<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 1995
REGISTRATION NO. 33-56429
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
CROWN CENTRAL PETROLEUM
CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
2911
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
MARYLAND 52-0550682
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(410) 539-7400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
THOMAS L. OWSLEY, ESQ.
VICE PRESIDENT--LEGAL
CROWN CENTRAL PETROLEUM CORPORATION
ONE NORTH CHARLES STREET
BALTIMORE, MARYLAND 21201
(410) 539-7400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
JOHN S. GRAHAM, III, ESQ. ARNOLD B. PEINADO, III, ESQ.
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P. MILBANK, TWEED, HADLEY & MCCLOY
ONE NORTH CHARLES STREET ONE CHASE MANHATTAN PLAZA
BALTIMORE, MARYLAND 21201 NEW YORK, NEW YORK 10005-1413
(410) 659-4400 (212) 530-5000
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER NOTE(1) PRICE(1) FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Notes due
2005.................... 125,000,000 100% $125,000,000 $43,104
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
----------------
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 JANUARY 16, 1995
PROSPECTUS
$125,000,000
[LOGO OF CROWN CENTRAL PETROLEUM CORPORATION APPEARS HERE]
CROWN CENTRAL PETROLEUM CORPORATION
% SENIOR NOTES DUE 2005
--------------
The % Senior Notes due 2005 (the "Notes") are being offered by Crown Central
Petroleum Corporation (the "Company"). Interest on the Notes will be payable
semiannually on and of each year, commencing , 1995. The Notes
will be redeemable at the option of the Company, in whole or in part, at any
time on or after , 2000, at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption.
On or prior to , 1998, the Company may redeem up to $ million principal
amount of the Notes, at a price equal to % of the aggregate principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
redemption, utilizing the proceeds of one or more Public Equity Offerings (as
defined), provided that Notes having an aggregate principal amount of at least
$ million remain outstanding immediately after any such redemption. In
addition, upon the occurrence of a Change of Control (as defined), each holder
of Notes may require the Company to purchase all or a portion of such holder's
Notes at 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of purchase. See "Description of the Notes."
The Notes will be unsecured senior obligations of the Company and will rank
pari passu in right of payment with all existing and future senior indebtedness
of the Company. The Notes, however, will be effectively subordinated to secured
senior indebtedness of the Company with respect to the assets securing such
indebtedness and will also be effectively subordinated to indebtedness of the
Company's subsidiaries. As of September 30, 1994, after giving effect to the
sale of the Notes offered hereby and the application of the net proceeds
thereof, the Company would have had $132.0 million of senior indebtedness
outstanding (including the Notes and $7.0 million of secured purchase money and
other indebtedness of the Company and its subsidiaries). As of September 30,
1994, the Company had, subject to certain restrictions, the ability to draw up
to $50.0 million of additional senior unsecured indebtedness under its Credit
Facility (as defined).
FOR INFORMATION CONCERNING CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "INVESTMENT CONSIDERATIONS."
--------------
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.
--------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
----------- ------------ -------------
<S> <C> <C> <C>
Per Note................................ % % %
Total................................... $ $ $
</TABLE>
- --------------
(1) Plus accrued interest, if any, from , 1995.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses estimated at $800,000, payable by the Company.
--------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, and subject to approval of
certain legal matters by counsel for the several Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery will be made in New York, New York on or about , 1995.
CHASE SECURITIES, INC. NATIONSBANC CAPITAL MARKETS, INC.
, 1995.
<PAGE>
[PHOTOS OR OTHER ARTWORK MAY APPEAR HERE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed Consolidated Financial Statements of the
Company and notes thereto appearing elsewhere, or incorporated by reference, in
this Prospectus. For definitions of certain terms used herein see "Glossary"
and "Description of the Notes -- Certain Definitions." Reference is made to
"Investment Considerations," which contains certain factors that investors
should consider prior to the purchase of the Notes offered hereby. The
"Company" means Crown Central Petroleum Corporation and its subsidiaries taken
as a whole, unless the context otherwise requires.
THE COMPANY
The Company, which traces its origins to 1917, is one of the largest
independent refiners and marketers of petroleum products in the United States.
The Company owns and operates two high-conversion refineries with a combined
capacity of 152,000 barrels per day of crude oil -- a 100,000 barrel per day
facility located in Pasadena, Texas, near Houston (the "Pasadena Refinery") and
a 52,000 barrel per day facility located in Tyler, Texas (the "Tyler Refinery",
and together with the Pasadena Refinery, the "Refineries"). The Company is also
a leading independent marketer of refined petroleum products and merchandise
through a network of over 350 gasoline stations and convenience stores located
in the Mid-Atlantic and Southeastern United States. In support of these
businesses, the Company operates 16 product terminals located on three major
product pipelines along the Gulf Coast and the Eastern Seaboard and in the
Central United States.
The Refineries are strategically located and have direct access to crude oil
supplies from major and independent producers and trading companies, thus
enabling the Company to select a crude oil mix to optimize refining margins and
minimize transportation costs. The Pasadena Refinery's Gulf Coast location
provides access to tankers, barges and pipelines for the delivery of foreign
and domestic crude oil and other feedstocks. The Tyler Refinery benefits from
its location in East Texas due to its ability to purchase high quality crude
oil directly from nearby suppliers at a favorable cost and its status as the
only supplier of a full range of refined petroleum products in its local market
area. The Refineries are operated to generate a product mix of over 85% higher
margin fuels, primarily transportation fuels such as gasoline, highway diesel
and jet fuel. During the past five years, the Company has invested over $67
million for environmental compliance, maintenance, upgrading, expansion and
process improvements at its two Refineries. As a result of these expenditures,
the Pasadena Refinery has one of the highest rates of conversion to higher
margin fuels, according to a recent industry study. The Tyler Refinery enjoys
essentially the same product yield characteristics as the Pasadena Refinery.
The Company is the largest independent retail marketer of gasoline in its
core retail market areas within Maryland, Virginia and North Carolina. In the
Company's primary retail marketing region of Baltimore, Maryland, the Company
is the leading independent gasoline retailer, with a 1993 market share of
approximately 11%. In addition to its leading market position in Baltimore, the
Company has a geographic concentration of retail locations in high growth areas
such as Charlotte and Raleigh, North Carolina and Atlanta, Georgia. Over the
past several years, the Company has rationalized and refocused its retail
operations, resulting in significant improvements in average unit performance
and positioning these operations for growth from a profitable base. For the
nine months ended September 30, 1994, average merchandise sales per unit
increased 27.1% on a same store basis when compared to the same period in 1993.
The Company has made substantial investments of approximately $22 million at
its retail locations pursuant to environmental requirements from 1989 to 1993
and believes that over 50% of its retail units are currently in full or
substantial compliance with the 1998 underground storage tank environmental
standards.
3
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is designed to utilize its strengths to take
advantage of the anticipated improvement in the refining industry and to
improve retail profitability, while managing the risks inherent in a cyclical,
commodity based business. The key elements of this strategy include: (i)
investing to increase productivity and improve the technical sophistication,
operating reliability and efficiency of the Company's refining operations; (ii)
managing refinery margins through formalized and disciplined programs to
achieve, at a minimum, prevailing margins available to comparable Gulf Coast
refiners and, where appropriate, to pursue hedging opportunities which lock in
attractive returns; (iii) achieving increased profitability and a better
balance between refinery output and retail sales by expanding retail volume
through the enhancement of existing units and the development of new sites, the
implementation of aggressive pricing and marketing strategies and the selective
acquisition of additional retail properties; (iv) continuing to make
investments pursuant to the Clean Air Act Amendments of 1990 (the "Clean Air
Act") and other environmental regulations; and (v) maintaining the Company's
balance sheet strength with particular emphasis on continued liquidity and low
leverage. Management believes that implementation of this strategy should
result in increased operational efficiency, improved profitability and reduced
earnings volatility.
INDUSTRY OVERVIEW
The Company believes that the profitability of the domestic refining industry
is likely to improve due to increased demand for refined petroleum products,
primarily transportation fuels, during a period when domestic refining
utilization is approaching its maximum crude oil processing limits.
Furthermore, the Company believes that increasing foreign demand resulting from
economic recovery in overseas markets, coupled with the more stringent
requirements associated with reformulated gasoline regulations in the United
States, will tend to reduce the opportunity and incentive for foreign refiners
to supply the increasing domestic demand. These trends are likely to benefit
those refiners, such as the Company, which are able to convert a higher
percentage of crude oil into higher margin transportation fuels.
Over the last several years, the retail markets have been characterized by
several significant trends. Since 1982, United States gasoline demand has grown
by an average of approximately 1% to 2% annually and the Company anticipates
that this demand will continue to track domestic economic growth. During the
last several years, however, petroleum retailers have rationalized their retail
networks by divesting many non-strategic, marginal or unprofitable stations as
well as many stations that require significant expenditures to comply with
environmental requirements, such as the replacement of underground storage
tanks. At the same time, petroleum retailers are attempting to increase retail
operating efficiencies by clustering retail units into fewer geographic regions
and increasing the retail space of newly constructed and existing units.
Another trend affecting the retail segment of the business is increased
consumer emphasis on convenience, quality, cleanliness and safety when
purchasing gasoline and related merchandise at a retail location. The Company
believes it has substantially completed its own rationalization program and is
pursuing a retailing strategy designed to increase volumes, margins,
productivity and overall profitability.
4
<PAGE>
THE OFFERING
Notes Offered............. $125,000,000 aggregate principal amount of %
Senior Notes due 2005.
Maturity Date............. , 2005.
Interest Payment Dates.... and of each year, commencing ,
1995.
Optional Redemption....... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after , 2000, at the redemption prices set
forth herein, together with accrued and unpaid
interest, if any, to the date of redemption. On or
prior to , 1998, the Company may redeem up to
$ million principal amount of the Notes, at a
price equal to % of the aggregate principal
amount thereof, together with accrued and unpaid
interest, if any, to the date of redemption,
utilizing the proceeds of one or more Public Equity
Offerings, provided that Notes having an aggregate
principal amount of at least $ million remain
outstanding immediately after any such redemption.
If less than all of the Notes are to be redeemed,
Notes or portions thereof to be redeemed will be
selected pro rata, by lot or by any other method
deemed fair and reasonable. See "Description of the
Notes -- Optional Redemption."
Change of Control......... Upon the occurrence of a Change of Control, each
holder of Notes may require the Company to purchase
all or a portion of such holder's Notes at 101% of
the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
purchase. See "Description of the Notes -- Certain
Covenants."
Ranking................... The Notes will be unsecured senior obligations of
the Company and will rank pari passu in right of
payment with all existing and future senior
indebtedness of the Company. The Notes, however,
will be effectively subordinated to secured senior
indebtedness of the Company with respect to the
assets securing such indebtedness and will also be
effectively subordinated to indebtedness of the
Company's subsidiaries. As of September 30, 1994,
after giving effect to the sale of the Notes
offered hereby and the application of the net
proceeds thereof, the Company would have had $132.0
million of senior indebtedness outstanding
(including the Notes and $7.0 million of Purchase
Money Debt (as defined) and other debt of the
Company and its subsidiaries). As of September 30,
1994, the Company had, subject to certain
restrictions, the ability to draw up to $50.0
million of additional senior unsecured indebtedness
under the Credit Facility. See "Description of
Other Indebtedness" and "Description of the Notes--
Ranking of the Notes."
5
<PAGE>
Certain Covenants......... The Indenture (as defined) governing the terms of
the Notes will contain certain covenants for the
benefit of the holders of the Notes, including
limitations on the incurrence of indebtedness, the
making of restricted payments, transactions with
affiliates, the disposition of proceeds of asset
sales, the existence of liens, the making of
guarantees and the granting of pledges by
subsidiaries, the incurrence of sale and leaseback
transactions, the issuance of capital stock by
subsidiaries, the imposition of certain payment
restrictions on subsidiaries and certain mergers
and sales of assets. See "Description of the
Notes -- Certain Covenants."
Use of Proceeds........... The net proceeds from the sale of the Notes
(estimated to be approximately $121.7 million) will
be used to: (i) retire the Existing Senior Notes
(as defined), including a required prepayment
premium; (ii) repay borrowings (excluding letters
of credit) outstanding under the Credit Facility at
the time of issuance of the Notes; and (iii)
provide working capital for general corporate
purposes, including capital expenditures. See "Use
of Proceeds."
6
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following table sets forth summary financial and other data of the
Company. The Statements of Operations Data and Balance Sheet Data for each of
the five years in the period ended December 31, 1993 are derived from the
Consolidated Financial Statements of the Company. The Statements of Operations
Data and Balance Sheet Data for the nine months ended September 30, 1993 and
1994 are derived from unaudited consolidated condensed financial statements.
"Sales and operating revenues" and "costs and operating expenses" include
Federal and state excise and other similar taxes. The information presented
below should be read in conjunction with the Consolidated Financial Statements
and related notes thereto included elsewhere in this Prospectus. See "Selected
Financial and Other Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1989(A) 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Sales and operating
revenues(b)........... $1,523.1 $2,019.9 $1,857.7 $1,795.3 $1,747.4 $1,316.8 $1,315.3
Costs and operating
expenses(b)........... 1,339.4 1,801.1 1,718.1 1,659.8 1,604.7 1,222.4 1,234.5
Selling and
administrative
expenses.............. 126.9 136.4 112.1 102.8 91.7 69.7 62.6
Operating income
(loss)(c)(d).......... 33.6 49.2 (5.8) (10.1) 6.8 (6.5) (32.1)
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 38.3 $ 82.5 $ 78.1 $ 55.5 $ 52.0 $ 36.4 $ 21.2
Total assets........... 623.7 687.7 687.8 675.3 656.2 649.5 604.2
Long-term debt
(including current
portion).............. 43.1 2.6 88.9 61.6 66.7 61.3 67.0
Total common
stockholders' equity.. 306.5 324.6 310.7 303.3 298.4 292.0 270.4
CASH FLOW DATA:
Net cash provided by
(used in) operating
activities............ $ 59.6 $ 123.3 $ 0.5 $ 53.0 $ 28.9 $ 9.3 $ (10.5)
Net cash used in
investing activities.. (142.5) (30.7) (80.8) (45.8) (40.0) (30.5) (17.9)
Net cash provided by
(used in) financing
activities............ 29.8 (48.3) 75.8 (29.8) 7.7 2.1 (2.6)
OPERATING DATA(E):
Refining Operations
Production (m bbl/day). 163.9 149.0 147.0 153.5 158.4 159.3 155.0
Utilization(f)......... 92.6% 83.8% 86.7% 87.8% 91.6% 92.2% 90.3%
Gross margin (per bbl). $ 3.42 $ 4.25 $ 2.35 $ 2.60 $ 2.29 $ 2.38 $ 2.64
Operating expenses (per
bbl).................. 1.73 2.13 2.50 2.36 2.31 2.26 2.41
Retail Operations
Number of units (at
period end)........... 715 605 524 435 376 393 356
Gasoline volume (mm
gals)................. 555 527 469 471 465 345 352
Average gasoline volume
per unit
(m gals/month)........ 64.7 72.6 74.6 90.2 103.1 97.5 109.9
Gasoline gross margin
(per gal)............. 11.9c 11.3c 10.4c 12.6c 13.8c 12.5c 11.0c
Merchandise sales (mm). $ 160.0 $ 150.9 $ 121.0 $ 103.8 $ 82.8 $ 63.7 $ 64.3
Average merchandise
sales per unit
(m $/month)........... 18.6 20.8 19.2 19.9 18.4 18.0 20.1
Merchandise gross
margin................ 32.3% 31.7% 32.3% 32.4% 31.6% 32.2% 23.6%
Operating expenses as a
percentage
of retail sales....... 18.9% 18.5% 17.2% 16.9% 16.6% 16.6% 16.6%
OTHER DATA:
EBITDAAL(g)............ $ 85.0 $ 117.4 $ (18.4) $ 26.9 $ 23.3 $ 24.6 $ 36.1
Turnaround
expenditures(h)....... 4.1 2.1 21.1 17.7 4.1 2.6 0.6
Capital expenditures... 32.5 29.4 64.8 38.0 40.9 29.8 21.1
-------- -------- -------- -------- -------- -------- --------
Total expenditures..... 36.6 31.5 85.9 55.7 45.0 32.4 21.7
Pro forma interest
expense(i)............ -- -- -- -- $ 14.3 -- $ 11.0
Ratio of EBITDAAL to
pro forma interest
expense(j)............ -- -- -- -- 1.6x -- 3.3x
Ratio of long-term debt
to total
capitalization........ 12.3% 0.8% 22.2% 16.9% 18.3% 17.4% 19.9%
</TABLE>
(footnotes on following page)
7
<PAGE>
(a) The Company acquired La Gloria Oil and Gas Company ("La Gloria"), the
owner of the Tyler Refinery, in the fourth quarter of 1989 and accounted
for this acquisition utilizing the purchase method of accounting. La
Gloria's results of operations have been included in the Company's results
of operations since the effective date of the acquisition in the fourth
quarter of 1989.
(b) Sales and operating revenues and costs and operating expenses for the
years 1989 through 1991 have been adjusted to reflect the reclassification
of certain finished product exchange transactions and to include all
Federal and state excise and other similar taxes. These changes were made
to conform with the current presentation and had no impact on net income
(loss) in any of the periods presented.
(c) The Company's crude oil, refined products, and convenience store
merchandise and gasoline inventories are valued at the lower of cost
(last-in, first-out or LIFO) or market with the exception of crude oil
inventory held for resale which is valued at the lower of cost (first-in,
first-out or FIFO) or market. Under the LIFO method, the effects of price
increases and decreases in crude oil and other feedstocks are reflected in
costs and operating expenses in the period that such price changes occur.
In periods of rising prices, using the LIFO method may cause reported
operating income to be lower than would otherwise result from the use of
the FIFO method. Conversely, in periods of falling prices the LIFO method
may cause reported operating income to be higher than would otherwise
result from the use of the FIFO method. The impact of LIFO for the periods
presented was to increase (decrease) operating income from what would have
been reported had the FIFO method been used as follows: year ended
December 31, 1989 - $(28.2) million; 1990 - $(35.0) million; 1991 - $45.9
million; 1992 - $5.8 million; 1993 - $27.7 million; nine months ended
September 30, 1993 - $0.1 million; 1994 - $(17.9) million.
(d) Operating loss for the nine months ended September 30, 1994 includes a
write-down of capitalized expenditures of $16.8 million (before income
taxes) related to the abandonment of the Company's plans to construct a
hydrodesulphurization unit at the Pasadena Refinery.
(e) Operating Data is determined before considering the impact of applying the
LIFO method.
(f) Utilization is defined as crude oil throughput relative to the rated
capacity to process crude oil for both Refineries. If other feedstocks
were included as throughput in the calculation, utilization would have
increased to 107.8%, 98.0%, 96.7%, 101.0%, 104.2%, 104.8% and 102.0% for
the years ended December 31, 1989, 1990, 1991, 1992, 1993, and for the
nine months ended September 30, 1993 and 1994, respectively. Utilization
reflects downtime for maintenance turnarounds during which refinery
production is reduced significantly. See "Business--Refining Operations--
Pasadena Refinery" and "--Tyler Refinery."
(g) EBITDAAL is defined herein as operating income (loss) before interest and
taxes ("EBIT"), excluding depreciation and amortization ("DA"), excluding
(gain) loss on sales and abandonments of property, plant and equipment
("A"), and excluding the impact on operating income (loss) of accounting
for inventory under the LIFO method compared with the FIFO method ("L"),
as set forth below:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------
1989 1990 1991 1992 1993 1993 1994
----- ------ ------ ------ ----- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss). $33.6 $49.2 $ (5.8) $(10.1) $ 6.8 $ (6.5) $ (32.1)
Depreciation and amorti-
zation................. 25.9 31.6 33.3 41.5 41.9 31.3 33.7
(Gain) loss on sales and
abandonments
of property, plant and
equipment.............. (2.7) 1.6 -- 1.3 2.3 (0.1) 16.6
Impact of LIFO method... 28.2 35.0 (45.9) (5.8) (27.7) (0.1) 17.9
----- ------ ------ ------ ----- -------- ---------
EBITDAAL............... $85.0 $117.4 $(18.4) $ 26.9 $23.3 $ 24.6 $ 36.1
===== ====== ====== ====== ===== ======== =========
</TABLE>
The Company has included this information because it believes that such
information is used by certain investors to assess a company's historical
ability to meet future debt service, capital expenditures and working
capital requirements. EBITDAAL should not be considered as an alternative
to net income, as an indicator of operating performance, or as an
alternative to cash flows as a measure of liquidity, as such measures would
be determined pursuant to generally accepted accounting principles.
(h) Turnaround expenditures reflects periodic major maintenance which is
capitalized. See "Business--Refining Operations--Turnarounds."
(i) Pro forma interest expense represents interest expense reported in the
applicable financial statements excluding the interest expense associated
with the Existing Senior Notes, and including estimated interest expense
associated with the Notes in the amount of $13.1 million and $9.8 million
for the year ended December 31, 1993 and for the nine months ended
September 30, 1994, respectively, as if the Notes had been issued at the
beginning of these periods.
(j) Ratio of EBITDAAL to pro forma interest expense is EBITDAAL divided by pro
forma interest expense.
8
<PAGE>
INVESTMENT CONSIDERATIONS
Prospective purchasers of the Notes offered hereby should consider the
following factors, as well as other information contained in this Prospectus.
VOLATILITY OF REFINING AND MARKETING MARGINS
The Company is engaged primarily in the business of refining crude oil and
selling refined petroleum products. The Company's earnings and cash flows from
operations are dependent upon its realizing refining and marketing margins at
least sufficient to cover its fixed and variable expenses. The cost of crude
oil and the prices of refined products depend upon numerous factors beyond the
Company's control, such as the supply of and demand for crude oil, gasoline and
other refined products, which are affected by, among other things, changes in
domestic and foreign economies, political affairs, production levels, the
availability of imports, the marketing of gasoline and other refined petroleum
products by its competitors, the marketing of competitive fuels, the impact of
energy conservation efforts, and the extent of government regulation. The
prices which the Company may obtain for its refined products are also affected
by regional factors, such as local market conditions and the operations of
competing refiners of petroleum products.
The Company has recently instituted programs designed to manage refining
profit margins by minimizing the Company's exposure to the risks of price
volatility related to the acquisition, conversion and sale of crude oil and
refined petroleum products. These programs include hedging activities such as
the purchase and sale of futures and options contracts to offset the effects of
fluctuations in the prices of crude oil and refined products. Such hedging
activities are subject to specific policies and guidelines designed to manage
the Company's crude oil acquisition, refining, and product sales on a daily
basis to achieve, at a minimum, prevailing margins available to comparable Gulf
Coast refiners and, where appropriate, to pursue forward hedging opportunities
which lock in attractive returns. There can be no assurance that the Company
will be able to enter into any such hedging activities when it desires to do
so, or if entered into that such hedging activities will be effective in
limiting any adverse effects of fluctuations in the prices of crude oil and
refined products on the Company's operations or its overall profitability. See
"Business -- Business Strategy."
An increase in crude oil prices could adversely affect the Company's
operating margins if the increased cost of raw materials could not be passed on
to the Company's customers and could adversely affect the Company's retail
sales volumes if automobile consumption of gasoline were to decline as a result
of such price increases. The cost of crude oil and the prices of refined
petroleum products fluctuate, making the Company's earnings subject to
substantial fluctuations. As evidence of the foregoing, the Company reported
net income of $21.0 million and $26.0 million for the years ended December 31,
1989 and 1990, respectively, and reported net losses (before cumulative effect
of changes in accounting principles) of $6.0 million, $13.3 million, $4.3
million and $25.2 million for the years ended December 31, 1991, 1992 and 1993
and for the nine months ended September 30, 1994, respectively (including the
effect of a $16.8 million write-down of the capitalized expenditures of certain
property, plant and equipment in the third quarter of 1994 related to the
abandonment of the Company's plans for a hydrodesulphurization unit at the
Pasadena Refinery). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
AVAILABILITY OF CRUDE OIL
Substantially all of the Company's crude oil requirements are currently
purchased in the spot market and are subject to price fluctuations. The Company
believes that adequate supplies of crude oil will be available for its
business, but no assurance can be given that the Company will be able to
negotiate favorable prices for crude oil on the spot market, or that adequate
supplies will be available during times of shortages. See "Business -- Supply,
Transportation and Wholesale Marketing."
9
<PAGE>
COMPETITION
The oil refining and marketing industry in which the Company operates is
highly competitive. Many of the Company's principal competitors are major
integrated, multinational oil companies that are substantially larger and
better known than the Company, and may have substantially greater financial and
operating resources than the Company. Because of their more diverse and
integrated operations, larger refineries and greater resources, these companies
may be better able than the Company to withstand severe price competition and
volatile market conditions, and to obtain crude oil in times of shortages. See
"Business -- Competition."
ENVIRONMENTAL LIABILITIES AND GOVERNMENT REGULATION
The Company's operations are subject to extensive and rapidly changing
Federal and state environmental regulations governing air emissions, waste
water discharges, and solid and hazardous waste management activities. The
Company anticipates that substantial additional capital investment will be
required over the next several years to comply with existing regulations. The
Company cannot predict the nature, scope or effect of future laws or regulatory
requirements, or how those future laws or regulations will be administered or
interpreted. It is possible that any new environmental laws or regulations, or
more vigorous regulatory enforcement policies or stricter interpretation of
existing laws, could have a material adverse effect on the business and
operations of the Company.
