notifying the Trustee and the
Company in writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee 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 Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note 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 Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 hereof shall continue
for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
As soon as practicable, the successor Trustee shall mail a notice of its
succession to the Company and the Holders of the Notes.
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Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to 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.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, exercise its
rights under either Section 8.02 or 8.03 hereof with respect to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have discharged
its obligations with respect to all outstanding Notes, and each Guarantor shall
be deemed to have discharged its obligations with respect to its Subsidiary
Guarantee, on the date the conditions set forth in Section 8.04 below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, and each Guarantor shall be
deemed to have paid and discharged its Subsidiary Guarantee (which in each case
shall thereafter be deemed to be "outstanding" only for the purposes of Section
8.05 hereof and the other Sections of this Indenture referred to in (a) and (b)
below) and to have satisfied all its other obligations under such Notes or
Subsidiary Guarantee and this Indenture (and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in Section 8.04 hereof,
and as more fully set forth in such Section, payments in respect of the
principal of and premium, if any, interest and Liquidated Damages, if any, on
such Notes when such payments are due, (b) the Company's obligations with
respect to such Notes under
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Sections 2.03, 2.04, 2.07, 2.10 and 4.02 hereof, (c) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each Guarantor shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from its obligations under the covenants contained in Article 4 (other
than those in Sections 4.01, 4.02, 4.06 and 4.14) and in clauses (c) and (d) of
Section 5.01 hereof on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company and
any Guarantor may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(e) through 6.01(g) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and premium, interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity
thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the Issue Date, there has been a change in
the applicable federal income tax law, in either case to the effect that,
and based thereon such Opinion of Counsel shall confirm that, the Holders
of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of
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such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness, all or a portion of
the proceeds of which will be used to defease the Notes pursuant to this
Article 8 concurrently with such incurrence or within 30 days thereof);
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Restricted Subsidiaries is a party or by which the Company or
any of its Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be based on such solvency certificates or solvency
opinions as counsel deems necessary or appropriate) to the effect that the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee pursuant
to Section 8.04 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 (including the Company acting as 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, premium, if any, and
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interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Subject to applicable escheat and abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium or Liquidated Damages, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium or Liquidated Damages, if any, or interest has become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), 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
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.05 hereof, by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.05 hereof; provided, however, that, if
the Company makes any payment of principal of, premium, if any, or interest on
any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes pursuant to Article 5 hereof;
(d) to secure the Notes pursuant to the requirements of Section 4.12
or otherwise;
(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note;
(f) to comply with Article 10 hereof;
(g) to add any Guarantor or to release any Guarantor from its
Subsidiary Guarantee, in each as provided in this Indenture; or
(h) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture and the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default
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or Event of Default or compliance with any provision of this Indenture or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company and the Guarantors in the execution of such amended or
supplemental indenture unless such amended or supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in principal amount of the Notes then outstanding may waive compliance
in a particular instance by the Company with any provision of this Indenture or
the Notes. However, without the consent of each Holder affected, an amendment,
supplement or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter any of the provisions with respect to the redemption of the Notes
(except as provided in Sections 3.09, 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, interest or Liquidated Damages, if any, on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a
majority in principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or Events of Default or the rights of Holders of
Notes to receive payments of
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principal of or premium, interest or Liquidated Damages, if any, on the
Notes (except as permitted in clause (g) below);
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 4.10 and 4.15 hereof);
(h) make any change in the ranking of the Notes relative to other
Indebtedness of the Company or in the Subsidiary Guarantees, in either case
in a manner adverse to the Holders of Notes; or
(i) make any change in the foregoing amendment, supplement and waiver
provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying
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upon, an Officers' Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is authorized or permitted
by this Indenture.
ARTICLE 10
GUARANTEES OF NOTES
Section 10.01. Subsidiary Guarantees.
Subject to Section 10.06 hereof, the Guarantors hereby, jointly and
severally, unconditionally guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes
held thereby and the Obligations of the Company hereunder and thereunder, that:
(a) the principal of and premium, interest and Liquidated Damages, if any, on
the Notes will be promptly paid in full when due, subject to any applicable
grace period, whether at maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal, premium, (to the extent permitted by law)
interest and Liquidated Damages, if any, on the Notes, and all other payment
Obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full and performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other Obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration, redemption or otherwise. Failing payment when so due of any
amount so guaranteed or any performance so guaranteed for whatever reason the
Guarantors will be jointly and severally obligated to pay the same immediately.
An Event of Default under this Indenture or the Notes shall constitute an event
of default under the Subsidiary Guarantees, and shall entitle the Holders to
accelerate the obligations of the Guarantors hereunder in the same manner and to
the same extent as the Obligations of the Company. The Guarantors hereby agree
that their obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
(other than complete performance) which might otherwise constitute a legal or
equitable discharge or defense of a Guarantor. Each Guarantor further, to the
extent permitted by law, hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
Obligations contained in the Notes and this Indenture. If any Holder or the
Trustee is required by any court or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee or other similar official acting in
relation to either the Company or the Guarantors, any amount paid by the Company
or any Guarantor to the Trustee or such Holder, the Subsidiary Guarantees, to
the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to, and hereby waives, any
right of subrogation in relation to the Holders in respect of any Obligations
guaranteed hereby. Each Guarantor further agrees that, as between the
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(a) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 hereof for the purposes of its Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of
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the Obligations guaranteed thereby, and (b) in the event of any declaration of
acceleration of such Obligations as provided in Article 6 hereof, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of its Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantees.
Section 10.02. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 10.01 hereof,
each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit D hereto shall be endorsed by manual or
facsimile signature by an Officer of such Guarantor on each Note authenticated
and delivered by the Trustee and that this Indenture shall be executed on behalf
of such Guarantor by an Officer of such Guarantor.
To the extent required by the provisions of Section 4.13 hereof, the
Company shall cause each of its Restricted Subsidiaries to execute a Subsidiary
Guarantee substantially in the form of Exhibit D. Such Subsidiary Guarantee
shall be accompanied by a supplemental indenture substantially in the form of
Exhibit E, along with the Opinion of Counsel and Officers' Certificate required
under Section 9.06 of this Indenture; provided, however, that any Subsidiary
that has been properly designated as an Unrestricted Subsidiary in accordance
with this Indenture need not execute a Subsidiary Guarantee for so long as it
continues to constitute an Unrestricted Subsidiary.
Each Guarantor hereby agrees that its Subsidiary Guarantee shall remain in
full force and effect notwithstanding any failure to endorse on each Note a
notation of such Subsidiary Guarantee.
If an Officer whose signature is on the Subsidiary Guarantee no longer
holds that office at the time the Trustee authenticates the Note on which a
Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantees on behalf
of the Guarantors.
Section 10.03. Guarantors May Consolidate, etc., on Certain Terms.
(a) Except as set forth in Articles 4 and 5 hereof, nothing contained in
this Indenture shall prohibit a merger between a Guarantor and another Guarantor
or a merger between a Guarantor and the Company.
(b) No Guarantor shall consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person), another Person (other than the
Company or another Guarantor), whether or not affiliated with such Guarantor,
unless, (i) subject to the provisions of Section 10.04 hereof, the Person formed
by or surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture, substantially in the form of Exhibit E hereto, under the Notes and
this Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; (iii) such Guarantor, or any Person formed
by or surviving any such consolidation or merger, would have Consolidated
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Net Worth (immediately after giving effect to such transaction), equal to or
greater than the Consolidated Net Worth of such Guarantor immediately preceding
the transaction; and (iv) the Company, at the time of such transaction and after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Consolidated Interest
Coverage Ratio test set forth in Section 4.09 hereof.
(c) In the case of any such consolidation or merger and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and substantially in the form of Exhibit E hereto, of
the Subsidiary Guarantee and the due and punctual performance of all of the
covenants of this Indenture to be performed by the Guarantor, such successor
Person shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor; provided, however, that,
solely for purposes of computing Consolidated Net Income for purposes of clause
(c) of the first paragraph of Section 4.07 hereof, the Consolidated Net Income
of any Person other than the Company and its Restricted Subsidiaries shall only
be included for periods subsequent to the effective time of such merger or
consolidation. Such successor Person thereupon may cause to be signed any or
all of the notations of Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All of the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the Issue Date.
Section 10.04. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets or Capital
Stock of any Guarantor, by way of merger, consolidation or otherwise, then such
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the Capital Stock of such Guarantor) or
the Person acquiring the assets (in the event of a sale or other disposition of
all of the assets of such Guarantor) shall be released and relieved of any
obligations under its Subsidiary Guarantee; provided, however, that (i) in the
event such transaction constitutes an Asset Sale, the Net Proceeds from such
sale or other disposition are treated in accordance with the provisions of
Section 4.10 hereof and (ii) the Company is in compliance with all other
provisions of this Indenture applicable to such disposition; provided, further,
that upon such release, the obligations of such Guarantor in respect of any and
all other guarantees of Indebtedness of the Company or a Guarantor are similarly
released. Upon delivery by the Company to the Trustee of an Officers'
Certificate to the effect of the foregoing, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Subsidiary Guarantee. Any Guarantor not released
from its obligations under its Subsidiary Guarantee shall remain liable for the
full amount of principal of and premium, interest and Liquidated Damages, if
any, on the Notes and for the other Obligations of such Guarantor under this
Indenture as provided in this Article 10.
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Section 10.05. Releases Following Designation as an Unrestricted Subsidiary.
In the event that the Company designates a Guarantor to be an Unrestricted
Subsidiary, then such Guarantor shall be released and relieved of any
obligations under its Subsidiary Guarantee; provided that such designation is
conducted in accordance with this Indenture.
Section 10.06. Limitation on Guarantor Liability.
For purposes hereof, each Guarantor's liability under its Subsidiary
Guarantee shall be limited to the lesser of (a) the aggregate amount of the
Obligations of the Company under the Notes and this Indenture and (b) the
amount, if any, which would not have (i) rendered such Guarantor "insolvent" (as
such term is defined in the Bankruptcy Law and in the Debtor and Creditor Law of
the State of New York) or (ii) left such Guarantor with unreasonably small
capital at the time its Subsidiary Guarantee of the Notes was entered into;
provided, however, that, it will be a presumption in any lawsuit or other
proceeding in which a Guarantor is a party that the amount guaranteed pursuant
to the Subsidiary Guarantee is the amount set forth in clause (a) above unless
any creditor, or representative of creditors of such Guarantor, or debtor in
possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a
lawsuit that the aggregate liability of the Guarantor is the amount set forth in
clause (b) above. In making any determination as to solvency or sufficiency of
capital of a Guarantor in accordance with the previous sentence, the right of
such Guarantor to contribution from other Guarantors, and any other rights such
Guarantor may have, contractual or otherwise, shall be taken into account.
Section 10.07. "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 10 shall in each case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 10 in place of the Trustee.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing (in the English language) and delivered
in person or mailed by first class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery,
to the others' address:
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If to the Company or the Guarantors:
Wainoco Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024-3411
Attention: Julie H. Edwards
Telecopier No.: (713) 688-0616
With a copy to:
Andrews & Kurth L.L.P.
4200 Chase Tower
600 Travis Street
Houston, Texas 77002
Attention: Christopher Collins
Telecopier No.: (713) 220-4285
If to the Trustee:
(1) For payment, registration, transfer and exchange of the Notes:
By Hand:
Chase Bank of Texas, National Association
One Main Place
1201 Main Street, 18th Floor
Dallas, Texas 75202
Attention: Registered Bond Events
Telephone No.: (214) 672-5125 or (800) 275-2048
Telecopier No.: (214) 672-5746
By Mail:
Chase Bank of Texas, National Association
P. O. Box 2320
Dallas, Texas 75221-2320
Attention: Registered Bond Events
Telephone No.: (214) 672-5125 or (800) 275-2048
Telecopier No.: (214) 672-5746
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(2) For all other communications relating to the Notes:
Chase Bank of Texas, National Association
Global Trust Services
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Mauri J. Cowen
Telephone No.: (713) 216-5811
Telecopier No.: (713) 216-5476
If to the Paying Agent:
Chase Bank of Texas, National Association
c/o Texas Commerce Trust Company of New York
55 Water Street, North Building
Room 234, Windows 20 and 21
New York, New York 10041
Telephone No.: (212) 638-4020 or (212) 738-4021
Telecopier No.: (212) 638-7267
The Company, any of the Guarantors or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA(S) 313(c), to the extent required by the TIA. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
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Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
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Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, the
Subsidiary Guarantees, this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE AND
ENFORCE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Restricted Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
Section 11.10. Successors.
All agreements of the Company and the Guarantors in this Indenture and the
Notes shall bind their successors. All agreements of the Trustee in this
Indenture shall bind its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in 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.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table 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 of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
WAINOCO OIL CORPORATION
By: /s/ Julie H. Edwards
-------------------------------------
Name: Julie H. Edwards
Title: Senior Vice President Finance
and Chief Financial Officer
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as Trustee
By: /s/ Mauri J. Cowen
-------------------------------------
Mauri J. Cowen
Vice President and Trust Officer
<PAGE>
EXHIBIT 4.9
WAINOCO OIL CORPORATION
$70,000,000
9 1/8% Senior Notes due 2006
REGISTRATION RIGHTS AGREEMENT
Dated as of February 9, 1998
BEAR, STEARNS & CO. INC.
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 9, 1998 by and between Wainoco Oil Corporation, a Wyoming
corporation (the "Company"), and Bear, Stearns & Co. Inc. (the "Initial
Purchaser"), who has agreed to purchase $70,000,000 aggregate principal amount
of the Company's 9 1/8% Senior Notes due 2006 (the "Initial Notes") pursuant to
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated February 4,
1998 (the "Purchase Agreement"), by and between the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Initial
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser set forth in Section 3 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date on which the Initial Notes are originally
issued under the Indenture.
Commission: The Securities and Exchange Commission.
Consummate: The Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the delivery by
the Company to the Registrar under the Indenture of Exchange Notes in the
same aggregate principal amount as the aggregate principal amount of Initial
Notes that were tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Initial Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
<PAGE>
Exchange Notes: The Company's 9 1/8% Senior Notes due 2006 registered
under the Act with terms substantially identical to the Initial Notes, to be
issued pursuant to the Indenture and the Exchange Offer.
Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities
the opportunity to exchange all such outstanding Transfer Restricted
Securities held by such Holders for Exchange Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
proposes to sell the Initial Notes (i) to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act and (ii) outside
the United States to certain non-U.S. Persons meeting the requirements of
Rule 904 under the Act.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of February 9, 1998, among the
Company and Chase Bank of Texas, National Association, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
Initial Notes: As defined in the preamble hereto.
Initial Purchaser: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Initial Notes and the Exchange Notes.
Person: An individual, partnership, corporation, trust, limited
liability company or unincorporated organization, or a government or agency
or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
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Record Holder: With respect to any Damages Payment Date relating to
Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Initial Note until (i) the date
on which such Initial Note has been exchanged by a person other than a
Broker-Dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a Broker-Dealer in the Exchange Offer of an Initial Note for an
Exchange Note, the date on which such Exchange Note is sold to a purchaser
who receives from such Broker-Dealer on or prior to the date of such sale a
copy of the Prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Initial Note has been effectively
registered under the Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Initial Note is
distributed to the public pursuant to Rule 144 under the Act or may be
distributed to the public pursuant to Rule 144(k) under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities of record.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable law
or Commission policy (after the procedures set forth in Section 6(a) below have
been complied with), the Company shall (i) cause to be filed with the Commission
on or before the 60th day after the
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Closing Date, a Registration Statement under the Act relating to the Exchange
Notes and the Exchange Offer, (ii) use their reasonable best efforts to cause
such Registration Statement to become effective on or before the 150th day after
the Closing Date, (iii) in connection with the foregoing, file (A) all
pre-effective amendments to such Registration Statement as may be necessary in
order to cause such Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings in connection
with the registration and qualification of the Exchange Notes to be made under
the Blue Sky laws of such jurisdictions as are necessary to permit Consummation
of the Exchange Offer, and (iv) upon the effectiveness of such Registration
Statement, commence the Exchange Offer. The Exchange Offer Registration
Statement shall be on the appropriate form under the Act permitting registration
of the Exchange Notes to be offered in exchange for the Transfer Restricted
Securities and to permit resales of the Exchange Notes held by Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement to be
effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Exchange Notes shall be included in the
Exchange Offer Registration Statement. The Company shall use its reasonable
best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective on or prior to the 180th day after the Closing Date.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Initial Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company) may exchange such
Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with any
resales of the Exchange Notes received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such resales by Broker-Dealers that the
Commission may require in order to permit such resales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Notes held by any such Broker-Dealer except to the extent required
by the Commission as a result of a change in policy after the date of this
Agreement.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Notes acquired by Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for
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a period of one year from the date on which the Exchange Offer Registration
Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) any Holder of Transfer Restricted Securities
notifies the Company prior to the 20th day following the Consummation of the
Exchange Offer (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that such
Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and that the Prospectus contained in
the Exchange Offer Registration Statement is not available for such resales by
such Holder, then the Company shall use its reasonable best efforts to:
(x) cause to be filed a shelf registration statement pursuant to Rule
415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement")
on or prior to the 60th day after the date the obligation to file such Shelf
Registration Statement arises pursuant to clause (i) or (ii) above, which
Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) cause such Shelf Registration Statement to be declared effective
by the Commission on or before the 150th day after the obligation to file
such Shelf Registration Statement arises.
The Company shall use its reasonable best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years following the Closing Date or, if
earlier, until the Shelf Registration Statement terminates when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any
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Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), whether or
not the Company has breached any obligation to use its reasonable best efforts,
to cause any such Registration Statement to be declared effective, (iii) the
Exchange Offer has not been Consummated within 180 days of the Closing Date with
respect to the Exchange Offer Registration Statement or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective on or prior to the Effectiveness Target Date (each such event referred
to in clauses (i) through (iv), a "Registration Default"), the Company hereby
agrees to pay liquidated damages to each Holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues. The
amount of the liquidated damages shall increase by an additional $.05 per week
per $1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.20 per week per $1,000
principal amount of Transfer Restricted Securities. All accrued liquidated
damages shall be paid to Record Holders by the Company by wire transfer of
immediately available funds or by federal funds check on each payment date for
liquidated damages, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company shall comply with all of the provisions of Section 6(c)
below, shall use its reasonable best efforts to effect such exchange to permit
the sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof and shall comply with all of
the following provisions:
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(i) If in the reasonable opinion of counsel to the Company there is a
question as to whether the Exchange Offer is permitted by applicable law,
the Company hereby agrees to seek a no-action letter or other favorable
decision from the Commission allowing the Company to Consummate an Exchange
Offer for such Initial Notes. The Company hereby agrees to pursue the
issuance of such a decision to the Commission staff level but shall not be
required to take commercially unreasonable action to effect a change of
Commission policy. The Company hereby agrees, however, to (A) participate
in telephonic conferences with the Commission, (B) deliver to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that such an Exchange
Offer should be permitted and (C) diligently pursue a resolution (which need
not be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation thereof, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of the
Company, (B) it is not engaged in, and does not intend to engage in, and has
no arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer, (C)
it is acquiring the Exchange Notes in its ordinary course of business and
(D) if such Holder is a broker-dealer, that it will receive Exchange Notes
for its own account in exchange for Securities that were acquired as a
result of market-making activities or other trading activities and that it
will deliver a prospectus in connection with any resale of such Exchange
Notes. Each Holder shall be required to make such other representations as
may be reasonably necessary under applicable Commission rules, regulations
or interpretations to render the use of Form S-4 or another appropriate form
under the Securities Act available and will be required to agree to comply
with their agreements and covenants set forth in this Agreement. In
addition, the Initial Purchaser, for itself and on behalf of the Holders,
hereby acknowledges and agrees, and each Holder by its purchase of Transfer
Restricted Securities shall be deemed to have acknowledged and agreed, that
any Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be covered
by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of Regulation
S-K if the resales are of Exchange Notes obtained by such Holder in exchange
for Initial Notes acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the Commission
(A) stating that the
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Company is registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above and
(B) including a representation that the Company has not entered into any
arrangement or understanding with any Person to distribute the Exchange
Notes to be received in the Exchange Offer and that, to the best of the
Company's information and belief, each Holder participating in the Exchange
Offer is acquiring the Exchange Notes in its ordinary course of business and
has no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, if required, the Company shall comply with all the
provisions of Section 6(c) below and shall use its reasonable best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof and, pursuant thereto, the Company will prepare and file
with the Commission in accordance with Section 4(a) hereof a Shelf Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Company shall:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3(b) or 4 of this Agreement,
as applicable; upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
the resale of Transfer Restricted Securities during the period required by
this Agreement, the Company shall file promptly an appropriate amendment to
such Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B), use
its reasonable best efforts to cause such amendment to be declared effective
and such Registration Statement and the related Prospectus to become usable
for their intended purpose(s) as soon as practicable thereafter;
(ii) use its reasonable best efforts to prepare and file with the
Commission such amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration Statement effective
for the applicable period set forth in Section 3(b) or 4 hereof, as
applicable, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with the applicable provisions of Rules 424 and
430A under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
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Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Company shall use its reasonable best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (but
excluding any documents incorporated by reference as a result of the
Company's periodic reporting requirements under the Exchange Act), and the
Company shall not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
(excluding all such documents incorporated by reference as a result of the
Company's periodic reporting requirements under the Exchange Act) to which a
selling Holder of Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s), if any, shall reasonably
object within three business days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission;
(v) upon written request, promptly following the filing of any
document that is to be incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to the selling
Holders and to the underwriter(s), if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
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(vi) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), relevant financial and other
records, pertinent corporate documents and properties of the Company and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness; provided, however, that
the foregoing inspection and information gathering (i) shall be coordinated
on behalf of the selling Holders, underwriters, or any representative
thereof, by one counsel, who shall be Vinson & Elkins L.L.P. or such other
counsel as may be chosen by the Holders of a majority in principal amount of
Transfer Restricted Securities, and (ii) shall not be available for any such
Holder who does not agree in writing to hold such information in confidence.
(vii) if requested by any selling Holders or any managing
underwriter in connection with such sale, if any, promptly incorporate in
any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling
Holders and underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being sold
to such underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(viii) upon written request, furnish to each selling Holder and each
of the underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein
and all exhibits (including exhibits incorporated therein by reference);
(ix) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection with
the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto; provided that such
use of the Prospectus and any amendment or supplement thereto and such
offering and sale conforms to the Plan of Distribution set forth in the
Prospectus and complies with the terms of this Agreement and all applicable
laws and regulations thereunder;
(x) in the event of an Underwritten Registration, enter into such
customary agreements (including an underwriting agreement), and make such
customary representations and warranties, and take all such other customary
actions in connection therewith in order
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to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Shelf Registration Statement contemplated by this
Agreement, all to such extent as may be requested by the Holders of Transfer
Restricted Securities or a managing underwriter in connection with any sale
or resale pursuant to any Shelf Registration Statement contemplated by this
Agreement; provided, however, that the Company shall have no obligation to
enter into an underwriting agreement or permit an Underwritten Offering
unless a request therefor shall have been received from Holders of not less
than 33% of the aggregate principal amount of Transfer Restricted
Securities then outstanding; and whether or not an underwriting agreement is
entered into and whether or not the registration is an Underwritten
Registration, the Company shall:
(A) Except in the case of an Underwritten Registration, furnish
to each selling Holder upon the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of effectiveness of the
Shelf Registration Statement, signed on behalf of the Company by
two senior officers, one of whom must be its Chief Financial
Officer, confirming, as of such date, the matters set forth in
paragraphs (a), (c) and (d) of Section 8 of the Purchase Agreement
with respect to the transactions contemplated by the Shelf
Registration Statement;
(2) an opinion, dated the date of effectiveness of the Shelf
Registration Statement, of counsel for the Company, covering the
matters set forth in Exhibit A of the Purchase Agreement with
respect to the transactions contemplated by the Shelf Registration
Statement, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
independent accountants of the Company and representatives of the
Initial Purchaser at which the contents of the Registration
Statement and related matters were discussed and, although it does
not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement
during the course of such participation, no facts came to its
attention that caused such counsel to believe that the
Registration Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective, contained
an untrue statement of a material fact or omitted to state any
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date contained
an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading (except as to financial statements and related notes,
the financial statement schedules and other financial and
statistical data included therein); and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement, from the
Company's
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independent accountants if such comfort letter shall be issuable
to the selling Holders in accordance with the relevant accounting
industry pronouncements, in the customary form and covering
matters of the type customarily covered in comfort letters by
underwriters in connection with primary underwritten offerings,
and affirming the matters set forth in the comfort letters
delivered pursuant to Section 8(g) of the Purchase Agreement,
without exception; and
(B) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause
(A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (x), if any.
If at any time the representations and warranties of the Company
contemplated in clause (A)(1) above cease to be true and correct, the
Company shall so advise the Initial Purchaser and the underwriter(s), if
any, and each selling Holder promptly and, if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may request and
do any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however,
that the Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation in any
jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Initial Notes
covered by the Shelf Registration Statement, Exchange Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Initial Notes being sold by such Holder; such Exchange Notes to be
registered in the name of the purchaser(s) of such Notes, as the case may
be; in return, the Initial Notes held by such Holder shall be surrendered to
the Company for cancellation;
(xiii) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in
such denominations and registered in such names as the Holders or the
underwriter(s), if any, may reasonably request at least two business days
prior to any sale of Transfer Restricted Securities made by such
underwriter(s);
(xiv) if any fact or event contemplated by clause 6(c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact
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<PAGE>
or omit to state any material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
(xv) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of the Registration Statement and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvi) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD;
(xvii) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to underwriters in
a firm or best efforts Underwritten Offering or (B) if not sold to
underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement;
(xviii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use its reasonable best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner;
(xix) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which the
Notes are then listed if requested by the Holders of a majority in aggregate
principal amount of Initial Notes or the managing underwriter(s), if any;
and
(xx) provide promptly to each Holder upon written request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will keep such
notice confidential and forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xiv) hereof, or until it is advised in writing (the "Advice") by
the Company that the use
- 13 -
<PAGE>
of the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3(b) or 4
hereof, as applicable, shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xiv) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by the Initial
Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of
any "qualified independent underwriter" and its counsel that may be required by
the rules and regulations of the NASD)); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Exchange Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and, subject to Section 7(b) below, the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing Notes on a national securities exchange or automated quotation system,
if any; and (vi) all fees and disbursements of independent public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company. The Company shall not be responsible for any other expenses or costs,
including but not limited to commissions, fees and discounts of underwriters,
brokers, dealers and agents.
(b) In connection with any Registration Statement required by this
Agreement (excluding the Exchange Offer Registration Statement), the Company
will reimburse the Initial Purchaser and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Vinson & Elkins L.L.P. or such other counsel as may be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
- 14 -
<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder, (ii)
the Initial Purchaser, (iii) each person, if any, who controls any Holder or the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or the Initial Purchaser or
any controlling person (any person referred to in clauses (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder"), to the fullest extent
lawful, from and against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable attorneys' fees and
any and all reasonable expenses whatsoever incurred in investigating, preparing
or defending against any investigation or litigation, commenced or threatened,
or any claim whatsoever, and any and all amounts paid in settlement of any claim
or litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus, or in any
supplement thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent, but only to
the extent, that any such loss, liability, claim, damage or expense arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the any of
the Holders expressly for use therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have, including under
this Agreement.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each of its respective officers, directors,
employers, partners, representatives and agents to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only to the extent such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon or in conformity with information
relating to such Holder furnished in writing by such Holder for use in any
Registration Statement, or in any amendment thereof or supplement thereto;
provided, however, that in no case shall any selling Holder be liable or
responsible for any amount in excess of proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. This indemnity will be in addition to any liability which the
Holders may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 or otherwise except to the extent that it has been
prejudiced in any material respect by such failure). In case any such action is
brought against any indemnified party, and it notifies an indemnifying
- 15 -
<PAGE>
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume and control the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to take charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall be advised by
counsel that there may be defenses available to it which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party shall not have the right to direct the defense
of such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its prior
written consent; provided that such consent was not unreasonably withheld.
SECTION 9. CONTRIBUTION
In order to provide for contribution in circumstances in which the
indemnification provided for in Section 8 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified thereunder,
the Company, on one hand, and the Holders, on the other hand, shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than a Holder, who may also be liable for contribution, including persons
who control the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act) to which the Company or any Holder may be subject,
(i) in such proportion as is appropriate to reflect the relative fault of the
Company, on one hand, and each Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative fault referred to in clause (i) above but also other relevant
equitable considerations. The relative fault of the Company, on one hand, and
of each Holder, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or such Holder and the party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this
Section 9, (i) in no case
- 16 -
<PAGE>
shall any Holder be required to contribute any amount in excess of the amount by
which the proceeds received by such Holder upon the sale of the Transfer
Restricted Securities giving rise to such obligation exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 9,
(A) each person, if any, who controls any of the Holders within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives and agents
of such Holder or any controlling person shall have the same rights to
contribution as the Holders, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 9. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 9, notify such party
or parties from whom contribution may be sought, but the failure to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 9 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its prior written consent; provided that
such written consent was not unreasonably withheld.
SECTION 10. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
SECTION 12. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal
- 17 -
<PAGE>
amount of the Transfer Restricted Securities included in such offering; provided
that such investment bankers and managers must be reasonably satisfactory to the
Company.
SECTION 13. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary damages (including the
liquidated damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate; provided that the liquidated
damages contemplated hereby shall be the exclusive remedy for any such breach of
Section 3 or 4 of this Agreement.
(b) No Inconsistent Agreements. The Company shall not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company shall not take any action
with respect to the Notes that would materially and adversely affect the ability
of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
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<PAGE>
(ii) if to the Company:
Wainoco Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024-3411
Telecopier No.: (713) 688-0616
Attention: Corporate Secretary
with a copy to:
Andrews & Kurth L.L.P.
4200 Chase Tower
600 Travis Street
Houston, Texas 77002
Telecopier No.: (713) 220-4285
Attention: Christopher S. Collins
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by owning and holding such Transfer
Restricted Securities such Person shall be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(g) 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.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
- 19 -
<PAGE>
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
- 20 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WAINOCO OIL CORPORATION
By:________________________________________
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:______________________________
Name:
Senior Managing Director
- 21 -
<PAGE>
[LETTERHEAD OF ANDREWS & KURTH L.L.P.]
EXHIBIT 5.1
March 11, 1998
Board of Directors
Wainoco Oil Corporation
10000 Memorial Drive, Suite 600
Houston, Texas 77024-3411
Gentlemen:
We have acted as counsel to Wainoco Oil Corporation, a Wyoming corporation
(the "Company"), in connection with the Company's Registration Statement on Form
S-4 (the "Registration Statement") relating to the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the offer by the
Company to exchange up to $70,000,000 aggregate principal amount of its 9 1/8%
Senior Notes due 2006, Series A (the "Exchange Notes") for its existing 9 1/8%
Senior Notes due 2006 (the "Old Notes"). The Exchange Notes are proposed to be
issued in accordance with the provisions of the Indenture, dated as of February
9, 1998, between the Company and Chase Bank of Texas, National Association, as
Trustee (the "Indenture").
As the basis for the opinions expressed below, we have examined the
Registration Statement, the Prospectus contained therein, the Indenture, which
is filed as an exhibit to the Registration Statement, and such statutes,
regulations, corporate records and documents, certificates of corporate and
public officials and other instruments as we have deemed necessary or advisable
for the purposes of this opinion. In such examination, we have assumed (i) that
the signatures on all documents that we have examined are genuine, (ii) the
authenticity of all documents submitted to us as originals, and (iii) the
conformity with the original documents of all documents submitted to us as
copies.
Based upon the foregoing and having due regard for such legal
considerations as we deem relevant, we are of the opinion that the Exchange
Notes, (a) when exchanged in the manner described in the Registration Statement,
(b) when duly executed, authenticated, issued and delivered in accordance with
the terms of the Indenture, (c) when the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended, and (d) when applicable provisions
of "blue sky" laws have been complied with, will be legally issued and
constitute binding obligations of the Company, enforceable against the Company
in accordance with their terms and the terms of the Indenture.
The opinion expressed above with respect to the Exchange Notes may be
limited by applicable bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfer,
<PAGE>
Wainoco Oil Corporation
March 11th, 1998
Page 2
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law)). Such opinion is also subject to
the qualification that the remedy of specific performance and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which proceedings may be brought.
This opinion is limited in all respects to the laws of the States of New
York and Texas, and the laws of the United States of America insofar as such
laws are applicable. We hereby consent to the use of this opinion as an exhibit
to the Registration Statement and to the use of the firm name under the heading
"Legal Matters" in the Registration Statement.
Very truly yours,
ANDREWS & KURTH L.L.P.
1173/1213/2647
<PAGE>
EXHIBIT 12.1
WAINOCO OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
PRO
FORMA
1993 1994 1995 1996 1997 1997
----- ----- ------ ------ ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations........................... $(2.2) $ 1.7 $(19.3) $(11.6) $ 7.8 $15.1
Add:
Interest............................ 18.7 18.8 18.3 17.5 15.9 7.7
----- ----- ------ ------ ----- -----
Earnings as defined............... $16.5 $20.5 $ (1.0) $ 5.9 $23.7 $22.8
===== ===== ====== ====== ===== =====
Interest.............................. $18.7 $18.8 $ 18.3 $ 17.5 $15.9 $ 7.7
Interest capitalized.................. .7 -- -- -- -- --
----- ----- ------ ------ ----- -----
Fixed charges as defined.......... $19.4 $18.8 $ 18.3 $ 17.5 $15.9 $ 7.7
===== ===== ====== ====== ===== =====
Ratio of earnings to fixed charges.... NM 1.1 NM NM 1.5 2.9
===== ===== ====== ====== ===== =====
Fixed charges in excess of earnings... $ 2.9 N/A $ 19.3 $ 11.6 N/A N/A
===== ===== ====== ====== ===== =====
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in this Registration Statement and our reports dated February
10, 1998 included (incorporated by reference) in Wainoco Oil Corporation's
Form 10-K for the year ended December 31, 1997 and to all references to our
Firm included in this Registration Statement.
Arthur Andersen LLP
Houston, Texas
March 10, 1998
<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) ____
--------------
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
74-0800980
(I.R.S. Employer Identification Number)
712 MAIN STREET, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip code)
LEE BOOCKER, 712 MAIN STREET, 26TH FLOOR
HOUSTON, TEXAS 77002 (713) 216-2448
(Name, address and telephone number of agent for service)
WAINOCO OIL CORPORATION
(Exact name of obligor as specified in its charter)
WYOMING 74 - 1895085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10000 MEMORIAL DRIVE, SUITE 600
HOUSTON, TEXAS 77024
(Address of principal executive offices) (Zip code)
9-1/8% SENIOR NOTES DUE 2006
SERIES A
(Title of indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee. (See Note on Page 7.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING
SECURITIES OF THE TRUSTEE.
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
-------------- ------------------
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
1
<PAGE>
ITEM 4. (CONTINUED)
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE
CLAIM THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION
310(B)(1) OF THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER
ANY SUCH OTHER INDENTURE, INCLUDING A STATEMENT AS TO HOW THE
INDENTURE SECURITIES WILL RANK AS COMPARED WITH THE SECURITIES
ISSUED UNDER SUCH OTHER INDENTURE.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICER OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable by virtue of Form T-1 General Instruction B and
response to Item 13.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ -----------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
2
<PAGE>
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
COL. A COL. B COL. C COL. D
PERCENTAGE OF
VOTING SECURITIES
REPRESENTED BY
AMOUNT OWNED AMOUNT GIVEN IN
NAME OF OWNER TITLE OF CLASS BENEFICIALLY COL. C
------------- -------------- ------------ -----------------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO THE SECURITIES OF THE OBLIGOR
OWNED BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY
THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
WHETHER THE BENEFICIALLY OR PERCENT OF
SECURITIES HELD AS COLLATERAL CLASS
ARE VOTING SECURITY FOR REPRESENTED BY
OR NONVOTING OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS SECURITIES DEFAULT IN COL. C
-------------- ---------- ------- ---------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
3
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
-------------- ----------- ------------------ ---------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR OR (2)
IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
-------------- ----------- ------------------ ---------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
4
<PAGE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50% OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OR SUCH PERSON ANY OF WHICH
ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A COL. B COL. C COL. D
AMOUNT OWNED
BENEFICIALLY OR PERCENT OF
HELD AS COLLATERAL CLASS
TITLE OF ISSUER SECURITY FOR REPRESENTED BY
AND AMOUNT OBLIGATIONS IN AMOUNT GIVEN
TITLE OF CLASS OUTSTANDING DEFAULT BY TRUSTEE IN COL. C
-------------- ----------- ------------------ ---------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
COL. A COL. B COL. C
NATURE OF AMOUNT
INDEBTEDNESS OUTSTANDING DATE DUE
------------ ----------- --------
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There is not, nor has there been, a default with respect to the securities
under this indenture. (See Note on Page 7.)
5
<PAGE>
ITEM 13. (CONTINUED)
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH
ANY SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
There has not been a default under any such indenture or series. (See
Note on Page 7.)
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable by virtue of Form T-1 General Instruction B and response
to Item 13.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
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 now in
effect.
# 2. A copy of the certificate of authority of the trustee to
commence business.
* 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors
of the Federal Reserve System under date of January 21, 1948.
+ 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6
<PAGE>
6. The consent of United States institutional trustees required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
8. Not applicable.
9. Not applicable.
___________________________________________________________________
NOTE REGARDING ATTACHED AND INCORPORATED EXHIBITS
Effective January 20, 1998, the name of the Trustee was changed from
Texas Commerce Bank National Association to Chase Bank of Texas, National
Association. Exhibit 7 listed above, the Trustee's Consolidated Reports of
Condition and Income for the fourth quarter of 1997, and the exhibits
incorporated by reference below, were filed under the former name of the
Trustee.
. Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as
exhibits to the Form S-3 File No. 33-56195.
# Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as
exhibits to the Form S-3 File No. 33-42814.
* Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as
exhibits to the Form S-11 File No. 33-25132.
+ Incorporated by reference to exhibit bearing the same designation
and previously filed with the Securities and Exchange Commission as
exhibits to the Form S-3 File No. 33-65055.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Items 2 and 13, the
answers to said Items are based on incomplete information. Such Items may,
however, be considered as correct unless amended by an amendment to this
Form T-1.
7
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, A NATIONAL BANKING
ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF
AMERICA, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF
HOUSTON, AND STATE OF TEXAS, ON THE 11TH DAY OF MARCH, 1998.
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION
(Trustee)
By: /s/ Mauri J. Cowen
------------------------------------
Mauri J. Cowen
Vice President and Trust Officer
8
<PAGE>
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
The undersigned is trustee under an Indenture dated as of February 9, 1998,
between Wainoco Oil Corporation (the "Company") and Chase Bank of Texas,
National Association, as Trustee, entered into in connection with the issuance
of the Company's 9-1/8% Senior Notes due 2006, Series A.
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned hereby consents that reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Mauri J. Cowen
------------------------------------
Mauri J. Cowen
Vice President and Trust Officer
<PAGE>
<TABLE>
<CAPTION>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 2000
<S> <C>
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
- ------------------------------------------------------------------------------------------------------------------------------------
[LOGO APPEARS HERE] Please refer to page i, [1]
Table of Contents, for
the required disclosure
of estimated burden.
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES--FFIEC 031
(971231)
__________
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1997 (RCRI 9999)
This report is required by law: 12 U.S.C. (S)324 (State This report form is to be filed by banks with branches and
member banks); 12 U.S.C. (S)1817 (State nonmember banks); consolidated subsidiaries in U.S. territories and possessions,
and 12 U.S.C. (S)161 (National banks). Edge or Agreement subsidiaries, foreign branches, consoli-
dated foreign subsidiaries, or International Banking Facilities.
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed The Reports of Condition and Income are to be prepared in
by an authorized officer and the Report of Condition must be accordance with Federal regulatory authority instructions.
attested to by not less than two directors (trustees) for
State nonmember banks and three directors for State member We, the undersigned directors (trustees), attest to the
and National banks. correctness of this Report of Condition (including the
supporting schedules) for this report date and declare
I, C. Richards Summers, EVP & Controller that it has been examined by us and to the best of our
____________________________________________________________ knowledge and belief has been prepared in conformance with
Name and Title of Officer Authorized to Sign Report the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
of the named bank do hereby declare that the Reports of
Condition and Income (including the supporting schedules)
for this report date have been prepared in conformance John L. Adams
with the instructions issued by the appropriate Federal ___________________________________________________________
regulatory authority and are true to the best of my Director (Trustee)
knowledge and belief.
C. Richard Summers Alan R. Buckwalter, III
____________________________________________________________ ___________________________________________________________
Signature of Officer Authorized to Sign Report Director (Trustee)
2/11/98 Robert C. Hunter
____________________________________________________________ ___________________________________________________________
Date of Signature Director (Trustee)
- ------------------------------------------------------------------------------------------------------------------------------------
SUBMISSION OF REPORTS
Each bank must prepare its Reports of Condition and Income (b) in hard-copy (paper) form and arrange for another party to convert
either: the paper report to automated form. That party (if other than EDS)
must transmit the bank's computer data file to EDS.
(a) in automated form and then file the computer data file
directly with the banking agencies' collection agent, To fulfill the signature and attestation requirement for the
Electronic Data Systems Corporation (EDS), by modem Reports of Condition and Income for this report date, attach this
or on computer diskette; or signature page to the hard-copy record of the completed report
that the bank places in its files.
- ------------------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number |0|3|2|6|3|
(RCRI 9050)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
EXHIBIT 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FFIEC 031
Page i
<S> <C>
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR [2]
A BANK WITH DOMESTIC AND FOREIGN OFFICES
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
Signature Page Cover Report of Condition
Report of Income Schedule RC--Balance Sheet ............................ RC-1, 2
Schedule RI--Income Statement ......... RI-1, 1, 2, 3 Schedule RC-A--Cash and Balances Due
From Depository Institutions ........................... RC-3
Schedule RI-A--Changes in Equity Capital ....... RI-4
Schedule RC-B--Securities .......................... RC-3, 4, 5
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease Schedule RC-C--Loans and Lease Financing
Losses .................................... RI-4, 5 Receivables:
Part I. Loans and Leases ......................... RC-6, 7, 8
Schedule RI-D--Income from Part II. Loans to Small Businesses and
International Operations ..................... RI-6 Small Farms (included in the forms for
June 30 only) ................................... RC-8a, 8b
Schedule RI-E--Explanations ................. RI-7, 8
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks) ............... RC-8
Disclosure of Estimated Burden Schedule RC-E--Deposit Liabilities ............... RC-9, 10, 11
The estimated average burden associated with this information Schedule RC-F--Other Assets ............................. RC-11
collection is 34.1 hours per respondent and is estimated to
vary from 15 to 400 hours per response, depending on indivi- Schedule RC-G--Other Liabilities ........................ RC-11
dual circumstances. Burden estimates include the time for
reviewing instructions, gathering and maintaining data in the Schedule RC-H--Selected Balance Sheet Items
required form, and completing the information collection, but for Domestic Offices .................................. RC-12
exclude the time for compiling and maintaining business
reports in the normal course of a respondent's activities. A Schedule RC-I--Selected Assets and Liabilities
Federal agency may not conduct or sponsor, and an organiza- of IBFs ............................................... RC-13
tion (or a person) is not required to respond to a
collection of information, unless it displays a currently Schedule RC-K--Quarterly Averages ....................... RC-13
valid OMB control number. Comments concerning the accuracy
of this burden estimate and suggestions for reducing this Schedule RC-L--Off-Balance Sheet Items .......... RC-14, 15, 16
burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Schedule RC-M--Memoranda ............................ RC-17, 18
Washington, D.C. 20503, and to one of the following:
Schedule RC-N--Past Due and Nonaccrual Loans,
Secretary Leases, and Other Assets .......................... RC-19, 20
Board of Governors of the Federal Reserve System
Washington, D.C. 20551 Schedule RC-O--Other Data for Deposit
Insurance and FICO Assessments .................... RC-21, 22
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency Schedule RC-R--Regulatory Capital ................... RC-23, 24
Washington, D.C. 20219
Optional Narrative Statement Concerning the Amounts
Assistant Executive Secretary Reported in the Reports of Condition and Income .... RC-25
Federal Deposit Insurance Corporation
Washington, D.C. 20429 Special Report (to be completed by all banks)
For information or assistance, National and State nonmember banks should contact the FDIC's Call Reports Analysis Unit, 550 17th
Street, NW, Washington, D.C. 20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00 a.m. and 5:00 p.m.,
Eastern time. State member banks should contact their Federal Reserve Bank.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-1
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1997 - DECEMBER 31, 1997
All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.