The Company's operations are inherently subject to the possibility of spills,
discharges or other releases of contaminants, possibly including hazardous
substances, which may give rise to liability to governmental entities or
private parties under Federal, state or local environmental laws and
regulations. Discharges of contaminants have occurred from time to time during
the normal course of the Company's operations. Although the Company has
invested substantial resources to prevent and minimize future discharges and to
remediate contamination resulting from prior discharges, there can be no
assurance 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. Such governmental or third
party actions could require substantial expenditures by the Company and
adversely affect the financial position of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Environmental and Other Regulations."
CONTROL BY PRINCIPAL STOCKHOLDER; POTENTIAL CONFLICTS OF INTEREST
As of January 31, 1994, American Trading and Production Corporation
("ATAPCO") beneficially owned 2,366,526 shares, or 49.1%, of the Company's
Class A Common Stock (as defined) and 591,629 shares, or 11.8%, of the
Company's Class B Common Stock (as defined). Various persons who hold stock in
ATAPCO, either individually or in a fiduciary or beneficial capacity, also
beneficially owned 104,662 shares, or 2.2%, of the Class A Common Stock and
23,080 shares, or 0.5%, of the Class B Common Stock and are members of a
"group" (as such term is used in Section 13(d) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act")) (the "ATAPCO Group") along with
ATAPCO. The ATAPCO Group's holdings amount in the aggregate to 2,471,188
shares, or 51.3%, of the Class A Common Stock and 614,709 shares, or 12.3%, of
the Class B Common Stock. The holders of Class B Common Stock are entitled to
elect two directors and the holders of Class A Common Stock are entitled to
elect the remainder of the Board of Directors. Consequently, the ATAPCO Group
has the ability to determine the composition of a majority of the Company's
Board of Directors and thereby effectively has the ability to exercise control
over the Company. Henry A. Rosenberg, Jr., the Company's Chairman and Chief
Executive Officer, and Edward L. Rosenberg, Senior Vice President --
Administration, Corporate Development and Long Range Planning, are directors
and stockholders of ATAPCO, and Frank B. Rosenberg, Vice President--Marketing,
is a stockholder of ATAPCO. See "Management" and "Principal Stockholders."
10
<PAGE>
The relationship with ATAPCO creates the potential for conflicts of interest.
For example, the Company leases offices in a building owned by an indirect,
wholly-owned subsidiary of ATAPCO. There is no established procedure or policy
for resolving such conflicts of interest. The Indenture provides that
transactions between the Company or any of its subsidiaries and any affiliate
of the Company must be on terms that are no less favorable to the Company or
such subsidiary, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party. The
Indenture provides certain additional procedures for transactions involving
aggregate consideration in excess of $1.0 million. See "Management--Interest of
Management and Others in Transactions with the Company and its Subsidiaries"
and "Description of the Notes--Certain Covenants--Limitation on Transactions
with Affiliates."
RANKING OF THE NOTES
The Notes will be unsecured senior obligations of the Company, will rank pari
passu in right of payment with all existing and future senior indebtedness of
the Company and will be senior in right of payment to all existing and future
subordinated indebtedness of the Company. The Notes, however, will be
effectively subordinated to secured senior indebtedness of the Company with
respect to the assets securing such indebtedness and will also be effectively
subordinated to indebtedness of the Company's subsidiaries. As of September 30,
1994, after giving effect to the sale of the Notes offered hereby and the
application of the net proceeds thereof, the Company would have had $132.0
million of senior indebtedness outstanding (including the Notes and $7.0
million of Purchase Money Debt and other debt of the Company and its
subsidiaries). As of September 30, 1994, the Company had, subject to certain
restrictions, the ability to draw up to $50.0 million of additional senior
unsecured indebtedness under the Credit Facility. Pursuant to the Indenture
governing the Notes, the Company and its subsidiaries may incur additional
secured and unsecured indebtedness, or provide guarantees of indebtedness, in
certain circumstances. See "Description of the Notes -- Ranking of the Notes"
and "-- Certain Covenants."
INABILITY TO FUND A CHANGE OF CONTROL OFFER
In the event of a Change of Control, the Company will be required, subject to
certain conditions, to offer to purchase all outstanding Notes at a price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any. After giving effect to the sale of Notes offered hereby and the
application of proceeds thereof the Company does not currently have, and no
assurance can be given that the Company will have, sufficient funds available
to purchase all or any material portion of the outstanding Notes were they to
be tendered in response to an offer made as a result of a Change of Control.
See "Description of the Notes -- Certain Covenants."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There is currently no public market for the Notes, and the Company does not
intend to apply for listing of the Notes on any national securities exchange,
or for inclusion of the Notes on any automated inter-dealer quotation system.
The Underwriters have advised the Company that following the completion of the
offering of the Notes, the Underwriters presently intend to make a market in
the Notes, but they are not obligated to do so, and any such market making may
be discontinued at any time, without notice. Accordingly, there is no assurance
that any market will develop for the Notes or, if developed, that any trading
market will be sustained. If a market for the Notes does develop, the Notes may
trade at a premium or discount from their face amount, depending upon, among
other factors, fluctuations in interest rates, the Company's financial results,
future announcements concerning the Company or its competitors, government
regulation and general economic and other conditions and developments affecting
the industry. If an active public market does not develop or is not maintained,
the market price and liquidity of the Notes may be adversely affected.
11
<PAGE>
THE COMPANY
The Company, which traces its origins to 1917, is one of the largest
independent refiners and marketers of petroleum products in the United States.
The Company owns and operates two high-conversion refineries with a combined
capacity of 152,000 barrels per day of crude oil -- a 100,000 barrel per day
facility located in Pasadena, Texas, near Houston, and a 52,000 barrel per day
facility located in Tyler, Texas. The Company is also a leading independent
marketer of petroleum products and merchandise through a network of over 350
gasoline stations and convenience stores located in the Mid-Atlantic and
Southeastern United States. In support of these businesses, the Company
operates 16 product terminals located on three major product pipelines along
the Gulf Coast and the Eastern Seaboard and in the Central United States.
The Company's principal executive offices are located at One North Charles
Street, Baltimore, Maryland 21201, and the Company's telephone number at such
address is (410) 539-7400.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes (after deducting
the estimated underwriting discount and commissions and offering expenses) are
estimated to be approximately $121.7 million. Such proceeds will be used to:
(i) retire the 10.42% Senior Notes due January 3, 2001 (the "Existing Senior
Notes") in the original principal amount of $60.0 million plus a required
prepayment premium of approximately $3 million; (ii) repay borrowings
(excluding letters of credit) outstanding under the Credit Facility (estimated
to be approximately $15 million at the time of issuance of the Notes); and
(iii) provide working capital for general corporate purposes, including capital
expenditures.
As of September 30, 1994, no cash borrowings were outstanding under the
Credit Facility, and no such borrowings are outstanding as of the date hereof.
For the nine months ended September 30, 1994, the average interest rate on
borrowings under the Credit Facility was 7.25% per annum. The final maturity of
the Credit Facility is May 10, 1996. After giving effect to the sale of the
Notes, the Company will be able to draw up to $50.0 million of additional
indebtedness under the Credit Facility, subject to certain restrictions set
forth therein. Pending the application of the net proceeds from the offering of
the Notes, such proceeds will be invested in short-term marketable securities
as permitted under the terms of the Indenture. See "Description of Other
Indebtedness."
12
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of September 30, 1994, and the consolidated capitalization of the Company as
of September 30, 1994 as adjusted to give effect to the sale of the Notes and
the application of the net proceeds thereof, as if such transaction had
occurred on September 30, 1994. The table should be read in conjunction with
the Consolidated Financial Statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1994
---------------------------
ACTUAL AS ADJUSTED
------------ --------------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents (a)...................... $ 21.2 $ 79.9
============ ============
Long-term debt (including current portion) (b):
Credit Facility (c).............................. $ -- $ --
Existing Senior Notes............................ 60.0 --
% Senior Notes due 2005........................ -- 125.0
Purchase Money Debt and other debt............... 7.0 7.0
------------ ------------
Total long-term debt........................... 67.0 132.0
Common Stockholders' Equity:
Common Stock, Classes A and B.................... 49.0 49.0
Additional paid-in capital (d)................... 89.3 89.3
Retained earnings (e)............................ 132.1 130.1
------------ ------------
Total Common Stockholders' Equity.............. 270.4 268.4
------------ ------------
Total Capitalization........................... $ 337.4 $ 400.4
============ ============
</TABLE>
- ---------------------
(a) Cash and cash equivalents, as adjusted, includes the proceeds of the Notes
after payment for the retirement of the Existing Senior Notes of
approximately $63 million (including a prepayment premium of approximately
$3 million) and payment of debt issuance costs of approximately $3.3
million.
(b) Long-term debt includes the current portion, consisting of $8.6 million of
the Existing Senior Notes and $1.4 million of the Purchase Money Debt and
other debt.
(c) As of September 30, 1994, no cash borrowings were outstanding under the
unsecured Credit Facility and the Company had cash borrowing availability
of up to $50.0 million, subject to certain restrictions. The Company
estimates that approximately $15 million of cash borrowings will be
outstanding under the Credit Facility at the time of issuance of the Notes,
which amount will be repaid as described under "Use of Proceeds."
(d) Additional paid-in capital is presented net of unearned restricted stock of
$1.7 million.
(e) Retained earnings, as adjusted, is after giving effect to the loss (after
income tax benefit) on the early extinguishment of the Existing Senior
Notes in the amount of approximately $2 million. This loss which consists
principally of the prepayment premium on the Existing Senior Notes will be
recorded as an extraordinary loss from the early extinguishment of debt in
the period that the Existing Senior Notes are retired.
13
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected financial and other data of the
Company. The Statements of Operations Data and Balance Sheet Data for each of
the five years in the period ended December 31, 1993 are derived from the
Consolidated Financial Statements of the Company. The Statements of Operations
Data and Balance Sheet Data for the nine months ended September 30, 1993 and
1994 are derived from unaudited consolidated condensed financial statements.
The unaudited consolidated condensed financial statements include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for the fair presentation of the financial position and
the results of operations for these periods. Operating results for the nine
months ended September 30, 1994 are not necessarily indicative of the results
that may be expected for the entire year ended December 31, 1994. The
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the Consolidated
Financial Statements and related notes thereto and other financial information
included or incorporated by reference in this Prospectus. "Sales and operating
revenues" and "costs and operating expenses" include Federal and state excise
and other similar taxes.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -------------------
1989(A) 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- ---------
(DOLLARS IN MILLIONS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Sales and operating
revenues(b)........... $1,523.1 $2,019.9 $1,857.7 $1,795.3 $1,747.4 $1,316.8 $ 1,315.3
Costs and operating
expenses(b)........... 1,339.4 1,801.1 1,718.1 1,659.8 1,604.7 1,222.4 1,234.5
Selling and
administrative
expenses.............. 126.9 136.4 112.1 102.8 91.7 69.7 62.6
Depreciation and
amortization.......... 25.9 31.6 33.3 41.5 41.9 31.3 33.7
Sales and abandonments
of property, plant and
equipment(c).......... (2.7) 1.6 -- 1.3 2.3 (0.1) 16.6
Operating income
(loss)(d)............. 33.6 49.2 (5.8) (10.1) 6.8 (6.5) (32.1)
Interest expense....... 1.8 2.7 7.9 6.8 7.5 5.5 5.8
Net income (loss)(e)... 21.0 26.0 (6.0) (5.5) (4.3) (11.2) (25.2)
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 38.3 $ 82.5 $ 78.1 $ 55.5 $ 52.0 $ 36.4 $ 21.2
Total assets........... 623.7 687.7 687.8 675.3 656.2 649.5 604.2
Long-term debt
(including current
portion).............. 43.1 2.6 88.9 61.6 66.7 61.3 67.0
Total common
stockholders' equity.. 306.5 324.6 310.7 303.3 298.4 292.0 270.4
CASH FLOW DATA:
Net cash provided by
(used in) operating
activities............ $ 59.6 $ 123.3 $ 0.5 $ 53.0 $ 28.9 $ 9.3 $ (10.5)
Net cash used in
investing activities.. (142.5) (30.7) (80.8) (45.8) (40.0) (30.5) (17.9)
Net cash provided by
(used in) financing
activities............ 29.8 (48.3) 75.8 (29.8) 7.7 2.1 (2.6)
OPERATING DATA(F):
Refining Operations
Production (m bbl/day). 163.9 149.0 147.0 153.5 158.4 159.3 155.0
Utilization (g)........ 92.6% 83.8% 86.7% 87.8% 91.6% 92.2% 90.3%
Gross margin (per bbl). $ 3.42 $ 4.25 $ 2.35 $ 2.60 $ 2.29 $ 2.38 $ 2.64
Operating expenses (per
bbl).................. 1.73 2.13 2.50 2.36 2.31 2.26 2.41
Retail Operations
Number of units (at
period end)........... 715 605 524 435 376 393 356
Gasoline volume (mm
gals)................. 555 527 469 471 465 345 352
Average gasoline volume
per unit
(m gals/month)........ 64.7 72.6 74.6 90.2 103.1 97.5 109.9
Gasoline gross margin
(per gal)............. 11.9c 11.3c 10.4c 12.6c 13.8c 12.5c 11.0c
Merchandise sales (mm). $ 160.0 $ 150.9 $ 121.0 $ 103.8 $ 82.8 $ 63.7 $ 64.3
Average merchandise
sales per unit
(m $/month)........... 18.6 20.8 19.2 19.9 18.4 18.0 20.1
Merchandise gross
margin................ 32.3% 31.7% 32.3% 32.4% 31.6% 32.2% 23.6%
Operating expenses as a
percentage of
retail sales.......... 18.9% 18.5% 17.2% 16.9% 16.6% 16.6% 16.6%
OTHER DATA:
EBITDAAL(h)............ $ 85.0 $ 117.4 $ (18.4) $ 26.9 $ 23.3 $ 24.6 $ 36.1
Turnaround
expenditures(i)...... 4.1 2.1 21.1 17.7 4.1 2.6 0.6
Capital expenditures... 32.5 29.4 64.8 38.0 40.9 29.8 21.1
-------- -------- -------- -------- -------- -------- ---------
Total expenditures..... 36.6 31.5 85.9 55.7 45.0 32.4 21.7
Pro forma interest
expense(j)........... -- -- -- -- $ 14.3 -- $ 11.0
Ratio of EBITDAAL to
pro forma interest
expense (k)........... -- -- -- -- 1.6x -- 3.3x
Ratio of long-term debt
to total
capitalization........ 12.3% 0.8% 22.2% 16.9% 18.3% 17.4% 19.9%
Ratio of earnings to
fixed charges(l)..... 6.0x 7.1x -- -- 1.0x -- --
</TABLE>
(footnotes on following page)
14
<PAGE>
(a) The Company acquired La Gloria, the owner of the Tyler Refinery, in the
fourth quarter of 1989 and accounted for this acquisition utilizing the
purchase method of accounting. La Gloria's results of operations have been
included in the Company's results of operations since the effective date of
the acquisition in the fourth quarter of 1989.
(b) Sales and operating revenues and costs and operating expenses for the years
1989 through 1991 have been adjusted to reflect the reclassification of
certain finished product exchange transactions and to include all Federal
and state excise and other similar taxes. These changes were made to
conform with the current presentation and had no impact on net income
(loss) in any of the periods presented.
(c) Sales and abandonments of property, plant and equipment in 1989 represent
an excess of proceeds over the net book value of the assets sold. Sales and
abandonments for all other periods represent a deficiency of the proceeds
over the net book value of assets sold or abandoned. For the nine months
ended September 30, 1994, losses from sales and abandonments of property,
plant and equipment includes the write-down of capitalized expenditures of
$16.8 million (before income taxes) related to the abandonment of the
Company's plans to construct a hydrodesulphurization unit at the Pasadena
Refinery.
(d) The Company's crude oil, refined products, and convenience store
merchandise and gasoline inventories are valued at the lower of cost (last-
in, first-out or LIFO) or market with the exception of crude oil inventory
held for resale which is valued at the lower of cost (first-in, first-out
or FIFO) or market. Under the LIFO method, the effects of price increases
and decreases in crude oil and other feedstocks are reflected in costs and
operating expenses in the period that such price changes occur. In periods
of rising prices, using the LIFO method may cause reported operating income
to be lower than would otherwise result from the use of the FIFO method.
Conversely, in periods of falling prices the LIFO method may cause reported
operating income to be higher than would otherwise result from the use of
the FIFO method. The impact of LIFO for the periods presented was to
increase (decrease) operating income from what would have been reported had
the FIFO method been used as follows: year ended December 31, 1989 -
$(28.2) million; 1990 - $(35.0) million; 1991 - $45.9 million; 1992 -
$5.8 million; 1993 - $27.7 million; nine months ended September 30, 1993 -
$0.1 million; 1994 - $(17.9) million.
(e) In 1992, the Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" which resulted in a cumulative
decrease in net loss of $13.4 million, and Statement of Financial
Accounting Standards No. 106 "Accounting for Postretirement Benefits Other
Than Pensions" which resulted in a cumulative increase in net loss of $5.6
million.
(f) Operating Data is determined before considering the impact of applying the
LIFO method.
(g) Utilization is defined as crude oil throughput relative to the rated
capacity to process crude oil for both Refineries. If other feedstocks were
included as throughput in the calculation, utilization would have increased
to 107.8%, 98.0%, 96.7%, 101.0%, 104.2%, 104.8% and 102.0% for the years
ended December 31, 1989, 1990, 1991, 1992, 1993, and for the nine months
ended September 30, 1993 and 1994, respectively. Utilization reflects
downtime for maintenance turnarounds during which refinery production is
reduced significantly. See "Business--Refining Operations--Pasadena
Refinery" and "--Tyler Refinery."
(h) EBITDAAL is defined herein as operating income (loss) before interest and
taxes ("EBIT"), excluding depreciation and amortization ("DA"), excluding
(gain) loss on sales and abandonments of property, plant and equipment
("A"), and excluding the impact on operating income (loss) of accounting
for inventory under the LIFO method compared with the FIFO method ("L"), as
set forth below:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------
1989 1990 1991 1992 1993 1993 1994
----- ------ ------ ------ ----- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss). $33.6 $ 49.2 $ (5.8) $(10.1) $ 6.8 $ (6.5) $ (32.1)
Depreciation and amorti-
zation................. 25.9 31.6 33.3 41.5 41.9 31.3 33.7
(Gain) loss on sales and
abandonments of proper-
ty, plant and equip-
ment................... (2.7) 1.6 -- 1.3 2.3 (0.1) 16.6
Impact of LIFO method... 28.2 35.0 (45.9) (5.8) (27.7) (0.1) 17.9
----- ------ ------ ------ ----- -------- ---------
EBITDAAL............... $85.0 $117.4 $(18.4) $ 26.9 $23.3 $ 24.6 $ 36.1
===== ====== ====== ====== ===== ======== =========
</TABLE>
The Company has included this information because it believes that such
information is used by certain investors to assess a company's historical
ability to meet future debt service, capital expenditures and working capital
requirements. EBITDAAL should not be considered as an alternative to net
income, as an indicator of operating performance, or as an alternative to
cash flows as a measure of liquidity, as such measures would be determined
pursuant to generally accepted accounting principles.
(i) Turnaround expenditures reflects periodic major maintenance which is
capitalized. See "Business--Refining Operations-- Turnarounds."
(j) Pro forma interest expense represents interest expense reported in the
applicable financial statements excluding the interest expense associated
with the Existing Senior Notes, and including estimated interest expense
associated with the Notes in the amount of $13.1 million and $9.8 million
for the year ended December 31, 1993 and for the nine months ended
September 30, 1994, respectively, as if the Notes had been issued at the
beginning of these periods.
(k) Ratio of EBITDAAL to pro forma interest expense is EBITDAAL divided by pro
forma interest expense.
(l) The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings
to fixed charges, earnings consists of earnings (loss) before income taxes,
cumulative effects of changes in accounting principles and fixed charges
(excluding capitalized interest). Fixed charges consists of interest
expense, capitalized interest and that portion of rental expense
representative of the interest factor. For the years ended December 31,
1991 and 1992 and the nine months ended September 30, 1993 and 1994 there
were deficiencies in the coverage of fixed charges by earnings before fixed
charges of $5.6 million, $17.9 million, $11.8 million and $37.0 million,
respectively. The deficiency for the nine months ended September 30, 1994
would have been $20.2 million exclusive of the loss incurred on the
abandonment of certain refinery equipment of $16.8 million (before income
taxes).
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Purchases of crude oil supply are typically made pursuant to relatively
short-term, renewable contracts with numerous foreign and domestic major and
independent oil producers, generally containing market-responsive pricing
provisions. The Company has instituted programs designed to manage profit
margins by minimizing the Company's exposure to the risks of price volatility
related to the acquisition, conversion and sale of crude oil and refined
petroleum products. These programs include hedging activities such as the
purchase and sale of futures and options contracts to mitigate the effect of
fluctuations in the prices of crude oil and refined products. While the
Company's net sales and operating revenues fluctuate significantly with
movements in industry crude oil prices, such prices do not have a direct
relationship to net earnings, which are subject to the impact of the Company's
LIFO method of accounting discussed below. The effect of changes in crude oil
prices on the Company's operating results is determined more by the rate at
which the prices of refined products adjust to reflect such changes. See
"Business -- Business Strategy" and "-- Refining Operations."
The following table estimates the sensitivity of the Company's income before
taxes to price changes which impact its refining and retail margins based on a
representative production rate for the Refineries and a representative amount
of total gasoline sold at the Company's retail units:
<TABLE>
<CAPTION>
EARNINGS SENSITIVITY CHANGE ANNUAL IMPACT
-------------------- --------- -------------
<S> <C> <C>
Refining margin.................................. $0.10/bbl $5.8 million
Retail margin.................................... $0.01/gal $4.8 million
</TABLE>
The Company conducts environmental assessments and remediation efforts at
multiple locations, including operating facilities and previously owned or
operated facilities. The Company accrues environmental and clean-up related
costs of a non-capital nature when it is both probable that a liability has
been incurred and that the amount can be reasonably estimated. Accruals for
losses from environmental remediation obligations generally are recognized no
later than completion of the remedial feasibility study. Estimated costs,
which are based upon experience and assessments, are recorded at undiscounted
amounts without considering the impact of inflation, and are adjusted
periodically as additional or new information is available. Expenditures for
equipment necessary for environmental issues relating to ongoing operations
are capitalized.
The Company's crude oil, refined products and convenience store merchandise
and gasoline inventories are valued at the lower of cost (based on the last-
in, first-out or LIFO method of accounting) or market, with the exception of
crude oil inventory held for resale which is valued at the lower of cost
(based on the first-in, first-out or FIFO method of accounting) or market.
Under the LIFO method, the effects of price increases and decreases in crude
oil and other feedstocks are charged directly to the cost of refined products
sold in the period that such price changes occur. In periods of rising prices,
the LIFO method may cause reported operating income to be lower than would
otherwise result from the use of the FIFO method. Conversely, in periods of
falling prices the LIFO method may cause reported operating income to be
higher than would otherwise result from the use of the FIFO method. In
addition, the Company's use of the LIFO method may understate, for periods of
rising prices, or overstate, for periods of falling prices, the value of
inventories on the Company's consolidated balance sheet as compared to the
value of inventories under the FIFO method. The Company will make an actual
valuation of inventory under the LIFO method only at the end of each year
based on the inventory levels and costs at that time. Accordingly, the Company
calculates interim LIFO projections based on management's estimates of
expected year-end inventory levels and values. Following is the Company's
inventory carrying values at September 30, 1994 and December 31, 1993. The
Company recorded a LIFO allowance of $46.1 million and $28.2 million as of
September 30, 1994 and December 31, 1993, respectively, which represents the
approximate understatement of the value of inventories on the
16
<PAGE>
Company's consolidated balance sheets as compared to the value of inventories
as computed on a FIFO basis.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(IN MILLIONS)
<S> <C> <C>
Crude oil........................................ $ 39.0 $ 47.8
Refined products................................. 60.5 73.1
------ ------
Total inventories at FIFO (approximates current
cost).......................................... 99.5 120.9
LIFO allowance................................... (25.8) (43.7)
------ ------
Total crude oil and refined products............ 73.7 77.2
------ ------
Merchandise inventory at FIFO (approximates cur-
rent cost)...................................... 7.2 7.7
LIFO allowance................................... (2.4) (2.4)
------ ------
Total merchandise............................... 4.8 5.3
------ ------
Materials and supplies inventory at FIFO......... 8.3 7.9
------ ------
Total Inventory................................. $ 86.8 $ 90.4
====== ======
</TABLE>
As discussed in Notes D and F of the Notes to Consolidated Financial
Statements contained elsewhere in this Prospectus, the Company and its
subsidiaries adopted the provisions of the Financial Accounting Standards
Board's Statements of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"), and No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"), effective January 1,
1992. Results for the year ended December 31, 1992, include a $13.4 million
cumulative benefit from the effect on prior years of the adoption of SFAS 109,
and a $5.6 million cumulative charge, net of tax, from the application of SFAS
106.