SCHEDULE RI--INCOME STATEMENT
__________
I480 (-
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________
1. Interest income: | ////////////////// |
a. Interest and fee income on loans: | ////////////////// |
(1) In domestic offices: | ////////////////// |
(a) Loans secured by real estate..................................................... | 4011 225,463 | 1.a.(1)(a)
(b) Loans to depository institutions................................................. | 4019 901 | 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers.............. | 4024 3,257 | 1.a.(1)(c)
(d) Commercial and industrial loans.................................................. | 4012 433,730 | 1.a.(1)(d)
(e) Acceptances of other banks....................................................... | 4026 0 | 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: | ////////////////// |
(1) Credit cards and related plans............................................... | 4054 17,683 | 1.a.(1)(f)(1)
(2) Other........................................................................ | 4055 216,699 | 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions........................... | 4056 8,039 | 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political | ////////////////// |
subdivisions in the U.S.: | ////////////////// |
(1) Taxable obligations.......................................................... | 4503 0 | 1.a.(1)(h)(1)
(2) Tax-exempt obligations....................................................... | 4504 537 | 1.a.(1)(h)(2)
(i) All other loans in domestic offices.............................................. | 4058 90,700 | 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs........................ | 4059 11,587 | 1.a.(2)
b. Income from lease financing receivables: | ////////////////// |
(1) Taxable leases....................................................................... | 4505 10,135 | 1.b.(1)
(2) Tax-exempt leases.................................................................... | 4307 0 | 1.b.(2)
c. Interest income on balances due from depository institutions:(1) | ////////////////// |
(1) In domestic offices.................................................................. | 4105 0 | 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs........................ | 4106 0 | 1.c.(2)
d. Interest and dividend income on securities: | ////////////////// |
(1) U.S. Treasury securities and U.S. Government agency obligations...................... | 4027 282,272 | 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: | ////////////////// |
(a) Taxable securities............................................................... | 4506 4 | 1.d.(2)(a)
(b) Tax-exempt securities............................................................ | 4507 31 | 1.d.(2)(b)
(3) Other domestic debt securities....................................................... | 3657 170 | 1.d.(3)
(4) Foreign debt securities.............................................................. | 3658 0 | 1.d.(4)
(5) Equity securities (including investments in mutual funds)............................ | 3659 2,768 | 1.d.(5)
e. Interest income from trading assets...................................................... | 4069 0 | 1.e.
|____________________|
________________
(1) Includes interest income on time certificates of deposit not held for trading.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-2
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI--CONTINUED ______________
Dollar Amounts in Thousands | Year-to-date |
________________________________________________________________________________________________________|
1. Interest income (continued) | RIAD Bil Mil Thou |
f. Interest income on federal funds sold and securities purchased under | ////////////////// |
agreements to resell ....................................................... | 4020 53,666 | 1.f.
g. Total interest income (sum of items 1.a through 1.f) ....................... | 4107 1,357,642 | 1.g.
2. Interest expense: | ////////////////// |
a. Interest on deposits: | ////////////////// |
(1) Interest on deposits in domestic offices: | ////////////////// |
(a) Transaction accounts (NOW accounts, ATS accounts, and | ////////////////// |
telephone and preauthorized transfer accounts) ..................... | 4508 5,258 | 2.a.(1)(a)
(b) Nontransaction accounts: | ////////////////// |
(1) Money market deposit accounts (MMDAs) .......................... | 4509 41,667 | 2.a.(1)(b)(1)
(2) Other savings deposits ......................................... | 4511 111,395 | 2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more .............................. | A517 46,757 | 2.a.(1)(b)(3)
(4) Time deposits of less than $100,000 ............................ | A518 125,884 | 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement | ////////////////// |
subsidiaries, and IBFs ................................................. | 4172 21,962 | 2.a.(2)
b. Expense of federal funds purchased and securities sold under | ////////////////// |
agreements to repurchase ................................................... | 4180 101,421 | 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading | ////////////////// |
liabilities, and other borrowed money ..................................... | 4185 37,564 | 2.c.
d. Not applicable | ////////////////// |
e. Interest on subordinated notes and debentures .............................. | 4200 28,625 | 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ...................... | 4073 520,533 | 2.f.
|______________________
3. Net interest income (item 1.g minus 2.f) ...................................... | ////////////////// | RIAD 4074 | 837,109 | 3.
|_____________________
4. Provisions: | ////////////////// |_____________________
a. Provision for loan and lease losses ........................................ | ////////////////// | RIAD 4230 | 5,299 | 4.a.
b. Provision for allocated transfer risk ...................................... | ////////////////// | RIAD 4243 | 0 | 4.b.
|_____________________|
5. Noninterest income: | ////////////////// |
a. Income from fiduciary activities ........................................... | 4070 130,317 | 5.a.
b. Service charges on deposit accounts in domestic offices .................... | 4080 158,215 | 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum | ////////////////// |
items 8.a through 8.d) ..................................................... | A220 18,894 | 5.c.
d.-e. Not applicable | ////////////////// |
f. Other noninterest income: | ////////////////// |
(1) Other fee income ....................................................... | 5407 74,859 | 5.f.(1)
(2) All other noninterest income* .......................................... | 5408 50,863 | 5.f.(2)
|_____________________
g. Total noninterest income (sum of items 5.a through 5.f) .................... | ////////////////// | RIAD 4079 | 433,148 | 5.g.
6. a. Realized gains (losses) on held-to-maturity securities ..................... | ////////////////// | RIAD 3521 | 0 | 6.a.
b. Realized gains (losses) on available-for-sale securities ................... | ////////////////// | RIAD 3196 | 14,096 | 6.b.
|_____________________
7. Noninterest expense: | ////////////////// |
a. Salaries and employee benefits ............................................. | 4135 470,912 | 7.a.
b. Expenses of premises and fixed assets (net of rental income) | ////////////////// |
(excluding salaries and employee benefits and mortgage interest) ........... | 4217 170,179 | 7.b.
c. Other noninterest expense* ................................................. | 4092 270,263 | 7.c.
|_____________________
d. Total noninterest expense (sum of items 7.a through 7.c) ................... | ////////////////// | RIAD 4093 | 911,354 | 7.d.
|_____________________
8. Income (loss) before income taxes and extraordinary items and other | ////////////////// |
|_____________________
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)...... | ////////////////// | RIAD 4301 | 367,700 | 8.
9. Applicable income taxes (on item 8) ........................................... | ////////////////// | RIAD 4302 | 120,499 | 9.
|_____________________
10. Income (loss) before extraordinary items and other adjustments (item 8 | ////////////////// |_____________________
minus 9) ..................................................................... | ////////////////// | RIAD 4300 | 247,201 | 10.
11. Extraordinary items and other adjustments, net of income taxes* .............. | ////////////////// | RIAD 4320 | 0 | 11.
12. Net income (loss) (sum of items 10 and 11) ................................... | ////////////////// | RIAD 4340 | 247,201 | 12.
|____________________|___________|_________|
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>
4
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<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI--CONTINUED
| I480 | (-
| Year-to-date |
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after | ////////////////// |
August 7, 1986, that is not deductible for federal income tax purposes.......................... | 4513 200 | M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices | ////////////////// |
(included in Schedule RI, item 8)............................................................... | 8431 8,280 | M.2.
3.-4. Not applicable | ////////////////// |
5. Number of full-time equivalent employees at end of current period (round to | //// Number |
nearest whole number)........................................................................... | 4150 8,930 | M.5.
6. Not applicable | ////////////////// |
7. If the reporting bank has restated its balance sheet as a result of applying push down | RIAD CC YY MM DD |
accounting this calendar year, report the date of the bank's acquisition(1)............... | 9106 00 00 00 00 | M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) | ////////////////// |
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): | //// Bil Mil Thou |
a. Interest rate exposures...................................................................... | 8757 867 | M.8.a.
b. Foreign exchange exposures................................................................... | 8758 18.027 | M.8.b.
c. Equity security and index exposures.......................................................... | 8759 0 | M.8.c.
d. Commodity and other exposures................................................................. | 8760 0 | M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: | ////////////////// |
a. Net increase (decrease) to interest income................................................... | 8761 (1,783)| M.9.a.
b. Net (increase) decrease to interest expense.................................................. | 8762 (310)| M.9.b.
c. Other (noninterest) allocations.............................................................. | 8763 0 | M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions).............................. | A251 0 | M.10.
____________________
11. Does the reporting bank have a Subchapter S election in effect for federal income tax YES NO
____________________
purposes for the current tax year?............................................................. | A530 | | /// | X | M.11.
____________________
12. Deferred portion of total applicable income taxes included in Schedule RI, | //// Bil Mil Thou |
____________________
items 9 and 11 (to be reported with the December Report of Income)............................. | 4772 29,742 | M.12.
____________________
____________
(1) For example, a bank acquired on June 1, 1997, would report 19970601.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-4
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI--A--CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses. ________
| I483 | (-
|____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________|___________________ |
1. Total equity capital originally reported in the December 31, 1996, Reports of Condition | ////////////////// |
and Income....................................................................................... | 3215 1,746,010 | 1.
2. Equity capital adjustments from amended Reports of Income, net*.................................. | 3216 0 | 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2)............................. | 3217 1,746,010 | 3.
4. Net income (loss) (must equal Schedule RI, item 12).............................................. | 4340 247,201 | 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net............................... | 4346 0 | 5.
6. Changes incident to business combinations, net................................................... | 4356 0 | 6.
7. LESS: Cash dividends declared on preferred stock................................................. | 4470 0 | 7.
8. LESS: Cash dividends declared on common stock.................................................... | 4460 200,000 | 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions for | ////////////////// |
this schedule)................................................................................... | 4411 18,770 | 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) | 4412 0 | 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities ............... | 8433 47,191 | 11.
12. Foreign currency translation adjustments........................................................ | 4414 0 | 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) ....... | 4415 0 | 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal | ////////////////// |
Schedule RC, item 28)........................................................................... | 3210 1,859,172 | 14.
|____________________|
____________
*Describe on Schedule RI-E--Explanations.
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
Part I excludes charge-offs and recoveries through the allocated transfer risk reserve. __________
| I486 | (-
_________________________________________|
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
|____________________|____________________|
| Calendar year-to-date |
|_________________________________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
________________________________________________________________________________|_________________________________________|
1. Loans secured by real estate: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................................... | 4651 4,753 | 4661 25,274 | 1.a.
b. To non-U.S. addressees (domicile) ....................................... | 4652 0 | 4662 2 | 1.b.
2. Loans to depository institutions and acceptances of other banks: | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository institutions .................... | 4653 0 | 4663 6 | 2.a.
b. To foreign banks ........................................................ | 4654 0 | 4664 0 | 2.b.
3. Loans to finance agricultural production and other loans to farmers ........ | 4655 72 | 4665 30 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................................... | 4645 12,155 | 4617 4,632 | 4.a.
b. To non-U.S. addressees (domicile) ....................................... | 4646 1 | 4618 0 | 4.b.
5. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures: | ////////////////// | ////////////////// |
a. Credit cards and related plans .......................................... | 4656 4,254 | 4666 285 | 5.a.
b. Other (includes single payment, installment, and all student loans) ..... | 4657 49,340 | 4667 6,884 | 5.b.
6. Loans to foreign governments and official institutions ..................... | 4643 0 | 4627 21 | 6.
7. All other loans ............................................................ | 4644 336 | 4628 1,414 | 7.
8. Lease financing receivables: | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ........................................... | 4658 0 | 4668 0 | 8.a.
b. Of non-U.S. addressees (domicile) ....................................... | 4659 0 | 4669 0 | 8.b.
9. Total (sum of items 1 through 8) ........................................... | 4635 70,911 | 4605 38,548 | 9.
|_________________________________________|
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-5
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI--B--CONTINUED
PART I. CONTINUED
_________________________________________
| (Column A) | (Column B) |
| Charge-offs | Recoveries |
_________________________________________|
| Calendar year-to-date |
_________________________________________
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou | RIAD Bil Mil Thou |
________________________________________________________________________________________________________________________
1-3. Not applicable | ////////////////// | ////////////////// |
4. Loans to finance commercial real estate, construction, and land | ////////////////// | ////////////////// |
development activities (not secured by real estate) included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, items 4 and 7, above .............................. | 5409 0 | 5410 169 | M.4.
5. Loans secured by real estate in domestic offices (included in | ////////////////// | ////////////////// |
Schedule RI-B, part I, item 1, above): | ////////////////// | ////////////////// |
a. Construction and land development ..................................... | 3582 0 | 3583 23,832 | M.5.a.
b. Secured by farmland ................................................... | 3584 0 | 3585 0 | M.5.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ......................... | 5411 0 | 5412 0 | M.5.c. (1)
(2) All other loans secured by 1-4 family residential properties ...... | 5413 3,291 | 5414 613 | M.5.c. (2)
d. Secured by multifamily (5 or more) residential properties ............. | 3588 0 | 3589 13 | M.5.d.
e. Secured by nonfarm nonresidential properties .......................... | 3590 1,462 | 3591 816 | M.5.e.
|_________________________________________|
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________
1. Balance originally reported in the December 31, 1996, Reports of Condition and Income ......... | 3124 250,613 | 1.
2. Recoveries (must equal part I, item 9, column B above)......................................... | 4605 38,548 | 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above).................................. | 4635 70,911 | 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)......................... | 4230 5,299 | 4.
5. Adjustments* (see instructions for this schedule).............................................. | 4815 (18)| 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, | ////////////////// |
item 4.b)...................................................................................... | 3123 223,531 | 6.
|____________________|
____________
*Describe on Schedule RI-E--Explanations.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-6
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI--D--INCOME FROM INTERNATIONAL OPERATIONS
FOR ALL BANKS WITH FOREIGN OFFICES, EDGE OR AGREEMENT SUBSIDIARIES, OR IBFs WHERE INTERNATIONAL OPERATIONS ACCOUNT FOR MORE THAN 10
PERCENT OF TOTAL REVENUES, TOTAL ASSETS, OR NET INCOME.
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
_________
| I492 | (-
_______________|
| Year-to date |
____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, | ////////////////// |
and IBFs: | ////////////////// |
a. Interest income booked................................................................... | 4837 N/A | 1.a.
b. Interest expense booked.................................................................. | 4838 N/A | 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs (item 1.a minus 1.b)................................................................ | 4839 N/A | 1.c.
2. Adjustments for booking location of international operations: | ////////////////// |
a. Net interest income attributable to international operations booked at domestic offices.. | 4840 N/A | 2.a.
b. Net interest income attributable to domestic business booked at foreign offices ......... | 4841 N/A | 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)..................................... | 4842 N/A | 2.c.
3. Noninterest income and expense attributable to international operations: | ////////////////// |
a. Noninterest income attributable to international operations.............................. | 4097 N/A | 3.a.
b. Provision for loan and lease losses attributable to international operations ............ | 4235 N/A | 3.b.
c. Other noninterest expense attributable to international operations....................... | 4239 N/A | 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a minus | ////////////////// |
3.b and 3.c)............................................................................. | 4843 N/A | 3.d.
4. Estimated pretax income attributable to international operations before capital allocation | ////////////////// |
adjustment (sum of items 1.c, 2.c, and 3.d)................................................. | 4844 N/A | 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect | ////////////////// |
the effects of equity capital on overall bank funding costs................................. | 4845 N/A | 5.
6. Estimated pretax income attributable to international operations after capital allocation | ////////////////// |
adjustment (sum of items 4 and 5)........................................................... | 4846 N/A | 6.
7. Income taxes attributable to income from international operations as estimated in item 6 ... | 4797 N/A | 7.
8. Estimated net income attributable to international operations (item 6 minus 7) ............. | 4341 N/A | 8.
|____________________|
____________________
Memoranda Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. Intracompany interest income included in item 1.a above..................................... | 4847 N/A | M.1.
2. Intracompany interest expense included in item 1.b above.................................... | 4848 N/A | M.2.
|____________________|
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR
PURPOSES OF THE U.S. INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
______________
| Year-to date |
____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. Interest income booked at IBFs.............................................................. | 4849 N/A | 1.
2. Interest expense booked at IBFs............................................................. | 4850 N/A | 2.
3. Noninterest income attributable to international operations booked at domestic offices | ////////////////// |
(excluding IBFs): | ////////////////// |
a. Gains (losses) and extraordinary items................................................... | 5491 N/A | 3.a.
b. Fees and other noninterest income........................................................ | 5492 N/A | 3.b.
4. Provision for loan and lease losses attributable to international operations booked at | ////////////////// |
domestic offices (excluding IBFs)........................................................... | 4852 N/A | 4.
5. Other noninterest expense attributable to international operations booked at domestic | ////////////////// |
offices (excluding IBFs).................................................................... | 4853 N/A | 5.
|____________________|
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-7
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI-E--EXPLANATIONS
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
_________
| I495 | (-
_______________|
| Year-to-date |
|______________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
1. All other noninterest income (from Schedule RI, item 5.f.(2)) | ////////////////// |
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): | ////////////////// |
a. Net gains (losses) on other real estate owned............................................ | 5415 0 | 1.a.
b. Net gains (losses) on sales of loans..................................................... | 5416 (25,512)| 1.b.
c. Net gains (losses) on sales of premises and fixed assets................................. | 5417 0 | 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 5.f.(2): | ////////////////// |
___________ | |
d. | TEXT 4461 | Check Printing Income | 4461 10,097 | 1.d.
|___________|_____________________________________________________________________________| |
e. | TEXT 4462 | Interbank Contract Services | 4462 56,791 | 1.e.
|___________|_____________________________________________________________________________| |
f. | TEXT 4463 | | 4463 | 1.f.
|___________|_____________________________________________________________________________| |
2. Other noninterest expense (from Schedule RI, item 7.c): | ////////////////// |
a. Amortization expense of intangible assets................................................ | 4531 34,051 | 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: | ////////////////// |
b. Net (gains) losses on other real estate owned............................................ | 5418 0 | 2.b.
c. Net (gains) losses on sales of loans..................................................... | 5419 0 | 2.c.
d. Net (gains) losses on sales of premises and fixed assets................................. | 5420 0 | 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, | ////////////////// |
item 7.c: | ////////////////// |
___________ | |
e. | TEXT 4464 | Deposit System Conversion | 4464 32,443 | 2.e.
|___________|_____________________________________________________________________________| |
f. | TEXT 4467 | Name Change Expense | 4467 25,101 | 2.f.
|___________|_____________________________________________________________________________| |
g. | TEXT 4468 | | 4468 | 2.g.
|___________|_____________________________________________________________________________| |
3. Extraordinary items and other adjustments and applicable income tax effect | ////////////////// |
(from Schedule RI, item 11) (itemize and describe all extraordinary items and | ////////////////// |
other adjustments): | ////////////////// |
___________ | |
a. (1) | TEXT 4469 | | 4469 | 3.a. (1)
|___________|_________________________________________________________________________| |
(2) Applicable income tax effect | RIAD 4486 | | ////////////////// | 3.a. (2)
___________ |___________|______________| |
b. (1) | TEXT 4487 | | 4487 | 3.b. (1)
_____________________________________________________________________________________| |
(2) Applicable income tax effect | RIAD 4488 | | ////////////////// | 3.b. (2)
___________ |___________|______________| |
c. (1) | TEXT 4489 | | 4489 | 3.c. (1)
______________________________________________________________________________________| |
(2) Applicable income tax effect | RIAD 4491 | | ////////////////// | 3.c. (2)
|___________|______________| |
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
___________ | |
a. | TEXT 4492 | | 4492 | 4.a.
|_________________________________________________________________________________________|
b. | TEXT 4493 | | 4493 | 4.b.
_________________________________________________________________________________________| |
5. Cumulative effect of changes in accounting principles from prior years | ////////////////// |
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): | ////////////////// |
___________ | |
a. | TEXT A546 | Effect of change to GAAP from previous non-GAAP instructions | A546 18,770 | 5.a.
|_________________________________________________________________________________________|
b. | TEXT 4495 | | 4495 | 5.b.
_________________________________________________________________________________________| |
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) | ////////////////// |
(itemize and describe all corrections): | ////////////////// |
___________ | |
a. | TEXT 4496 | | 4496 | 6.a.
|_________________________________________________________________________________________|
b. | TEXT 4497 | | 4497 | 6.b.
_________________________________________________________________________________________|____________________|
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RI-8
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RI-E--CONTINUED ______________
| Year-to-date |
____________________|
Dollar Amounts in Thousands | RIAD Bil Mil Thou |
_____________________________________________________________________________________________________________________|
7. Other transactions with parent holding company (from Schedule RI-A, item 13) | ////////////////// |
(itemize and describe all such transactions): | ////////////////// |
___________ | |
a. | TEXT 4498 | | 4498 | 7.a.
|___________|_____________________________________________________________________________| |
b. | TEXT 4499 | | 4499 | 7.b.
|___________|_____________________________________________________________________________| |
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) | ////////////////// |
(itemize and describe all adjustments): | ////////////////// |
___________ | |
a. | TEXT 4521 | Sale of Business Unit | 4521 (18)| 8.a.
_________________________________________________________________________________________| |
b. | TEXT 4522 | | 4522 | 8.b.
_________________________________________________________________________________________|____________________|
9. Other explanations (the space below is provided for the bank to briefly describe, at its | I498 | I499 | (-
option, any other significant items affecting the Report of Income): |____________________|
No comment [ ] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-1
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding
as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET ______
| C400 | (-
|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_____________________________________________________________________________________________________________________
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1)................................... | 0081 3,102,229 | 1.a.
b. Interest-bearing balances(2)............................................................ | 0071 100 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A).............................. | 1754 380,208 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............................ | 1773 4,637,087 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell..................... | 1350 1,765,902 | 3.
4. Loans and lease financing receivables: ________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) | RCFD 2122 | 12,816,686 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses ..................... | RCFD 3123 | 223,531 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve ......................... | RCFD 3128 | 0 | ////////////////// | 4.c.
d. Loans and leases, net of unearned income, ________________________| ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c)..................................... | 2125 12,593,155 | 4.d.
5. Trading assets (from Schedule RC-D)........................................................ | 3545 58,085 | 5.
6. Premises and fixed assets (including capitalized leases)................................... | 2145 606,396 | 6.
7. Other real estate owned (from Schedule RC-M)............................................... | 2150 0 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) .. | 2130 13,697 | 8.
9. Customers' liability to this bank on acceptances outstanding............................... | 2155 17,647 | 9.
10. Intangible assets (from Schedule RC-M)..................................................... | 2143 417,016 | 10.
11. Other assets (from Schedule RC-F).......................................................... | 2160 253,165 | 11.
12. Total assets (sum of items 1 through 11)................................................... | 2170 23,844,687 | 12.
|____________________|
____________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-2
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC--CONTINUED _________________________
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
___________________________________________________________________________________________|_________________________|
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, | /////////////////////// |
part I)........................................................................... | RCON 2200 17,775,668 | 13.a.
______________________| |
(1) Noninterest-bearing(1) ................................. | RCON 6631 8,255,456 | /////////////////////// | 13.a.(1)
(2) Interest-bearing ....................................... | RCON 6636 9,520,212 | /////////////////////// | 13.a.(2)
______________________| |
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, | /////////////////////// |
part II)........................................................................... | RCFN 2200 1,089,647 | 13.b.
_______________________| |
(1) Noninterest-bearing ....................................| RCFN 6631 0 | /////////////////////// | 13.b.(1)
(2) Interest-bearing ...................................... | RCFN 6636 1,089,647 | /////////////////////// | 13.b.(2)
_______________________| |
14. Federal funds purchased and securities sold under agreements to repurchase............ | RCFD 2800 1,603,850 | 14.
15. a. Demand notes issued to the U.S. Treasury........................................... | RCON 2840 690,984 | 15.a.
b. Trading liabilities (from Schedule RC-D)........................................... | RCFD 3548 51,511 | 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under | /////////////////////// |
capitalized leases): | /////////////////////// |
a. With a remaining maturity of one year or less...................................... | RCFD 2332 120,519 | 16.a.
b. With a remaining maturity of more than one year through three years................ | RCFD A547 223 | 16.b.
c. With a remaining maturity of more than three years................................. | RCFD A548 23,157 | 16.c.
17. Not applicable | /////////////////////// |
18. Bank's liability on acceptances executed and outstanding.............................. | RCFD 2920 17,647 | 18.
19. Subordinated notes and debentures(2).................................................. | RCFD 3200 345,000 | 19.
20. Other liabilities (from Schedule RC-G)................................................ | RCFD 2930 267,309 | 20.
21. Total liabilities (sum of items 13 through 20)........................................ | RCFD 2948 21,985,515 | 21.
22. Not applicable | /////////////////////// |
EQUITY CAPITAL | /////////////////////// |
23. Perpetual preferred stock and related surplus......................................... | RCFD 3838 0 | 23.
24. Common stock.......................................................................... | RCFD 3230 612,893 | 24.
25. Surplus (exclude all surplus related to preferred stock).............................. | RCFD 3839 924,675 | 25.
26. a. Undivided profits and capital reserves............................................. | RCFD 3632 297,286 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities............. | RCFD 8434 24,318 | 26.b.
27. Cumulative foreign currency translation adjustments................................... | RCFD 3284 0 | 27.
28. Total equity capital (sum of items 23 through 27)..................................... | RCFD 3210 1,859,172 | 28.
29. Total liabilities and equity capital (sum of items 21 and 28)......................... | RCFD 3300 23,844,687 | 29.
|_________________________|
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best Number
describes the most comprehensive level of auditing work performed for the bank ________________
by independent external auditors as of any date during 1996................................... | RCFD 6724 N/A | M.1.
________________
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
____________
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-3
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-A--CASH AND BALANCE DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held for trading. _____
| C405 | (-
_________________________________________|
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank Offices |
_________________________________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
___________________________________________________________________________________________________________________________|
1. Cash items in process of collection, unposted debits, and currency and | ////////////////// | ////////////////// |
coin ........................................................................ | 0022 2,707,091 | ////////////////// | 1.
a. Cash items in process of collection and unposted debits .................. | ////////////////// | 0020 2,339,899 | 1.a.
b. Currency and coin ........................................................ | ////////////////// | 0080 367,192 | 1.b.
2. Balances due from depository institutions in the U.S. ....................... | ////////////////// | 0082 21,400 | 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) ....... | 0083 0 | ////////////////// | 2.a.
b. Other commercial banks in the U.S. and other depository institutions | ////////////////// | ////////////////// |
in the U.S. (including their IBFs) ....................................... | 0085 21,400 | ////////////////// | 2.b.
3. Balances due from banks in foreign countries and foreign central banks ...... | ////////////////// | 0070 18,161 | 3.
a. Foreign branches of other U.S. banks ..................................... | 0073 971 | ////////////////// | 3.a.
b. Other banks in foreign countries and foreign central banks ............... | 0074 17,190 | ////////////////// | 3.b.
4. Balances due from Federal Reserve Banks ..................................... | 0090 355,677 | 0090 355,677 | 4.
5. Total (sum of items 1 through 4) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, sum of items 1.a and 1.b) ...................................... | 0010 3,102,329 | 0010 3,102,329 | 5.
|_________________________________________|
Memorandum Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________________________________
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2, | ////////////////// |
column B above)................................................................................... | 0050 21,300 | M.1.
____________________
SCHEDULE RC-B--SECURITIES
Exclude assets held for trading. ______
| C410 | (-
__________________________________________________________________________________ |
| Held-to-maturity | Available-for-sale |
|___________________________________________________________________________________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
|____________________|____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_______________________________________|____________________|____________________|____________________|____________________|
1. U.S. Treasury securities .......... | 0211 17,980 | 0213 17,955 | 1286 1,070,278 | 1287 1,070,580 | 1.
2. U.S. Government agency obligations | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(exclude mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Issued by U.S. Govern- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
ment agencies(2) ............... | 1289 0 | 1290 0 | 1291 0 | 1293 0 | 2.a.
b. Issued by U.S. | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Government-sponsored | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
agencies(3) .................... | 1294 36 | 1295 202 | 1297 0 | 1298 0 | 2.b.
___________________________________________________________________________________
_____________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home Loan Bank
System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation,
Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-4
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-B--CONTINUED
________________________________________ _________________________________________
| Held-to-maturity | Available-for-sale |
|___________________________________________________________________________________|
| (Column A) | (Column B) | (Column C) | (Column D) |
| Amortized Cost | Fair Value | Amortized Cost | Fair Value(1) |
|____________________|____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
______________________________________|____________________|____________________|____________________|____________________|
3. Securities issued by states | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and political subdivisions | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
in the U.S.: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. General obligations ........... | 1676 200 | 1677 200 | 1678 0 | 1679 0 | 3.a.
b. Revenue obligations ........... | 1681 10 | 1686 10 | 1690 0 | 1691 0 | 3.b.
c. Industrial development | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and similar obligations ....... | 1694 0 | 1695 0 | 1696 0 | 1697 0 | 3.c.
4. Mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Pass-through securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Guaranteed by | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
GNMA ...................... | 1698 0 | 1699 0 | 1701 1,281,989 | 1702 1,305,998 | 4.a. (1)
(2) Issued by FNMA | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
and FHLMC ................. | 1703 361,982 | 1705 363,040 | 1706 1,949,283 | 1707 1,959,250 | 4.a. (2)
(3) Other pass-through | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities ................ | 1709 0 | 1710 0 | 1711 0 | 1713 0 | 4.a. (3)
b. Other mortgage-backed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities (include CMOs, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
REMICs, and stripped | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
MBS): | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Issued or guaranteed | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by FNMA, FHLMC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
or GNMA ................... | 1714 0 | 1715 0 | 1716 253,208 | 1717 252,800 | 4.b. (1)
(2) Collateralized | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
by MBS issued or | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
guaranteed by FNMA, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
FHLMC, or GNMA ............ | 1718 0 | 1719 0 | 1731 2,297 | 1732 2,332 | 4.b. (2)
(3) All other mortgage- | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
backed securities ......... | 1733 0 | 1734 0 | 1735 0 | 1736 0 | 4.b. (3)
5. Other debt securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Other domestic debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1737 0 | 1738 0 | 1739 0 | 1741 0 | 5.a.
b. Foreign debt | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities .................... | 1742 0 | 1743 0 | 1744 0 | 1746 0 | 5.b.
6. Equity securities: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Investments in mutual | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
funds and other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities with readily | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
determinable fair values ...... | ////////////////// | ////////////////// | A510 0 | A511 0 | 6.a.
b. All other equity | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
securities(1) ................. | ////////////////// | ////////////////// | 1752 46,127 | 1753 46,127 | 6.b.
7. Total (sum of items 1 | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
through 6) (total of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
column A must equal | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
Schedule RC, item 2.a) | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(total of column D must | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
item 2.b) ........................ | 1754 380,208 | 1771 381,407 | 1772 4,603,182 | 1773 4,637,087 | 7.
|___________________________________________________________________________________|
_____________
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.b, column D.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-5
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-B--CONTINUED
_______
| C412 |(-
_____________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
_______________________________________________________________________________________________________________________
1. Pledged securities(1)......................................................................... | 0416 1,538,283 | M.1.
2. Maturity and repricing data for debt securities(1),(2) (excluding those in | ////////////////// |
nonaccrual status): | ////////////////// |
a. Securities issued by the U.S. Treasury, U.S. Government agencies, and states and political | ////////////////// |
subdivisions in the U.S.; other non-mortgage debt securities; and mortgage pass-through | ////////////////// |
securities other than those backed by closed-end first lien 1-4 family residential | ////////////////// |
mortgages with a remaining maturity or repricing frequency of:(3)(4) | ////////////////// |
(1) Three months or less................................................................... | A549 18,018 | M.2.a. (1)
(2) Over three months through 12 months.................................................... | A550 5,062 | M.2.a. (2)
(3) Over one year through three years...................................................... | A551 75,164 | M.2.a. (3)
(4) Over three years through five years.................................................... | A552 794,838 | M.2.a. (4)
(5) Over five years through 15 years....................................................... | A553 195,688 | M.2.a. (5)
(6) Over 15 years.......................................................................... | A554 36 | M.2.a. (6)
b. Mortgage pass-through securities backed by closed-end first lien 1-4 family residential | ////////////////// |
mortgages with a remaining maturity or repricing frequency of:(3)(5) | ////////////////// |
(1) Three months or less................................................................... | A555 28,857 | M.2.b. (1)
(2) Over three months through 12 months.................................................... | A556 45,401 | M.2.b. (2)
(3) Over one year through three years...................................................... | A557 240,283 | M.2.b. (3)
(4) Over three years through five years.................................................... | A558 65,979 | M.2.b. (4)
(5) Over five years through 15 years....................................................... | A559 620,851 | M.2.b. (5)
(6) Over 15 years.......................................................................... | A560 2,625,859 | M.2.b. (6)
c. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS; exclude mortgage | ////////////////// |
pass-through securities) with an expected average life of:(6) | ////////////////// |
(1) Three years or less.................................................................... | A561 103,953 | M.2.c. (1)
(2) Over three years....................................................................... | A562 151,179 | M.2.c. (2)
d. Fixed rate AND floating rate debt securities with a REMAINING MATURITY of one year or less | ////////////////// |
(included in Memorandum items 2.a through 2.c above)....................................... | A248 95,798 | M.2.d.
3.-6. Not applicable | ////////////////// |
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or | ////////////////// |
trading securities during the calendar year-to-date (report the amortized cost at date of sale | ////////////////// |
or transfer).................................................................................. | 1778 0 | M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale | ////////////////// |
accounts in Schedule RC-B, item 4.b): | ////////////////// |
a. Amortized cost............................................................................. | 8780 0 | M.8.a.
b. Fair value................................................................................. | 8781 0 | M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in | ////////////////// |
Schedule RC-B, items 2, 3, and 5): | ////////////////// |
a. Amortized cost............................................................................. | 8782 0 | M.9.a.
b. Fair value................................................................................. | 8783 0 | M.9.b.
--------------------
_____________
(1) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(3) Report fixed rate debt securities by remaining maturity and floating rate debt securities by repricing frequency.
(4) Sum of Memorandum items 2.a.(1) through 2.a.(6) plus any nonaccrual debt securities in the categories of debt securities
reported in Memorandum item 2.a that are included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, sum of
items 1, 2, 3, and 5, columns A and D, plus mortgage pass-through securities other than those backed by closed-end first
lien 1-4 family residential mortgages included in Schedule RC-B, item 4.a, columns A and D.
(5) Sum of Memorandum items 2.b.(1) through 2.b.(6) plus any nonaccrual mortgage pass-through securities backed by closed-end first
lien 1-4 family residential mortgages included in Schedule RC-N, item 9, column C, must equal Schedule RC-B, item 4.a, sum of
columns A and D, less the amount of mortgage pass-through securities other than those backed by closed-end first lien 1-4
family residential mortgages included in Schedule RC-B, item 4.a, columns A and D.
(6) Sum of Memorandum items 2.c.(1) and 2.c.(2) plus any nonaccrual "Other mortgage-backed securities" included in Schedule RC-N,
item 9, column C, must equal Schedule RC-B, item 4.b, sum of columns A and D.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-6
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-C-LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts ______
reported in this schedule. Report total loans and leases, net of unearned | C415 | (-
income. Exclude assets held for trading and commercial paper. _________________________________________
| (Column A) | (Column B) |
| Consolidated | Domestic |
| Bank Offices |
_________________________________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCON Bil Mil Thou |
_______________________________________________________________________________________________________________________|
1. Loans secured by real estate ........................................... | 1410 2,583,818 | ////////////////// | 1.
a. Construction and land development ................................... | ////////////////// | 1415 625,963 | 1.a.
b. Secured by farmland (including farm residential and other | ////////////////// | ////////////////// |
improvements) ....................................................... | ////////////////// | 1420 9,591 | 1.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by 1-4 family residential | ////////////////// | ////////////////// |
properties and extended under lines of credit ................... | ////////////////// | 1797 0 | 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: | ////////////////// | ////////////////// |
(a) Secured by first liens ...................................... | ////////////////// | 5367 842,377 | 1.c.(2)(a)
(b) Secured by junior liens ..................................... | ////////////////// | 5368 334,436 | 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ........... | ////////////////// | 1460 103,532 | 1.d.
e. Secured by nonfarm nonresidential properties ........................ | ////////////////// | 1480 667,919 | 1.e.
2. Loans to depository institutions: | ////////////////// | ////////////////// |
a. To commercial banks in the U.S. ..................................... | ////////////////// | 1505 679 | 2.a.
(1) To U.S. branches and agencies of foreign banks .................. | 1506 0 | ////////////////// | 2.a.(1)
(2) To other commercial banks in the U.S. ........................... | 1507 679 | ////////////////// | 2.a.(2)
b. To other depository institutions in the U.S. ........................ | 1517 122 | 1517 122 | 2.b.
c. To banks in foreign countries ....................................... | ////////////////// | 1510 23,578 | 2.c.
(1) To foreign branches of other U.S. banks ......................... | 1513 0 | ////////////////// | 2.c.(1)
(2) To other banks in foreign countries ............................. | 1516 23,578 | ////////////////// | 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers .... | 1590 50,318 | 1590 50,318 | 3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ....................................... | 1763 5,920,053 | 1763 5,810,592 | 4.a.
b. To non-U.S. addressees (domicile) ................................... | 1764 258,206 | 1764 215,500 | 4.b.
5. Acceptances of other banks: | ////////////////// | ////////////////// |
a. Of U.S. banks ....................................................... | 1756 0 | 1756 0 | 5.a.
b. Of foreign banks .................................................... | 1757 0 | 1757 0 | 5.b.
6. Loans to individuals for household, family, and other personal | ////////////////// | ////////////////// |
expenditures (i.e., consumer loans) (includes purchased paper) ......... | ////////////////// | 1975 2,457,221 | 6.
a. Credit cards and related plans (includes check credit and other | ////////////////// | ////////////////// |
revolving credit plans) ............................................. | 2008 134,372 | ////////////////// | 6.a.
b. Other (includes single payment, installment, and all student loans) . | 2011 2,322,849 | ////////////////// | 6.b.
7. Loans to foreign governments and official institutions (including | ////////////////// | ////////////////// |
foreign central banks) ................................................. | 2081 9,421 | 2081 5,321 | 7.
8. Obligations (other than securities and leases) of states and political | ////////////////// | ////////////////// |
subdivisions in the U.S. (includes nonrated industrial development | ////////////////// | ////////////////// |
obligations) ........................................................... | 2107 13,868 | 2107 13,868 | 8.
9. Other loans ............................................................ | 1563 1,366,475 | ////////////////// | 9.
a. Loans for purchasing or carrying securities (secured and unsecured) . | ////////////////// | 1545 33,409 | 9.a.
b. All other loans (exclude consumer loans) ............................ | ////////////////// | 1564 1,333,066 | 9.b.
10. Lease financing receivables (net of unearned income) ................... | ////////////////// | 2165 132,927 | 10.
a. Of U.S. addressees (domicile) ....................................... | 2182 132,477 | ////////////////// | 10.a.
b. Of non-U.S. addressees (domicile) ................................... | 2183 450 | ////////////////// | 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above ........ | 2123 0 | 2123 0 | 11.
12. Total loans and leases, net of unearned income (sum of items 1 | ////////////////// | ////////////////// |
through 10 minus item 11) (total of column A must equal | ////////////////// | ////////////////// |
Schedule RC, item 4.a) ................................................. | 2122 12,816,686 | 2122 12,660,419 | 12.
-----------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-7
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
__________________________
Memoranda Dollar Amounts in Thousands | ///////// Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Not applicable | /////////////////////// |
2. Loans and leases restructured and in compliance with modified terms (included in Schedule | /////////////////////// |
RC-C, part I, above and not reported as past due or nonaccrual in Schedule RC-N, | /////////////////////// |
Memorandum item 1): | /////////////////////// |
a. Loans secured by real estate: | /////////////////////// |
(1) To U.S. addressees (domicile) .................................................... | RCFD 1687 0 | M.2.a.(1)
(2) To non-U.S. addressees (domicile) ................................................ | RCFD 1689 0 | M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to individuals for | /////////////////////// |
household, family, and other personal expenditures) .................................. | RCFD 8691 0 | M.2.b.
c. Commercial and industrial loans to and lease financing receivables of non-U.S. | /////////////////////// |
addresses (domicile) included in Memorandum item 2.b above ........................... | RCFD 8692 0 | M.2.c.
3. Maturity and repricing data for loans and leases (excluding those in | /////////////////////// |
nonaccrual status): | /////////////////////// |
a. Closed-end loans secured by first liens on 1-4 family residential properties | /////////////////////// |
in domestic offices with a remaining maturity or repricing frequency of:(1)(2) | /////////////////////// |
(1) Three months or less ............................................................. | RCON A564 30,613 | M.3.a.(1)
(2) Over three months through 12 months .............................................. | RCON A565 132,273 | M.3.a.(2)
(3) Over one year through three years ................................................ | RCON A566 51,054 | M.3.a.(3)
(4) Over three years through five years .............................................. | RCON A567 37,165 | M.3.a.(4)
(5) Over five years through 15 years ................................................. | RCON A568 222,313 | M.3.a.(5)
(6) Over 15 years .................................................................... | RCON A569 357,302 | M.3.a.(6)
b. All loans and leases other than closed-end loans secured by first liens on 1-4 family | /////////////////////// |
residential properties in domestic offices with a remaining maturity or repricing | /////////////////////// |
frequency of:(1)(3) | /////////////////////// |
(1) Three months or less ............................................................. | RCFD A570 7,701,295 | M.3.b.(1)
(2) Over three months through 12 months .............................................. | RCFD A571 1,078,580 | M.3.b.(2)
(3) Over one year through three years ................................................ | RCFD A572 771,176 | M.3.b.(3)
(4) Over three years through five years .............................................. | RCFD A573 1,690,278 | M.3.b.(4)
(5) Over five years through 15 years ................................................. | RCFD A574 634,196 | M.3.b.(5)
(6) Over 15 years .................................................................... | RCFD A575 48,302 | M.3.b.(6)
c. Fixed rate AND floating rate loans and leases with a REMAINING MATURITY of one year | /////////////////////// |
or less (included in Memorandum items 3.a and 3.b above) ............................. | RCFD A247 4,544,855 | M.3.c.
d. Fixed rate AND floating rate loans secured by nonfarm nonresidential properties | /////////////////////// |
in domestic offices(4) with a REMAINING MATURITY of over five years (included in | /////////////////////// |
Memorandum item 3.b above) ........................................................... | RCON A577 112,450 | M.3.d.
e. Fixed rate AND floating rate commercial and industrial loans(5) with a REMAINING | /////////////////////// |
MATURITY of over three years (included in Memorandum item 3.b above) ................. | RCFD A578 2,555,895 | M.3.e.