The following discussion should be read in conjunction with "Selected
Financial and Other Data" and the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1993 and 1994
The Company's sales and operating revenues increased $12.6 million or 2.8% in
the third quarter of 1994 and decreased $1.5 million or 0.1% for the nine
months ended September 30, 1994 from the comparable periods in 1993. The
Company's sales and operating revenues include all Federal and state excise and
other similar taxes. These taxes totalled $97.0 million and $69.0 million for
the three months ended September 30, 1994 and 1993, respectively, and $295.1
million and $207.3 million for the nine months ended September 30, 1994 and
1993, respectively. The third quarter increase in sales and operating revenues
was primarily attributable to the increase in excise taxes and a 1.8% increase
in the average sales price per gallon of petroleum products. Due to
deteriorating refinery gross margins which occurred during the third quarter of
1994, the Company reduced operating runs which resulted in a 7.4% decrease in
petroleum product sales volumes. The decrease for the nine months ended
September 30, 1994 was a result primarily of an 8.5% decrease in the average
sales price per gallon of petroleum products and a 0.3% decrease in petroleum
products sales volumes which were partially offset by the increase in excise
taxes.
Merchandise sales increased $0.6 million or 1.0% for the nine months ended
September 30, 1994 compared to the same period in 1993, while merchandise gross
profit decreased $5.3 million or 25.9% for the nine months ended September 30,
1994 compared to the same period in 1993. Merchandise gross margin (merchandise
gross profit as a percent of merchandise sales) decreased from 32.2% to
17
<PAGE>
23.6% for the nine months ended September 30, 1993 and 1994, respectively. In
addition to a reduction in the number of operating units during the period, the
$5.3 million decrease in merchandise gross profit and the related decrease in
gross margin was also due to the introduction in early 1994 of a new
merchandise pricing program designed to increase per unit customer traffic and
overall merchandise sales and gasoline volumes. A key element of the program
includes the reduction of prices on certain items such as tobacco products and
beverages. While overall merchandise gross profit decreased in the first nine
months of 1994 compared with the same period in 1993 as a result of the new
strategy, by late September 1994 (that is, late in the third quarter of 1994),
merchandise revenue had increased to the point that aggregate merchandise gross
profit exceeded same store merchandise gross profit achieved in late September
1993. For the nine months ended September 30, 1994 as compared to the same
period in 1993, same store average monthly gasoline volumes and merchandise
sales increased approximately 7% and 27%, respectively.
Costs and operating expenses increased $35.3 million or 8.4% in the third
quarter of 1994 compared to the third quarter of 1993. The increase was due to
the increase in excise taxes and a 7.7% increase in the average cost per barrel
consumed of crude oil and feedstocks. These increases were partially offset by
the sales volume decreases as previously discussed. Costs and operating
expenses increased $12.2 million or 1.0% for the nine months ended September
30, 1994 compared to the same period in 1993. This increase was due to excise
tax increases as previously discussed which were partially offset by a 10.8%
decrease in the average cost per barrel consumed of crude oil and feedstocks.
The results of operations were affected by the Company's use of the LIFO method
to value inventory which decreased the Company's gross margin $0.54 per barrel
($7.4 million) for the three months ended September 30, 1994, while increasing
the gross margin $0.11 per barrel ($1.6 million) for the three months ended
September 30, 1993. The use of the LIFO method decreased the Company's gross
margin $0.43 per barrel ($17.9 million) for the nine months ended September 30,
1994 but did not have a significant effect on the Company's gross margin for
the nine months ended September 30, 1993.
The Company has recently instituted programs designed to manage refining
profit margins by minimizing the Company's exposure to the risks of price
volatility related to the acquisition, conversion and sale of crude oil and
refined petroleum products. These programs include hedging activities such as
the purchase and sale of futures and options contracts to offset the effects of
fluctuations in the prices of crude oil and refined products. Such hedging
activities are subject to specific policies and guidelines established by the
Company and are reviewed by the Margin Management Committee composed of senior
management and chaired by the Company's Chief Executive Officer. The Company's
policy is to manage its crude oil acquisition, refining, and product sales on a
daily basis to achieve, at a minimum, prevailing margins available to
comparable Gulf Coast refiners and, where appropriate, to pursue forward
hedging opportunities which lock in attractive returns. The number of barrels
of crude oil and refined products covered by such hedging activities varies
from time to time, within certain limits established by the Margin Management
Committee. While the Company's hedging activities are intended to reduce
volatility while providing an acceptable profit margin on a portion of
production, the use of such a program can limit the Company's ability to
participate in an improvement in related product profit margins.
Total refinery throughput averaged 149,500 barrels per day for the third
quarter of 1994 compared to 165,600 barrels per day for the third quarter of
1993 due to planned reductions in throughput. Total refinery throughput
averaged 155,000 barrels per day for the nine months ended September 30, 1994
compared to 159,300 barrels per day for the same period in 1993. Yields of
gasoline and distillates were 87,100 barrels per day (58.3%) and 48,900 barrels
per day (32.7%), respectively, in the third quarter of 1994 and 90,700 barrels
per day (54.8%) and 54,300 barrels per day (32.8%), respectively, for the third
quarter of 1993. Yields of gasoline and distillates were 88,100 barrels per day
(56.8%) and 50,600 barrels per day (32.6%), respectively, for the nine months
ended September 30, 1994 and
18
<PAGE>
87,600 barrels per day (55.0%) and 50,900 barrels per day (31.9%),
respectively, for the same period in 1993.
Selling and administrative expenses decreased $2.3 million or 9.8% for the
three months ended September 30, 1994 and $7.2 million or 10.3% for the nine
months ended September 30, 1994 as compared to the same periods in 1993. The
decreases are principally due to decreased costs associated with the sale or
closing throughout 1993 of retail marketing units which were either not
profitable or did not fit with the Company's strategic direction, and cost
reductions related to the Company's administrative functions.
Depreciation and amortization increased $2.1 million or 20.2% for the three
months ended September 30, 1994 and $2.4 million or 7.8% for the nine months
ended September 30, 1994 compared to the same periods in 1993. These increases
were due primarily to accelerated deferred turnaround amortization related to
the Pasadena Refinery's fluid catalytic cracking unit. A maintenance
turnaround of the fluid catalytic cracking unit, which was previously
scheduled for the first quarter of 1995, began in October 1994, and was
completed in the fourth quarter of 1994. While the fluid catalytic cracking
unit and certain related units were out of service for a significant portion
of the fourth quarter, the remainder of the Pasadena Refinery was in operation
and is expected to average approximately 81,000 barrels per day of throughput
during the fourth quarter of 1994.
In the three months ended September 30, 1994, costs and operating expenses
included $0.7 million and $0.9 million, respectively, related to environmental
matters and retail unit closings. This compares to $1.0 million and $0.7
million for the same period of 1993. For the nine months ended September 30,
1994 and 1993, costs and operating expenses included $1.8 million and $3.4
million, respectively, for environmental matters and $1.7 million and $1.8
million, respectively, for retail unit closings. Interest expense for the nine
months ended September 30, 1994 and 1993 included the reduction of $0.7
million and $0.6 million, respectively, as a result of the interest rate swap
contracts.
As was discussed in the Company's 1993 Form 10-K, since 1991, the Company
had incurred expenditures of approximately $21 million in connection with
engineering and an equipment acquisition which would enable the Pasadena
Refinery to manufacture low sulphur distillate. As of December 31, 1993, this
project had been temporarily halted while the Company further studied the
market economics of high sulphur versus low sulphur distillate during a
complete business cycle. Management estimates that additional expenditures in
the range of approximately $50 million to approximately $80 million would be
required to complete this project. Following an evaluation of current and
projected margins based on available supply and forecasted demand for low
sulphur distillate after one full business cycle, management abandoned its
plans to construct a hydrodesulphurization unit at the Pasadena Refinery.
Accordingly, sales and abandonments of property, plant, and equipment in the
third quarter of 1994 reflect a write-down of the capitalized expenditures of
$16.8 million to an estimated net realizable salvage value of $4.0 million.
The Pasadena Refinery will continue to manufacture high sulphur distillates
which are readily saleable in the Company's market areas.
Three Years Ended December 31, 1993
The Company's sales and operating revenues decreased 2.7% in 1993 and 3.4%
in 1992 over the previous years. The Company's sales and operating revenues
include all Federal and state excise and other similar taxes, which totaled
$296.2 million in 1993, $218.9 million in 1992, and $214.7 million in 1991.
The 1993 decrease in sales and operating revenues was primarily due to an 8.8%
decrease in the average unit selling price of petroleum products (which was
partially offset by a 2.1% increase in sales volumes), to a 19.9% decrease in
merchandise sales, and to the increase in excise taxes indicated above. The
1992 decrease in sales and operating revenues was primarily attributable to a
6.6% decrease in the average unit selling price of petroleum products, which
was partially offset by a 3.4% increase in sales volumes, and a 12.5% decrease
in merchandise sales. The merchandise sales
19
<PAGE>
decreases resulted principally from the sale or closing throughout 1992 and
1993 of retail units which were either not profitable or not compatible with
the Company's strategic direction. There were 524, 435 and 376 retail units
operating at December 31, 1991, 1992 and 1993, respectively.
Gasoline sales accounted for 56.4% of total 1993 revenues (excluding excise
taxes), while distillates and merchandise sales represented 30.4% and 6.0%,
respectively. This compares to a dollar mix from sales of 56.8% gasoline,
28.7% distillates and 6.9% merchandise in 1992, and 56.8% gasoline, 29.3%
distillates and 7.5% merchandise in 1991.
Costs and operating expenses decreased 3.3% in 1993, after decreasing 3.4%
in 1992. The 1993 decrease was attributable to a decrease of $2.29, or 11.2%,
in the average cost per barrel of crude oil and feedstocks, which was
partially offset by increases in volumes sold and excise taxes. The 1992
decrease in costs and operating expenses was due primarily to a decrease of
$1.45, or 6.6%, in the average cost per barrel of crude oil and feedstocks,
which was partially offset by higher sales volumes.
The results of operations were affected by the Company's use of the LIFO
method to value inventory, which results in a better matching of current
revenues and costs. The impact of LIFO was to increase the Company's gross
margins in 1993, 1992 and 1991 by $0.48 per barrel ($27.7 million), $0.10 per
barrel ($5.8 million) and $0.86 per barrel ($45.9 million), respectively. The
1992 LIFO impact is net of a $2.3 million gross margin decrease resulting from
a liquidation of LIFO inventory quantities as discussed in Note B of the Notes
to Consolidated Financial Statements appearing elsewhere in this Prospectus.
Total refinery production was: 158,400 barrels per day in 1993, yielding
86,300 barrels per day of gasoline (54.5%) and 51,700 barrels per day of
distillates (32.6%); 153,500 barrels per day in 1992, yielding 86,200 barrels
per day of gasoline (56.2%) and 49,000 barrels per day of distillates (31.9%);
and 147,000 barrels per day in 1991, yielding 78,000 barrels per day of
gasoline (53.1%) and 47,300 barrels per day of distillates (32.2%). Refinery
production was slightly impacted in 1993 by a scheduled maintenance turnaround
in the second quarter at the Tyler Refinery, while refinery production was
more dramatically reduced in 1992 by scheduled first quarter maintenance
turnarounds at both Refineries. Due to poor refining margins in the fourth
quarter of 1993, the Company announced that it had reduced throughput at its
Pasadena Refinery by approximately 20%. In 1991, overall refinery production
and gasoline yields were reduced by the first quarter's scheduled turnaround
and extensive modification of the Pasadena Refinery's fluid catalytic cracking
unit, an important component in gasoline production. The Company's finished
product requirements in excess of its refinery yields and existing inventory
levels are acquired through exchange agreements or outright purchases.
On September 28, 1993, a fire destroyed the Company's Red Bluff truck
loading rack (the "Pasadena Terminal Rack") located one mile from the Pasadena
Refinery. Since the fire, the Company has supplied its terminal rack customers
with refined product from nearby locations. However, due to the strategic
location of the Pasadena Terminal Rack, the Company has experienced certain
reductions in operating margins in selling refined product at these
alternative sites or in the bulk products market. Prior to the fire, refined
product sold from the Pasadena Terminal Rack approximated 4% of consolidated
1993 refined product sales volumes. In the interim, the Company has supplied
its customers through exchange terminals while it evaluates its options
regarding repairs to the facility.
Annual selling and administrative expenses decreased 10.8% in 1993 after
decreasing 8.3% in 1992. The 1993 decrease resulted primarily from decreased
store level and marketing administrative costs associated with the closing of
retail units, and the consolidation of certain marketing field operations. The
1992 decrease is also attributable to reduced costs associated with the
closing of retail units and reductions resulting from the reorganization of
the Company's administrative functions. At December 31, 1993, the Company had
127 convenience stores, 111 mini-marts, and 138 gasoline stations, compared to
173 convenience stores, 119 mini-marts, and 143 gasoline stations at December
31, 1992 and 246 convenience stores, 126 mini-marts, and 152 gasoline stations
at December 31, 1991. Despite the net reduction in 1993 of 59 units (13.6%)
from the December 31, 1992 level, the
20
<PAGE>
Company experienced a 9.1% increase in total retail petroleum product gross
margin while total retail sales volumes decreased less than 1%. Selling and
administrative expenses in 1993 include $0.7 million in reorganization and
office closure costs, while reorganization costs of $0.4 million and $1.1
million are included in selling and administrative expenses for 1992 and 1991,
respectively.
Operating costs and expenses in 1993, 1992 and 1991 include $6.3 million,
$5.2 million and $10.6 million, respectively, related to environmental matters
and $2.4 million, $2.4 million and $5.2 million, respectively, related to
retail units that have been closed. Operating costs and expenses in 1993 also
include $1.8 million of accrued casualty related costs. Operating costs and
expenses in 1992 include a $1.0 million reserve for the write-off of excess
refinery equipment and a $1.3 million write-off of refinery feasibility
studies.
Depreciation and amortization in 1993 was comparable to that recorded in
1992. Depreciation and amortization increased 24.5% in 1992. This increase
resulted from additional depreciation and amortization relating to the 1991
capital modification and turnaround at the Pasadena Refinery, which was
completed in March 1991, depreciation associated with other capital
expenditures made in 1991 and amortization of the 1992 turnarounds.
Additionally, $2.4 million of depreciation was recorded as a result of the
step-up in basis of fixed assets as required by the adoption of SFAS 109,
effective January 1, 1992.
There was a loss of $2.3 million from sales and abandonments of property,
plant and equipment in 1993, primarily as a result of a write-down of the
sulphur unit at the Pasadena Refinery. There was a loss of $1.3 million from
sales and abandonments of property, plant and equipment in 1992, including a
$0.9 million write-off of abandoned equipment related to the capital
modification of the Pasadena Refinery's fluid catalytic cracking unit.
Interest and other income increased $1.4 million in 1993 and decreased $4.7
million in 1992 from the previous year. The 1992 decrease was due primarily to
a decrease of $40.9 million in the average daily cash invested and to
decreases in average interest rates. Interest and other income in 1993
included income of $0.7 million from the Company's wholly owned insurance
subsidiary, compared to a loss of $1.0 million in 1992 and income of $0.2
million in 1991 from such subsidiary.
Non-operating gains in 1991 related to the Pasadena Refinery include a
favorable $2.4 million litigation settlement with respect to property tax
assessments for the years 1986 to 1989 and a favorable $1.2 million insurance
settlement. There were no material net non-operating gains or losses credited
or charged to income in 1993 or 1992.
Interest expense increased $0.6 million in 1993 and decreased $1.1 million
in 1992 from the previous year. The 1993 increase related to a decrease in
capitalized interest as disclosed in Note C of the Notes to Consolidated
Financial Statements appearing elsewhere in this Prospectus. The 1992 decrease
was due to decreases in the average effective rate on cash borrowed,
reflecting the positive results of the Company's interest rate swap program.
Interest expense for 1993 and 1992 was reduced by $0.8 million and $1.1
million, respectively, as a result of the interest rate swap contracts.
Increases of $5.2 million in the average daily cash borrowed in 1992 partially
offset the decreased expense.
As discussed in Note D of the Notes to Consolidated Financial Statements
appearing elsewhere in this Prospectus, the passage of the Tax Act of 1993
increased the Federal corporate income tax rate from 34% to 35%, effective
January 1, 1993. The effect of this change in rate was to increase the
Company's 1993 income tax expense and net loss by $2.3 million, or $0.23 per
share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at September 30, 1994 of $21.2
million were $30.9 million lower than at December 31, 1993. This decrease
resulted from cash used in investment activities
21
<PAGE>
of $17.9 million for the nine months ended September 30, 1994, which consists
of capital expenditures of $21.1 million and deferred turnaround expenditures
of $0.6 million net of proceeds from sales of property, plant and equipment of
$3.4 million. Additionally, cash outflows included $2.7 million for the
acquisition of shares of the Company's Class B Common Stock as discussed below.
Partially offsetting these cash outflows was cash provided from operations
before changes in working capital of $17.9 million and net proceeds received
from the Purchase Money Debt of $0.4 million.
Net cash used in operating activities (including changes in working capital)
totaled $10.4 million for the nine months ended September 30, 1994 compared to
cash provided by operating activities of $9.3 million for the nine months ended
September 30, 1993. The 1994 outflows consist of $28.3 million related to
working capital requirements resulting from increases in the value and volume
of crude oil and finished product inventories, receivables and prepaid
operating expenses and to decreases in inventory payables and in accrued excise
tax liabilities. These outflows were partially offset by $17.9 million of cash
provided from operations before changes in working capital. The 1993 amount
consists of cash provided from operations before changes in working capital of
$20.0 million, and cash outflows of $10.7 million relating to working capital,
resulting primarily from decreases in crude oil and refined products payable
and increases in the value of crude oil and finished product inventories, which
were partially offset by net decreases in accounts receivable. The timing of
collection of the Company's receivables is impacted by the specific type of
sale and associated terms. Bulk sales of finished products are typically sold
in 25,000 barrel increments with three day payment terms. Rack sales at the
Company's product terminals are sold by truckload (approximately 8,000 gallons)
with seven to ten day payment terms. While the Company's overall sales are
aligned to its refining capability, receivables can vary between periods
depending upon the specific type of sale and associated payment terms for sales
near the end of a reporting period. At September 30, 1994 and December 31,
1993, accounts receivable had decreased from the same period of the previous
year due to bulk sales representing a higher proportion of overall sales volume
immediately preceding the end of the respective periods.
Net cash outflows from investment activities were $17.9 million for the nine
months ended September 30, 1994 compared to a net outflow of $30.5 million for
the same period in 1993. The 1994 activity relates primarily to $21.1 million
of capital expenditures (which includes $11.8 million for the Refineries and
$6.9 million related to the marketing area). These cash outflows were partially
offset by proceeds from the sale of property, plant and equipment of $3.4
million. The 1993 amount consists principally of capital expenditures of $29.8
million ($15.3 million relating to marketing and $14.0 million relating to the
Refineries) and $2.6 million in Tyler Refinery deferred turnaround charges.
Net cash used in financing activities was $2.6 million for the nine months
ended September 30, 1994 compared to cash provided by financing activities of
$2.1 million for the nine months ended September 30, 1993. The 1994 cash
outflows relate primarily to the acquisition of 135,000 shares of Class B
Common Stock for use in connection with the awards of stock and options under
the 1994 Long-Term Incentive Plan, as disclosed in Note E of the Notes to
Unaudited Consolidated Condensed Financial Statements appearing elsewhere in
this Prospectus. The 1993 inflows are the result of proceeds from the
termination of interest rate swap contracts.
The Company had recorded a liability of approximately $16 million as of
September 30, 1994 to provide for the estimated costs of compliance with
environmental regulations which are not anticipated to be of a capital nature.
During the years 1994-1996, the Company estimates environmental related
expenditures of approximately $4 million and approximately $19 million at the
Pasadena Refinery and the Tyler Refinery, respectively. Of these expenditures,
it is anticipated that approximately $3 million for the Pasadena Refinery and
approximately $17 million for the Tyler Refinery will be of a capital nature,
while approximately $1 million at the Pasadena Refinery and approximately $2
million for the Tyler Refinery will be related to previously accrued
expenditures of a non-capital nature. At the Company's retail marketing
facilities, capital expenditures relating to environmental improvements are
planned totalling approximately $23 million through 1998.
22
<PAGE>
The Company's cash and cash equivalents were $3.5 million lower at year-end
1993 than at year-end 1992. The decrease was attributable to $40.0 million of
net cash outflows from investment activities, which was partially offset by
cash provided by operating activities of $28.9 million and cash provided by
financing activities of $7.6 million.
The $28.9 million cash generated from operating activities in 1993 is net of
an $11.2 million cash outflow relating to working capital. The cash was
generated primarily from $40.0 million of cash from operations before changes
in operating assets and liabilities and a net reduction in accounts receivable
of $21.5 million. This amount was reduced by decreases in accounts payable for
crude oil and refined products and by increases in crude oil and finished
product inventories. Since the Company purchases much of its crude oil in
bulk, crude oil payables fluctuate, depending on when the cargo is received
and when the related payment is made.
Net cash outflows from investment activities in 1993 consisted principally
of capital expenditures of $40.9 million (which includes $19.1 million related
to marketing and $19.5 million for the Refineries operations) and $4.1 million
of Tyler Refinery deferred turnaround costs. The total outflows from
investment activities were partially offset by proceeds of $5.5 million from
the sale of property, plant and equipment.
Net cash provided by financing activities in 1993 relates primarily to $5.5
million borrowed upon the security of the Purchase Money Debt as discussed in
Note C of the Notes to Consolidated Financial Statements appearing elsewhere
in this Prospectus.
As a result of a strong balance sheet and overall favorable credit
relationships, the Company has been able to maintain open lines of credit with
its major suppliers. Under the Credit Facility, the Company had outstanding as
of September 30, 1994 irrevocable standby letters of credit in the principal
amount of $18.8 million for purposes in the ordinary course of business.
During the second quarter of 1994, the Company obtained an additional
uncommitted line of credit with a major financial institution, for up to $20.0
million in standby letters of credit, primarily for the purchase of crude oil.
Under this agreement, the Company had outstanding as of September 30, 1994 an
irrevocable standby letter of credit in the principal amount of $7.2 million.
As discussed in Note C of the Notes to Consolidated Financial Statements
appearing elsewhere in this Prospectus, effective December 1, 1993, the
Company entered into the Purchase Money Debt for the financing of certain
gasoline station and terminal equipment and office furnishings. As of
September 30, 1994, there was a total of $5.8 million outstanding under the
Purchase Money Debt.
As of September 30, 1994, no cash borrowings were outstanding under the
Credit Facility, and no such borrowings are outstanding as of the date hereof.
As discussed in Note C of the Notes to Unaudited Consolidated Condensed
Financial Statements, effective September 30, 1994, the Company executed
amendments to the Credit Facility and the Note Purchase Agreement (as defined)
under which the Existing Senior Notes were issued. These amendments establish
new financial covenants which became necessary due to decreased refining
margins in 1994 and the write-down of Pasadena Refinery equipment as
previously discussed. The amendment to the Credit Facility also permits the
incurrence of indebtedness represented by the Notes. At September 30, 1994,
the Company was in compliance with all amended covenants and provisions of the
Note Purchase Agreement and the Credit Facility. Continued compliance with the
covenants imposed by the Note Purchase Agreement and the Credit Facility is
dependent, among other things, upon the level of future earnings and the rate
of capital spending. The Company intends to use a portion of the net proceeds
from the sale of the Notes to retire the Existing Senior Notes, including the
payment of accrued interest and a required prepayment premium, and to repay
borrowings outstanding under the Credit Facility. See "Use of Proceeds" and
"Description of Other Indebtedness."
Also as discussed in Note C of the Notes to Unaudited Consolidated Condensed
Financial Statements appearing elsewhere in this Prospectus, the Company has
entered into interest rate swap
23
<PAGE>
agreements to manage the cost of borrowings. These swaps have effectively
converted $47.5 million of its fixed rate debt to variable interest rates with
remaining periods ranging from 1996 to 1998. According to the terms of these
swap agreements, interest rates are reset on various predetermined dates which
range from November 1994 to March 1998. Due to recent increases in market
interest rates, it is possible that the Company's net effective interest rate
will increase from current levels. As of September 30, 1994, the Company had
recorded a deferred gain of $1.4 million associated with having terminated an
interest rate swap. The termination of existing interest rate swap agreements
as of September 30, 1994 would result in a loss of approximately $2 million.
The Company may utilize interest rate swaps in the future to manage the cost
of funds.
In 1993, due to declining interest rates, the Company reduced the discount
rate used to measure obligations for pension and postretirement benefits other
than pensions. While this change has the effect of increasing the Company's
1994 net periodic pension cost, adjustments to other assumptions used in
accounting for the Company's defined benefit plans have resulted in a minimal
impact on the overall cost.
The Company is involved in a continual process of evaluating growth
opportunities in its core business as well as its capital resources
alternatives. Total capital expenditures and deferred turnaround costs in 1994
are projected to approximate the 1993 expenditures of $44.9 million. The
capital expenditures relate primarily to planned enhancements at the
Refineries, retail unit improvements and company-wide environmental
requirements. The estimated expenditures for 1994 include approximately $17.4
million expected during the fourth quarter relating to the Pasadena Refinery
turnaround and associated capital expenditures. The Company anticipates
funding these 1994 expenditures principally through funds from operations,
existing available cash and the net proceeds from the sale of Notes.
The oil refining and marketing industry in which the Company operates is
highly competitive. Many of the Company's principal competitors are major
integrated, multinational oil companies that are substantially larger and may
have substantially greater financial and operating resources than the Company.
See "Business -- Competition."
The Company believes that following the sale of the Notes and the
application of the proceeds thereof, cash provided from its operating
activities, together with other available sources of liquidity, including
borrowings under the Credit Facility and the remaining proceeds of the Notes,
will be sufficient over the next several years to make required payments of
principal and interest on its debt, including interest payments due on the
Notes, permit anticipated capital expenditures and fund the Company's working
capital requirements.
The Company has disclosed in Note G of the Notes to Consolidated Financial
Statements various contingencies which involve litigation, environmental
liabilities and examinations by the Internal Revenue Service. Depending on the
occurrence, amount and timing of an unfavorable resolution of these
contingencies, the outcome of which cannot be determined at this time, it is
possible that the Company's future results of operations or cash flows could
be materially affected in a particular quarter or year. However, the Company
has concluded, after consultation with counsel, that there is no reasonable
basis to believe that the ultimate resolution of any of these contingencies
will have a material adverse effect on the Company.
EFFECTS OF INFLATION AND CHANGING PRICES
The Company's Consolidated Financial Statements are prepared on the
historical cost method of accounting and, as a result, do not reflect changes
in the dollar's purchasing power. In the capital intensive industry in which
the Company operates, the replacement costs for its properties would generally
far exceed their historical costs. Accordingly, depreciation would be greater
if it were based on current replacement costs. However, since replacement
facilities would reflect technological
24
<PAGE>
improvements and changes in business strategies, such facilities would be
expected to be more productive and versatile than existing facilities, thereby
increasing profits and offsetting increased depreciation and operating costs.
In recent years, crude oil and refined petroleum product prices have been
falling which has resulted in a net reduction in working capital requirements.
If the prices increase in the future, the Company will expect a related
increase in working capital needs.
BUSINESS
COMPANY OVERVIEW
The Company, which traces its origins to 1917, is one of the largest
independent refiners and marketers of petroleum products in the United States.
The Company owns and operates two strategically located, high-conversion
refineries with a combined capacity of 152,000 barrels of crude oil per day --
a 100,000 barrel per day facility located in Pasadena, Texas, near Houston,
and a 52,000 barrel per day facility located in Tyler, Texas. The Company is
also a leading marketer of petroleum products and merchandise through a network
of over 350 gasoline stations and convenience stores located in the Mid-
Atlantic and Southeastern United States. In support of these businesses, the
Company operates 16 product terminals located on three major product pipelines
along the Gulf Coast and Eastern Seaboard and in the Central United States.
The Company's predecessor began operations as an oil and gas exploration and
production company. The Company constructed its own refinery in 1920, the first
on the Houston Ship Channel, which began manufacturing lube oils in 1920 and
gasoline in 1925. The Company began retail operations on the East Coast in
1943. In addition, during World War II, the Company pioneered the manufacture
of 100 octane aviation fuel. In the 1960's, the Company expanded the Pasadena
Refinery and originated the multi-pump retailing concept. The Company further
expanded its retail operations in the Southeastern United States in 1983 by
acquiring two convenience store chains. In 1987, the Company divested its
exploration and production operations and focused on its refining and marketing
businesses. The proceeds of the sale of the exploration and production
properties enabled the Company to acquire all of the outstanding stock of La
Gloria Oil and Gas Company, the owner of the Tyler Refinery. As a result of
that acquisition, the Company's aggregate refining capacity increased by more
than 50%.
BUSINESS STRATEGY
The Company's business strategy is designed to take advantage of the
anticipated improvement in the refining industry and to improve retail
profitability, while managing the risks inherent in a cyclical, commodity based
business. The key elements of this strategy include:
Invest in Improved Productivity
The Company intends to focus on improving productivity in two areas. First,
the Company is continuing efforts to position itself as a low-cost refiner
through the implementation of low-risk capital projects which are expected to
have short payback periods and attractive internal rates of return. Over the
last five years, the Company has invested over $91 million in projects focusing
on improved productivity. For example, the Company recently completed the first
phase of a distributed control system designed to optimize yields and improve
efficiency at the Pasadena Refinery. Second, the Company has recently initiated
a comprehensive program to improve its business processes, including the
installation of an integrated information system. This integrated system should
enable management to more effectively monitor and control the critical elements
of its business. In particular, the system is designed to link relevant
information throughout the Company's operations, including raw material
25
<PAGE>
acquisitions, refining operations, finished product distribution and retail
marketing operations. Management believes that this project should improve
productivity by reducing expenses and enhancing organizational effectiveness.
Manage Refinery Margins
The Company has recently instituted programs designed to manage refining
profit margins by minimizing the Company's exposure to the risks of price
volatility related to the acquisition, conversion and sale of crude oil and
refined petroleum products. These programs include hedging activities such as
the purchase and sale of futures and options contracts to offset the effects of
fluctuations in the prices of crude oil and refined products. Such hedging
activities are subject to specific policies and guidelines established by the
Company and are reviewed by the Margin Management Committee composed of senior
management and chaired by the Company's Chief Executive Officer. The Company's
policy is to manage its crude oil acquisition, refining, and product sales on a
daily basis to achieve, at a minimum, prevailing margins available to
comparable Gulf Coast refiners and, where appropriate, to pursue forward
hedging opportunities which lock in attractive returns. The number of barrels
of crude oil and refined products covered by such hedging activities varies
from time to time, within certain limits established by the Margin Management
Committee. While the Company's hedging activities are intended to reduce
volatility while providing an acceptable profit margin on a portion of
production, the use of such a program can limit the Company's ability to
participate in an improvement in related product profit margins.
Expand Retail Volume and Profitability
The Company believes that there is substantial opportunity to improve margins
and reduce earnings volatility by improving the balance between its Pasadena
Refinery production and its marketing of gasoline through retail units.
Currently, average daily retailing volumes of gasoline represent approximately
47% of the Pasadena Refinery's daily gasoline production capability. Management
believes that improving this balance should enable the Company to reduce its
vulnerability to short term or cyclical margin shrinkage at the refining level.
The Company has developed a retail marketing initiative which focuses on
increasing gasoline volumes and merchandise sales and decreasing the per unit
administrative cost of its retail operations to improve overall productivity.
In pursuit of increased gasoline volumes and merchandise sales, the Company
intends to: (i) enhance its existing retail locations and develop new sites;
(ii) continue its aggressive pricing and marketing strategies, including
regular promotional programs; and (iii) pursue the selective acquisition of
additional retail units which are located adjacent to or within the Company's
current market areas or in new markets. Additionally, the Company intends to
improve overall retail marketing productivity by taking advantage of newly
developed technologies and by leveraging its existing retail support and
overhead structure across a higher volume retail marketing operation.
Continue Emphasis on Environmental Improvements
The Company intends to continue to invest in projects encouraged by the Clean
Air Act and projects required by Federal and state environmental regulations.
The Company recently installed a hydrodesulphurization unit at its Tyler
Refinery at a cost of $8.5 million to enable the Company to produce 12,000
barrels per day of low sulphur highway diesel. The Company is also spending
$3.5 million to enable the Pasadena Refinery to produce summer grade
reformulated gasoline. With respect to its retail operations, the Company has
accelerated compliance with the 1998 underground storage tank environmental
requirements. The Company believes that over 50% of its retail units are
currently in full or substantial compliance with these 1998 standards. The
Company has spent approximately $107 million over the past five years on
environmental related matters, both capital and non-capital in nature. The
Company plans to invest approximately $63 million during the next five years on
capital projects for its refining and marketing operations either in connection
with compliance or to enable the
26
<PAGE>
Company to produce transportation fuel products that meet higher environmental
standards such as improved air quality.
Maintain Strong Balance Sheet
The Company intends to maintain a low ratio of debt to total capitalization
consistent with historical levels, which management believes will assist the
Company in withstanding cyclical industry downturns and taking advantage of
strategic opportunities. As of September 30, 1994, as adjusted to give effect
to the sale of the Notes and the application of the net proceeds therefrom,
the Company's ratio of total debt to total capitalization was 33.0%.
REFINING OPERATIONS
Overview
The Company owns and operates two strategically located, high conversion
refineries with a combined capacity of 152,000 barrels of crude oil per day --
a 100,000 barrel per day facility located in Pasadena, Texas, near Houston,
and a 52,000 barrel per day facility located in Tyler, Texas. Both Refineries
are operated to generate a product mix of over 85% higher margin fuels,
primarily transportation fuels such as gasoline, highway diesel and jet fuel.
When operating to maximize the production of light products, the product mix
at both of the Refineries is approximately 55% gasoline, 33% distillates (such
as diesel, home heating oil, jet fuel, and kerosene), 6% petrochemical
feedstocks and 6% slurry oil and petroleum coke.
The Pasadena Refinery and Tyler Refinery averaged production of 106,746
barrels per day and 48,213 barrels per day, respectively, during the nine
months ended September 30, 1994. While both Refineries primarily run sweet
(low sulphur content) crude oil, they can process up to 20% of sour (high
sulphur content) crude oil in their mix.
The Company's access to extensive pipeline networks provides it with the
ability to acquire crude oil directly from major integrated and independent
domestic producers, foreign producers, or trading companies, and to transport
this crude to the Refineries at a competitive cost. The Pasadena Refinery, has
docking facilities which provide direct access to tankers and barges for the
delivery of crude oil and other feedstocks. The Company also has agreements
with terminal operators for the storage and handling of the crude oil it
receives from large ocean-going vessels and which the Company transports to
the Refineries by pipeline. The Tyler Refinery benefits from its location in
East Texas since the Company can purchase high quality crude oil at favorable
prices directly from nearby producers. In addition, the Tyler Refinery is the
only supplier of a full range of petroleum products in its local market area.
See "-- Supply, Transportation and Wholesale Marketing."
Over the past several years, the Company has made significant capital
investments to upgrade its refining facilities and improve operational
efficiency. The Company has also recently completed several programs which
have resulted in increased profitability at the refinery level. The Company
began a maintenance expense reduction program at the Pasadena Refinery in
1992. This program is designed to reduce routine maintenance expenditures by
increasing project reliability, reducing the use of outside contractors,
decreasing the overall amount of overtime expenditures and realigning
maintenance personnel responsibilities. The result of this program has been to
reduce average maintenance expenditures from $1.6 million per month in 1991 to
approximately $1 million per month for the nine months ended September 30,
1994. The Company has also initiated a gain sharing program with its employees
at the Tyler Refinery under which savings realized are shared with the
employees on a quarterly basis. Both the Company and the employees are already
benefitting from the early stages of this program. See "-- Employees."
Refining Strategy
The Company's refining strategy is designed to utilize its strengths to take
advantage of the anticipated improvement in the refining industry while
managing the risks involved in a cyclical,
27
<PAGE>
commodity based business. The key elements of this strategy include: (i)
increasing productivity and improving the technical sophistication and
operating reliability of the Company's refining operations; (ii) managing
margins through formalized and disciplined programs to achieve, at a minimum,
prevailing industry margins available to comparable Gulf Coast refiners and,
when appropriate, to pursue hedging opportunities which lock in attractive
returns; and (iii) continuing to make investments encouraged by the Clean Air
Act and other regulations. The Company believes that the implementation of this
strategy should result in increased operational efficiency, improved refining
profitability and reduced earnings volatility.
Pasadena Refinery
The Pasadena Refinery is located on approximately 174 acres in Pasadena,
Texas and was the first refinery built on the Houston Ship Channel. The
Refinery has been substantially modernized since 1969 and today has a rated
crude capacity of 100,000 barrels per day. During the past five years, the
Company has invested approximately $105 million in major upgrading and
maintenance projects.
The Company's refining strategy includes several initiatives to enhance
productivity. For example, the Company has completed the first phase of an
extensive plant-wide distributed control system at the Pasadena Refinery which
is designed to improve product yields, make more efficient use of personnel and
optimize process operations. The crude and vacuum distillation, coking, and
distillate hydrotreating units are currently benefitting from the system which
began operating in June 1994. The fluid catalytic cracking unit is scheduled to
be added to the system in the second quarter of 1995 and the remainder of the
Pasadena Refinery is scheduled to be added by the first quarter of 1996. The
distributed control system uses technology that is fast, accurate and provides
increased information to both operators and supervisors.
The Pasadena Refinery has a crude unit with a 100,000 barrels per day
atmospheric column and a 38,000 barrels per day vacuum tower. Major downstream
units consist of a 52,000 barrels per day fluid catalytic cracking unit, a
12,000 barrels per day delayed coking unit, two alkylation units with a
combined capacity of 10,000 barrels per day of alkylate production, and two
reformers with a combined capacity of 36,000 barrels per day. Other units
include two depropanizer units that can produce 5,500 barrels per day of
refinery grade propylene, a liquefied petroleum gas unit that removes
approximately 1,000 barrels per day of liquids from the refinery fuel system
and a methyl tertiary butyl ether ("MTBE") unit which can produce approximately
1,500 barrels per day of MTBE for gasoline blending. The Company recently
abandoned its plans to construct a hydrodesulphurization unit at its Pasadena
Refinery. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations -- Nine Months Ended September
30, 1993 and 1994."
The Clean Air Act mandates that after January 1, 1995 only reformulated
gasoline ("RFG") may be sold in certain ozone non-attainment areas, including
some metropolitan areas where the Company sells gasoline. Using production from
its MTBE unit, the Pasadena Refinery can currently produce 12,000 barrels per
day of winter grade RFG. With additional purchases of MTBE, ethanol or other
oxygenates, all of the Pasadena Refinery's current gasoline production could
meet winter grade RFG standards. The Company is in the process of constructing
a reformate splitter at its Pasadena Refinery at a cost of $3.5 million which
will enable it to make 12,000 barrels per day of summer grade RFG using its own
MTBE, and up to 100% of its Pasadena Refinery gasoline production as summer
grade RFG with the purchase of additional oxygenates. This project is expected
to be completed by August 1995 and will satisfy all of the Company's retail RFG
requirements.
During the first nine months of 1994, the Pasadena Refinery operated at
approximately 90% of rated crude unit capacity with production yielding
approximately 57% gasoline and 32% distillates. Of the total gasoline
production, approximately 16% was premium octane grades. In addition, the
Pasadena Refinery produced and sold by-products including propylene, propane,
slurry oil, petroleum coke and sulphur.
28
<PAGE>
The Company owns and operates storage facilities located on approximately
130 acres near its Pasadena Refinery which, together with tanks on the
refinery site, provide the Company with a storage capacity of approximately
6.2 million barrels (2.8 million barrels for crude oil and 3.4 million barrels
for refined petroleum products and intermediate stocks).
The Pasadena Refinery's refined petroleum products are delivered to both
wholesale and retail customers. Approximately one-half of the gasoline and
distillate production is sold wholesale into the Gulf Coast spot market and
one-half is shipped by the Company on the Colonial and Plantation pipelines
for sale in East Coast wholesale and retail markets. The Company's retail
gasoline requirements represent approximately 47% of the Pasadena Refinery's
gasoline production capability.
The production levels of the Pasadena Refinery for the years ended December
31, 1991, 1992 and 1993 and for the nine months ended September 30, 1993 and
1994 were as follows:
PASADENA REFINERY PRODUCTION YIELD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------
1991 1992 1993 1993 1994
------------ ------------- ------------- --------------- ---------------
BPD % BPD % BPD % BPD % BPD %
------ ----- ------- ----- ------- ----- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline
Unleaded............... 39,600 40.1 46,445 44.8 49,009 45.1 49,590 45.1 51,200 48.0
Premium unleaded....... 11,301 11.4 12,468 12.0 9,903 9.1 10,697 9.7 9,613 9.0
------ ----- ------- ----- ------- ----- -------- ------ -------- ------
Total gasoline......... 50,901 51.5 58,913 56.8 58,912 54.2 60,287 54.8 60,813 57.0
Diesel fuel............. 25,452 25.7 28,311 27.3 28,064 25.8 28,758 26.3 24,783 23.1
Jet fuel................ 5,898 6.0 3,767 3.6 6,646 6.2 5,754 5.2 9,346 8.8
------ ----- ------- ----- ------- ----- -------- ------ -------- ------
Total high value
products.............. 82,251 83.2 90,991 87.7 93,622 86.2 94,799 86.3 94,942 88.9
Other................... 16,556 16.8 12,783 12.3 15,031 13.8 15,101 13.7 11,804 11.1
------ ----- ------- ----- ------- ----- -------- ------ -------- ------
Total production....... 98,807 100.0 103,774 100.0 108,653 100.0 109,900 100.0 106,746 100.0
====== ===== ======= ===== ======= ===== ======== ====== ======== ======
Refinery utilization(a). 84.5 85.2 90.6 91.6 89.7
</TABLE>
- ---------------------
(a) Refinery utilization is crude throughput relative to the rated capacity of
the refinery to process crude oil. If other feedstocks were included as
throughput in the calculation, the utilization would have increased to
98.8%, 103.8%, 108.7%, 109.9% and 106.7% for the years ended December 31,
1991, 1992, 1993 and for the nine months ended September 30, 1993 and
1994, respectively. Refinery utilization reflects downtime for maintenance
turnarounds of approximately two months on the fluid catalytic cracking
unit in 1991, and two months on the crude, alkylation, coking and reformer
units in 1992. During a turnaround, refinery production is reduced
significantly.
Tyler Refinery
The Tyler Refinery is located on approximately 100 of the 529 acres owned by
the Company in Tyler, Texas and has a rated crude capacity of 52,000 barrels
per day. This Refinery, which was acquired from Texas Eastern Corporation in
the fourth quarter of 1989, had been substantially modernized between 1977 and
1980. The Tyler Refinery's location allows it to access nearby high quality
East Texas crude oil which accounts for approximately 95% of its crude supply.
This crude oil is transported to the Refinery on the McMurrey and Scurlock
pipeline systems. The Company owns the McMurrey system and has a long-term
contract for use of the Scurlock system with Scurlock Permian Pipe Line
Corporation. The Company also has the ability to ship crude oil to the Tyler
Refinery by pipeline from the Gulf Coast and does so when market conditions
are favorable. Storage capacity at the Tyler Refinery exceeds 2.7 millions
barrels (1.2 million barrels for crude and 1.5 million barrels for refined
petroleum products and intermediate stocks), including tankage along the
Company's pipeline system.
The Tyler Refinery has a crude unit with a 52,000 barrels per day
atmospheric column and a 16,000 barrels per day vacuum tower. The other major
process units at the Tyler Refinery include an 18,000
29
<PAGE>
barrels per day fluid catalytic cracking unit, a 6,000 barrels per day delayed
coking unit, a 20,000 barrels per day naphtha hydrotreating unit, a 12,000
barrels per day distillate hydrotreating unit, two reforming units with a
combined capacity of 16,000 barrels per day, a 5,000 barrels per day
isomerization unit, and an alkylation unit with a capacity of 4,700 barrels
per day. The hydrotreating units were significantly modified in 1993 enabling
this plant to produce 12,000 barrels per day of distillate which meets the
Clean Air Act's .05% sulphur requirements for highway diesel.
For the first nine months of 1994, the Tyler Refinery operated at
approximately 91% of rated crude unit capacity, with production yielding
approximately 57% gasoline and approximately 34% distillates. Of the total
gasoline production, approximately 18% was premium octane grades. In addition,
the Refinery produced and sold by-products including propylene, propane,
slurry oil, petroleum coke and sulphur. The Tyler Refinery is the principal
supplier of refined petroleum products in the East Texas market with
approximately 60% of production sold at the Refinery's truck terminal. The
remaining production is shipped via the Texas Eastern Products Pipeline for
sale either from the Company's terminals or from other terminals along the
pipeline. Deliveries under term exchange agreements account for the majority
of the truck terminal sales.
The production levels of the Tyler Refinery for the years ended December 31,
1991, 1992 and 1993 and for the nine months ended September 30, 1993 and 1994
were as follows:
TYLER REFINERY PRODUCTION YIELD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------- ---------------------------------
1991 1992 1993 1993 1994
------------ ------------ ------------ ---------------- ----------------
BPD % BPD % BPD % BPD % BPD %
------ ----- ------ ----- ------ ----- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gasoline
Unleaded............... 22,831 47.4 22,650 45.5 22,443 45.1 22,338 45.3 22,290 46.2
Premium unleaded....... 4,263 8.9 4,651 9.4 4,921 9.9 4,936 10.0 4,969 10.3
------ ----- ------ ----- ------ ----- -------- ------- -------- -------
Total gasoline......... 27,094 56.3 27,301 54.9 27,364 55.0 27,274 55.3 27,259 56.5
Diesel fuel............. 11,341 23.5 11,440 23.0 12,516 25.1 11,872 24.1 11,777 24.5
Jet fuel................ 4,572 9.5 5,439 10.9 4,478 9.0 4,475 9.1 4,725 9.8
------ ----- ------ ----- ------ ----- -------- ------- -------- -------
Total high value prod-
ucts.................. 43,007 89.3 44,180 88.8 44,358 89.1 43,621 88.5 43,761 90.8
Other................... 5,139 10.7 5,556 11.2 5,399 10.9 5,740 11.5 4,452 9.2
------ ----- ------ ----- ------ ----- -------- ------- -------- -------
Total production....... 48,146 100.0 49,736 100.0 49,757 100.0 49,361 100.0 48,213 100.0
====== ===== ====== ===== ====== ===== ======== ======= ======== =======
Refinery utilization(a). 90.9 92.8 93.6 93.4 91.3
</TABLE>
- ---------------------
(a) Refinery utilization is crude throughput relative to the rated capacity
of the refinery to process crude oil. If other feedstocks were included as
throughput in the calculation, the utilization would have increased to
92.6%, 95.6%, 95.7%, 94.9% and 92.7% for the years ended December 31,
1991, 1992, 1993 and for the nine months ended September 30, 1993 and
1994, respectively. Refinery utilization reflects downtime for maintenance
turnarounds of approximately one month on the fluid catalytic cracking and
alkylation units in 1992, and approximately one month on the crude,
vacuum, coking and reformer units in 1993. During a turnaround, refinery
production is reduced significantly.
Inventory Management
The Company employs several strategies to minimize the impact on
profitability due to the volatility of feedstock costs and refined product
prices. These strategies involve the purchase and sale of futures and options
contracts on the New York Mercantile Exchange to minimize, on a short-term
basis, the Company's exposure to the risk of fluctuations in crude oil and
refined product prices. The number of barrels of crude oil and refined
products covered by such contracts varies from time to time. Such purchases
and sales are closely managed, balanced daily and subject to internally
established risk standards. See "--Business Strategy."
Turnarounds
Each unit in a refinery requires periodic shutdown for major maintenance
(referred to as a "turnaround") which can not be performed while the unit is
in operation. Turnaround cycles vary for
30
<PAGE>
different units and, in general, refinery managers plan product inventories
and unit maintenance to permit some operations to continue during specific
process unit turnarounds. Maintenance turnarounds involve the Company's own
personnel and some additional contract labor. Turnarounds are carefully
planned in order to minimize each unit's downtime. The Company has
historically expensed current maintenance charges and capitalized turnaround
costs which are then amortized over the estimated period until the next
turnaround.
In general, turnaround cycles vary from two and one-half to five years
depending on the maintenance requirements of the specific unit. In October
1994, at the Pasadena Refinery, the Company began a turnaround on the fluid
catalytic cracking and associated units which was completed in the fourth
quarter of 1994. At the Tyler Refinery, a turnaround on the fluid catalytic
cracking unit is scheduled for the first quarter of 1995.
RETAIL OPERATIONS
Overview
The Company traces its retail marketing history to the early 1930's when it
operated a retail network of 30 service stations in the Houston, Texas area.
It began retail operations on the East Coast in 1943. The Company has been
recognized as an innovative industry leader and, in the early 1960's,
pioneered the multi-pump retailing concept which has since become an industry
standard in the marketing of gasoline. In 1983 the Company significantly
expanded its retail presence with the acquisition of 642 Fast Fare (R) and
Zippy Mart (R) convenience stores located in the Southeastern United States.
In 1986 the Company purchased an additional 50 gasoline stations, expanding
the Company's presence in the Baltimore/Washington, D.C. region, and in 1991,
the Company acquired 48 additional units in Virginia which doubled its
presence in that state.
Beginning in 1989, the Company conducted a facility by facility review of
its retail units. As a result, the Company disposed of non-strategic, marginal
or unprofitable units as well as certain units which would have required
significant capital improvements to comply with environmental regulations.
During this period, the Company rebuilt and added individual units to increase
its market share in strategic core markets. Since 1990, the Company has
eliminated 414 retail units and added 45 retail units. During the same period,
the Company closed a number of district offices and divisional headquarters.
The Company believes it has substantially completed its retail unit
rationalization program.
As of September 30, 1994, the Company had 356 retail locations. Of these 356
units (245 owned and 111 leased), the Company directly operated 254 and the
remainder were operated by independent dealers. The Company conducts its
operations in Maryland through an independent dealer network as a result of
legislation which prohibits refiners from operating gasoline stations in
Maryland. The Company believes that the high proportion of Company-operated
units enables it to respond quickly and uniformly to changing market
conditions.
While most of the Company's units are located in or around major
metropolitan areas, its sites are generally not situated on major interstate
highways or inter-city thoroughfares. These off-highway locations primarily
serve local customers and, as a result, the Company's retail marketing unit
volumes are not as highly seasonal or dependent on seasonal vacation traffic
as locations operating on major traffic arteries. The Company is the largest
independent retail marketer of gasoline in its core retail market areas within
Maryland, Virginia and North Carolina. In the Company's primary retail
marketing area of Baltimore, Maryland, the Company is the leading independent
gasoline retailer, with a 1993 market share of approximately 11%. In addition
to its leading market position in Baltimore, the Company has a geographic
concentration of retail locations in high growth areas such as Raleigh and
Charlotte, North Carolina and Atlanta, Georgia. The Company's three highest
volume core markets are Baltimore,
31
<PAGE>
the suburban areas of Maryland and Virginia surrounding Washington, D.C., and
the greater Norfolk, Virginia area.