---------------------------
_____________
(1) Report fixed rate loans and leases by remaining maturity and floating rate loans by repricing frequency.
(2) Sum of Memorandum items 3.a.(1) through 3.a.(6) plus total nonaccrual closed-end loans secured by first liens on 1-4 family
residential properties in domestic offices included in Schedule RC-N, Memorandum item 3.c.(2), column C, must equal total
closed-end loans secured by first liens on 1-4 family residential properties from Schedule RC-C, part I, item 1.c.(2)(a),
column B.
(3) Sum of Memorandum items 3.b.(1) through 3.b.(6), plus total nonaccrual loans and leases from Schedule RC-N, sum of items 1
through 8, column C, minus nonaccrual closed-end loans secured by first liens on 1-4 family residential properties in domestic
offices included in Schedule RC-N, Memorandum item 3.c.(2), column C, must equal total loans and leases from Schedule RC-C,
part I, sum of items 1 through 10, column A, minus total closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices from Schedule RC-C, part I, item 1.c.(2)(a), column B.
(4) As defined for Schedule RC-C, part I, item 1.e, column B.
(5) As defined for Schedule RC-C, part I, item 4, column A.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-8
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
__________________________
Memoranda (Continued) Dollar Amounts in Thousands | ///////// Bil Mil Thou |
________________________________________________________________________________________________________________________
4. Loans to finance commercial real estate, construction, and land development activities | /////////////////////// |
(not secured by real estate) included in Schedule RC-C, part I, items 4 and 9, column A, | /////////////////////// |
page RC-6(1) ................................................................................. | RCFD 2746 464,697 | M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6) ................ | RCFD 5369 49,750 | M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties | /////////////////////// |
in domestic offices (included in Schedule RC-C, part I, item 1.c.(2)(a), column B, page RC-6) | RCON 5370 166,174 | M.6.
|_________________________|
_____________
(1) Exclude loans secured by real estate that are included in Schedule RC-C, part I, item 1, column A.
SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
_______
| C420 |(-
__________________________|
Dollar Amounts in Thousands | ///////// Bil Mil Thou |
____________________________________________________________________________________________________________________________|
ASSETS | /////////////////////// |
1. U.S. Treasury securities in domestic offices ................................................ | RCON 3531 0 | 1.
2. U.S. Government agency obligations in domestic offices (exclude mortgage-backed securities) . | RCON 3532 0 | 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices ...... | RCON 3533 0 | 3.
4. Mortgage-backed securities (MBS) in domestic offices: | /////////////////////// |
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA ..................... | RCON 3534 0 | 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA | /////////////////////// |
(include CMOs, REMICs, and stripped MBS) ................................................. | RCON 3535 0 | 4.b.
c. All other mortgage-backed securities ..................................................... | RCON 3536 0 | 4.c.
5. Other debt securities in domestic offices ................................................... | RCON 3537 0 | 5.
6. Certificates of deposit in domestic offices ................................................. | RCON 3538 0 | 6.
7. Commercial paper in domestic offices ........................................................ | RCON 3539 0 | 7.
8. Bankers acceptances in domestic offices ..................................................... | RCON 3540 0 | 8.
9. Other trading assets in domestic offices .................................................... | RCON 3541 0 | 9.
10. Trading assets in foreign offices ........................................................... | RCFN 3542 0 | 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts: | /////////////////////// |
a. In domestic offices ...................................................................... | RCON 3543 55,889 | 11.a.
b. In foreign offices ....................................................................... | RCFN 3543 2,196 | 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5) ........... | RCFD 3545 58,085 | 12.
|_________________________|
|_________________________|
| ///////// Bil Mil Thou |
LIABILITIES |_________________________|
13. Liability for short positions ............................................................... | RCFD 3546 0 | 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and equity | /////////////////////// |
contracts ................................................................................... | RCFD 3547 51,511 | 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b) ...... | RCFD 3548 51,511 | 15.
|_________________________|
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-9
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
________
| C425| (-
_______________________________________________________________
| | Nontransaction |
| Transaction Accounts | Accounts |
_______________________________________________________________
| (Column A) | (Column B) | (Column C) |
| Total transaction | Memo: Total | Total |
|accounts (including | demand deposits | nontransaction |
| total demand | (included in | accounts |
| deposits) | column A) | (including MMDAs) |
________________________________________________________________
Dollar Amounts in Thousands | RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
_________________________________________________________________________________________________________________________
Deposits of: | ////////////////// | ////////////////// | ////////////////// |
1. Individuals, partnerships, and corporations .......... | 2201 5,946,402 | 2240 5,391,192 | 2346 10,419,964 | 1.
2. U.S. Government ...................................... | 2202 34,096 | 2280 32,402 | 2520 1,020 | 2.
3. States and political subdivisions in the U.S. ........ | 2203 281,394 | 2290 46,361 | 2530 242,548 | 3.
4. Commercial banks in the U.S. ......................... | 2206 729,231 | 2310 729,231 | 2550 0 | 4.
5. Other depository institutions in the U.S. ............ | 2207 18,306 | 2312 18,306 | 2349 0 | 5.
6. Banks in foreign countries ........................... | 2213 19,130 | 2320 19,130 | 2236 0 | 6.
7. Foreign governments and official institutions | ////////////////// | ////////////////// | ////////////////// |
(including foreign central banks) .................... | 2216 1,989 | 2300 1,989 | 2377 0 | 7.
8. Certified and official checks ........................ | 2330 81,588 | 2330 81,588 | ////////////////// | 8.
9. Total (sum of items 1 through 8) (sum of | ////////////////// | ////////////////// | ////////////////// |
columns A and C must equal Schedule RC, | ////////////////// | ////////////////// | ////////////////// |
item 13.a) ........................................... | 2215 7,112,136 | 2210 6,320,199 | 2385 10,663,532 | 9.
----------------------------------------------------------------
_____________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________________________________
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): | ////////////////// |
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ......................... | 6835 689,701 | M.1.a.
b. Total brokered deposits ..................................................................... | 2365 0 | M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): | ////////////////// |
(1) Issued in denominations of less than $100,000 ........................................... | 2343 0 | M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than | ////////////////// |
$100,000 and participated out by the broker in shares of $100,000 or less ............... | 2344 0 | M.1.c.(2)
d. Maturity data for brokered deposits: | ////////////////// |
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining | ////////////////// |
maturity of one year or less (included in Memorandum item 1.c.(1) above) ................ | A243 0 | M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining | ////////////////// |
maturity of one year or less (included in Memorandum item 1.b above) .................... | A244 0 | M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. | ////////////////// |
reported in item 3 above which are secured or collateralized as required under state law) ... | 5590 494,236 | M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d | ////////////////// |
must equal item 9, column C above): | ////////////////// |
a. Savings deposits: | ////////////////// |
(1) Money market deposit accounts (MMDAs) ................................................... | 6810 4,209,973 | M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ................................................. | 0352 3,019,524 | M.2.a.(2)
b. Total time deposits of less than $100,000 ................................................... | 6648 2,475,407 | M.2.b.
c. Total time deposits of $100,000 or more ..................................................... | 2604 958,628 | M.2.c.
3. All NOW accounts (included in column A above) .................................................. | 2398 791,937 | M.3.
----------------------
4. Not applicable
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-10
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-E--CONTINUED
PART I. CONTINUED
Memoranda (continued)
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
_________________________________________________________________________________________________________________________
5. Maturity and repricing data for time deposits of less than $100,000: | ////////////////// |
a. Time deposits of less than $100,000 with a remaining maturity or repricing frequency | ////////////////// |
of:(1)(2) | ////////////////// |
(1) Three months or less ................................................................... | A579 1,459,713 | M.5.a.(1)
(2) Over three months through 12 months .................................................... | A580 705,874 | M.5.a.(2)
(3) Over one year through three years ...................................................... | A581 244,709 | M.5.a.(3)
(4) Over three years ....................................................................... | A582 65,111 | M.5.a.(4)
b. Fixed rate AND floating rate time deposits of less than $100,000 with a REMAINING MATURITY | ////////////////// |
of one year or less (included in Memorandum items 5.a.(1) through 5.a.(4) above) ........... | A241 2,165,587 | M.5.b.
6. Maturity and repricing data for time deposits of $100,000 or more: | ////////////////// |
a. Time deposits of $100,000 or more with a remaining maturity or repricing frequency of:(1)(3) | ////////////////// |
(1) Three months or less ................................................................... | A584 792,338 | M.6.a.(1)
(2) Over three months through 12 months .................................................... | A585 111,628 | M.6.a.(2)
(3) Over one year through three years ...................................................... | A586 40,115 | M.6.a.(3)
(4) Over three years ....................................................................... | A587 14,547 | M.6.a.(4)
b. Fixed rate AND floating rate time deposits of $100,000 or more with a REMAINING MATURITY of | ////////////////// |
one year or less (included in Memorandum items 6.a.(1) through 6.a.(4) above) .............. | A242 903,966 | M.6.b.
----------------------
_____________
(1) Report fixed rate time deposits by remaining maturity and floating rate time deposits by repricing frequency.
(2) Sum of Memorandum items 5.a.(1) through 5.a.(4) must equal Schedule RC-E, Memorandum item 2.b above.
(3) Sum of Memorandum items 6.a.(1) through 6.a.(4) must equal Schedule RC-E, Memorandum item 2.c above.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-11
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-E--CONTINUED
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBDIARIES AND IBFs)
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_________________________________________________________________________________________________________________________
Deposits of: | ////////////////// |
1. Individuals, partnerships, and corporations ................................................... | 2621 1,089,561 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) ................................ | 2623 0 | 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs) ... | 2625 86 | 3.
4. Foreign governments and official institutions (including foreign central banks) ............... | 2650 0 | 4.
5. Certified and official checks ................................................................. | 2330 0 | 5.
6. All other deposits ............................................................................ | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b) .......................... | 2200 1,089,647 | 7.
|____________________|
Memorandum _____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_________________________________________________________________________________________________________________________
1. Time deposits with a remaining maturity of one year or less (included in Part II, item 7 above) | A245 1,089,647 | M.1.
____________________
Schedule RC-F--Other Assets
__________
| C430 | (-
__________________________
Dollar Amounts in Thousands | //////// Bil Mil Thou |
____________________________________________________________________________________________________________________________
1. Income earned, not collected on loans ........................................................ | RCFD 2164 84,210 | 1.
2. Net deferred tax assets(1) ................................................................... | RCFD 2148 24,134 | 2.
3. Interest-only strips receivable (not in the form of a security)(2) on: | /////////////////////// |
a. Mortgage loans ............................................................................ | RCFD A519 0 | 3.a.
b. Other financial assets .................................................................... | RCFD A520 0 | 3.b.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................ | RCFD 2168 144,821 | 4.
_____________ | |
a. | TEXT 3549 | ____________________________| |
_________________________________________________________________| RCFD 3549 | /////////////////////// | 4.a.
b. | TEXT 3550 | ____________________________| |
_________________________________________________________________| RCFD 3550 | /////////////////////// | 4.b.
c. | TEXT 3551 | ____________________________| |
_________________________________________________________________| RCFD 3551 | /////////////////////// | 4.c.
____________________________| |
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) ........................... | RCFD 2160 253,165 | 5.
|_________________________|
_________________________
Memorandum Dollar Amounts in Thousands | ///////// Bil Mil Thou |
____________________________________________________________________________________________________________________________
1. Deferred tax assets disallowed for regulatory capital purposes ............................... | RCFD 5610 0 | M.1.
_________________________
Schedule RC-G--Other Liabilities
__________
| C435 | (-
__________________________|
Dollar Amounts in Thousands | //////// Bil Mil Thou |
____________________________________________________________________________________________________________________________|
1. a. Interest accrued and unpaid on deposits in domestic offices(3) ............................ | RCON 3645 24,229 | 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ................. | RCFD 3646 216,422 | 1.b.
2. Net deferred tax liabilities(1) .............................................................. | RCFD 3049 380 | 2.
3. Minority interest in consolidated subsidiaries ............................................... | RCFD 3000 0 | 3.
4. Other (itemize and describe amounts that exceed 25% of this item) ............................ | RCFD 2938 26,278 | 4.
_____________ INTERCOMPANY RECEIVALBE ___________________________| |
a. | TEXT 3552 |____________________________________________________| RCFD 3552 | 14,376 | /////////////////////// | 4.a.
------------- | |
b. | TEXT 3553 |____________________________________________________| RCFD 3553 | | /////////////////////// | 4.b.
------------- | |
c. | TEXT 3554 |____________________________________________________| RCFD 3554 | | /////////////////////// | 4.c.
_____________________________________________________________________________________________| |
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ........................... | RCFD 2930 267,309 | 5.
_________________________
____________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) Report interest-only strips receivable in the form of a security as available-for-sale securities
in Schedule RC, item 2.b, or as trading assets in Schedule RC, item 5, as appropriate.
(3) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-12
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
_________
| C440 | (-
_____________________|
| Domestic Offices |
_____________________|
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________________________________|
1. Customers' liability to this bank on acceptances outstanding .................................... | 2155 17,657 | 1.
2. Bank's liability on acceptances executed and outstanding ........................................ | 2920 17,647 | 2.
3. Federal funds sold and securities purchased under agreements to resell .......................... | 1350 1,765,902 | 3.
4. Federal funds purchased and securities sold under agreements to repurchase ...................... | 2800 1,603,850 | 4.
5. Other borrowed money ............................................................................ | 3190 143,899 | 5.
EITHER | ////////////////// |
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ..................... | 2163 N/A | 6.
OR | ////////////////// |
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ....................... | 2941 931,006 | 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs) ........................................................................................... | 2192 23,684,083 | 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries, and | ////////////////// |
IBFs) ........................................................................................... | 3129 20,893,905 | 9.
----------------------
______________________
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices. | RCON Bil Mil Thou |
|____________________|
10. U.S. Treasury securities ....................................................................... | 1779 1,088,560 | 10.
11. U.S. Government agency obligations (exclude mortgage-backed securities) ........................ | 1785 36 | 11.
12. Securities issued by states and political subdivisions in the U.S. ............................. | 1786 210 | 12.
13. Mortgage-backed securities (MBS): | ////////////////// |
a. Pass-through securities: | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1787 3,627,229 | 13.a.(1)
(2) Other pass-through securities ........................................................... | 1869 0 | 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): | ////////////////// |
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA ............................................ | 1877 252,800 | 13.b.(1)
(2) All other mortgage-backed securities .................................................... | 2253 2,332 | 13.b.(2)
14. Other domestic debt securities ................................................................. | 3159 0 | 14.
15. Foreign debt securities ........................................................................ | 3160 0 | 15.
16. Equity securities: | ////////////////// |
a. Investments in mutual funds and other equity securities with readily | ////////////////// |
determinable fair values .................................................................... | A513 0 | 16.a.
b. All other equity securities ................................................................. | 3169 46,127 | 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) .......... | 3170 5,017,294 | 17.
|____________________|
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
______________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
___________________________________________________________________________________________________________________________
EITHER | ////////////////// |
1. Net due from the IBF of the domestic offices of the reporting bank .............................. | 3051 N/A | M.1.
OR | ////////////////// |
2. Net due to the IBF of the domestic offices of the reporting bank ................................ | 3059 N/A | M.2.
|____________________|
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-13
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs
To be completed only by banks with IBFs and other "foreign" offices.
_________
| C445 | (-
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
________________________________________________________________________________________________________________________
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) ................. | 2133 N/A | 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, | ////////////////// |
item 12, column A) ............................................................................ | 2076 N/A | 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, | ////////////////// |
column A) ..................................................................................... | 2077 N/A | 3.
4. Total IBF liabilities (component of Schedule RC, item 21) ..................................... | 2898 N/A | 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E, | ////////////////// |
part II, items 2 and 3) ....................................................................... | 2379 N/A | 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) ..... | 2381 N/A | 6.
----------------------
SCHEDULE RC-K--QUARTERLY AVERAGES(1)
_________
| C445 | (-
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
__________________________________________________________________________________________________________________________
ASSETS | /////////////////////// |
1. Interest-bearing balances due from depository institutions ............................... | RCFD 3381 100 | 1.
2. U.S. Treasury securities and U.S. Government agency obligations(2) ....................... | RCFD 3382 4,623,021 | 2.
3. Securities issued by states and political subdivisions in the U.S.(2) .................... | RCFD 3383 219 | 3.
4. a. Other debt securities(2) .............................................................. | RCFD 3647 2,336 | 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) . | RCFD 3648 46,127 | 4.b.
5. Federal funds sold and securities purchased under agreements to resell ................... | RCFD 3365 1,089,207 | 5.
6. Loans: | /////////////////////// |
a. Loans in domestic offices: | /////////////////////// |
(1) Total loans ....................................................................... | RCON 3360 12,604,793 | 6.a.(1)
(2) Loans secured by real estate ...................................................... | RCON 3385 2,661,409 | 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers ............... | RCON 3386 51,048 | 6.a.(3)
(4) Commercial and industrial loans ................................................... | RCON 3387 5,841,430 | 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures ....... | RCON 3388 2,495,668 | 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs ............. | RCFN 3360 163,869 | 6.b.
7. Trading assets ........................................................................... | RCFD 3401 51,340 | 7.
8. Lease financing receivables (net of unearned income) ..................................... | RCFD 3484 132,547 | 8.
9. Total assets(4) .......................................................................... | RCFD 3368 22,044,288 | 9.
LIABILITIES | /////////////////////// |
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts, | /////////////////////// |
and telephone and preauthorized transfer accounts) (exclude demand deposits) ............. | RCON 3485 366,013 | 10.
11. Nontransaction accounts in domestic offices: | /////////////////////// |
a. Money market deposit accounts (MMDAs) ................................................. | RCON 3486 4,235,358 | 11.a.
b. Other savings deposits ................................................................ | RCON 3487 2,999,740 | 11.b.
c. Time deposits of $100,000 or more ..................................................... | RCON A514 946,034 | 11.c.
d. Time deposits of less than $100,000 ................................................... | RCON A529 2,495,475 | 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs .. | RCFN 3404 652,510 | 12.
13. Federal funds purchased and securities sold under agreements to repurchase ............... | RCFD 3353 2,193,825 | 13.
14. Other borrowed money (includes mortgage indebtedness and obligations under capitalized | /////////////////////// |
leases) .................................................................................. | RCFD 3355 55,235 | 14.
---------------------------
_____________
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
(4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized
cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-14
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. _________
| C460 | (-
_____________________
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
__________________________________________________________________________________________________________________________
1. Unused commitments: | ////////////////// |
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity | ////////////////// |
lines ...................................................................................... | 3814 0 | 1.a.
b. Credit card lines .......................................................................... | 3815 0 | 1.b.
c. Commercial real estate, construction, and land development: | ////////////////// |
(1) Commitments to fund loans secured by real estate ....................................... | 3816 718,371 | 1.c.(1)
(2) Commitments to fund loans not secured by real estate ................................... | 6550 373,755 | 1.c.(2)
d. Securities underwriting .................................................................... | 3817 0 | 1.d.
e. Other unused commitments ................................................................... | 3818 8,228,653 | 1.e.
2. Financial standby letters of credit and foreign office guarantees ............................. | 3819 1,139,719 | 2.
___________________________
a. Amount of financial standby letters of credit conveyed to others | RCFD 3820 | 83,269 | ////////////////// | 2.a.
---------------------------
3. Performance standby letters of credit and foreign office guarantees ........................... | 3821 177,707 | 3.
___________________________
a. Amount of performance standby letters of credit conveyed to others| RCFD 3822 | 1,000| ////////////////// | 3.a.
___________________________
4. Commercial and similar letters of credit ...................................................... | 3411 223,932 | 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the | ////////////////// |
reporting bank ................................................................................ | 3428 0 | 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting | ////////////////// |
(nonaccepting) bank ........................................................................... | 3429 0 | 6.
7. Securities borrowed ........................................................................... | 3432 0 | 7.
8. Securities lent (including customers' securities lent where the customer is indemnified against | ////////////////// |
loss by the reporting bank) ................................................................... | 3433 17,980 | 8.
9. Financial assets transferred with recourse that have been treated as sold for | ////////////////// |
Call Report purposes: | ////////////////// |
a. First lien 1-to-4 family residential mortgage loans: | ////////////////// |
(1) Outstanding principal balance of mortgages transferred as of the report date ........... | A521 0 | 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ................... | A522 0 | 9.a.(2)
b. Other financial assets (excluding small business obligations reported in item 9.c): | ////////////////// |
(1) Outstanding principal balance of assets transferred as of the report date .............. | A523 0 | 9.b.(1)
(2) Amount of recourse exposure on these assets as of the report date ...................... | A524 0 | 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the | ////////////////// |
Riegle Community Development and Regulatory Improvement Act of 1994: | ////////////////// |
(1) Outstanding principal balance of small business obligations transferred | ////////////////// |
as of the report date ...................................................................... | A249 0 | 9.c.(1)
(2) Amount of retained recourse on these obligations as of the report date ................. | A250 0 | 9.c.(2)
10. Notional amount of credit derivatives: | ////////////////// |
a. Credit derivatives on which the reporting bank is the guarantor ............................ | A534 0 | 10.a.
b. Credit derivatives on which the reporting bank is the beneficiary .......................... | A535 0 | 10.b.
11. Spot foreign exchange contracts ............................................................... | 8765 359,551 | 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 3430 0 | 12.
| ////////////////// |
____________ _____________________________
a. | TEXT 3555 |_____________________________________________________| RCFD 3555 | | ////////////////// | 12.a.
____________ _____________________________
b. | TEXT 3556 |_____________________________________________________| RCFD 3556 | | ////////////////// | 12.b.
____________ _____________________________
c. | TEXT 3557 |_____________________________________________________| RCFD 3557 | | ////////////////// | 12.c.
____________ _____________________________
d. | TEXT 3558 |_____________________________________________________| RCFD 3558 | | ////////////////// | 12.d.
---------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-15
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-L--CONTINUED
_____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________________________________
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and | ////////////////// |
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") | 5591 0 | 13.
_____________ ___________________________ | ////////////////// |
a. | TEXT 5592 |_____________________________________________________| RCFD 5592 | | ////////////////// | 13.a.
_____________ ___________________________
b. | TEXT 5593 |_____________________________________________________| RCFD 5593 | | ////////////////// | 13.b.
_____________ ___________________________
c. | TEXT 5594 |_____________________________________________________| RCFD 5594 | | ////////////////// | 13.c.
_____________ ___________________________
d. | TEXT 5595 |_____________________________________________________| RCFD 5595 | | ////////////////// | 13.d.
--------------------------------------------------------------------------------------------------------------------
____________
| C461 |
_________________________________________ ___________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative| Commodity and |
_____________________________________________| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |__________________|___________________|__________________|__________________|
| Position Indicators |Tril Bil Mil Thou | Tril Bil Mil Thou |Tril Bil Mil Thou |Tril Bil Mil Thou |
|____________________________________________|__________________| __________________|__________________|__________________|
14. Gross amounts (e.g., notional | //////////////// | //////////////// | //////////////// | //////////////// |
amounts) (for each column, sum of | //////////////// | //////////////// | //////////////// | //////////////// |
items 14.a through 14.e must equal | //////////////// | //////////////// | //////////////// | //////////////// |
sum of items 15, 16.a, and 16.b): | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
a. Futures contracts ................... | 0 | 0 | 0 | 0 | 14.a.
__________________ ___________________ __________________ __________________
| RCFD 8693 | RCFD 8694 | RCFD 8695 | RCFD 8696 |
__________________ ___________________ __________________ __________________
b. Forward contracts ................... | 0 | 851,123 | 0 | 0 | 14.b.
__________________ ___________________ __________________ __________________
| RCFD 8697 | RCFD 8698 | RCFD 8699 | RCFD 8700 |
__________________ ___________________ __________________ __________________
c. Exchange-traded option contracts: | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
(1) Written options ................. | 0 | 0 | 0 | 0 | 14.c.(1)
__________________ ___________________ __________________ __________________
| RCFD 8701 | RCFD 8702 | RCFD 8703 | RCFD 8704 |
__________________ ___________________ __________________ __________________
(2) Purchased options ............... | 0 | 0 | 0 | 0 | 14.c.(2)
__________________ ___________________ __________________ __________________
| RCFD 8705 | RCFD 8706 | RCFD 8707 | RCFD 8708 |
__________________ ___________________ __________________ __________________
d. Over-the-counter option contracts: | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
(1) Written options ................. | 473,227 | 46,717 | 0 | 0 | 14.d.(1)
__________________ ___________________ __________________ __________________
| RCFD 8709 | RCFD 8710 | RCFD 8711 | RCFD 8712 |
__________________ ___________________ __________________ __________________
(2) Purchased options ............... | 473,227 | 46,717 | 0 | 0 | 14.d.(2)
__________________ ___________________ __________________ __________________
| RCFD 8713 | RCFD 8714 | RCFD 8715 | RCFD 8716 |
__________________ ___________________ __________________ __________________
e. Swaps ............................... | 5,674,532 | 194 | 587,702 | 0 | 14.e.
__________________ ___________________ __________________ __________________
| RCFD 3450 | RCFD 3826 | RCFD 8719 | RCFD 8720 |
__________________ ___________________ __________________ __________________
15. Total gross notional amount of | //////////////// | //////////////// | //////////////// | //////////////// |
derivative contracts held for trading .. | 6,363,049 | 944,751 | 587,702 | 0 | 15.
__________________ ___________________ __________________ __________________
| RCFD A126 | RCFD A127 | RCFD 8723 | RCFD 8724 |
__________________ ___________________ __________________ __________________
16. Gross notional amount of | //////////////// | //////////////// | //////////////// | //////////////// |
derivative contracts held for | //////////////// | //////////////// | //////////////// | //////////////// |
purposes other than trading: | //////////////// | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
a. Contracts marked to market .......... | 0 | 0 | 0 | 0 | 16.a.
__________________ ___________________ __________________ __________________
| RCFD 8725 | RCFD 8726 | RCFD 8727 | RCFD 8728 |
__________________ ___________________ __________________ __________________
b. Contracts not marked to market ...... | 257,937 | 0 | 0 | 0 | 16.b.
__________________ ___________________ __________________ __________________
| RCFD 8729 | RCFD 8730 | RCFD 8731 | RCFD 8732 |
__________________ ___________________ __________________ __________________
c. Interest rate swaps where the bank | //////////////// | //////////////// | //////////////// | //////////////// |
has agreed to pay a fixed rate ...... | 7,937 | //////////////// | //////////////// | //////////////// | 16.c.
__________________ ___________________ __________________ __________________
| RCFD A589 | //////////////// | //////////////// | //////////////// |
__________________ ___________________ __________________ __________________
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-16
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-L--CONTINUED
_________________________________________ __________________________________________
| (Column A) | (Column B) | (Column C) | (Column D) |
Dollar Amounts in Thousands | Interest Rate | Foreign Exchange | Equity Derivative | Commodity and |
_____________________________________| Contracts | Contracts | Contracts | Other Contracts |
| Off-balance Sheet Derivatives |__________________ |___________________ |____________________|____________________|
| Position Indicators |Tril Bil Mil Thou | Tril Bil Mil Thou |Tril Bil Mil Thou |Tril Bil Mil Thou |
|____________________________________|__________________ | __________________ |____________________|__________________ |
17. Gross fair values of | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
derivative contracts: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
a. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8733 37,074 | 8734 23,059 | 8735 11,729 | 8736 0 | 17.a.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8737 33,486 | 8738 20,013 | 8739 11,729 | 8740 0 | 17.a.(2)
b. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are marked | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
to market: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8741 0 | 8742 0 | 8743 0 | 8744 0 | 17.b.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8745 0 | 8746 0 | 8747 0 | 8748 0 | 17.b.(2)
c. Contracts held for | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
purposes other than | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
trading that are not | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
marked to market: | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
(1) Gross positive | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8749 0 | 8750 0 | 8751 0 | 8752 0 | 17.c.(1)
(2) Gross negative | ////////////////// | ////////////////// | ////////////////// | ////////////////// |
fair value .............. | 8753 1,202 | 8754 0 | 8755 0 | 8756 0 | 17.c.(2)
|___________________________________________________________________________________|
_____________________
Memoranda Dollar Amounts in Thousands | RCFD Bil Mil Thou |
________________________________________________________________________________________________________________________|
1.-2. Not applicable | ////////////////// |
3. Unused commitments with an original maturity exceeding one year that are reported in | ////////////////// |
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments | ////////////////// |
that are fee paid or otherwise legally binding) ............................................... | 3833 5,771,245 | M.3.
a. Participations in commitments with an original maturity | ////////////////// |
__________________________
exceeding one year conveyed to others ........................... | RCFD 3834 | 103,619 | ////////////////// | M.3.a.
__________________________
4. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Standby letters of credit and foreign office guarantees (both financial and performance) issued | ////////////////// |
to non-U.S. addressees (domicile) included in Schedule RC-L, items 2 and 3, above ............. | 3377 51,503 | M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that | ////////////////// |
have been securitized and sold (with servicing retained), amounts outstanding by type of loan: | ////////////////// |
a. Loans to purchase private passenger automobiles (to be completed for the | ////////////////// |
September report only) ..................................................................... | 2741 N/A | M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) ................................. | 2742 0 | M.5.b.
c. All other consumer installment credit (including mobile home loans) (to be completed for the | ////////////////// |
September report only) ..................................................................... | 2743 N/A | M.5.c.
|____________________|
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-17
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-M--MEMORANDA
__________
| C465 | (-
_____________________
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
__________________________________________________________________________________________________________________________
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////////// |
shareholders, and their related interests as of the report date: | ////////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////////// |
shareholders, and their related interests ..................................................... | 6164 6,914 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the amount of | ////////////////// |
all extensions of credit by the reporting bank (including extensions of credit to | ////////////////// |
related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////////// |
___________________________
of total capital as defined for this purpose in agency regulations . | RCFD 6165 | 2 | ////////////////// | 1.b.
___________________________
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches | ////////////////// |
and agencies of foreign banks(1) (included in Schedule RC, item 3) ............................... | 3405 0 | 2.
3. Not applicable. | ////////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////////// |
(include both retained servicing and purchased servicing): | ////////////////// |
a. Mortgages serviced under a GNMA contract ...................................................... | 5500 0 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////////// |
(1) Serviced with recourse to servicer ........................................................ | 5501 0 | 4.b.(1)
(2) Serviced without recourse to servicer ..................................................... | 5502 0 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////////// |
(1) Serviced under a regular option contract .................................................. | 5503 0 | 4.c.(1)
(2) Serviced under a special option contract .................................................. | 5504 0 | 4.c.(2)
d. Mortgages serviced under other servicing contracts ............................................ | 5505 0 | 4.d.
5. To be completed only by banks with $1 billion or more in total assets: | ////////////////// |
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must | ////////////////// |
equal Schedule RC, item 9): | ////////////////// |
a. U.S. addressees (domicile) .................................................................... | 2103 6,058 | 5.a.
b. Non-U.S. addressees (domicile) ................................................................ | 2104 11,589 | 5.b.
6. Intangible assets: | ////////////////// |
a. Mortgage servicing assets ..................................................................... | 3164 0 | 6.a.
__________________________
(1) Estimated fair value of mortgage servicing assets .............. | RCFD A590 | 0 | ////////////////// | 6.a.(1)
__________________________
b. Other identifiable intangible assets: | ////////////////// |
(1) Purchased credit card relationships ....................................................... | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets .................................................. | 5507 74,966 | 6.b.(2)
c. Goodwill ...................................................................................... | 3163 342,050 | 6.c.
d. Total (sum of items 6.a, 6.b.(1), 6.b.(2), and 6.c) (must equal Schedule RC, item 10) ......... | 2143 417,016 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or | ////////////////// |
are otherwise qualifying for regulatory capital purposes ...................................... | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////////// |
redeem the debt .................................................................................. | 3295 0 | 7.
----------------------
_____________
(1) Do not report federal funds sold and securities purchased under agreements to resell with other
commercial banks in the U.S. in this item.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-18
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-M--CONTINUED
__________________________
Dollar Amounts in Thousands | Bil Mil Thou |
_______________________________________________________________________________________________________________________
8. a. Other real estate owned: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5372 0 | 8.a.(1)
(2) All other real estate owned: | /////////////////////// |
(a) Construction and land development in domestic offices ....................... | RCON 5508 0 | 8.a.(2)(a)
(b) Farmland in domestic offices ................................................ | RCON 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices ....................... | RCON 5510 0 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices .......... | RCON 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices ....................... | RCON 5512 0 | 8.a.(2)(e)
(f) In foreign offices .......................................................... | RCFN 5513 0 | 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) ....... | RCFD 2150 0 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | /////////////////////// |
(1) Direct and indirect investments in real estate ventures ......................... | RCFD 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies ... | RCFD 5375 13,697 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) ....... | RCFD 2130 13,697 | 8.b.(3)
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | /////////////////////// |
item 23, "Perpetual preferred stock and related surplus" ............................... | RCFD 3778 0 | 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include | /////////////////////// |
proprietary, private label, and third party products): | /////////////////////// |
a. Money market funds .................................................................. | RCON 6441 5,021,999 | 10.a.
b. Equity securities funds ............................................................. | RCON 8427 41,024 | 10.b.
c. Debt securities funds ............................................................... | RCON 8428 6,466 | 10.c.
d. Other mutual funds .................................................................. | RCON 8429 212,311 | 10.d.
e. Annuities ........................................................................... | RCON 8430 8,505 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through | /////////////////////// |
10.e above) ......................................................................... | RCON 8784 3,735,041 | 10.f.
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative | /////////////////////// |
contracts included in assets and liabilities reported in Schedule RC ................... | RCFD A525 (29)| 11.
12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices | /////////////////////// |
(other than insured branches in Puerto Rico and U.S. territories and possessions) on | /////////////////////// |
the balance sheet (Schedule RC) in accordance with generally accepted accounting | /////////////////////// |
principles(1) .......................................................................... | RCFD A526 581 | 12.
13. Outstanding principal balance of loans other than 1-4 family residential mortgage | /////////////////////// |
loans that are serviced for others (to be completed if this balance is more than | /////////////////////// |
$10 million and exceeds ten percent of total assets) ................................... | RCFD A591 0 | 13.
---------------------------
_________________________________________________________________________________________________________________________|
| ___________________________|
|Memeorandum Dollar Amounts in Thousands | Bil Mil Thou |
| _______________________________________________________________________________________________________________________|
|1. Reciprocal holdings of banking organizations' capital instruments | ////////////////// | |
| (to be completed for the December report only) ............................................| 3836 0 |M.1.|
- -------------------------------------------------------------------------------------------------------------------------
_____________
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet derivative contracts, deferred tax assets
netted against deferred tax liabilities, and assets netted in accounting for pensions.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-19
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES,
AND OTHER ASSETS
______
The FFIEC regards the information reported in |C470 | (-
all of Memorandum item 1, in items 1 through 10, _______________________________________________________________|
column A, and in Memorandum items 2 through 4, | (Column A) | (Column B) | (Column C) |
column A, as confidential. | Past due | Past due 90 | Nonaccural |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
|____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_____________________________________________________________|____________________|____________________|____________________|
1. Loans secured by real estate: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................ | 1245 0 | 1246 16,597 | 1247 22,671 |1.a.
b. To non-U.S. addressees (domicile) .................... | 1248 0 | 1249 0 | 1250 0 |1.b.
2. Loans to depository institutions and acceptances | ////////////////// | ////////////////// | ////////////////// |
of other banks: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. banks and other U.S. depository | ////////////////// | ////////////////// | ////////////////// |
institutions ............................................ | 5377 0 | 5378 0 | 5379 0 |2.a.
b. To foreign banks ..................................... | 5380 0 | 5381 0 | 5382 0 |2.b.
3. Loans to finance agricultural production and | ////////////////// | ////////////////// | ////////////////// |
other loans to farmers .................................. | 1594 0 | 1597 0 | 1583 0 |3.
4. Commercial and industrial loans: | ////////////////// | ////////////////// | ////////////////// |
a. To U.S. addressees (domicile) ........................ | 1251 0 | 1252 12,434 | 1253 35,791 |4.a.
b. To non-U.S. addressees (domicile) .................... | 1254 0 | 1255 0 | 1256 114 |4.b.
5. Loans to individuals for household, family, and | ////////////////// | ////////////////// | ////////////////// |
other personal expenditures: | ////////////////// | ////////////////// | ////////////////// |
a. Credit cards and related plans ....................... | 5383 0 | 5384 1,205 | 5385 0 |5.a.
b. Other (includes single payment, installment, | ////////////////// | ////////////////// | ////////////////// |
and all student loans) .................................. | 5386 0 | 5387 10,931 | 5388 2,517 |5.b.
6. Loans to foreign governments and official | ////////////////// | ////////////////// | ////////////////// |
institutions ............................................ | 5389 0 | 5390 0 | 5391 0 |6.
7. All other loans ......................................... | 5459 0 | 5460 1,379 | 5461 1,046 |7.
8. Lease financing receivables: | ////////////////// | ////////////////// | ////////////////// |
a. Of U.S. addressees (domicile) ........................ | 1257 0 | 1258 0 | 1259 0 |8.a.
b. Of non-U.S. addressees (domicile) .................... | 1271 0 | 1272 0 | 1791 0 |8.b.
9. Debt securities and other assets (exclude other | ////////////////// | ////////////////// | ////////////////// |
real estate owned and other repossessed assets).......... | 3505 0 | 3506 0 | 3507 0 |9.
|____________________|____________________|____________________|
=============================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items
1 through 8.
_____________________________________________________________
| RCFD Bil Mil Thou |RCFD Bil Mil Thou | RCFD Bil Mil Thou |
10. Loans and leases reported in items 1 _____________________________________________________________
through 8 above which are wholly or partially | ////////////////// | ///////////////// | ////////////////// |
guaranteed by the U.S. Government ...................... | 5612 0 | 5613 566 | 5614 4,992 |10.
a. Guaranteed portion of loans and leases | ////////////////// | ////////////////// | ////////////////// |
included in item 10 above ........................... | 5615 0 | 5616 505 | 5617 3,994 |10.a.
|____________________|____________________|____________________|
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-20
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-N--CONTINUED
______
|C473 | (-
_______________________________________________________________|
| (Column A) | (Column B) | (Column C) |
| Past due | Past due 90 | Nonaccural |
| 30 through 89 | days or more | |
| days and still | and still | |
| accruing | accruing | |
Memoranda |____________________|____________________|____________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
__________________________________________________________|____________________|____________________|____________________|
1. Restructured loans and leases included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 1 through 8, above (and not | ////////////////// | ////////////////// | ////////////////// |
reported in Schedule RC-C, part I, Memorandum | ////////////////// | ////////////////// | ////////////////// |
item 2) ...............................................| 1658 0 | 1659 0 | 1661 0 |M.1.
2. Loans to finance commercial real estate, | ////////////////// | ////////////////// | ////////////////// |
construction, and land development activities | ////////////////// | ////////////////// | ////////////////// |
(not secured by real estate) included in | ////////////////// | ////////////////// | ////////////////// |
Schedule RC-N, items 4 and 7, above ...................| 6558 0 | 6559 0 | 6560 719 |M.2.
|____________________|____________________|____________________|
| RCON Bil Mil Thou | RCON Bil Mil Thou | RCON Bil Mil Thou |
3. Loans secured by real estate in domestic offices |____________________|____________________|____________________|
(included in Schedule RC-N, item 1, above): | ////////////////// | ////////////////// | ////////////////// |
a. Construction and land development ..................| 2759 0 | 2769 13,306 | 3492 1,177 |M.3.a.
b. Secured by farmland ................................| 3493 0 | 3494 0 | 3495 0 |M.3.b.
c. Secured by 1-4 family residential properties: | ////////////////// | ////////////////// | ////////////////// |
(1) Revolving, open-end loans secured by | ////////////////// | ////////////////// | ////////////////// |
1-4 family residential properties and | ////////////////// | ////////////////// | ////////////////// |
extended under lines of credit ....................| 5398 0 | 5399 0 | 5400 0 |M.3.c.(1)
(2) All other loans secured by 1-4 family | ////////////////// | ////////////////// | ////////////////// |
residential properties ............................| 5401 0 | 5402 2,238 | 5403 11,657 |M.3.c.(2)
d. Secured by multifamily (5 or more) residential | ////////////////// | ////////////////// | ////////////////// |
properties .........................................| 3499 0 | 3500 0 | 3501 808 |M.3.d.
e. Secured by nonfarm nonresidential properties........| 3502 0 | 3503 1,053 | 3504 9,029 |M.3.e.
|____________________|____________________|____________________|
___________________________________________
| (Column A) | (Column B) |
| Past due 30 | Past due 90 |
| through 89 days | days or more |
_________________________________________
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
_________________________________________
4. Interest rate, foreign exchange rate, and other | ////////////////// | ////////////////// |
commodity and equity contracts: | ////////////////// | ////////////////// |
a. Book value of amounts carried as assets .............| 3522 0 | 3528 0 |M.4.a.
b. Replacement cost of contracts with a | ////////////////// | ////////////////// |
positive replacement cost ...........................| 3529 0 | 3530 0 |M.4.b.
|____________________|____________________|
_______________________________________________________________________________________________________________________________
Person to whom questions about the Reports of Condition and Income should be directed: |C477| (-
Karen Gatenby, Vice President (713) 216-5263
_______________________________________________________________________________________________________________________________
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</TABLE>
30
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<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-21
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE AND FICO ASSESSMENTS
| C475 | (-
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________|____________________
1. Unposted debits (see instructions): | ////////////////// |
a. Actual amount of all unposted debits....................................................... | 0030 N/A |1.a.
OR | ////////////////// |
b. Separate amount of unposted debits: | ////////////////// |
(1) Actual amount of unposted debits to demand deposits..................................... | 0031 0 |1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)........................ | 0032 0 |1.b.(2)
2. Unposted credits (see instructions): | ////////////////// |
a. Actual amount of all unposted credits...................................................... | 3510 N/A |2.a.