The geographic distribution of retail locations by state, as of September 30,
1994, was as follows:
<TABLE>
<CAPTION>
COMPANY DEALER TOTAL
STATE OPERATED OPERATED UNITS
----- -------- -------- -----
<S> <C> <C> <C>
Maryland............................................. -- 101 101
Virginia............................................. 76 1 77
North Carolina....................................... 61 -- 61
Georgia.............................................. 50 -- 50
South Carolina....................................... 39 -- 39
Alabama.............................................. 26 -- 26
Pennsylvania......................................... 2 -- 2
--- --- ---
Total.............................................. 254 102 356
=== === ===
</TABLE>
Retail Marketing Strategy
The Company believes that there is substantial opportunity to increase
margins by improving the balance between its Pasadena Refinery production and
its sale of gasoline through retail units. Additionally, the Company believes
that increasing sales of gasoline through its retail units will enable the
Company to capture a greater portion of the available downstream margin,
thereby reducing the Company's exposure to the volatility inherent in its
refining operations. To capitalize on this opportunity and capture greater
margins, the Company has developed a retail marketing strategy which focuses
on: (i) increasing gasoline volumes and merchandise sales and (ii) decreasing
the administrative cost of its retail operations to improve overall
productivity.
In pursuit of increased gasoline volumes and merchandise sales, the Company
intends to: (i) enhance its existing retail locations and develop new sites;
(ii) continue its aggressive pricing and marketing strategies, including
regular promotional programs; and (iii) pursue the selective acquisition of
additional retail units which are located adjacent to or within the Company's
current market areas or in new markets. In early 1994, the Company unveiled,
with significant advertising support, a new merchandise pricing program
designed to increase per unit customer traffic. The key elements of this
program include the reduction of prices on certain items such as tobacco
products and beverages, improved retail unit layouts and higher impact signage.
In addition to this program, the Company is continuing its efforts to increase
customer loyalty and purchase frequency through the expansion of a frequent
fueler program and increased local media advertising.
The Company intends to improve overall retail marketing productivity by
taking advantage of newly developed technologies and by leveraging its existing
retail support and overhead structure across a higher volume retail marketing
operation. The Company intends to upgrade its point of sale system to provide
unit level personnel with more accurate, timely and focused retail pricing and
operating data. Additionally, the Company has introduced gasoline pump credit
and debit card readers which streamline the sales process and provide increased
customer convenience. These enhancements are intended to expand retail unit
management responsibility, thereby enabling the Company to decentralize
decision making and reduce per unit overhead expenses.
The initial results from the implementation of this retail marketing strategy
are illustrated by evaluating same store sales data for recent periods. As the
table below demonstrates, for the nine months ended September 30, 1994 compared
to the same period in 1993, both gasoline volumes and merchandise sales have
increased throughout the Company's network of retail units.
32
<PAGE>
SAME STORE SALES DATA(A)
<TABLE>
<CAPTION>
AVERAGE AVERAGE MONTHLY
MONTHLY GALLONS MERCHANDISE SALES
----------------------------------------- -----------------------------------------
YEAR ENDED NINE MONTHS ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
----------------------- ----------------- ----------------------- -----------------
RETAIL UNIT
CONFIGURATION 1991 1992 1993 1993 1994 1991 1992 1993 1993 1994
------------- ------- ------- ------- -------- -------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Convenience stores...... 45,834 45,236 53,575 51,701 62,074 $30,976 $31,654 $33,037 $ 33,242 $ 40,305
Mini-marts.............. 114,902 108,151 113,154 111,367 122,031 18,590 18,151 18,393 18,539 24,272
Gasoline stations....... 125,732 128,637 131,908 129,075 131,332 7,495 7,595 7,862 7,751 13,348
</TABLE>
- --------
(a) Same store sales data is based on those units open at September 30, 1994
which have been open for all of the previous periods presented.
Retail Unit Operations
The Company conducts its retail marketing operations through three basic
store formats: convenience stores, mini-marts and gasoline stations. At
September 30, 1994, the Company had 106 convenience stores, 112 mini-marts and
138 gasoline stations.
. The Company's convenience stores operate primarily under the names Fast
Fare and Zippy Mart. These units generally contain 1,500 to 2,800 square
feet of retail space and typically provide gasoline and a variety of
convenience store merchandise such as tobacco products, beer, wine, soft
drinks, snacks, dairy products and baked goods.
. The Company's mini-marts generally contain up to 800 square feet of
retail space and typically sell gasoline and much of the same merchandise
as at the Company's convenience stores. The Company has installed lighted
canopies at most of its locations which extend over the multi-pump fuel
islands and the store itself, providing added security and protection
from the elements for customers and employees.
. The Company's gasoline stations generally contain up to 100 square feet
of retail space in an island kiosk and typically offer gasoline and a
limited amount of merchandise such as tobacco products, candies, snacks
and soft drinks.
The Company's units are brightly decorated with its trademark signage to
create a consistent appearance and encourage customer recognition and
patronage. The Company believes that consistency of brand image is important to
the successful operation and expansion of its retail marketing system. In all
aspects of its retail marketing operations the Company emphasizes quality,
value, cleanliness and friendly and efficient customer service. The Company has
conducted customer surveys which indicate strong consumer preference for units
which are well-lighted and safe. In response to such customer preferences, the
Company has initiated a system-wide lighting upgrade and safety enhancement
program which includes the installation of improved lighting as well as the
installation of its proprietary Coronet (R) Security System, an interactive
audio and video monitoring system, at over 70 of its units.
While the Company derives approximately 75% of its revenue from the sale of
gasoline, it also provides a variety of merchandise and other services designed
to meet the non-fuel needs of its customers. Sales of these additional products
are an important source of revenue, contribute to increased profitability and
serve to increase customer traffic. The Company believes that its existing
retail sites present significant additional profit opportunities based upon
their strategic locations in high traffic areas. The Company also offers
ancillary services such as compressed air service, car washes, vacuums, and
automated teller machines, and management continues to evaluate the addition of
new ancillary services such as the marketing of fast food from major branded
chains.
Dealer Operations
The Company maintains 102 dealer-operated units, 101 of which are located in
Maryland. Under the Maryland Divorcement Law, refiners are prohibited from
operating gasoline stations. The Maryland
33
<PAGE>
units are operated under a Branded Service Station Lease and Dealer Agreement
(the "Dealer Agreement"), generally with a term of three years. Pursuant to
the Dealer Agreement, a dealer leases the facility from the Company and
purchases and resells Crown-branded motor fuel and related products. Dealers
also purchase and resell merchandise from independent third parties. The
Dealer Agreement sets forth certain operating standards; however, the Company
does not control the independent dealer's personnel, pricing policies or other
aspects of the independent dealer's business. The Company believes that its
relationship with its dealers has been very favorable as evidenced by a low
rate of dealer turnover.
The Company realizes little direct benefit from the sale of merchandise or
ancillary services at the dealer operated units, and the revenue from these
sales is not reflected in the Company's Consolidated Financial Statements.
However, to the extent that the availability of merchandise and ancillary
services increases customer traffic and gasoline sales at its units, the
Company benefits from higher gasoline sales volumes.
Promotional Programs
From time to time, the Company engages in various promotional programs
designed to enhance the Company's reputation for value as well as to enlarge
its customer base. For example, the Company periodically sells premium grades
of gasoline for the price of regular unleaded gasoline. The Company also
coordinates joint promotions with local car dealers and radio stations for
gasoline giveaways which generate significant positive publicity for the
Company. As part of its marketing campaign in Maryland and Virginia, the
Company features the Baltimore Orioles (R) baseball team in certain of its
promotional materials. Recently, the Company has used posters of Orioles star
Cal Ripken, Jr. and a video highlighting the Orioles' success. Many of the
Company's television and radio advertisements feature former Orioles star and
Major League Hall of Famer Brooks Robinson.
The Company has maintained a Crown branded consumer credit card program for
many years. As of September 30, 1994, there were approximately 175,000 Crown
credit card accounts outstanding, of which on average approximately 30,000
accounts were active on a monthly basis during the first nine months of 1994.
Aggregate credit card sales accounted for approximately 12% of total sales
during such nine month period, of which approximately half was charged to
Crown branded credit card accounts.
In order to increase customer loyalty and purchase frequency, the Company
has established its proprietary frequent fueler program to complement its
existing branded credit card program, and has also developed a branded fleet
credit card program designed specifically to encourage fleet participation.
The Company's frequent fueler program, entitled Road to RedemptionTM
encourages repeat visits by awarding customers with points redeemable for
selected items of merchandise or services. Awards which have been available
under this program include Starter (R) hats and T-shirts, Champion (R)
sportswear, free dinners at Subway (R), Pizza Hut (R) and Olive Garden (R)
restaurants, and American Automobile Association (R) memberships.
SUPPLY, TRANSPORTATION AND WHOLESALE MARKETING
Supply
The Company's Refineries, terminals and retail outlets are strategically
located in close proximity to a variety of supply and distribution channels.
As a result, the Company has the flexibility to acquire available domestic and
foreign crude oil economically, and also the ability to distribute its
products cost effectively to its own system and to other domestic wholesale
markets. Purchases of crude oil and feedstocks are determined by quality,
price and general market conditions.
34
<PAGE>
Purchases of raw materials for the periods indicated are summarized below:
RAW MATERIALS CONSUMPTION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ---------------------------
1991 1992 1993 1993 1994
------------- ------------- ------------- ------------- -------------
BPD % BPD % BPD % BPD % BPD %
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic crude.......... 81,532 55.5 78,982 51.4 80,825 51.0 82,685 51.9 84,044 54.2
Foreign crude........... 50,208 34.2 54,465 35.5 58,477 36.9 57,480 36.1 53,139 34.3
Other feedstocks........ 15,213 10.3 20,063 13.1 19,108 12.1 19,096 12.0 17,776 11.5
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total.................. 146,953 100.0 153,510 100.0 158,410 100.0 159,261 100.0 154,959 100.0
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Transportation
Most of the domestic crude oil processed by the Company at its Pasadena
Refinery is transported by pipeline. The Company's purchases of Alaskan and
foreign crude oil are transported primarily by tankers under spot charters
which are arranged by either the seller or by the Company. The Company is not
currently obligated under any time-charter contracts. The Company has an
approximate 5% interest in the Rancho Pipeline and generally receives between
20,000 and 25,000 barrels per day of crude through this system. As the table
above indicates, foreign crudes (principally from the North Sea, West Africa
and South America) account for approximately 35% of total crude supply and are
delivered by tanker. Most of the crude for the Tyler Refinery is gathered from
local East Texas fields and delivered by two pipeline systems, one of which is
owned by the Company. Foreign crude also can be delivered to the Tyler Refinery
by pipeline from the Gulf Coast.
Terminals
The Company operates 11 product terminals located along the Colonial and
Plantation pipelines from the Pasadena Refinery to Elizabeth, New Jersey and,
in addition to the terminal at the Tyler Refinery, operates four product
terminals located along the Texas Eastern Products Pipeline system. These
terminals have a combined storage capacity of 2.7 million barrels. The
Company's distribution network is augmented by agreements with other terminal
operators also located along these pipelines. In addition to serving the
Company's retail requirements, these terminals supply products to other
refiner/marketers, jobbers and independent distributors.
Wholesale Marketing
Approximately 16% of the gasoline produced by the Company's Pasadena Refinery
is transported by pipeline for sale at wholesale through Company and other
terminals in the Mid-Atlantic and Southeastern United States. Heating oil is
also regularly sold at wholesale through these same terminals. Gasoline,
heating oil, diesel fuel and other refined products are also sold at wholesale
in the Gulf Coast market.
The Company has entered into long-term product exchange agreements for
approximately one-third of its Tyler Refinery production with two major oil
companies headquartered in the United States. These agreements provide for the
delivery of refined products at the Company's terminals in exchange for
delivery by these companies of a similar amount of refined products to the
Company. The terms of these agreements extend through March 1998 and December
1999, respectively, and require the exchange of 8,400 barrels per day and 9,800
barrels per day, respectively. These exchange agreements provide the Company
with the ability to broaden its geographic distribution, supply markets not
connected to the refined products pipeline systems and reduce transportation
costs.
35
<PAGE>
INDUSTRY OVERVIEW
Refining
The refining industry processes crude oil into refined products such as
gasoline, jet fuel, diesel fuel, home heating oil, slurry oil and petroleum
coke. The Company believes that the profitability of the domestic refining
industry is likely to improve due to increased demand for refined products
during a period when domestic refining utilization approaches its maximum
crude oil processing limits. Furthermore, the Company believes that increasing
foreign demand, resulting from economic recovery in overseas markets, coupled
with the more stringent requirements associated with reformulated gasoline
regulations in the United States, will tend to reduce the opportunity and
incentive for foreign refiners to supply the increasing domestic demand. The
Company believes that it is well positioned to benefit from these trends.
In the last decade, worldwide demand for all refined petroleum products has
grown from 57.9 million barrels per day to 67.4 million barrels per day. The
Company believes that this rate of demand growth is likely to continue due to
economic growth occurring in developing countries, principally in Eastern
Europe and Asia. In addition, industry studies forecast that worldwide demand
growth will continue to be linked to worldwide economic development.
Similarly, in the last decade, United States demand for all refined
petroleum products has grown from 15.2 million barrels per day to 17.2 million
barrels per day. Industry studies indicate that this growth is largely the
result of demand for gasoline, jet fuel and highway diesel. These studies
further indicate that from 1983 to 1993, demand for these transportation fuels
has grown from 9.4 million barrels per day to 11.1 million barrels per day.
The Company believes that this growth is particularly noteworthy given the
impact of fleet efficiency standards in the United States. Industry studies
anticipate demand for these transportation fuels will continue to track
overall levels of economic growth as measured by statistics such as gross
national product.
In contrast, industry studies indicate that United States demand for
residual fuel oils peaked at 3.1 million barrels per day in 1977 and declined
over the next 14 years, to 1.2 million barrels per day in 1991. The Company
believes that demand for residual fuel oils in the United States is likely to
remain stable or continue to decline due to the growing use of natural gas and
coal.
The Company believes that these industry trends are likely to benefit those
refiners, such as the Company, which are able to convert a higher percentage
of crude oil into higher margin transportation fuels. Approximately 85% of the
Company's refined output meets the specifications for transportation fuels.
Approximately 72% of the Company's current refined output meets the
requirements for highway use and the remaining 13% of light product production
(mainly No. 2 distillate) consists of products capable of meeting
specifications for off-road uses.
The Company believes that domestic refining utilization is near its maximum
capacity and that significant increases in domestic processing capacity are
unlikely due to a number of factors. First, the cost of new refinery
construction has increased significantly over the last two decades. Industry
consultants estimate the cost of constructing a new refinery to be in excess
of $5,000 per barrel per day of rated crude capacity. The last significant new
domestic refinery construction was completed in the mid-1970's. Second, the
increased scope and complexity of environmental and other governmental
requirements has made the permitting process for refinery construction more
difficult. Third, refiners are faced with significant expenditures to bring
older refineries into compliance with current environmental requirements.
Industry studies indicate that as a result of these factors, refinery rated
capacity has declined 15% since 1982 from 17.9 million barrels per day to 15.2
million barrels per day in 1993 and that the number of operable refineries has
fallen from 301 to 187 during this same period. However, in order
36
<PAGE>
to meet growing demand, domestic refiners have increased production capacity
for higher margin transportation fuels by 0.5 million barrels per day through
investment in projects to increase conversion capabilities. Capacity
reductions have also been offset by the addition of oxygenates to gasoline to
meet the requirements of the Clean Air Act. The Company believes that these
offsetting factors and initiatives are unlikely to continue due to physical
constraints on existing facilities and the reduction in the need for
additional capacity for oxygenates.
The net result of these factors has been a substantial increase in the
domestic refining industry's capacity utilization rate over the last decade
from 71.7% to 91.6% in 1993. The Company believes that the maximum sustainable
crude oil processing capacity for the refinery industry is approximately 93%
due to the industry-wide requirement for periodic major maintenance
turnarounds of refinery operations as well as unscheduled shutdowns.
Accordingly, the Company believes that current domestic utilization rates are
nearing capacity and are likely to remain above historical averages due to
modestly increasing demand for transportation fuels, lack of future
significant increases in domestic refining capacity and less incentive for
foreign refiners to export their product into the United States market.
Retail Marketing
The retail markets have historically been highly competitive with a number
of well capitalized oil companies and both large and small independent
competitors. Management believes that over the last several years, the retail
markets have been characterized by several significant trends including: (i)
increased store rationalization with marketers clustering retail units into
fewer geographic regions and increasing the retail space of newly constructed
and existing units; (ii) increased consumer emphasis on convenience, quality,
cleanliness and safety when purchasing gasoline and related merchandise at a
retail location; and (iii) growth in gasoline demand.
Rationalization. During the past several years, the retail market has
experienced increased concentration of market shares as major oil companies
have divested non-strategic stations and have focused efforts in fewer
geographic regions, many of which are near strategic supply sources.
Additionally, many smaller operators have closed marginal and unprofitable
stations as a result of increasing environmental regulations. The lack of
favorable new sites in existing markets and the high cost of construction of
new facilities are also believed to be barriers to new competition.
Consumer Emphasis on Convenience. Industry studies indicate that consumer
buying behavior continues to reflect the effect of increasing demands on
consumer time. Convenience and the time required to make the purchase are
increasingly important considerations in the buying decision.
Gasoline Demand Growth. Since 1982, United States gasoline demand has grown
by an average of approximately 1% to 2% annually and industry studies
anticipate this demand will continue to track economic growth. Other factors
which contribute to the modest growth outlook for gasoline sales include: (i)
the lower energy content of oxygenated gasoline compared with conventional
gasoline, and the resultant fewer miles per gallon delivered by this fuel when
used in the existing automobile fleet; (ii) the declining differential between
the fuel efficiency of the existing and retiring automobile fleet; and (iii)
the anticipation of relatively small increases in fuel economy of new car
models.
Impact of Regulatory Requirements
The Company believes that government regulation with respect to the
environment and worker safety has increased significantly in the last decade
and that the costs associated with complying with these regulatory
requirements have altered the economics of the refining business. The
regulatory requirements that have had the most significant impact upon the
Company's business are the requirements of the Clean Air Act and requirements
pertaining to retail fuel pumps and underground storage tanks.
37
<PAGE>
The Clean Air Act requires the Company to meet certain air emission
standards and to obtain and comply with the terms of emissions permits. The
Clean Air Act will impact the Company primarily in the following areas: (i)
beginning in 1995, reformulated gasoline (meeting content standards for
oxygen, benzene and aromatics) is mandated for gasoline sold in certain non-
attainment areas, including certain of the Company's core retail market areas;
(ii) Stage II hose and nozzle controls are required in gas pumps to capture
fuel vapors in certain non-attainment areas, including areas in which many of
the Company's retail units are located; and (iii) the imposition of more
stringent refinery emissions limitations, particularly with regard to
emissions of hazardous air pollutants. Recently, the United States
Environmental Protection Agency ("EPA") has required additional controls upon
emissions of benzene from refineries under the National Emission Standards for
Hazardous Air Pollutants ("NESHAPS") program. Emission standards under the
NESHAPS program for other hazardous air pollutants will be applicable to the
Refineries and most of the Company's terminals in the next few years.
The Company believes that the long term profitability of the retail
marketing sector of the petroleum industry will be affected by the number of
gasoline stations competing in each geographic region. Industry studies
indicate a trend toward closing or divesting marginally profitable gasoline
stations as the industry faces more widespread implementation of Stage II
vapor recovery requirements, as well as eventual compliance with underground
storage tank regulations. The Company believes that closing or divesting
retail locations due to large expected environmental liabilities has not been
limited to the smaller companies in the industry. The Company believes that,
not only are the larger companies divesting marginally profitable sites, but
during the past two years these companies have invested primarily in areas
where they desire to strengthen an existing presence. The Company believes
that the net effect has been, and will continue to be, a reduction in the
number of gasoline stations.
COMPETITION
Oil industry refining and marketing is highly competitive. Many of the
Company's principal competitors are integrated multinational oil companies
that are substantially larger and better known than the Company. Because of
their diversity, integration of operations, larger capitalization and greater
resources, these major oil companies may be better able to withstand volatile
market conditions, compete on the basis of price and more readily obtain crude
oil in times of shortages.
The principal competitive factors affecting the Company's refining division
are crude oil and other feedstock costs, refinery efficiency, refinery product
mix and product distribution and transportation costs. Certain of the
Company's larger competitors have refineries which are larger and more complex
and, as a result, could have lower per barrel costs or higher margins per
barrel of throughput. The Company has no crude oil reserves and is not engaged
in exploration. The Company believes that it will be able to obtain adequate
crude oil and other feedstocks at generally competitive prices for the
foreseeable future.
The principal competitive factors affecting the Company's retail marketing
division are locations of stores, product price and quality, appearance and
cleanliness of stores and brand identification. Competition from large,
integrated oil companies, as well as from convenience stores which sell motor
fuel, is expected to continue. The principal competitive factors affecting the
Company's wholesale marketing business are product price and quality,
reliability and availability of supply and location of distribution points.
EMPLOYEES
At September 30, 1994, the Company had approximately 2,960 full-time
employees, including approximately 1,826 in convenience stores. The total
number of employees decreased approximately 2.3% from year end 1993. This
decrease was due primarily to the elimination of retail units and to the
consolidation of certain marketing field operations.
38
<PAGE>
At September 30, 1994, the Company employed 277 hourly workers at its
Pasadena Refinery who are represented by the Oil, Chemical and Atomic Workers
Union under a collective bargaining agreement which expires in February of
1996. Also as of September 30, 1994, the Company employed 161 hourly workers at
its Tyler Refinery who are represented by the same union under a separate
collective bargaining agreement which expires in March of 1997. During March
1994, the Company experienced a brief work stoppage at its Tyler Refinery which
did not interrupt production. Following such work stoppage, the Company and the
union negotiated and entered into the present collective bargaining agreement.
The Tyler Refinery collective bargaining agreement is innovative in the
industry in that it links a portion of employee compensation to the success and
profitability of the operation. The Company is also a party to various other
labor agreements covering 29 of its employees. The Company believes its
relations with its employees to be satisfactory.
ENVIRONMENTAL AND OTHER REGULATIONS
Like other companies in the petroleum refining and marketing industries, the
Company's operations are subject to extensive regulation and the Company has
responsibility for the investigation and cleanup of contamination resulting
from past operations. Current compliance activities relate to air emissions
limitations, waste water and storm water discharges and solid and hazardous
waste management activities. In connection with certain of these compliance
activities and for other reasons, the Company is engaged in various
investigations and, where necessary, remediation of soils and ground water
relating to past spills, discharges and other releases of petroleum, petroleum
products and wastes. The Company's environmental activities are different with
respect to each of its principal business activities: refining, terminal
operations and retail marketing. The Company is not currently aware of any
information that would suggest that the costs related to the air, water or
solid waste compliance and clean-up matters discussed herein will have a
material adverse effect on the Company's financial condition or results of
operations.
The Company conducts environmental assessments and remediation efforts at
multiple locations, including operating facilities, and previously owned or
operated facilities. Estimated closure and post-closure costs for active,
operated refinery and finished product terminal facilities are not recognized
until a decision for closure is made. Estimated closure and post-closure costs
for active and operated marketing facilities and costs of environmental matters
related to ongoing refinery, terminal and marketing operations are recognized
as described below. Expenditures for equipment necessary for environmental
issues relating to ongoing operations are capitalized. The Company accrues
environmental and clean-up related costs of a non-capital nature when it is
both probable that a liability has been incurred and that the amount can be
reasonably estimated. Accruals for costs of environmental remediation
obligations generally are recognized no later than completion of the remedial
feasibility study. Estimated costs, which are based upon experience and
assessments, are recorded at undiscounted amounts without considering the
impact of inflation, and are adjusted periodically as additional or new
information is available. The Company has recorded a liability as of September
30, 1994 of $16.3 million for certain identified environmental compliance and
remediation costs that are not of a capital nature. The Company reviews its
accruals regularly to determine whether the anticipated future costs of
environmental remediation projects are adequately provided for in light of this
accounting policy with respect to accruals.
Refining Operations
All refinery operations are subject to extensive regulation relating to air
emissions, waste water discharges and the generation of solid and hazardous
waste. In order to achieve and ensure compliance with current and anticipated
permits and requirements relating to such regulation, the Company plans to
undertake capital facility improvements totaling approximately $15 million at
the Pasadena Refinery and approximately $9 million at the Tyler Refinery during
the period from 1995 to 1999.
39
<PAGE>
Air Emissions. The Company has recently reached agreement in principle with
the Texas Natural Resource Conservation Commission ("TNRCC") to settle
outstanding proceedings relating to air emissions at the Pasadena Refinery.
TNRCC originally alleged a variety of violations in connection with sulphur
dioxide emissions from the sulphur recovery unit, the hydrogen sulfide content
limit in fuel gas from the fluid catalytic cracking unit and the release of
catalyst from that unit. Under the proposed settlement, which is subject to
TNRCC approval, the Company will implement various corrective measures and
improved record keeping procedures and will pay administrative penalties of
$110,000 which have been accrued. Settlement of the TNRCC matter is also
expected to satisfy related charges filed by the EPA and by the Harris County
Pollution Control Board. Recently, TNRCC has issued a Notice of Violation (the
"NOV") with respect to certain alleged violations at the reformer unit at the
Pasadena Refinery, which the Company had self-reported in early 1994. The
Company and the TNRCC staff are currently working to resolve the issues raised
by the NOV.
In general, the Company continues to review and evaluate air emissions
requirements and compliance with respect to its refinery operations. At
present, the Company is evaluating specific compliance issues that, in the
Company's opinion, may require capital expenditures in addition to capital
expenditures that have already been identified. Although the Company cannot
determine at this time the amount of such expenditures that may be necessary,
the Company believes that they are not likely to materially adversely affect
its consolidated financial position or results of operations. If the Company
were required to modify process or air pollution control equipment or
operating procedures to achieve compliance, the Company would expect to
consult appropriate regulatory authorities and to pursue resolution of those
issues without enforcement action. There can be no assurance, however, that
the Company will not be subjected to additional fines or penalties with
respect to historical or future operations.
The Company has been reviewing a number of air quality issues at the
Pasadena Refinery (in connection with the recent TNRCC proceedings) and at the
Tyler Refinery, and has also been attempting to assess the scope of additional
environmental compliance that will be required under Title V of the Clean Air
Act ("Title V"). The Company expects that Title V will require all refineries,
including both the Pasadena Refinery and the Tyler Refinery, to apply for and
obtain one or more Federal operating permits covering all operations and
processes at their facilities. Under proposed Texas regulations, initial
permit applications by refineries will be required no earlier than January 1,
1996.
Waste Water Discharges. Waste water discharges from the Refineries are
subject to permits governing storm water discharges to surface waters and
process and sanitary waste water discharges to municipal sewer systems. The
Company is nearing completion of an upgrade of the Tyler Refinery's storm
water management and treatment system, pursuant to a 1993 Agreed Order with
the TNRCC in order to achieve compliance with waste water discharge permits.
Soil and Ground Water Remediation. Certain areas at the Refineries have also
been subject to remediation under the Resource Conservation and Recovery Act
("RCRA"), which governs hazardous waste disposal activities and the
remediation of certain past waste disposal activities. Under RCRA, the Company
has conducted investigations of soil and ground water conditions at both
Refineries. As a result of those investigations, the Company has conducted
certain treatment, removal, disposal and containment activities to address
areas of soil contamination. In addition, the Company operates an extensive
system of ground water wells at both Refineries for the monitoring, extraction
and remediation of ground water. The Company is currently planning to install
additional ground water wells, to continue monitoring, pumping and remediating
ground water and to conduct additional remediation of contaminated soils. The
Tyler Refinery is subject to both a RCRA permit, issued by the EPA, and an
Agreed Order, issued by the Texas Water Commission (now the TNRCC), with
respect to solid waste management practices. The Company has implemented
programs at the Tyler Refinery necessary to bring its operations into
compliance with Federal and state solid and hazardous waste regulations, as
required by the RCRA permit and the Agreed Order. The Company estimates that
compliance with the RCRA permit
40
<PAGE>
and the Agreed Order will require additional expenditures of approximately $6
million, over the next five years of which approximately $1 million may be
attributable to environmental clean-up matters.
Terminals
The Company currently owns or operates 16 terminals for the storage of
refined petroleum products, including gasoline, highway diesel, home heating
oil and jet fuel. Many of these terminal locations are subject to permit
requirements relating to air emissions and waste water discharges. The Company
anticipates capital spending of approximately $2 million over the next five
years to upgrade emissions control equipment and waste water management and
treatment systems at the terminals.
Many of the terminal locations have been affected by on-site or off-site
releases of petroleum products and some waste materials. At some terminals,
there have been accidental spills of various products. At other terminals, tank
and line leaks have been discovered and corrected. Most of the terminals have
been in operation for several decades. Based on historical industry practices,
it is possible that discharges of petroleum products and wastes, such as tank
bottoms, may have occurred at some of the terminals at times when such releases
were not illegal. As a result of these and other causes (including migration of
off-site contamination), the soil or ground water at several of the terminals
has been adversely affected.
The Company is currently conducting ground water remediation activities,
including in some cases the recovery of free product, at many of the terminals
in accordance with regulatory requirements. The Company actively monitors and
manages these remediation activities to achieve and maintain compliance with
all applicable government orders, permits and other requirements with respect
to this contamination.
In the past five years, the Company has incurred $1.3 million in capital
expenditures and $1.2 million in non-capital expenses relating to environmental
matters at the terminal facilities. In the next five years, the Company
anticipates incurring approximately $7 million in capital expenditures, and
non-capital expenditures of approximately $2 million which has been accrued for
remediation of past releases of petroleum products at the terminal locations.
There can be no assurance that the costs associated with the terminal
remediation activities will not increase substantially if new issues are
identified or the regulatory authorities impose unanticipated requirements upon
the Company.
Retail Operations
The Company owns or operates over 350 retail units at which there are
underground storage tanks containing gasoline, and formerly owned or operated
more than 400 other sites. The Company believes that it is substantially in
compliance with current Federal and state underground storage tank
requirements, which require monitoring, tank tightness testing and inventory
control to discover leaks. The Company has replaced many such tanks, and has
budgeted approximately $20 million through 1998 to comply with environmental
requirements at the retail locations.
The Company's retail units are subject to environmental requirements for
Stage II vapor recovery systems and requirements with respect to underground
storage tanks. The Clean Air Act requires states with certain designated ozone
non-attainment areas to implement a Stage II vapor recovery control program. In
those areas where Stage II systems are required, the Company has either
installed, or is currently in the process of installing Stage II equipment.
EPA regulations require that by 1998 all underground storage tanks must have
installed the following: (i) leak detection monitoring; (ii) spill and overfill
protection; and (iii) corrosion protection for tanks and piping (coated and
cathodically-protected steel, or fiberglass). The Company believes that
41
<PAGE>
over 30% of its retail units are currently in full compliance with the 1998
standards and an additional 24% require very little additional work in order to
achieve such compliance.
The Company is aware of soil or ground water conditions requiring further
investigation or remediation at 185 of the operating locations and 226 of the
closed locations. Thirty-six sites are currently undergoing remediation
activities, at an average per unit cost to date of approximately $135,000 per
site. Based on reduced costs for recent remediation activities, the average per
unit cost of future remediation at affected sites is expected to be
approximately $45,000. The Company has accrued approximately $5 million with
respect to the costs of investigating, monitoring and remediating the retail
sites. While the Company's anticipated costs with respect to environmental
matters at the retail locations are not expected to adversely affect the
Company's financial condition or results of operations, there can be no
assurance that future investigations or changing regulatory requirements will
not result in substantially higher costs than have been projected by the
Company which could adversely affect the financial position of the Company.
Superfund
Under the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended ("CERCLA") and analogous state laws, the Company has
received notice of potential liability at several sites for the disposal of
materials allegedly containing hazardous substances. As a potentially
responsible party ("PRP"), the Company could be jointly, severally and strictly
liable for the response costs associated with such sites. The Company's
exposure in these matters has either been resolved or is de minimis and is not
expected to have a material adverse effect on the financial position of the
Company.
LITIGATION
Various lawsuits and other litigation have been filed against the Company, in
some of which substantial amounts are claimed for alleged personal injury and
property damage from prolonged exposure to petroleum, petroleum related
products and asbestos used at the Company's refineries or in the petroleum
refining process. The Company is a co-defendant with numerous other defendants
in a number of these suits. Although the Company is vigorously defending these
actions, their final resolution could take several years. The Company's
liability, if any, in connection with these cases has either been accrued in
accordance with generally accepted accounting principles or was not
determinable at September 30, 1994. The Company consults with counsel with
respect to pending or threatened claims. While litigation can contain a high
degree of uncertainty and the risk of an unfavorable outcome, in the opinion of
management, there is no reasonable basis to believe that the eventual outcome
of any such matter or group of related matters will have a material adverse
effect on the Company's consolidated financial position.
The Company is a defendant in a citizens suit pertaining to alleged
violations of waste water discharge permits at the Tyler Refinery. As noted
above, the Company has made significant investments in improving its waste
water discharge treatment capability at the Tyler Refinery and believes that it
will be able to demonstrate a current and continuing ability to achieve
compliance with its permit. In the event that such compliance cannot be
achieved, the Company may be exposed to liability in connection with the suit,
which the Company does not believe would be material to its consolidated
financial position or results of operations.
The Company has recently reached an agreement in principle to settle with the
TNRCC outstanding enforcement proceedings relating to air emissions at the
Pasadena Refinery. See "Environmental and Other Regulations -- Refining
Operations."
42
<PAGE>
MANAGEMENT
Following is a list of the Company's executive officers and directors, their
ages and their offices and positions as of September 30, 1994:
<TABLE>
<CAPTION>
NAME AGE POSITION OR OFFICE
------------------------- --- -----------------------------------------------
<C> <C> <S>
Henry A. Rosenberg, Jr. 64 Director, Chairman of the Board and Chief
Executive Officer
Charles L. Dunlap 51 Director, President and Chief Operating Officer
Edward L. Rosenberg 39 Senior Vice President -- Administration,
Corporate Development and Long Range Planning
Phillip W. Taff 52 Senior Vice President -- Finance and Chief
Financial Officer
John E. Wheeler, Jr. 41 Senior Vice President -- Treasurer and
Controller
Thomas L. Owsley 53 Vice President -- Legal
Randall M. Trembly 48 Vice President -- Refining
Paul J. Ebner 36 Vice President -- Marketing Support Services
J. Michael Mims 45 Vice President -- Human Resources
George R. Sutherland, Jr. 49 Vice President -- Supply and Transportation
Frank B. Rosenberg 36 Vice President -- Marketing
Dolores B. Rawlings 57 Secretary
Jack Africk 66 Director
George L. Bunting, Jr. 53 Director
Michael F. Dacey 50 Director
Robert M. Freeman 53 Director
Patricia A. Goldman 52 Director
William L. Jews 42 Director
Thomas M. Gibbons 68 Director
Malcolm McNair 69 Director
</TABLE>
Henry A. Rosenberg, Jr. has been Chairman of the Board and Chief Executive
Officer of the Company since April 24, 1975. He is also a director of Signet
Banking Corporation and USF&G Corporation. Mr. Rosenberg is a member of the
National Petroleum Council, a member and former Chairman of the National
Petroleum Refiners Association and a member of the 25 Year Club of the
Petroleum Industry. Mr. Rosenberg has been a director of the Company since
1955. Mr. Rosenberg is the father of Edward L. Rosenberg and Frank B.
Rosenberg. He is a member of the ATAPCO Group. See "Principal Stockholders."
Charles L. Dunlap has been President and Chief Operating Officer of the
Company since December 1991. He is presently a director and member of the
Executive Committee of the National Petroleum Refiners Association, and a
member of the 25 Year Club of the Petroleum Industry. He previously was the
Executive Vice President and a Director of Pacific Resources, Inc. from July
1985 through November 1991. Mr. Dunlap has been a director of the Company since
1991.
Edward L. Rosenberg has been Senior Vice President -- Administration,
Corporate Development and Long Range Planning of the Company since June, 1994.
He was formerly Senior Vice President --Finance and Administration from
December 1991 to June 1994; Vice President -- Supply & Transportation from
October 1990 to December 1991; and Vice President -- Corporate Development
43
<PAGE>
from August 1989 to October 1990. He is the son of Henry A. Rosenberg, Jr.,
and the brother of Frank B. Rosenberg. He is a member of the ATAPCO Group. See
"Principal Stockholders."
Phillip W. Taff has been Senior Vice President -- Finance and Chief
Financial Officer of the Company since June 1994. He was Executive Vice
President, Chief Financial Officer and Chief Administrative Officer of
Greyhound Lines, Inc. from April 1993 to May 1994; and Senior Vice President
and Chief Financial Officer, American Trading and Production Corporation from
May 1991 to April 1993. He was Executive Vice President, PHH Corporation and
President, PHH Fleet America, April 1987 through April 1991.
John E. Wheeler, Jr. has been Senior Vice President -- Treasurer and
Controller of the Company since June 1994. He was formerly Vice President --
Treasurer and Controller from December 1991 to June 1994; and Vice
President -- Controller from March 1984 to December 1991.
Thomas L. Owsley has been Vice President -- Legal of the Company since April
1983.
Randall M. Trembly has been Vice President -- Refining of the Company since
December 1991. He was formerly Vice President -- Treasurer from October 1987
to December 1991.
Paul J. Ebner has been Vice President -- Marketing Support Services since
December 1991. He was formerly General Manager -- Marketing Support Services
from November 1988 to December 1991.
J. Michael Mims has been Vice President -- Human Resources of the Company
since June 1992. He was formerly Vice President -- Internal Auditing and
Consulting Services from December 1991 to June 1992, and Director of Internal
Auditing from September 1983 to December 1991.
George R. Sutherland, Jr. has been Vice President -- Supply and
Transportation of the Company since July 1992. He was formerly Senior Vice
President -- Trading of Pacific Resources, Inc. from 1989 until his employment
by the Company.
Frank B. Rosenberg has been Vice President -- Marketing of the Company since
January 1993. He was formerly Southern Marketing Division Manager from January
1992 to January 1993; Vice President -- Wholesale Marketing -- La Gloria Oil
and Gas Company from October 1990 to January 1992; Manager -- Economics,
Planning and Scheduling from October 1989 to October 1990; and Manager --
Refinery Sales from November 1988 to October 1989. Mr. Rosenberg is the son
of Henry A. Rosenberg, Jr. and the brother of Edward L. Rosenberg. He is a
member of the ATAPCO Group. See "Principal Stockholders."
Dolores B. Rawlings has been Secretary of the Company since November 1990.
She was formerly Assistant to the Chairman and Assistant Secretary from April
1988 to November 1990.
Jack Africk was formerly Vice Chairman, UST Inc. from September 1990 through
May 1993. Mr. Africk was Executive Vice President of UST Inc. from May 1985
through September 1990. He was President and Chief Executive Officer of U.S.
Tobacco Company, a subsidiary of UST Inc. from May 1987 through September
1990. Mr. Africk is also a director of Duty-Free International, Inc., Tanger
Factory Outlet Centers, Inc. and Transmedia Network, Inc. He has been a
director of the Company since 1991. Mr. Africk also acts as a general business
advisor and consultant to the Company.
George L. Bunting, Jr. has been President and Chief Executive Officer of
Bunting Management Group since July 1991. Mr. Bunting was Chairman and Chief
Executive Officer of Noxell Corporation from April 1986 through June 1991. He
is also a director of Mercantile Bankshares Corporation, PHH Corporation and
USF&G Corporation. He has been a director of the Company since 1992.
44
<PAGE>
Michael F. Dacey was an Executive Vice President of The Chase Manhattan
Corporation and The Chase Manhattan Bank, N.A. from December 1987 through
December 1994. He has been a director of the Company since 1991.
Robert M. Freeman has been Chairman of the Board and Chief Executive Officer
of Signet Banking Corporation since April of 1990. He was President and Chief
Executive Officer of Signet from April 1989 through March 1990 and Vice
Chairman from December 1978 to April 1989. He is also a director of Signet
Banking Corporation. Mr. Freeman has been a director of the Company since 1993.
Patricia A. Goldman was Senior Vice President -- Corporate Communications of
USAir, Inc. from February 1988 through January 1994. She has been a director of
the Company since 1989.
William L. Jews has been President and Chief Executive Officer of Blue Cross
and Blue Shield of Maryland since April 1993. Mr. Jews was President and Chief
Executive Officer of Dimensions Health Corporation from March 1990 through
March 1993, and was President and Chief Executive Officer of Liberty Medical
Center, Inc., and St. Luke's Lutheran Holding Company from June 1986 through
February 1990. Mr. Jews is also a director of NationsBank, N.A. and the Shelter
Development Corporation. He has been a director of the Company since 1992.
Thomas M. Gibbons was formerly Chairman of the Board of The Chesapeake and
Potomac Telephone Companies (part of Bell Atlantic Corporation) from January
1990 through April 1990. Mr. Gibbons was Chairman of the Board and Chief
Executive Officer of that corporation from July 1988 to January 1990. He was
President and Chief Executive Officer from January 1983 to July 1988. He has
been a director of the Company since 1988.
Malcolm McNair was formerly a Financial Services Group Representative,
Cushman & Wakefield of Long Island, Inc., from January 1988 through May 1989.
He has been a director of the Company since 1972.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company or any subsidiary of the
Company is paid $12,000 per year for serving as a director and a meeting fee of
$600, plus travel expenses, for attendance at each meeting. Each non-employee
director who is a member of any committee of the Board of Directors other than
the Executive Committee is paid $3,000 per year for serving on each such
committee. The Chairman of any committee other than the Executive Committee is
paid a fee of $1,000 for serving in that capacity. Directors who are employees
receive no separate compensation for serving on the Board, on any Board
committee or as Chairman of any committee.
45
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by or paid
to the Chief Executive Officer and the other four most highly compensated
executive officers as of December 31, 1993 for all services rendered in all
capacities to the Company and its subsidiaries during the last three fiscal
years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION(A)
----------------------------------------- ------------------------
NAME AND OTHER ANNUAL LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(B) PAYOUTS COMPENSATION(C)
------------------ ---- -------- -------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Henry A. Rosenberg, Jr. 1993 $525,000 -- $17,734 -- $15,736
Chairman of the Board 1992 521,668 -- 17,460 -- 15,670
and Chief Executive 1991 501,672 -- $125,698
Officer
Charles L. Dunlap 1993 $381,672 -- $16,224 -- $13,777
President and Chief 1992 375,000 -- 15,210 -- 3,833
Operating Officer 1991 31,250 $100,000(d) --
Thomas L. Owsley 1993 $148,000 -- $13,225 -- $ 7,038
Vice President -- Legal 1992 137,000 -- 13,044 -- 6,914
1991 132,500 -- $ 33,692
George R. Sutherland,
Jr. 1993 $152,504 -- $12,265 -- $ 5,322
Vice President --
Supply 1992 75,577 -- 6,000 -- 1,241
and Transportation 1991 N/A N/A N/A
Randall M. Trembly 1993 $145,000 -- $12,000 -- $ 7,034
Vice President -- 1992 135,000 -- 12,000 -- 6,945
Refining 1991 119,667 -- $ 31,250
</TABLE>
- ---------------------
(a) These amounts represent payments made under the Company's Long-Term
Performance Reward Plan which is based on the Company's earnings during a
three year period, and bonuses are calculated as a percentage of the
employee's year-end base pay during the cycle.
(b) These amounts include automobile allowances, gasoline allowances, and the
tax gross-ups applicable to the gasoline allowances. Information for years
prior to 1992 is not required.
(c) These amounts include imputed income related to excess life insurance,
payments for executive medical insurance and the Company's matching
payments under the Employees Savings Plan. Information for years prior to
1992 is not required. In 1993, the imputed income for Mr. Rosenberg was
$4,176; for Mr. Dunlap, $2,218 and for Mr. Sutherland, $1,072. The
executive medical payments for the officers listed in the table were
$1,560. The balance of the amount reported for 1993 represents the
Company's matching payments under the Employees Savings Plan.
(d) Mr. Dunlap joined the Company in 1991 and was paid a signing bonus of
$100,000.
1994 ANNUAL INCENTIVE PLAN
The 1994 Annual Incentive Plan is a cash plan that may, based upon the
approval of the Executive Compensation and Bonus Committee (the "Committee"),
be offered to officers, senior management and other key operational managers.
Minimum performance levels, targets and maximum awards are established by the
Committee for each plan year. Participants can earn a percentage of base salary
46
<PAGE>
and from 25% to 40% of a participant's award is based upon the individual's
performance which is measured by the Crown management system. The balance of
the award is determined by the Company's performance which is based upon income
before income taxes. Income before income taxes must meet the annual minimum
threshold approved by the Committee for any awards to be earned in a plan year.
1994 LONG-TERM INCENTIVE PLAN
At the Company's 1994 Annual Meeting, the stockholders approved the adoption
of the 1994 Long-Term Incentive Plan (the "Plan"). There are currently 12
executive officers and 14 other key employees participating in the Plan. The
Plan provides for Awards of Non-qualified Stock Options ("Options") for the
purchase of the Class B Common Stock (the "Option Stock") and Performance
Vested Restricted Stock ("PVR Stock") which is also awarded in shares of Class
B Common Stock.
Awards are made by the Committee, or such other committee as may be
designated by the Board. Awards of up to a total of 1,100,000 shares of Option
Stock and PVR Stock are available under the Plan, either from authorized but
unissued shares of Class B Common Stock or from shares of Class B Common Stock
purchased specifically for use under the Plan. No more than 550,000 shares of
the total shares allocated to the Plan may be for awards in the form of PVR
Stock, and no participant may receive more than 150,000 shares of Option Stock
or 50,000 shares of PVR Stock in any one year. Shares relating to unexercised
Options or undistributed shares that have been terminated or forfeited may, to
the extent permitted by law, be reissued under the Plan.
INTEREST OF MANAGEMENT AND OTHERS IN TRANSACTIONS WITH THE COMPANY AND ITS
SUBSIDIARIES
In the ordinary course of business, the Company leases offices in an office
building owned by American Trading Real Estate Company, Inc., all of the stock
of which is owned by American Trading Real Estate Properties, Inc., a wholly-
owned subsidiary of ATAPCO of which Messrs. Henry A. Rosenberg, Jr. and Edward
L. Rosenberg are directors and stockholders, and Mr. Frank B. Rosenberg is a
stockholder. During 1993 the total rent paid including escalation was
$1,031,059 which was no greater than the rent charged others for comparable
space in such building. In addition, the Company paid $61,928 for alterations,
maintenance, and miscellaneous charges, which was no greater than charges to
others for comparable services.
In the ordinary course of business, the Company and its subsidiaries maintain
bank accounts in and relationships with, including from time to time borrowings
from, The Chase Manhattan Bank, N.A., of which Mr. Dacey was formerly an
officer, and Signet Bank/Maryland, a subsidiary of Signet Banking Corporation,
of which Mr. Freeman is an officer and a director and Mr. Henry A. Rosenberg,
Jr. is a director. The Chase Manhattan Bank, N.A. is the agent and a lender,
and Signet Bank/Maryland is a lender, under the Credit Facility. Signet
Bank/Maryland is also the Trustee of the Company's Retirement Plan.
NationsBank, N.A., of which Mr. Jews is a director, and its affiliate
NationsBank of Texas, N.A., are lenders under the Credit Facility.
Effective November 1, 1993, Mr. Africk became a general business advisor and
consultant to the Company for which he is paid a consultancy fee of $3,000 per
month. His work in this capacity is in addition to his service as a director,
member of the Executive Committee and Chairman of the Audit Committee.
EMPLOYMENT CONTRACTS
The Company has a five-year employment contract with Charles L. Dunlap, its
President and Chief Operating Officer. The contract provides for Mr. Dunlap to
serve as President and Chief Operating Officer and as a director of the
Company. The contract also provides for him to participate in the Company's
bonus and benefit plans and to be covered by the Company's Supplemental
Retirement Income Plan for Senior Executives.
47
<PAGE>
PRINCIPAL STOCKHOLDERS
The Company's common stock is divided into two classes, Class A Common
Stock, par value $5 per share (the "Class A Common Stock") and Class B Common
Stock, par value $5 per share (the "Class B Common Stock"). The holders of the
Class B Common Stock, voting separately as a class, are entitled to elect two
directors (who may not be employees of the Company or any of its subsidiaries)
and to remove the directors so elected. The holders of the Class A Common
Stock, voting separately as a class, are entitled to elect and remove all
directors other than the directors elected by the holders of the Class B
Common Stock. On all matters other than the election of directors, each share
of Class A Common Stock is entitled to one vote, and each share of Class B
Common Stock is entitled to one-tenth ( 1/10) vote. Except with respect to
voting rights, both classes of stock have the same rights and privileges
without differentiation as to class, except that the Board of Directors has
the authority to declare stock dividends payable in Class A Common Stock to
the holders of the Class A Common Stock and dividends payable in Class B
Common Stock to the holders of the Class B Common Stock, or dividends payable
in either class to the holders of both classes. As a consequence of its
stockholdings, the ATAPCO Group, detailed herein, has the ability to determine
the composition of a majority of the Company's Board of Directors, except for
the two directors elected by the holders of the Class B Common Stock and
thereby effectively has the ability to exercise control over the Company. The
ATAPCO Group's stockholdings also give it the ability to determine the outcome
of any matter submitted to the Company's stockholders for approval other than
matters requiring a vote in excess of a majority, or a vote by class of
stockholders, under the Maryland General Corporation Law or the Company's
charter. The following table sets forth the shares of each class of the
Company's stock and the percentage of each class owned by all persons known by
the Company to be the beneficial owner of more than 5% of the shares of any
class on January 31, 1994:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENTAGE
BENEFICIAL OWNER TITLE OF CLASS SHARES OF CLASS
- ------------------------------- -------------------- --------- ----------
<S> <C> <C> <C>
American Trading and Production
Corporation "group"(a)(b) Class A Common Stock 2,471,188 51.3%
Blaustein Building Class B Common Stock 614,709 12.3
P.O. Box 238
Baltimore, MD 21203
A.I.C. Limited "group"(c) Class A Common Stock 448,900 9.3
7930 Clayton Road
St. Louis, MO 63117
Heine Securities Corporation(d) Class A Common Stock 242,700 5.0
51 John F. Kennedy Parkway Class B Common Stock 463,600 9.2
Short Hills, NJ 07078
</TABLE>
- ---------------------
(a) ATAPCO (holder of 2,366,526 shares of Class A Common Stock and 591,629
shares of Class B Common Stock) and various persons who hold stock in that
corporation either individually or in a fiduciary or beneficial capacity
(holders of 104,662 shares of Class A Common Stock and 23,080 shares of
Class B Common Stock) are a "group" as that term is used in Section
13(d)(3) of the Exchange Act.