OR | ////////////////// |
b. Separate amount of unposted credits: | ////////////////// |
(1) Actual amount of unposted credits to demand deposits................................... | 3512 0 |2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)...................... | 3514 0 |2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total | ////////////////// |
deposits in domestic offices)................................................................. | 3520 30,690 |3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto | ////////////////// |
Rico and U.S. territories and possessions (not included in total deposits): | ////////////////// |
a. Demand deposits of consolidated subsidiaries............................................... | 2211 2,628 |4.a.
b. Time and savings deposits(1) of consolidated subsidiaries.................................. | 2351 17 |4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries....................... | 5514 0 |4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: | ////////////////// |
a. Demand deposits in insured branches (included in Schedule RC-E, Part II).................... | 2229 0 |5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II) ...... | 2383 0 |5.b.
c. Interest accrued and unpaid on deposits in insured branches | ////////////////// |
(included in Schedule RC-G, item 1.b)....................................................... | 5515 0 |5.c.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on | ////////////////// |
behalf of its respondent depository institutions that are also reflected as deposit liabilities| ////////////////// |
of the reporting bank: | ////////////////// |
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, | ////////////////// |
column B).................................................................................. | 2314 0 |6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, | ////////////////// |
item 4 or 5, column A or C, but not column B).............................................. | 2315 0 |6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1),(2) | ////////////////// |
a. Unamortized premiums....................................................................... | 5516 300 |7.a.
b. Unamortized discounts...................................................................... | 5517 0 |7.b.
8. To be completed by banks with "Oakar deposits." | ////////////////// |
a. Deposits purchased or acquired from other FDIC-insured institutions during the quarter | ////////////////// |
(exclude deposits purchased or acquired from foreign offices other than insured branches | ////////////////// |
in Puerto Rico and U.S. territories and possessions): | ////////////////// |
(1) Total deposits purchased or acquired from other FDIC-insured institutions during | ////////////////// |
the quarter............................................................................ | A531 N/A |8.a.(1)
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above attributable | ////////////////// |
to a secondary fund (i.e., BIF members report deposits attributable to SAIF; SAIF | ////////////////// |
members report deposits attributable to BIF)........................................... | A532 N/A |8.a.(2)
b. Total deposits sold or transferred to other FIDC-insured institutions during the quarter | ////////////////// |
(exclude sales or transfers by the reporting bank of deposits in foreign offices other than | ////////////////// |
insured branches in Puerto Rico and U.S. territories and possessions) ..................... | A533 N/A |8.b.
_____________________
(1) For FDIC insurance and FICO assessment purposes, "time and savings deposits" consists of nontransaction accounts and all
transaction accounts other than demand deposits.
(2) Exclude core deposit intangibles.
</TABLE>
31
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<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-22
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-O--CONTINUED
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________|____________________
9. Deposits in lifeline accounts................................................................ | 5596 ///////////// |9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total | ////////////////// |
deposits in domestic offices)................................................................ | 8432 0 |10.
11. Adjustments to demand deposits in domestic offices and in insured branches in Puerto Rico | ////////////////// |
and U.S. territories and possessions reported in Schedule RC-E forcertain reciprocal | ////////////////// |
demand balances: | ////////////////// |
a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal | ////////////////// |
demand balances with the domestic offices of U.S. banks and savings associations | ////////////////// |
and insured branches in Puerto Rico and U.S. territories and possessions that were | ////////////////// |
reported on a gross basis in Schedule RC-E had been reported on a net basis .............. | 8785 0 |11.a.
b. Amount by which demand deposits would be increased if the reporting bank's reciprocal | ////////////////// |
demand balances with foreign banks and foreign offices of other U.S. banks (other than | ////////////////// |
insured branches in Puerto Rico and U.S. territories and possessions) that were reported | ////////////////// |
on a net basis in Schedule RC-E had been reported on a gross basis ....................... | A181 0 |11.b.
c. Amount by which demand deposits would be reduced if cash items in process of collection | ////////////////// |
were included in the calculation of the reporting bank's net reciprocal demand balances | ////////////////// |
with the domestic offices of U.S. banks and savings associations and insured branches | ////////////////// |
in Puerto Rico and U.S. territories and possessions in Schedule RC-E ..................... | A182 0 |11.c.
12. Amount of assets netted against deposit liabilities in domestic offices and in insured | ////////////////// |
branches in Puerto Rico and U.S. territories and possessions on the balance sheet | ////////////////// |
(Schedule RC) in accordance with generally accepted accounting principles (exclude amounts | ////////////////// |
related to reciprocal demand balances): | ////////////////// |
a. Amount of assets netted against demand deposits........................................... | A527 0 |12.a.
b. Amount of assets netted against time and savings deposits................................. | A528 0 |12.b.
|____________________|
Memoranda (to be completed each quarter except as noted)
_____________________
Dollar Amounts in Thousands | RCON Bil Mil Thou |
__________________________________________________________________________________________________|____________________|
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and | ////////////////// |
1.b.(1) must equal Schedule RC, item 13.a): | ////////////////// |
a. Deposit accounts of $100,000 or less: | ////////////////// |
(1) Amount of deposit accounts of $100,000 or less.......................................... | 2702 8,361,680 |M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less to be Number | ////////////////// |
completed for the June report only)................................|RCON 3779 | N/A | ////////////////// |M.1.a.(2)
b. Deposit accounts of more than $100,000: | ////////////////// |
(1) Amount of deposit accounts of more than $100,000....................................... | 2710 9,413,988 |M.1.b.(1)
Number | ////////////////// |
(2) Number of deposit accounts of more than $100,000 ................| RCON 2722 | 19,769 | ////////////////// |M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank: ----------------------
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the |____________________|
estimate described above.................................................................. | 6861 | |///| |M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured deposits | RCON Bil Mil Thou |
determined by using your bank's method or procedure....................................... | 5597 N/A |M.2.b.
3. Has the reporting institution been consolidated with a parent bank or ----------------------
savings association in that parent bank's or parent savings association's
Call Report or Thrift Financial Report?
If so, report the legal title and FDIC Certificate Number of the parent bank or parent
savings association: FDIC Cert No.
____________________
| TEXT A545 |N/A | RCON A545| N/A |M.3.
_________________________________________________________________________________________________________________________________
</TABLE>
32
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<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-23
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-R--REGULATORY CAPITAL
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC, item
12, for June 30, 1996, must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets of less than $1 billion must
complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
1. Test for determining the extent to which Schedule RC-R must be completed. To be | C480B | (-
completed only by banks with total assets of less than $1 billion. Indicate in the | YES NO |
appropriate box at the right whether the bank has total capital greater than or ____________________________|
equal to eight percent of adjusted total assets..............................................| RCFD 6056 | |////| |1.
|___________________________|
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for
loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than
eight percent or that the bank is not in compliance with the risk-based capital guidelines.
____________________________________________________________________
| NOTE: All banks are required to complete items 2 and 3 below. |
| See optional worksheet for items 3.a through 3.f. |
|___________________________________________________________________|
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
___________________________________________________________________________________________________|____________________|
2. Portion of qualifying limited-life capital instruments (original weighted | ////////////////// |
average maturity of at least five years) that is includible in Tier 2 capital: | ////////////////// |
a. Subordinated debt(1) and intermediate term preferred stock.................................. | A515 345,000 |2.a.
b. Other limited-life capital instruments...................................................... | A516 0 |2.b.
3. Amounts used in calculating regulatory capital ratios (report amounts | ////////////////// |
determined by the bank for its own internal regulatory capital analyses | ////////////////// |
consistent with applicable capital standards): | ////////////////// |
a. Tier 1 capital.............................................................................. | 8274 1,417,838 |3.a.
b. Tier 2 capital.............................................................................. | 8275 568,531 |3.b.
c. Total risk-based capital.................................................................... | 3792 1,986,369 |3.c.
d. Excess allowance for loan and lease losses (amount that exceeds 1.25% of gross | ////////////////// |
risk-weighted assets)....................................................................... | A222 0 |3.d.
e. Net risk-weighted assets (gross risk-weighted assets less excess allowance reported | ////////////////// |
in item 3.d above and all other deductions)................................................. | A223 18,372,645 |3.e.
f. "Average total assets" (quarterly average reported in Schedule RC-K, item 9, less all | ////////////////// |
assets deducted from Tier 1 capital)(2).................................................... | A224 22,044,288 |3.f.
|____________________|
_________________________________________
| (Column A) | (Column B) |
Items 4-9 and Memoranda items 1 and 2 are to be completed | Assets | Credit Equiv- |
by banks that answered NO to item 1 above and | Recorded | alent Amount |
by banks with total assets of $1 billion or more. | on the | of Off-Balance |
| Balance Sheet | Sheet Items(3) |
|--------------------| ------------------|
| RCFD Bil Mil Thou | RCFD Bil Mil Thou |
4. Assets and credit equivalent amounts of off-balance sheet items | ------------------ | ------------------|
assigned to the Zero percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................. | 5163 3,200,329 | ////////////////// |4.a.
b. Credit equivalent amount of off-balance sheet items ................... | ////////////////// | 3796 22,343 |4.b.
|____________________|____________________|
___________________________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>
33
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<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-24
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
SCHEDULE RC-R--CONTINUED
| (Column A) | (Column B) |
| Assets | Credit Equiv- |
| Recorded | alent Amount |
| on the | of Off-Balance |
| Balance Sheet | Sheet Items(1) |
|--------------------|--------------------|
Dollar Amounts in Thousands | RCFD Bil Mil Thou | RCFD Bil Mil Thou |
___________________________________________________________________________________|____________________|____________________|
5. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 20 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................... | 5165 7,018,565 | ////////////////// |5.a
b. Credit equivalent amount of off-balance sheet items ..................... | ////////////////// | 3801 201,340 |5.b.
6. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 50 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................... | 3802 833,933 | ////////////////// |6.a.
b. Credit equivalent amount of off-balance sheet items ..................... | ////////////////// | 3803 127,021 |6.b.
7. Assets and credit equivalent amounts of off-balance sheet items | ////////////////// | ////////////////// |
assigned to the 100 percent risk category: | ////////////////// | ////////////////// |
a. Assets recorded on the balance sheet .................................... | 3804 12,516,009 | ////////////////// |7.a.
b. Credit equivalent amount of off-balance sheet items ..................... | ////////////////// | 3805 3,932,176 |7.b.
8. On-balance sheet asset values excluded from and deducted in | ////////////////// | ////////////////// |
the calculation of the risk-based capital ratio(2) ......................... | 3806 499,382 | ////////////////// |8.
9. Total assets recorded on the balance sheet (sum of | ////////////////// | ////////////////// |
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC, | ////////////////// | ////////////////// |
item 12 plus items 4.b and 4.c) ............................................ | 3807 24,068,218 | ////////////////// |9.
|____________________|____________________|
Memoranda
Dollar Amounts in Thousands| RCFD Bil Mil Thou |
_______________________________________________________________________________________________________|____________________ |
1. Current credit exposure across all off-balance sheet derivative contracts covered by the | ////////////////// |
risk-based capital standards........................................................................| 8764 59,393 |M.1.
|____________________ |
__________________________________________________________________________
| With a remaining maturity of |
__________________________________________________________________________
| (Column A) | (Column B) | (Column C) |
| One year or less | Over one year | Over five years |
| | through five years | |
2. Notional principal amounts of __________________________________________________________________________
off-balance sheet derivative contracts(3): |RCFD Tril Bil Mil Thou |RCFD Tril Bil Mil Thou |RCFD Tril Bil Mil Thou |
__________________________________________________________________________
a. Interest rate contracts ................... | 3809 1,811,957 | 8766 3,872,255 | 8767 463,546 |M.2.a.
b. Foreign exchange contracts ................ | 3812 693,802 | 8769 140,385 | 8770 63,847 |M.2.b.
c. Gold contracts ............................ | 8771 0 | 8772 0 | 8773 0 |M.2.c.
d. Other precious metals contracts ........... | 8774 0 | 8775 0 | 8776 0 |M.2.d.
e. Other commodity contracts ................. | 8777 0 | 8778 0 | 8779 0 |M.2.e.
f. Equity derivative contracts ............... | A000 93,550 | A001 494,152 | A002 0 |M.2.f.
|________________________|_______________________|________________________|
______________________________
(1) Do not report in column B the risk-weighted amount of assets reported in column A.
(2) Include the difference between the fair value and the amortized cost of available-for-sale debt securities in item 8 and report
the amortized cost of these debt securities in items 4 through 7 above. For available-for-sale equity securities, if fair value
exceeds cost, include the difference between the fair value and the cost in item 8 and report the cost of these equity
securities in items 5 through 7 above; if cost exceeds fair value, report the fair value of these equity securities in items 5
through 7 above and include no amount in item 8. Item 8 also includes on-balance sheet asset values (or portions thereof) of
off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g., futures contracts)
not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables not included in the calculation
of credit equivalent amounts of off-balance sheet derivatives as well as any portion of the allowance for loan and lease losses
in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.
</TABLE>
34
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<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926 FFIEC 031
Address: P.O. Box 2558 Page RC-25
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on June 30, 1997
TEXAS COMMERCE BANK NATIONAL ASSOCIATION HOUSTON , TEXAS
__________________________________________________________________ ___________________________________ ____________________
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, both on agency computerized records and in computer-file
submit a brief narrative statement on the amounts reported in releases to the public.
the Reports of Condition and Income. This optional statement
will be made available to the public, along with the publicly All information furnished by the bank in the narrative
available data in the Reports of Condition and Income, in statement must be accurate and not misleading. Appropriate
response to any request for individual bank report data. efforts shall be taken by the submitting bank to ensure the
However, the information reported in column A and in all of statement's accuracy. The statement must be signed, in the
Memorandum item 1 of Schedule RC-N is regarded as space provided below, by a senior officer of the bank who
confidential and will not be released to the public. BANKS thereby attests to its accuracy.
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT
SHOULD ENSURE THAT THE STATEMENT DOES NOT If, subsequent to the original submission, material changes are
CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF submitted for the data reported in the Reports of Condition
INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE and Income, the existing narrative statement will be deleted
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN from the files, and from disclosure; the bank, at its option,
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT may replace it with a statement, under signature, appropriate
THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT to the amended data.
WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOM-
ERS. Banks choosing not to make a statement may check the The optional narrative statement will appear in agency records
"No comment" box below and should make no entries of any and in release to the public exactly as submitted (or amended
kind in the space provided for the narrative statement; i.e., as described in the preceding paragraph) by the management
DO NOT enter in this space such phrases as "No statement," of the bank (except for the truncation of statements
"Not applicable," "N/A," "No comment," and "None." exceeding the 750-character limit described above). THE
STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY
The optional statement must be entered on this sheet. The WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR
statement should not exceed 100 words. Further, regardless RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT
of the number of words, the statement must not exceed 750 SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
characters, including punctuation, indentation, and standard VERIFIED OR CONFIRMED THE ACCURACY OF THE
spacing between words and sentences. If any submission INFORMATION CONTAINED THEREIN. A STATEMENT TO
should exceed 750 characters, as defined, it will be truncated THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF
at 750 characters with no notice to the submitting bank and THE OPTIONAL STATEMENT SUBMITTED BY THE
the truncated statement will appear as the bank's statement MANAGEMENT OF THE REPORTING BANK.
___________________________________________________________________________________________________________________________________
No comment | | (RCON 6979) | C471 | C472 | (-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
_______________________________________ ________________________________
Signature of Executive Officer of Bank Date of Signature
</TABLE>
35
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<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Texas Commerce Bank National Association Call Date: 12/31/97 ST-BK: 48-3926
Address: P.O. Box 2558
City, State Zip: Houston, TX 77252-2558
FDIC Certificate No.: |0|3|2|6|3|
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BANK | OMB No. For OCC: 1557-0081
| OMB No. For FDIC: 3064-0052
| OMB No. For Federal Reserve: 7100-0036
| Expiration Date: 3/31/2000
|
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
|__________________________________________________________________
| CLOSE OF BUSINESS | FDIC Certificate Number |
| DATE | | C-700 (-
| 12/31/97 | 0 |3|2|6|3| |
___________________________________________________________________________________________________________________________________
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- -----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their
executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other extensions
of credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against
subitem (a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See Sections 215.2
and 215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation O) for the definitions of "executive
officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
- -----------------------------------------------------------------------------------------------------------------------------------
a. Number of loans made to executive officers since the previous Call Report date .............. | RCFD 3561 | 0 a.
b. Total dollar amount of above loans (in thousands of dollars)................................. | RCFD 3562 | 0 b.
c. Range of interest charged on above loans ___________________________________________________________
(example: 9 3/4% = 9.75) ............................................ | RCFD 7701 | 0.00 | % to | RCFD 7702 | 0.00 % c.
___________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
/s/ RICHARD SUMMERS, EVP & CONTROLLER | 2/11/98
___________________________________________________________________________________________________________________________________
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
Karen Gatenby, Vice President | (713) 216-5263
___________________________________________________________________________________________________________________________________
FDIC 8040/53 (6-95)
</TABLE>
36
<PAGE>
EXHIBIT 99.1
WAINOCO OIL CORPORATION
LETTER OF TRANSMITTAL
FOR TENDER OF ALL OUTSTANDING
9 1/8% SENIOR NOTES DUE 2006
IN EXCHANGE FOR
9 1/8% SENIOR NOTES DUE 2006, SERIES A
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED.
TO: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered or Certified Mail:
Chase Bank of Texas, National (Eligible Institutions Only) Chase Bank of Texas, National Association
Association P. O. Box 2320
One Main Place (214) 672-5932 Dallas, Texas 75221-2320
1201 Main Street, 18th Floor Attention: Frank Ivins
Dallas, Texas 75202 Registered Bond Events
Attention: Frank Ivins
Registered Bond Events
</TABLE>
To Confirm by Telephone
or for Information Call:
(214) 672-5678
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A FACSIMILE
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE
METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS AT THE RISK OF
THE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. THE INSTRUCTIONS ACCOMPANYING
THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1998 (the "Prospectus") of Wainoco Oil Corporation, a Wyoming
corporation (the "Company"), and this Letter of Transmittal and the
instructions hereto (the "Letter of Transmittal"), which together constitute
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 9 1/8% Senior Notes due 2006, Series A (the "Exchange Notes") that have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which the Prospectus is a part,
for each $1,000 principal amount of its outstanding 9 1/8% Senior Notes due
2006, (the "Old Notes"), of which $70,00,000 aggregate principal amount is
outstanding, upon the terms and subject to the conditions set forth in the
Prospectus. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on , 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term shall mean the latest date and time to
which the Exchange Offer is extended by the Company. Capitalized terms used
but not defined herein shall have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be used either if (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders, (ii) tender of Old Notes is m be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository
Trust Company ("DTC"), pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus by any
<PAGE>
financial institution that is a participant in DTC and whose name appears on a
security position listing as the owner of Old Notes or (iii) tender of Old
Notes is to be made according to the guaranteed delivery procedures set forth
in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
Delivery of this Letter of Transmittal and any other required documents must
be made to the Exchange Agent. Delivery of documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" as used herein means any person in whose name Old Notes
are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
All Holders of Old Notes who wish to tender their Old Notes must, prior to
the Expiration Date: (1) complete, sign, and deliver this Letter of
Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to
the address set forth above; and (2) tender (and not withdraw) his or her Old
Notes or, if a tender of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at DTC, confirm such book-entry
transfer (a "Book-Entry Confirmation"), in each case in accordance with the
procedures for tendering described in the Instructions to this Letter of
Transmittal. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or Book-Entry
Confirmation and all other documents required by this Letter of Transmittal to
be delivered to the Exchange Agent on or prior to the Expiration Date, must
tender their Old Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures"
in the Prospectus. (See Instruction 2.)
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of the Old Notes validly tendered and not withdrawn
and the issuance of the Exchange Notes will be made promptly following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and
if the Company has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED IN THIS LETTER OF
TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR
ADDITIONAL COPIES OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE NOTICE
OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE INSTRUCTION
12 HEREIN.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND COMPLY WITH ALL
OF ITS TERMS.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amounts should be listed on a separate signed schedule, attached hereto. The
minimum permitted tender is $1,000 in principal amount of 9 1/8% Senior Notes
due 2006. All other tenders must be in integral multiples of $1,000.
2
<PAGE>
DESCRIPTION OF 9 1/8% SENIOR NOTES DUE 2006
BOX I
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S)*
(PLEASE FILL IN, IF BLANK)
- ----------------------------------------------------------------------
<S> <C> <C>
(A) (B)
AGGREGATE
PRINCIPAL AMOUNT
TENDERED
CERTIFICATE (IF LESS THAN
NUMBER(S) ALL)**
---------------------------------
---------------------------------
---------------------------------
---------------------------------
---------------------------------
</TABLE>
TOTAL
PRINCIPAL
AMOUNT OF OLD
NOTES TENDERED
*Need not be completed by book-entry holders
**Need not be completed by Holders who wish to tender with respect to all Old
Notes listed.
3
<PAGE>
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
BOX II BOX III
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes in a certificates for Old Notes in a
principal amount not tendered, or principal amount not tendered, or
Exchange Notes issued in exchange Exchange Notes issued in exchange
for Old Notes accepted for for Old Notes accepted for
exchange, are to be issued in the exchange, are to be delivered to
name of someone other than the someone other than the
undersigned. undersigned.
Issue certificates to: Issue certificates to:
Name Name
------------------------------ ------------------------------
(Please Print) (Please Print)
----------------------------------- -----------------------------------
(Please Print) (Please Print)
Address Address
--------------------------- ---------------------------
----------------------------------- -----------------------------------
(Including Zip Code) (Including Zip Code)
----------------------------------- -----------------------------------
(Tax Identification or Social (Tax Identification or Social
Security Number) Security Number)
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
THE CERTIFICATE(S) FOR OLD NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF
SUCH OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED DELIVERY
PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
[_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT MAINTAINED
BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution [_] The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." (See Instruction 2.)