(b) Henry A. Rosenberg, Jr., the Company's Chairman and Chief Executive
Officer, and Edward L. Rosenberg, Senior Vice President -- Administration,
Corporation Development and Long Range Planning, are directors and
stockholders of ATAPCO, and Frank B. Rosenberg, Vice President --
Marketing, is a stockholder of ATAPCO. Henry A. Rosenberg, Jr. owns shares
of preferred stock of ATAPCO and is a beneficiary of a trust of which he
is one of the trustees holding common stock of ATAPCO. In addition Mr.
Henry Rosenberg is one of the trustees of other trusts, in which he has no
beneficial interest, which own shares of preferred and common stock of
ATAPCO. Of the ATAPCO Group's shares listed above, Mr. Henry Rosenberg
holds 21,132 shares of Class A Common Stock and 2,187 shares of Class B
Common Stock individually and in the Company's Employees Savings Plan.
(c) This information was obtained from a report on Schedule 13D dated January
14, 1983, and an amendment dated May 24, 1990, which were filed with the
Securities and Exchange Commission (the "Commission"). A.I.C. Limited, the
record owner of 448,900 shares of Class A Common Stock, and two
associates, who have no record ownership of Class A Common Stock, are a
"group" as that term is used in Section 13(d)(3) of the Exchange Act.
(d) This information was obtained from a report on Schedule 13G dated February
12, 1993 filed with the Commission. Heine Securities Corporation is a
registered investment advisor.
48
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
CREDIT FACILITY
The Company entered into a Credit Agreement dated as of May 10, 1993 (the
"Credit Facility") among the Company and the lenders named therein and The
Chase Manhattan Bank, N.A., as agent. The eight lenders have committed a
maximum of $125.0 million to the Company for cash borrowings and letters of
credit. The maximum amount permitted to be outstanding under the Credit
Facility (the "Borrowing Base") is limited to, as at any date, the sum of (A)
80% of certain of the Company's aggregate accounts receivable, and (B) 50% of
certain of the Company's aggregate inventory. There is a $50.0 million
limitation on cash borrowings. As of September 30, 1994 there were $18.8
million in undrawn letters of credit issued under the Credit Facility and no
cash borrowings. The Credit Facility expires on May 10, 1996, subject to the
right of the Company to request an extension for a period of one year, which
extension may be agreed to or rejected by each individual bank. If banks with
aggregate commitments of at least $50.0 million agree to the extension, the
expiration date with respect to the commitments of the agreeing banks will be
extended for one year. The Company may utilize the Credit Facility for working
capital and general corporate purposes.
The Credit Facility provides for interest on outstanding borrowings to be
calculated under either a base rate or a fixed rate. The base rate is defined
as the higher of the Federal funds rate plus one-half of 1%, or the prime rate.
The fixed rate for Eurodollar loans is defined as the arithmetic mean of the
rates quoted by the reference banks referred to in the Credit Facility for the
offering to leading banks in the London interbank market of United States
dollar deposits of comparable terms and amounts. The fixed rate for certificate
of deposit loans is defined to mean the arithmetic mean of the rates determined
by the reference banks to be the average of the bid rates quoted by at least
two certificate of deposit dealers for the purchase of certificates of deposit
with a comparable term and amount. For the nine months ended September 30,
1994, the average interest rate on borrowings under the Credit Facility was
7.25% per annum.
The Credit Facility contains numerous restrictive financial and other
covenants including, without limitation: (i) prohibitions on incurring further
indebtedness (other than indebtedness represented by the Notes) and
restrictions on creating further liens and contingent obligations; (ii)
restrictions on mergers, acquisitions, purchases and sales of assets,
investments and transactions with affiliates; (iii) limitations on
distributions and dividends by the Company; (iv) limitations on the Company's
ability to acquire assets or engage in activities outside of its ordinary
course of business; and (v) financial maintenance tests, including, among
others, those requiring the Company to maintain a minimum current ratio,
minimum consolidated tangible net worth and a maximum ratio of indebtedness to
tangible net worth, all as defined. The Credit Facility also limits the
Company's capital expenditures. The Credit Facility includes a fixed charge
coverage ratio and other customary events of default.
EXISTING SENIOR NOTES
The Company issued $60.0 million of unsecured Existing Senior Notes pursuant
to a Note Purchase Agreement dated January 3, 1991 (the "Note Purchase
Agreement"). The Note Purchase Agreement limits the payment of cash dividends
on the Company's Common Stock and requires the maintenance of various covenants
including minimum working capital, a minimum fixed charge coverage ratio, and
minimum consolidated tangible net worth, all as defined. The Note Purchase
Agreement provides for the principal to be repaid in seven equal annual
installments commencing January 3, 1995. It is anticipated that the Existing
Senior Notes will be retired from the proceeds of the Notes offered hereby.
PURCHASE MONEY DEBT
Effective December 1, 1993, the Company and two subsidiaries entered into a
secured purchase money borrowing (the "Purchase Money Debt") for the financing
of certain gasoline station and terminal
49
<PAGE>
equipment and office furnishings, at an effective rate of 6.65%. Ninety percent
of the principal is repayable in 60 monthly installments, with a balloon
payment of 10% of the principal being payable in January 1999. The Purchase
Money Debt is secured by gasoline station equipment and office furnishings
having a cost basis of $6.5 million. The Purchase Money Debt allows for a
maximum drawdown of $6.5 million, all of which has been drawn down by the
Company. The Purchase Money Debt includes various customary events of default.
STANDBY LETTERS OF CREDIT
The Company has an additional uncommitted line of credit with a major
financial institution, for up to $20.0 million in standby letters of credit,
primarily for the purchase of crude oil. Under this agreement, the Company had
outstanding as of September 30, 1994, an irrevocable standby letter of credit
in the principal amount of $7.2 million.
DESCRIPTION OF THE NOTES
The Notes offered hereby will be issued under an Indenture to be dated as of
, 1995 (the "Indenture") between the Company and The First National Bank
of Boston, as trustee (the "Trustee"), a copy of the form of which is filed as
an exhibit to the Registration Statement and will be made available to
prospective purchasers of the Notes upon request. The Indenture is subject to
and governed by the Trust Indenture Act. The following summary of the material
provisions of the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, including the term "Company",
see "-- Certain Definitions."
GENERAL
The Notes will mature on , 2005, will be limited to $125,000,000 in
aggregate principal amount, and will be unsecured senior obligations of the
Company. Each Note will bear interest at the rate set forth on the cover page
hereof from , 1995 or from the most recent interest payment date to which
interest has been paid, payable semi-annually on and in each year
(each, an "Interest Payment Date"), commencing , 1995, to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the or preceding such Interest Payment Date. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Principal of, premium, if any, and interest on the Notes will be payable, and
the Notes will be exchangeable and transferable, at the office or agency of the
Company maintained for such purpose (which initially will be the office or
agent of the Trustee); provided, however, that payment of interest may be made
at the option of the Company by check mailed to the Person entitled thereto as
shown on the security register. The Notes will be issued only in fully
registered form without coupons, in denominations of $1,000 and any integral
multiple thereof. (Section 302). No service charge will be made for any
registration of transfer, exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith. (Section 305).
OPTIONAL REDEMPTION
The Notes will be subject to redemption at any time on or after , 2000,
at the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days' prior notice in amounts of $1,000 or an integral multiple thereof
at the following redemption prices (expressed as percentages of
50
<PAGE>
the principal amount), if redeemed during the 12-month period beginning
of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2000........................................................... %
2001........................................................... %
2002........................................................... %
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
right of holders of record on regular record dates to receive interest due on
an Interest Payment Date).
Notwithstanding the foregoing, at any time prior to , 1998, the Company
may redeem up to $ million principal amount of the Notes at a redemption
price of % of the principal amount of Notes redeemed, together with accrued
and unpaid interest, if any, to the redemption date, with the Net Cash
Proceeds of one or more Public Equity Offerings; provided that after such
redemption, Notes having an aggregate principal amount of at least $ million
remain outstanding.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee deems fair and reasonable. (Section 1104).
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
RANKING OF THE NOTES
The Indebtedness evidenced by the Notes will be senior unsecured obligations
of the Company, will rank pari passu in right of payment with all existing and
future senior Indebtedness of the Company and will be senior in right of
payment to all existing and future Subordinated Indebtedness of the Company.
The Notes, however, will be effectively subordinated to secured senior
Indebtedness of the Company with respect to the assets securing such
Indebtedness and will also be effectively subordinated to any Indebtedness of
the Company's Subsidiaries. As of September 30, 1994, after giving effect to
the sale of the Notes and the application of the estimated net proceeds
thereof, the Company would have had $132.0 million of senior Indebtedness
outstanding (including the Notes and $7.0 million of Purchase Money Debt and
other Indebtedness of the Company and its Subsidiaries). As of September 30,
1994, the Company had, subject to certain restrictions, the ability to draw up
to $50.0 million of additional senior unsecured Indebtedness under the Credit
Facility. See "Investment Considerations -- Ranking of the Notes."
Holders of secured Indebtedness of the Company have claims with respect to
the assets constituting collateral for such Indebtedness that are prior to the
claims of holders of the Notes. In the event of a default on the Notes, or a
bankruptcy, liquidation or reorganization of the Company, such assets will be
available to satisfy obligations with respect to the Indebtedness secured
thereby before any payment therefrom could be made on the Notes. To the extent
that the value of such collateral is not sufficient to satisfy the
Indebtedness secured thereby, amounts remaining outstanding on such
Indebtedness would be entitled to share, together with the Indebtedness under
the Notes, with respect to any other assets of the Company.
CERTAIN COVENANTS
The Indenture will contain, among other things, the following covenants:
Limitation on Indebtedness
(a) The Company will not create, issue, assume, guarantee, or otherwise in
any manner become directly or indirectly liable for or with respect to or
otherwise incur (collectively, "incur") any
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Indebtedness and the Company will not permit any of its Subsidiaries to incur
any Indebtedness, except that (1) the Company may incur Indebtedness and (2)
any Subsidiary of the Company may incur Acquired Indebtedness, Purchase Money
Indebtedness and Indebtedness in respect of Sale and Leaseback Transactions,
if, in each case, (x) the Consolidated Fixed Charge Coverage Ratio for the
Company for the four full fiscal quarters immediately preceding the incurrence
of such Indebtedness taken as one period (and after giving pro forma effect to
(i) the incurrence of such Indebtedness and (if applicable) the application of
the net proceeds therefrom, including to refinance other Indebtedness, as if
such Indebtedness was incurred, and the application of such proceeds occurred,
at the beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company and its Subsidiaries since
the first day of such four-quarter period as if such Indebtedness was incurred,
repaid or retired at the beginning of such four-quarter period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility will be computed based upon the average daily balance of such
Indebtedness during such four-quarter period); (iii) in the case of Acquired
Indebtedness and Purchase Money Indebtedness, the related acquisition as if
such acquisition occurred at the beginning of such four-quarter period; and
(iv) any acquisition or disposition by the Company and its Subsidiaries of any
company or any business or any assets out of the ordinary course of business,
whether by merger, stock purchase or sale or asset purchase or sale or any
related repayment of Indebtedness, since the first day of such four-quarter
period, as if such acquisition or disposition occurred at the beginning of such
four-quarter period) is at least equal to 2.5 to 1.0 and (y) if such
Indebtedness is Subordinated Indebtedness, such Indebtedness has an Average
Life to Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Notes and a Stated Maturity for its final scheduled principal
payment later than the Stated Maturity for the final scheduled principal
payment of the Notes.
(b) The foregoing limitations will not apply to the incurrence of any of the
following (collectively "Permitted Indebtedness"):
(i) Total Indebtedness under the Credit Facility in an aggregate
principal amount at any one time outstanding not to exceed $125.0 million;
provided that if such Indebtedness is for borrowed money, then such
Indebtedness together with all other Indebtedness for borrowed money under
the Credit Facility shall not exceed at any time $50.0 million in aggregate
principal amount;
(ii) Indebtedness of the Company pursuant to the Notes and Indebtedness
of any Guarantor pursuant to a Guarantee of the Notes;
(iii) Indebtedness of the Company or any of its Subsidiaries outstanding
on the date of the Indenture and listed on a schedule thereto;
(iv) Indebtedness (1) of the Company owing to a Subsidiary of the Company
or (2) of a Wholly Owned Subsidiary owing to the Company or another Wholly
Owned Subsidiary provided that any such Indebtedness is made pursuant to an
intercompany note in the form attached as an exhibit to the Indenture and,
in the case of Indebtedness of the Company owing to a Subsidiary of the
Company, is subordinated in right of payment from and after such time as
the Notes become due and payable (whether at Stated Maturity, acceleration
or otherwise) to the payment and performance of the Company's obligations
under the Notes; provided, further, that (x) any disposition, pledge or
transfer of any such Indebtedness to a Person (other than the Company or a
Wholly Owned Subsidiary) will be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (iv) and (y) any
transaction pursuant to which any Wholly Owned Subsidiary, which has
Indebtedness owing to the Company or any other Wholly Owned Subsidiary,
ceases to be a Wholly Owned Subsidiary will be deemed to be the incurrence
of Indebtedness by the Company or such other Wholly Owned Subsidiary that
is not permitted by this clause (iv);
(v) Indebtedness of the Company pursuant to Hedging Obligations, so long
as the notional amount of those Hedging Obligations which relate to other
Indebtedness described in clause (i),
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<PAGE>
(ii) or (iii) of the definition of "Indebtedness" at the time incurred does
not exceed the aggregate principal amount of such Indebtedness then
outstanding or in good faith anticipated to be outstanding within 90 days
of such incurrence;
(vi) guarantees of any Subsidiary of the Company made in accordance with
the provisions described under "-- Limitation on Issuances of Guarantees of
and Pledges for Indebtedness";
(vii) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings, provided, that (A)
the aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing plus the lesser of (I) the stated amount of
any premium, interest or other payment required to be paid in connection
with such refinancing pursuant to the terms of the Indebtedness being
refinanced or (II) the amount of premium, interest or other payment
actually paid at such time to refinance such Indebtedness, plus, in either
case, the amount of reasonable fees and expenses of the Company incurred in
connection with such refinancing, (B) such refinancing does not reduce the
Average Life to Stated Maturity or the Stated Maturity of such
Indebtedness, (C) Subordinated Indebtedness is refinanced only with
Indebtedness which is equally subordinated and (D) Indebtedness of the
Company is not refinanced with Indebtedness of any Subsidiary of the
Company; and
(viii) Indebtedness of the Company (including without limitation under
the Credit Facility) in addition to that described in clauses (i) through
(vii) above, and any renewals, extensions, substitutions, refundings,
refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of such Indebtedness does not exceed at any time the
greater of (A) $10.0 million and (B) the dollar amount represented by the
product of 0.5 million and the settlement price on the New York Mercantile
Exchange of the spot month for a barrel of West Texas Intermediate crude
oil (or, if such price cannot be obtained, the applicable price shown in
the then most recently published Platt's Oilgram Price Report or, if such
publication is not published at any time, or if it does not include such
prices, then in any comparable industry publication including such prices),
which amount will be calculated by the Company as of the last day of each
calendar quarter using the price per barrel as determined under (B) above
as of such date and shall be in effect for the next succeeding calendar
quarter. (Section 1008).
Limitation on Restricted Payments
(a) The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Company's Capital Stock (other than dividends or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire such Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any shares of the Capital Stock of the Company or any
Affiliate thereof (other than any Wholly Owned Subsidiary of the Company)
or any options, warrants or other rights to acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund or maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock of
any Subsidiary of the Company to any Person (other than the Company or any
of its Wholly Owned Subsidiaries) or purchase, redeem or otherwise acquire
or retire for value any Capital Stock of any Subsidiary of the Company held
by any Person (other than the Company or any of its Wholly Owned
Subsidiaries);
53
<PAGE>
(v) incur, create, assume or suffer to exist any guarantee of
Indebtedness of any Affiliate (other than a Wholly Owned Subsidiary); or
(vi) make any Investment (other than any Permitted Investment) in any
Person
(any of the foregoing payments described in clauses (i) through (vi) being,
collectively, "Restricted Payments"), unless after giving effect to the
proposed Restricted Payment (the amount of any such Restricted Payment, if
other than cash, as determined in good faith by the Board of Directors of the
Company, whose determination will be conclusive and evidenced by a board
resolution), (1) no Default or Event of Default has occurred and is continuing;
(2) immediately before and immediately after giving effect to such transaction
on a pro forma basis, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in accordance with the provisions described
under "-- Limitation on Indebtedness"; and (3) the aggregate amount of all such
Restricted Payments declared or made after the date of the Indenture does not
exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on the
date of the Indenture and ending on the last day of the Company's last
fiscal quarter ending prior to the date of the proposed Restricted Payment
(or if such aggregate cumulative Consolidated Net Income is a loss, minus
100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company as capital contributions to the Company;
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Subsidiaries) of its shares of Qualified Capital Stock or any options,
warrants or rights to purchase such shares of Qualified Capital Stock
(except, in each case, to the extent such proceeds are used to redeem any
of the Notes with the proceeds of an issuance of common stock of the
Company in a Public Equity Offering as provided under "-- Optional
Redemption");
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options, warrants or other rights to purchase shares of
Qualified Capital Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of
its Subsidiaries) of debt securities or shares of Redeemable Capital Stock
of the Company that have been converted into or exchanged for Qualified
Capital Stock of the Company to the extent such debt securities or shares
of Redeemable Capital Stock were originally issued or sold for cash plus
the aggregate Net Cash Proceeds received by the Company at the time of such
conversion or exchange; and
(F) $10.0 million.
(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(iv) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions will not prohibit the following actions:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (a) of this "Limitation on
Restricted Payments" covenant (such payment will be deemed to have been
paid on such date of declaration for purposes of the calculation required
by paragraph (a) of this "Limitation on Restricted Payments" covenant);
(ii) the repurchase, redemption or other acquisition or retirement of any
shares of any class of Capital Stock of the Company in exchange for, or out
of the Net Cash Proceeds of, a substantially concurrent issue and sale for
cash (other than to a Subsidiary of the Company) of other shares of
Qualified Capital Stock of the Company; provided that the Net Cash Proceeds
from the issuance of such shares of Qualified Capital Stock are excluded
from clause (3)(C) of paragraph (a) of this "Limitation on Restricted
Payments" covenant;
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<PAGE>
(iii) any repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the Net Cash Proceeds of, a
substantially concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Capital Stock of the Company,
provided that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(C) of paragraph (a) of
this "Limitation on Restricted Payments" covenant; and
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (collectively, a
"refinancing") through the issuance of new Subordinated Indebtedness of the
Company, provided, that any such new Subordinated Indebtedness (A) is in an
aggregate principal amount that does not exceed the principal amount so
refinanced (or, if such Subordinated Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, then such lesser amount as of the date
of determination) plus the lesser of (I) the stated amount of any premium,
interest or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Subordinated Indebtedness being
refinanced or (II) the amount of premium or other payment actually paid at
such time to refinance such Subordinated Indebtedness, plus, in either
case, the amount of reasonable fees and expenses of the Company incurred in
connection with such refinancing; (B) has an Average Life to Stated
Maturity greater than the remaining Average Life to Stated Maturity of the
Notes; (C) has a Stated Maturity for its final scheduled principal payment
later than the Stated Maturity for the final scheduled principal payment of
the Notes; and (D) is expressly subordinated in right of payment to the
Notes at least to the same extent as the Subordinated Indebtedness to be
refinanced. (Section 1009).
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of the
Company (other than the Company or a Wholly Owned Subsidiary) unless (i) such
transaction or series of related transactions is in writing on terms that are
no less favorable to the Company or such Subsidiary, as the case may be, than
would be available in a comparable transaction in arm's-length dealings with an
unrelated third party, (ii) with respect to any transaction or series of
related transactions in which the aggregate rental value, remuneration or other
consideration (including the value of a loan), together with the aggregate
rental value, remuneration or other consideration (including the value of a
loan) of all such other transactions consummated in the calendar year during
which such transaction or series of related transactions is proposed to be
consummated, exceeds $1.0 million, the Company delivers an officers'
certificate to the Trustee certifying that such transaction or series of
related transactions complies with clause (i) above, (iii) with respect to any
transaction or series of related transactions in which the aggregate rental
value, remuneration or other consideration (including the value of a loan),
together with the aggregate rental value, remuneration or other consideration
(including the value of a loan) of all such other transactions consummated in
the calendar year during which such transaction or series of related
transactions is proposed to be consummated, exceeds $2.5 million, the Company
delivers to the Trustee, in addition to the officers' certificate referred to
in clause (ii) above, a board resolution evidencing that such transaction or
series of related transactions has been approved in good faith by a majority of
the Independent Directors of the Company that are disinterested, and (iv) with
respect to any transaction or series of related transactions in which the
aggregate rental value, remuneration or other consideration (including the
value of a loan), together with the aggregate rental value, remuneration or
other consideration (including the value of a loan) of all such other
transactions consummated in the calendar year during which such transaction or
series of related transactions is proposed to be consummated, exceeds $5.0
million, the Company delivers to the Trustee, in addition
55
<PAGE>
to the officers' certificate and the board resolution referred to in clauses
(ii) and (iii) above, respectively, an opinion of an investment banking firm of
national standing, unaffiliated with the Company or such Subsidiary and the
Affiliate which is party to such transaction stating that the transaction or
series of related transactions is fair to the Company or such Subsidiary;
provided, however, that this provision shall not apply to transactions pursuant
to agreements in existence on the date of the Indenture. (Section 1010).
Limitation on Sale of Assets
(a) The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, consummate an Asset Sale unless (i) at least 85% of the
proceeds from such Asset Sale are received in cash or Cash Equivalents and (ii)
the Company or such Subsidiary receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares, properties or
assets sold.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any unsubordinated Indebtedness
then outstanding as required by the terms thereof, and the Company determines
not to apply such Net Cash Proceeds to the permanent prepayment of such
unsubordinated Indebtedness or if no such unsubordinated Indebtedness is then
outstanding, then the Company may within 12 months of the Asset Sale, invest
the Net Cash Proceeds thereof in other properties and assets which (as
determined in good faith by the Company's Board of Directors) replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets that will be used in the businesses of the Company or its
Subsidiaries existing on the date of the Indenture or in businesses reasonably
related thereto. The amount of such Net Cash Proceeds neither used to
permanently repay or prepay unsubordinated Indebtedness nor used or invested as
set forth in this paragraph constitute "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $5.0 million or more,
the Company will make an irrevocable offer to purchase (an "Offer") from all
holders of the Notes in accordance with the procedures set forth in the
Indenture in the maximum principal amount (expressed as an integral multiple of
$1,000) of Notes that may be purchased with the Excess Proceeds. The purchase
price to be paid pursuant to any such Offer will be payable in cash in an
amount equal to 100% of the principal amount of the Notes, plus accrued and
unpaid interest, if any, through the repurchase date. To the extent that the
aggregate purchase price for Notes tendered pursuant to an Offer is less than
the Excess Proceeds (the amount of such shortfall, if any, constituting a
"Deficiency"), the Company may use such Deficiency for general corporate
purposes. Upon completion of the purchase of all the Notes tendered pursuant to
an Offer, the amount of Excess Proceeds, if any, will be reset to zero.
(d) Whenever the aggregate amount of Excess Proceeds received by the Company
exceeds $5.0 million, such Excess Proceeds will, prior to any purchase of Notes
described in paragraph (c) above, be set aside by the Company in a separate
account pending (i) deposit with a depositary or a paying agent of the amount
required to purchase the Notes tendered in an Offer and (ii) delivery by the
Company of the purchase price to the holders of the Notes tendered in an Offer.
Such Excess Proceeds may be invested in Cash Equivalents at the Company's
written direction, provided that the maturity date of any such investment made
after the amount of Excess Proceeds exceeds $5.0 million, will not be later
than the repurchase date. The Company will be entitled to any interest or
dividends accrued, earned or paid on such Cash Equivalents, provided that the
Company will not withdraw such interest from the separate account if an Event
of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause (c)
above, the Notes will be purchased by the Company, at the option of the holder
thereof, in whole or in part in integral multiples of $1,000, on a date that is
not earlier than 45 days and not later than 60 days from the date the notice is
given to holders, or such later date as may be necessary for the Company to
comply with the requirements under the Exchange Act, subject to proration in
the event the Excess Proceeds are less than the aggregate purchase price of all
Notes tendered.
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<PAGE>
(f) The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with an Offer.
(g) The Company will not, and will not permit any of its Subsidiaries to,
create or permit to exist or become effective any consensual restriction (other
than restrictions not more restrictive than those in effect under Indebtedness
outstanding on the date of the Indenture and listed on a schedule thereto,
including Indebtedness under the Credit Facility) that would materially impair
the ability of the Company to comply with the provisions of this "Limitation on
Sale of Assets" covenant. (Section 1011).