4
<PAGE>
[_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of tendering Holder(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undesigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus in connection with any
resale of such Exchange Notes; however, by so acknowledging and by delivering
a prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Wainoco Oil Corporation (the "Company") the principal amount
of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered hereby in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Old Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent also acts as the agent of the Company and as Trustee and
Registrar under the Indenture for the Old Notes and the Exchange Notes) with
respect to the tendered Old Notes with full power of substitution (such power
of attorney being deemed an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver certificates for such Old Notes to the Company or transfer ownership
of such Old Notes on the account books maintained by DTC, together, in either
such case, with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company and (ii) present such Old Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretative advice given by the staff of the Securities and
Exchange Commission to third parties in connection with transactions similar
to the Exchange Offer, so that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than a
5
<PAGE>
broker-dealer who purchased such Old Notes directly from the Company for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act or a person that is an "affiliate" of the Company or any
Guarantor within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such Exchange Notes.
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement, (as defined in the Prospectus) and that, upon
the issuance of the Exchange Notes, the Company will have no further
obligations or liabilities thereunder (except in certain limited
circumstances).
The undersigned represents and warrants that (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being acquired in the ordinary course of
business of the person receiving Exchange Notes (which shall be the
undersigned unless otherwise indicated in the box entitled "Special Delivery
Instructions" above) (the "Recipient"), (ii) neither the undersigned nor the
Recipient (if different) is engaged in, intends to engage in or has any
arrangement or understanding with any person to participate in the
distribution of such Exchange Notes and (iii) neither the undersigned nor the
Recipient (if different) is an "affiliate" of the Company or any Guarantor as
defined in Rule 405 under the Securities Act. If the undersigned is not a
broker-dealer, the undersigned further represents that it is not engaged in,
and does not intend to engage in, a distribution of the Exchange Notes. If the
undersigned is a broker-dealer, the undersigned further (x) represents that it
acquired Old Notes for the undersigned's own account as a result of market
making activities or other trading activities, (y) represents that it has not
entered into any arrangement or understanding with the Company or any
"affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer and (z) acknowledges that it will deliver a prospectus meeting
the requirements of the Securities Act (for which purposes delivery of the
Prospectus, as the same may be hereafter supplemented or amended, shall be
sufficient) in connection with any resale of Exchange Notes received in the
Exchange Offer. Such a broker-dealer will not be deemed, solely by reason of
such acknowledgment and prospectus delivery, to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned understands and agrees that the Company reserves the right
not to accept tendered Old Notes from any tendering holder if the Company
determines, in its sole and absolute discretion, that such acceptance could
result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that, when the same are accepted for exchange,
the Company will acquire good and unencumbered title thereto, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed to be necessary or
desirable by the Exchange Agent or the Company in order to complete the
exchange, assignment and transfer of tendered Old Notes or transfer of
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility.
The undersigned understands and acknowledges that the Company reserves the
right in its sole discretion to purchase or make offers for any Old Notes that
remain outstanding subsequent to the Expiration Date or, as set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
The undersigned understands that the Company may accept the undersigned's
tender by delivering notice of acceptance, as provided below, to the Exchange
Agent, at which time the undersigned's right to withdraw
6
<PAGE>
such tender will terminate. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted validly tendered Old Notes when, as and if
the Company has given oral (which shall be confirmed in writing) or written
notice thereof to the Exchange Agent.
The undersigned understands that the first interest payment following the
Expiration Date will include unpaid interest on the Old Notes accrued through
the date of issuance of the Exchange Notes.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter of Transmittal, the
Prospectus shall prevail.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC)
at the Company's cost and expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that upon the receipt of notice by the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make
the statements therein not misleading (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use
of the Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission and has furnished copies of the
amended or supplemented prospectus to such broker-dealer.
Unless otherwise indicated under "Special Registration Instructions," please
issue the certificates representing the Exchange Notes issued in exchange for
the Old Notes accepted for exchange and return any certificates for Old Notes
not tendered or not exchanged, in the name(s) of the undersigned (or, in
either such event in the case of Old Notes tendered by DTC, by credit to the
account at DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the Exchange Notes
issued in exchange for the Old Notes accepted for exchange and any
certificates for Old Notes not tendered or not exchanged (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s), unless, in either event, tender is being made
through DTC. In the event that both "Special Registration Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Old Notes accepted
for exchange in the name(s) of, and return any certificates for Old Notes not
tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligations pursuant to the "Special
Registration Instructions" or "Special Delivery Instructions" to transfer any
Old Notes from the name of the registered Holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered.
Holders who wish to tender the Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date, may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction I
regarding the completion of the Letter of Transmittal.
7
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
AND WHETHER OR NOT TENDER IS TO BE MADE
PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES
This Letter of Transmittal must be signed by the registered holder(s) as
their name(s) appear on the Old Notes or, if tendered by a participant in DTC,
exactly as such participant's name appears on a security listing as the owner
of Old Notes, or by person(s) authorized to become registered holder(s) by a
properly completed bond power from the registered holder(s), a copy of which
must be transmitted with this Letter of Transmittal. If Old Notes to which
this Letter of Transmittal relate are held of record by two or more joint
holders, then all such holders must sign this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) unless waived by the Company, submit evidence
satisfactory to the Company of such person's authority so to act. (See
Instruction 4.)
X ________________________________________ _________________________________
Date
X ________________________________________ _________________________________
Signature(s) of Holder(s) of Date
Authorized Signatory
Name(s):__________________________________ Address: _______________________
__________________________________ _______________________
(Please Print) (including Zip Code)
Capacity: ___________________________ Area Code and Telephone Number: _____
Social Security No.: ________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
8
<PAGE>
BOX IV
SIGNATURE GUARANTEE (SEE INSTRUCTION 1)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
-----------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
-----------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
-----------------------------------------------------------------------------
(Authorized Signature)
-----------------------------------------------------------------------------
(Printed Name)
-----------------------------------------------------------------------------
(Title)
Date:
-----------------------
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal need
not be guaranteed if (a) this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered herewith and such holder(s)
have not completed the box set forth herein entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" or (b) such
Old Notes are tendered for the account of an Eligible Institution. (See
Instruction 6.) Otherwise, all signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution"). All
signatures on bond powers and endorsements on certificates must also be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes. Certificates for
all physically delivered Old Notes or confirmation of any book-entry transfer
to the Exchange Agent at DTC of Old Notes tendered by book-entry transfer, as
well as, in each case (including cases where tender is affected by book-entry
transfer), a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof and any other documents required by this
Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration
Date.
The method of delivery of the tendered Old Notes, this Letter of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the Holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If Old Notes are sent by mail, certified or
registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Depositary for purposes of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Depositary may make book-entry
delivery of Old Notes by causing
9
<PAGE>
the Depositary to transfer such Old Notes into the Exchange Agent's account at
the Depositary in accordance with the Depositary's procedures for transfer.
However, although delivery of Old Notes may be effected through book-entry
transfer at the Depositary, the Letter of Transmittal, with any required
signature guarantees or an Agent's Message (as defined below) in connection
with a book-entry transfer and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address
specified on the cover page of the Letter of Transmittal on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
A Holder may tender Old Notes that are held through the Depositary by
transmitting its acceptance through the Depositary's Automatic Tender Offer
Program, for which the transaction will be eligible, and the Depositary will
then edit and verify the acceptance and send an Agent's Message to the
Exchange Agent for its acceptance. The term "Agent's Message" means a message
transmitted by the Depositary to, and received by, the Exchange Agent and
forming part of the Book-Entry Confirmation, which states that the Depositary
has received an express acknowledgment from each participant in the Depositary
tendering the Old Notes and that such participant has received the Letter of
Transmittal and agrees to be bound by the terms of the Letter of Transmittal
and the Company may enforce such agreement against such participant.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent
prior to the Expiration Date or comply with book-entry transfer procedures on
a timely basis must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. See "Exchange Offer--
Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, overnight courier, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal (or facsimile hereof) together
with the certificate(s) representing the Old Notes and any other required
documents will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) such properly completed and executed Letter of Transmittal
(or facsimile hereof), as well as all other documents required by this Letter
of Transmittal and the certificate(s) representing all tendered Old Notes in
proper form for transfer (or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at DTC), must be received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all in the manner provided in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder who
wishes to tender his Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to Holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. All tendering holders, by execution
of this Letter of Transmittal (or facsimile thereof), shall waive any right to
receive notice of the acceptance of the Old Notes for exchange. The Company
reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any irregularities or conditions of tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in this Letter of Transmittal)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes, nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities
10
<PAGE>
have been cured to the Company's satisfaction or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering Holders pursuant to the Company's
determination, unless otherwise provided in this Letter of Transmittal as soon
as practicable following the Expiration Date. The Exchange Agent has no
fiduciary duties to the Holders with respect to the Exchange Offer and is
acting solely on the basis of directions of the Company.
3. Inadequate Space. If the space provided is inadequate, the certificate
numbers and/or the number of Old Notes should be listed on a separate signed
schedule attached hereto.
4. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial owner of Old Notes who is not the
registered Holder and who wishes to tender should arrange with such registered
holder to execute and deliver this Letter of Transmittal on such beneficial
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such beneficial owner's name or
obtain a properly completed bond power from the registered holder or properly
endorsed certificates representing such Old Notes.
5. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted only
in integral multiples of $1,000. If less than the entire principal amount of
any Old Notes is tendered, the tendering Holder should fill in the principal
amount tendered in the third column of the box entitled "Description of 9 1/8%
Senior Notes due 2006" above. The entire principal amount of any Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, then Old Notes for the principal amount of Old Notes not tendered
and a certificate or certificates representing Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the "Special
Delivery Instructions" box above on this Letter of Transmittal or unless
tender is made through DTC, promptly after the Old Notes are accepted for
exchange.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes, or, in the case of Old
Notes transferred by book-entry transfer the name and number of the account at
DTC to be credited), (iii) be signed by the Depositor in the same manner as
the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Registrar, with respect to the
Old Notes, register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn
are validly retendered. Any Old Notes which have been tendered but which are
not accepted for exchange by the Company will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described in
the Prospectus under "The Exchange Offer--Procedures for Tendering" at any
time prior to the Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and Endorsements. If
this Letter of Transmittal (or facsimile hereof) is signed by the registered
holder(s) of the Old Notes tendered hereby, the signature must correspond with
the name(s) as written on the face of the Old Note without alteration,
enlargement or any change whatsoever.
11
<PAGE>
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many copies of this Letter of
Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders (which term, for the Purposes described herein,
shall include a book-entry transfer facility whose name appears on a security
listing as the owner of the Old Notes) of Old Notes tendered and the
certificate or certificates for Exchange Notes issued in exchange therefor is
to be issued (or any untendered principal amount of Old Notes to be reissued)
to the registered Holder, then such Holder need not and should not endorse any
tendered Old Notes, nor provide a separate bond power. In any other case, such
Holder must either properly endorse the Old Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal with
the signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers in each case
signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which
Exchange Notes or substitute Old Notes for principal amounts not tendered or
not accepted for exchange are to be issued or sent, if different from the name
and address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
8. Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
federal income tax laws, payments that may be made by the Company on account
of Exchange Notes issued pursuant to the Exchange Offer may be subject to
backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute
Form W-9 included in this Letter of Transmittal and either (a) provide the
correct taxpayer identification number ("TIN") and certify, under penalties of
perjury, that the TIN provided is correct and that (i) the holder has not been
notified by the Internal Revenue Service (the "IRS") that the holder is
subject to backup withholding as a result of failure to report all interest or
dividends or (ii) the IRS has notified the holder that the holder is no longer
subject to backup withholding; or (b) provide an adequate basis for exemption.
If the tendering holder has not been issued a TIN and has applied for one, or
intends to apply for one in the near future, such holder should write "Applied
For" in the space provided for the TIN in Part I of the Substitute Form W-9,
sign and date the Substitute Form W-9 and sign the Certificate of Payee
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part
1, the Company (or the Paying Agent under the Indenture governing the Exchange
Notes) shall retain 31% of payments made to the tendering holder during the
sixty-day period following the date of the Substitute Form W-9. If the Holder
furnishes the Exchange Agent or the Company with its TIN within sixty days
after the date of the Substitute Form W-9, the Company (or the Paying Agent)
shall remit such amounts retained during the sixty-day period to the Holder
and no further amounts shall be retained or withheld from payments made to the
Holder thereafter. If, however, the Holder has not provided the Exchange Agent
or the Company with its TIN within such sixty-day period, the Company (or the
Paying Agent) shall remit such previously retained amounts to the IRS as
backup
12
<PAGE>
withholding. In general, if a Holder is an individual, the TIN is the Social
Security number of such individual. If the Exchange Agent or the Company are
not provided with the correct TIN, the Holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. Certain Holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, such Holder must submit a
statement (generally, IRS Form W-8), signed under penalties of perjury,
attesting to that individual's exempt status. Such statements can be obtained
from the Exchange Agent. For further information concerning backup withholding
and instructions for completing the Substitute Form W-9 (including how to
obtain a taxpayer identification number if you do not have one and how to
complete the Substitute Form W-9 if Old Notes are registered in more than one
name), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause Old
Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Exchange Notes. Backup withholding is not an additional federal income
tax. Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be registered in the name of, any person other than the registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in
the name of a person other than the person signing this Letter of Transmittal,
or if 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 on any other persons) will
be payable by the tendering Holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with this Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder. See the Prospectus under "The Exchange Offer--Solicitation
of Tenders; Fees and Expenses."
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
12. Requests for Assistance or Additional Copies. Requests for assistance
and requests for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
_________________________ _________________________ _________________________
_________________________ _________________________ _________________________
Date Received ___________ Accepted by _____________ Checked by ______________
Delivery Prepared by ____ Checked by ______________ Date ____________________
13
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish
a basis for exemption from backup withholding. If such Holder is an
individual, the TIN is his or her social security number. If the Exchange
Agent is not provided with the correct TIN, a $50 penalty may be imposed by
the Internal Revenue Service, and payments made pursuant to the Exchange Offer
may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is
not an additional federal income tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Offer, the Holder is required to provide the Exchange Agent with either: (i)
the Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (B) the internal Revenue
Service has notified the Holder that the Holder is no longer subject to backup
withholding or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
14
<PAGE>
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office (or
I intend to mail or deliver an application in the near future). I understand
that if I do not provide a Taxpayer Identification Number to the payer, 31%
of all payments made to me on account of the Exchange Notes shall be
retained until I provide a Taxpayer Identification Number to the payer and
that, if I do not provide my Taxpayer Identification Number within sixty
days, such retained amounts shall be remitted to the Internal Revenue
Service as backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a Taxpayer Identification Number.
SIGNATURE ________________________________________ DATE _______________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE
EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM
W-9 FOR ADDITIONAL DETAILS.
15
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYER'S NAME: WAINOCO OIL CORPORATION
PART I--TAXPAYER
IDENTIFICATION NUMBER (TIN)
SOCIAL SECURITY
SUBSTITUTE ENTER YOUR TIN IN THE NUMBER
FORM W-9 APPROPRIATE BOX. FOR ----------------------
INDIVIDUALS, THIS IS YOUR OR
DEPARTMENT OF THE SOCIAL SECURITY NUMBER
TREASURY (SSN). FOR SOLE PROPRIETORS, EMPLOYER
INTERNAL REVENUE SEE THE INSTRUCTIONS IN THE IDENTIFICATION NUMBER
SERVICE ENCLOSED GUIDELINES. FOR
OTHER ENTITIES, IT IS YOUR ----------------------
REQUEST FOR EMPLOYER IDENTIFICATION
TAXPAYER NUMBER (EIN). IF YOU DO NOT
IDENTIFICATION HAVE A NUMBER, SEE HOW TO
NUMBER AND GET A TIN IN THE ENCLOSED
CERTIFICATION GUIDELINES.
-------------------------------------------------------
NOTE: IF THE ACCOUNT IS IN
MORE THAN ONE NAME, SEE THE
CHART ON PAGE 2 OF THE
ENCLOSED GUIDELINES ON WHOSE
NUMBER TO ENTER.
--------------------------------------------------------
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHOLDING
(See Part II instructions in the enclosed
Guidelines.)
- -------------------------------------------------------------------------------
PART III--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
Signature ________________________________________ Date ____________ , 1998
CERTIFICATION INSTRUCTIONS.--You must cross out item 2 above if you have
been notified by the IRS that you are currently subject to backup withholding
because of under reporting interest or dividends on your tax return. For real
estate transactions, item 2 does not apply. For mortgage interest paid, the
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN.
16
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR 9 1/8% SENIOR NOTES DUE 2006
OF WAINOCO OIL CORPORATION
As set forth in the Prospectus dated , 1998 (the "Prospectus") of
Wainoco Corporation (the "Company") and in the Letter of Transmittal (the
"Letter of Transmittal"), this form or a form substantially equivalent to this
form must be used to accept the Exchange Offer (as defined below) if the
certificates for the outstanding 9 1/8% Senior Notes due 2006 (the "Old
Notes") of the Company and all other documents required by the Letter of
Transmittal cannot be delivered to the Exchange Agent by the expiration of the
Exchange Offer or compliance with book-entry transfer procedures cannot be
effected on a timely basis. Such form may be delivered by hand or transmitted
by facsimile transmission, telex or mail to the Exchange Agent no later than
the Expiration Date, and must include a signature guarantee by an Eligible
Institution as set forth below. Capitalized terms used herein but not defined
herein have the meanings ascribed thereto in the Prospectus.
TO: CHASE BANK OF TEXAS, NATIONAL ASSOCIATION (THE "EXCHANGE AGENT")
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand or Overnight Facsimile By Registered or
Delivery: Transmissions: Certified Mail:
Chase Bank of (Eligible Institutions Only) Chase Bank of
Texas,National Texas,National
Association (214) 672-5932 Association
One Main Place P.O. Box 2320
1201 Main Street, 18th Floor Dallas, Texas 75221-2320
Dallas, Texas 75202 Attention: Frank Ivins
Attention: Frank Ivins Registered Bond Events
Registered Bond Events
To Confirmation by Telephone
or for Information Call:
(214) 672-5678
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY IS BY MAIL,
REGISTERED OR CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED. THE INSTRUCTIONS ACCOMPANYING THE LETTER OF TRANSMITTAL SHOULD
BE READ CAREFULLY BEFORE THIS NOTICE OF GUARANTEED DELIVERY IS COMPLETED.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instruction thereto, such
signatures must appear in the applicable space provided on the Letter of
Transmittal for Guarantee of Signature(s).
<PAGE>
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus and the related
Letter of Transmittal which describes the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of a new series of 9 1/8%
Senior Notes due 2006, Series A (the "Exchange Notes") for each $1,000 in
principal amount of the Old Notes.
The undersigned hereby tenders to the Company the aggregate principal amount
of Old Notes set forth below on the terms and conditions set forth in the
Prospectus and the related Letter of Transmittal pursuant to the guaranteed
delivery procedure set forth in the "The Exchange Offer--Guaranteed Delivery
Procedures" section in the Prospectus and the accompanying Letter of
Transmittal.
The undersigned understands that no withdrawal of a tender of Old Notes may
be made on or after the Expiration Date. The undersigned understands that for
a withdrawal of a tender of Old Notes to be effective, a written notice of
withdrawal that complies with the requirements of the Exchange Offer must be
timely received by the Exchange Agent at one of its addresses specified on the
cover of this Notice of Guaranteed Delivery prior to the Expiration Date.
The undersigned understands that the exchange of Old Notes for Exchange
Notes pursuant to the Exchange Offer will be made only after timely receipt by
the Exchange Agent of (i) such Old Notes (or Book-Entry Confirmation of the
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company (the "Depositary" or "DTC")) and (ii) a Letter of Transmittal
(or facsimile thereof) with respect to such Old Notes, properly completed and
duly executed, with any required signature guarantees, this Notice of
Guaranteed Delivery and any other documents required by the Letter of
Transmittal or a properly transmitted Agent's Message. The term "Agent's
Message" means a message transmitted by the Depositary to, and received by,
the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that the Depositary has received an express
acknowledgment from each participant in the Depositary tendering the Old Notes
and that such participant has received the Letter of Transmittal and agrees to
be bound by the terms of the Letter of Transmittal and the Company may enforce
such agreement against such participant.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
2
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Owner(s) or Authorized Name(s) of Registered
Holder(s)
Signatory:
--------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
Principal Amount of Old Notes Address:
Tendered: ----------------------------
- ------------------------------------- -------------------------------------
Certificate No(s) of
Old Notes (if available): Area Code and Telephone No.:
---------
- ------------------------------------- If Old Notes will be delivered by
book-entry transfer
- ------------------------------------- at The Depository Trust Company,
insert
- -------------------------------------
Date: Depository Account No.:
------------------------------- --------------
This Notice of Guaranteed Delivery must be signed by the registered
Holder(s) of Old Notes exactly as its (their) name(s) appears on certificates
for Old Notes or on a security position listing as the owner of Old Notes, or
by person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): ---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Capacity: ---------------------------------------------------------------
Address(es): ---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or a correspondent in the United
States, or otherwise an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby (a)
represents that each holder of Old Notes on whose behalf this tender is being
made "own(s)" the Old Notes covered hereby within the meaning of Rule l3d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
(b) guarantees that, within three New York Stock Exchange trading days from
the expiration date of the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with
certificates representing the Old Notes covered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at The Depository Trust Company, pursuant to the
procedure for book-entry transfer set forth in the Prospectus) and required
documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Old Notes tendered hereby to the Exchange Agent within the time period set
forth above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm:________________________ _____________________________________
Authorized Signature
Address:_____________________________ Name:________________________________
_____________________________________ Title:_______________________________
Area Code and Telephone No.:_________ Date:________________________________
4