Limitation on Liens
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, affirm or suffer to exist any Lien of
any kind upon any of its property or assets (including any intercompany notes),
owned at the date of the Indenture or acquired after the date of the Indenture,
or any income or profits therefrom, unless the Notes (or in the case of Liens
on property or assets of a Guarantor, the related Guarantee) are directly
secured equally and ratably with (or prior to in the case of Liens with respect
to Subordinated Indebtedness or Indebtedness of a Guarantor subordinated in
right of payment to its Guarantee) the obligation or liability secured by such
Lien, excluding, however, from the operation of the foregoing any of the
following (collectively, "Permitted Liens"):
(a) any Lien existing as of the date of the Indenture;
(b) any Lien arising by reason of (i) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired; (ii) taxes
not yet delinquent or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and
against which appropriate reserves have been established in accordance with
GAAP; (iii) security for payment of workers' compensation or other
insurance; (iv) good faith deposits in connection with tenders, leases or
contracts (other than contracts for the payment of money); (v) zoning
restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord
or owner of the leased property, with or without consent of the lessee),
none of which materially impairs the use of any parcel of property material
to the operation of the businesses of the Company or any of its
Subsidiaries or the value of such property for the purpose of such
businesses; (vi) deposits to secure public or statutory obligations, or in
lieu of surety or appeal bonds; (vii) certain surveys, exceptions, title
defects, encumbrances, easements, reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph or telephone lines and
other similar purposes or zoning or other restrictions as to the use of
real property not materially adversely interfering with the ordinary
conduct of the businesses of the Company or any of its Subsidiaries; or
(viii) operation of law in favor of mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for
sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof and against which appropriate reserves have been established;
(c) any Lien (including extensions and renewals thereof) upon real or
tangible personal property acquired or constructed in the ordinary course
of business after the date of the Indenture; provided that (i) such Lien is
created (A) solely for the purpose of securing Purchase Money Indebtedness
incurred in respect of the item of property or assets subject thereto and
such Lien is created prior to, at the time of or within 90 days after the
later of the acquisition, the completion of construction or the
commencement of full operation of such property or (B) to refinance any
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Purchase Money Indebtedness previously incurred and so secured, (ii) the
principal amount of Purchase Money Indebtedness secured by such Lien does
not exceed 100% of the lesser of the aggregate cost or the Fair Market
Value of such item of property or assets, (iii) any such Lien does not
extend to or cover any property or assets other than such item of property
or assets and any improvements on such item and (iv) any such Lien does not
extend to or cover any property or assets of the Company or any of its
Subsidiaries existing as of the date of the Indenture;
(d) any Lien now or hereafter existing on property or assets of the
Company or any of its Subsidiaries securing the Notes;
(e) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any of its Subsidiaries, in each case which
Indebtedness is permitted under the provisions described under "--
Limitation on Indebtedness"; provided that any such Lien only extends to
the assets that were subject to such Lien securing such Acquired
Indebtedness prior to the related transaction by the Company or its
Subsidiaries;
(f) any Lien securing Hedging Obligations that the Company enters into in
the ordinary course of business for the purpose of protecting against
fluctuations in the price of crude oil, other feedstocks or refined
products;
(g) any Lien on pipeline or pipeline facilities which arise out of
operation of law;
(h) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (g) so
long as no additional assets become subject to such Liens as a result of
such extension, renewal, refinancing or replacement; and
(i) any Lien on property of the Company or any of its Subsidiaries that
is subject to a Sale and Leaseback Transaction, provided that after giving
effect to such transaction the aggregate principal amount of Attributable
Indebtedness in respect of all Sale and Leaseback Transactions entered into
by the Company and its Subsidiaries then outstanding, other than any Sale
and Leaseback Transactions existing as of the date of the Indenture, does
not at the time such Lien is incurred exceed 10% of the Consolidated Net
Worth of the Company. (Section 1012).
Limitation on Issuances of Guarantees of and Pledges for Indebtedness
(a) The Company will not permit any of its Subsidiaries, directly or
indirectly, to secure the payment of any Indebtedness of the Company or pledge
any intercompany notes representing obligations of any Subsidiary of the
Company to secure the payment of any Indebtedness unless in each case (i) such
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a guarantee of payment of the Notes by such Subsidiary,
which guarantee is on the same terms as the guarantee of such Indebtedness (if
a guarantee of Indebtedness is granted by any such Subsidiary) except that the
guarantee of the Notes need not be secured and (ii) such Subsidiary waives and
will not in any manner whatsoever claim or take the benefit or advantage of any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Subsidiary of the Company as a result of any payment
by such Subsidiary under its guarantee.
(b) The Company will not permit any of its Subsidiaries, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless (i) such Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a guarantee of the Notes on the same terms as the guarantee of
such Indebtedness except that (A) such guarantee need not be secured unless
required pursuant to "-- Limitation on Liens," and (B) if such Indebtedness is
by its terms expressly subordinated to the Notes, any such assumption,
guarantee or other liability of such Subsidiary with respect to such
Indebtedness is subordinated to such Subsidiary's assumption, guarantee or
other liability with respect to the Notes to the same extent as such
Indebtedness is subordinated to the Notes and (ii) such Subsidiary waives and
will not in any
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manner whatsoever claim or take the benefit or advantage of any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary of the Company as a result of any payment by such
Subsidiary under its guarantee.
(c) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each such
Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing, any
Guarantee by a Subsidiary of the Company of the Notes will provide by its terms
that it will be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's Capital Stock in, or all or substantially all
the assets of, such Subsidiary, which is in compliance with the terms of the
Indenture or (ii) the release by all of the holders of the Indebtedness of the
Company described in clauses (a) and (b) above of their security interest or
their guarantee by such Subsidiary (including any deemed release upon payment
in full of all obligations under such Indebtedness, except a release by or as a
result of enforcement upon such security interest or payment under such
guarantee), at a time when (A) no other Indebtedness of the Company has been
secured or guaranteed by such Subsidiary, as the case may be, or (B) the
holders of all such other Indebtedness which is secured or guaranteed by such
Subsidiary also release their security interest in, or guarantee by, such
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness, except a release by or as a result of
enforcement upon such security interest or payment under such guarantee).
(Section 1013).
Purchase of Notes Upon a Change of Control
If a Change of Control occurs at any time, then each holder of Notes will
have the right to require that the Company purchase such holder's Notes in
whole or in part in integral multiples of $1,000, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Notes, together with accrued and unpaid interest, if
any, to the date of purchase (the "Change of Control Purchase Date"), pursuant
to the irrevocable offer described below (the "Change of Control Offer") and
the other procedures set forth in the Indenture.
Within 15 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each
holder of Notes by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things, (i) the purchase price
and the purchase date, which will be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed, or such later date as
is necessary to comply with requirements under the Exchange Act, (ii) that any
Note not tendered will continue to accrue interest, (iii) that, unless the
Company defaults in the payment of the purchase price, any Notes accepted for
payment pursuant to the Change of Control Offer will cease to accrue interest
after the Change of Control Purchase Date and (iv) certain other procedures
that a holder of Notes must follow to accept a Change of Control Offer or to
withdraw such acceptance. (Section 1014).
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. The occurrence of the
event described in clause (ii) of the definition of "Change of Control" below
for a period of 25 months may cause an event of default under the Credit
Facility, and, upon such event of default, all amounts outstanding under the
Credit Facility may become due and payable. There can be no assurance that in
the event of such an event of default the Company will be able to obtain the
necessary waivers from the lenders under the Credit Facility to permit such
Change of Control or to consummate a Change of Control Offer. The failure of
the Company to make or consummate the Change of Control Offer or pay the Change
of Control Purchase Price when due would result in an Event of Default under
the Indenture and would give the Trustee and the holders of the Notes the
rights described under "-- Events of Default."
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"Change of Control" is defined in the Indenture to mean the occurrence of any
of the following events; (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is
or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person will be deemed to have beneficial
ownership of all shares that such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly
or indirectly, of more than 35% of the voting power of the total outstanding
Voting Stock of the Company voting as one class; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election to such Board or whose nomination for election by the shareholders of
the Company was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) for any reason
cease to constitute a majority of such Board of Directors then in office; (iii)
the Company consolidates with or merges with or into any Person or conveys,
transfers or leases all or substantially all of its assets to any Person, or
any corporation consolidates with or merges into or with the Company, in any
such event pursuant to a transaction in which the outstanding Voting Stock of
the Company is changed into or exchanged for cash, securities or other
property, other than any such transaction where (A) the outstanding Voting
Stock of the Company is changed into or exchanged for (x) Voting Stock of the
surviving corporation which is not Redeemable Capital Stock or (y) cash,
securities and other property (other than Capital Stock of the surviving
corporation which is not Redeemable Capital Stock) in an amount which could be
paid by the Company as a Restricted Payment in accordance with the provisions
described under "-- Limitation on Restricted Payments" (and such amount will be
treated as a Restricted Payment subject to the provisions described under "--
Limitation on Restricted Payments") and (B) no "person" or "group," other than
Permitted Holders, beneficially owns immediately after such transaction,
directly or indirectly, more than 35% of the voting power of the total
outstanding Voting Stock of the surviving corporation voting as one class; or
(iv) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under "-- Consolidation, Merger, Sale of Assets."
"Permitted Holders" means any of (i) the individuals who are members of the
ATAPCO Group on the date of the Indenture or any of their respective spouses or
lineal descendants or any trust for the benefit of any of the foregoing; (ii)
American Trading and Production Corporation, for so long as not less than 66
2/3% of the shares of Voting Stock of such corporation are beneficially owned
by any or all of the individuals or trusts referred to in the preceding clause
(i); (iii) any controlled Affiliate of any of the foregoing; or (iv) in the
event of incompetence or death of any of the individuals described in clause
(i), such individual's estate, executor, administrator, committee or other
personal representative or beneficiaries.
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As
consequence, in the event the holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there would be no assurance as to how a court interpreting New York law would
interpret the phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any of its Subsidiaries to, create
or permit to exist or become effective any restriction (other than restrictions
not more restrictive than those in effect under
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Indebtedness outstanding on the date of the Indenture and listed on a schedule
thereto, including Indebtedness under the Credit Facility) that would
materially impair the ability of the Company to make a Change of Control Offer
to purchase the Notes or, if such Change of Control Offer is made, to pay for
the Notes tendered for purchase. (Section 1014).
Limitation on Sale and Leaseback Transactions
The Company will not, and will not permit any of its Subsidiaries to, enter
into any Sale and Leaseback Transaction unless (i) immediately before and
immediately after giving effect to such transaction and the Attributable
Indebtedness in respect thereof, on a pro forma basis, the Company or such
Subsidiary could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) as described under "-- Limitation on Indebtedness," (ii)
immediately before and immediately after giving effect to such transaction, on
a pro forma basis, the Company or such Subsidiary could incur Indebtedness
secured by a Lien on property in a principal amount equal to or exceeding the
Attributable Indebtedness in respect of such Sale and Leaseback Transaction
pursuant to clause (i) of the covenant described under "-- Limitation on Liens"
had such Sale and Leaseback Transaction been structured as a secured loan
rather than a Sale and Leaseback Transaction without equally and ratably
securing the Notes, 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 provision described under "-- Limitation on
Sale of Assets." (Section 1015).
Limitation on Subsidiary Capital Stock
The Company will not permit (a) any Subsidiary of the Company to issue any
Capital Stock, except for (i) Capital Stock issued to and held by the Company
or a Wholly Owned Subsidiary, and (ii) Capital Stock issued by a Person prior
to the time (A) such Person becomes a Subsidiary of the Company, (B) such
Person merges with or into a Subsidiary of the Company or (C) a Subsidiary of
the Company merges with or into such Person, provided that such Capital Stock
was not issued or incurred by such Person in anticipation of the type of
transaction contemplated by subclauses (A), (B) or (C), or (b) any Person
(other than the Company or a Wholly Owned Subsidiary) to own or hold any
interest in any Preferred Stock of any Subsidiary of the Company (in each of
clauses (a) and (b) above, other than directors' qualifying shares or shares
required to be owned by foreign nationals under applicable law). (Section
1016).
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (i) pay dividends or make any other distribution
on its Capital Stock to the Company or any other Subsidiary of the Company,
(ii) pay any Indebtedness owed to the Company or any other Subsidiary of the
Company, (iii) make any Investment in the Company or any other Subsidiary of
the Company or (iv) transfer any of its properties or assets to the Company or
any other Subsidiary of the Company, except (A) any encumbrance or restriction
pursuant to an agreement in effect or entered into on the date of the
Indenture; (B) any encumbrance or restriction, with respect to a Subsidiary
that is not a Subsidiary of the Company on the date of the Indenture, in
existence at the time such Person becomes a Subsidiary of the Company and not
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary of the Company; and (C) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (A) and
(B), or in this clause (C), provided that the terms and conditions of any such
encumbrances or restrictions are not materially less favorable to the holders
of the Notes than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced. (Section 1017).
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Provision of Financial Statements
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company will, to the extent permitted under the Exchange
Act, file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) if the Company were so
subject, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all holders of Notes, as their names and addresses
appear in the security register, without cost to such holders and (ii) file
with the Trustee copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if the
Company were subject to such Sections and (y) if filing such documents by the
Company with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective holder of Notes
at the Company's cost. (Section 1018).
Additional Covenants
The Indenture will also contain covenants with respect to the following
matters: (i) payment of principal, premium and interest; (ii) maintenance of
an office or agency in the City of New York; (iii) arrangements regarding the
handling of money held in trust; (iv) maintenance of corporate existence; (v)
payment of taxes and other claims; (vi) maintenance of properties; and (vii)
maintenance of insurance.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company will not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets as an entirety to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or transactions if such transaction or transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
disposal of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a Consolidated basis to any other Person or
group of affiliated Persons, unless at the time and after giving effect
thereto: (i) either (A) the Company is the continuing corporation or (B) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or disposition all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis (the "Surviving Entity") is a corporation duly organized and validly
existing under the laws of the United States of America, any state thereof or
the District of Columbia and such Person expressly assumes, by an indenture
supplemental to the Indenture, executed and delivered to the Trustee in a form
reasonably satisfactory to the Trustee, all the obligations of the Company
under the Notes and the Indenture, and the Indenture remains in full force and
effect; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default has occurred and is continuing;
(iii) except in the case of the consolidation or merger of any Subsidiary of
the Company with or into the Company, immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net Worth of the Company
(or the Surviving Entity if the Company is not the continuing obligor under
the Indenture) is equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction; (iv) except in the case of the
consolidation or merger of any Subsidiary of the Company with or into the
Company, immediately before and immediately after giving effect to such
transaction on a pro forma basis, the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture) could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the
provisions described under "-- Certain Covenants -- Limitation on
Indebtedness"; (v) each Guarantor, if any, unless it is the other party to the
transactions described
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above, has by supplemental indenture confirmed that its Guarantee applies to
such Person's obligations under the Indenture and the Notes; (vi) if any of the
property or assets of the Company or any of its Subsidiaries would thereupon
become subject to any Lien, the provisions described under "-- Certain
Covenants -- Limitation on Liens" are complied with; and (vii) the Company or
the Surviving Entity delivers, or causes to be delivered to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each to the effect that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
transaction and such supplemental indenture complies with the Indenture and
that all conditions precedent therein provided for relating to such transaction
have been complied with. (Section 801).
Each Guarantor, if any, will not, and the Company will not permit a Guarantor
to, in a single transaction or through a series of related transactions merge
or consolidate with or into any other Person (other than the Company or any
other Guarantor), or sell, assign, convey, transfer, lease or otherwise dispose
of all or substantially all of its properties and assets on a Consolidated
basis to any Person (other than the Company or any other Guarantor) unless at
the time and after giving effect thereto: (i) either (1) such Guarantor is the
continuing corporation or (2) the Person (if other than such Guarantor) formed
by such consolidation or into which such Guarantor is merged or the Person
which acquires by sale, assignment, conveyance, transfer, lease or disposition
the properties and assets of such Guarantor is a corporation duly organized and
validly existing under the laws of the United States of America, any state
thereof, the District of Columbia or the jurisdiction in which such Guarantor
was organized and such Person expressly assumes by an indenture supplemental to
the Indenture, executed and delivered to the Trustee, in a form reasonably
satisfactory to the Trustee, all the obligations of such Guarantor under its
Guarantee and the Indenture; (ii) immediately before and immediately after
giving effect to such transaction, no Default or Event of Default has occurred
and is continuing; and (iii) such Guarantor delivers or causes to be delivered
to the Trustee, in form and substance reasonably satisfactory to the Trustee,
an officers' certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or
disposition and such supplemental indenture comply with the Indenture and that
all conditions precedent therein provided for relating to such transaction have
been complied with. The provisions of this paragraph will not apply to any
transaction (including any Asset Sale made in accordance with the provisions
described under "-- Certain Covenants -- Limitation on Sale of Assets") with
respect to any Guarantor if the Guarantee of such Guarantor is released in
connection with such transaction in accordance with subparagraph (b) under "--
Certain Covenants -- Limitation on Issuances of Guarantees of and Pledges for
Indebtedness." (Section 801).
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company or any Guarantor is not the continuing corporation, the
successor Person formed or remaining will succeed to, and be substituted for,
and may exercise every right and power of, the Company or such Guarantor, as
the case may be, and the Company or such Guarantor, as the case may be, would
be discharged from all obligations and covenants under the Indenture and the
Notes. (Section 802).
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there is a default in the payment of any interest on any Note when it
becomes due and payable, and such default continues for a period of 30
days;
(ii) there is a default in the payment of the principal of (or premium,
if any, on) any Note at its Maturity (upon acceleration, optional or
mandatory redemption, required repurchase or otherwise);
(iii) (A) there is a default in the performance, or breach, of any
covenant, or agreement of the Company or any Guarantor under the Indenture
(other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clauses (i) or (ii) or in
clauses (B), (C)
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and (D) of this clause (iii)) and such default or breach continues for a
period of 30 days after written notice has been given, by certified mail,
(x) to the Company by the Trustee or (y) to the Company and the Trustee by
the holders of at least 25% in aggregate principal amount of the
outstanding Notes, specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Indenture; (B) there is a default in the performance or breach of the
provisions described in "-- Consolidation, Merger, Sale of Assets"; (C) the
Company fails to make or consummate an Offer in accordance with the
provisions described under "-- Certain Covenants -- Limitation on Sale of
Assets"; or (D) the Company fails to make or consummate a Change of Control
Offer in accordance with the provisions described under "-- Certain
Covenants-- Purchase of Notes Upon a Change of Control";
(iv) (A) one or more defaults by the Company or any of its Subsidiaries
in the payment of the principal on Indebtedness occurs aggregating $5.0
million or more, when the same becomes due and payable at the final
maturity thereof, and such default or defaults have continued after any
applicable grace period and have not been cured or waived or (B)
Indebtedness of the Company or any of its Subsidiaries in the aggregate
principal amount of $5.0 million or more has been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased, prior
to the Stated Maturity thereof;
(v) any holder of at least $5.0 million in aggregate principal amount of
Indebtedness of the Company or any of its Subsidiaries after a default
under such Indebtedness commences proceedings, or takes any action
(including by way of set-off, other than set-off or netting arising under a
single agreement with respect to regularly scheduled payments or deliveries
to be made in respect of any Hedging Obligation), to retain in satisfaction
of such Indebtedness or to collect or seize, dispose of or apply in
satisfaction of Indebtedness, assets of the Company or any of its
Subsidiaries having a Fair Market Value in excess of $1.0 million
individually or in the aggregate (including funds on deposit or held
pursuant to lock-box and other similar arrangements), and in any such case
there is a period of 60 consecutive days during which a stay of, or
injunction with respect to, such proceedings or action, by reason of an
order, decree, appeal or otherwise, is not in effect;
(vi) any Guarantee for any reason ceases to be, or is asserted in writing
by any Guarantor or the Company not to be, in full force and effect and
enforceable in accordance with its terms, except to the extent contemplated
by the Indenture and any such Guarantee;
(vii) one or more judgments, orders or decrees for the payment of money
in excess of $5.0 million either individually or in the aggregate (net of
amounts covered by insurance, bond, surety or similar instrument), are
entered against the Company, any Subsidiary of the Company or any of their
respective properties and are not discharged and either (A) there is a
period of 60 consecutive days during which a stay of enforcement of such
judgment or order, by reason of an appeal or otherwise, is not in effect or
(B) any creditor commences an enforcement proceeding upon such judgment,
order or decree and there is a period of 60 consecutive days during which a
stay of such enforcement proceeding, by reason of an appeal or otherwise,
is not in effect;
(viii) a court of competent jurisdiction enters (A) a decree or order for
relief in respect of the Company or any of its Subsidiaries in an
involuntary case or proceeding under any applicable Bankruptcy Law or (B) a
decree or order adjudging the Company or any of its Subsidiaries bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any of its Subsidiaries
under any applicable Federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any of its Subsidiaries or of any substantial
part of their respective properties, or ordering the winding up or
liquidation of their affairs, and any such decree or order for relief
continues to be in effect, or any such other decree or order is unstayed
and in effect, for a period of 60 consecutive days; or
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(ix) (A) the Company or any of its Subsidiaries commences a voluntary
case or proceeding under any applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent, (B) the Company or any
of its Subsidiaries consents to the entry of a decree or order for relief
in respect of the Company or such Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, (C) the Company
or any of its Subsidiaries files a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state law, (D) the
Company or any of its Subsidiaries (x) consents to the filing of such
petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or such Subsidiary or of any substantial part of their
respective properties, (y) makes an assignment for the benefit of creditors
or (z) admits in writing its inability to pay its debts generally as they
become due or (E) the Company or any of its Subsidiaries takes any
corporate action in furtherance of any such actions described in this
paragraph (ix). (Section 501).
If an Event of Default (other than as specified in clauses (viii) and (ix) of
the prior paragraph) occurs and is continuing, the Trustee or the holders of
not less than 25% in aggregate principal amount of the Notes then outstanding
may, and the Trustee at the request of such holders will, declare all unpaid
principal of, premium, if any, and accrued interest on all the Notes to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the Notes). Thereupon such principal will
become immediately due and payable, and the Trustee may, at its discretion,
proceed to protect and enforce the rights of the holders of Notes by
appropriate judicial proceeding. If an Event of Default specified in clause
(viii) or (ix) of the prior paragraph occurs and is continuing, then all the
notes will ipso facto become and be immediately due and payable, in an amount
equal to the principal amount of the Notes, together with accrued and unpaid
interest, if any, to the date the Notes become due and payable, without any
declaration or other act on the part of the Trustee or any holder of Notes. The
Trustee or, if notice of acceleration is given by the holders of Notes, such
holders will give notice to the agent under the Credit Facility of any such
acceleration.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
and (iii) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; and (b) all Events of Default,
other than the non-payment of principal of the Notes which have become due
solely by such declaration of acceleration, have been cured or waived; and (c)
the rescission will not conflict with any judgment or decree. (Section 502).
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may on behalf of the holders of all the Notes waive any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, premium, if any, or interest on any Note or in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each Note outstanding affected
by such modification or amendment. (Section 513).
The Company is also required to notify the Trustee within five business days
of the occurrence of any Default. (Section 1019). The Company is required to
deliver to the Trustee, on or before a date not more than 60 days after the end
of each fiscal quarter and not more than 120 days after the end of each fiscal
year, a written statement as to compliance with the Indenture, including
whether or not any Default has occurred. (Section 1019). The Trustee is under
no obligation to exercise any of the rights or powers vested in it by the
Indenture at the request or direction of any of the holders of the Notes unless
such holders offer to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred thereby. (Section 602).
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The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the obligations
of the Company and any Guarantor and any other obligor upon the Notes, if any,
discharged with respect to the outstanding Notes ("defeasance"). Such
defeasance means that the Company will be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, except for (i)
the rights of holders of outstanding Notes to receive payments out of amounts
deposited in trust with the Trustee (as described below) in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due, (ii) 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 any office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and (iv) the defeasance provision of the
Indenture. In addition, the Company may, at its option and at any time, elect
to have the obligations of the Company and any Guarantor released with respect
to certain covenants that are described in the Indenture ("covenant
defeasance") and any omission to comply with such obligations will not
constitute a Default or an Event of Default with respect to the Notes. In the
event covenant defeasance occurs, certain events (not including non-payment,
enforceability of any Guarantee, bankruptcy and insolvency events) described
under "-- Events of Default" will no longer constitute an Event of Default with
respect to the Notes. (Sections 1201-1203).
In order to exercise either 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 United States of America dollars, U.S.
Government Obligations (as defined in the Indenture), 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 and discharge the
principal of, premium, if any, and interest on the outstanding Notes on the
Stated Maturity of such principal or installment of principal (or on any date
after , 2000 (such date being referred to as the "Defeasance Redemption
Date") if when exercising either defeasance or covenant defeasance, the Company
has delivered to the Trustee an irrevocable notice to redeem all of the
outstanding Notes on the Defeasance Redemption Date); (ii) in the case of
defeasance, the Company delivers to the Trustee an opinion of independent
counsel in the United States of America stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel in the United States of America confirms that,
the holders of the outstanding Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance had not occurred;
(iii) in the case of covenant defeasance, the Company delivers to the Trustee
an opinion of independent counsel in the United States of America to the effect
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 has occurred
and is continuing on the date of such deposit or insofar as clause (viii) or
(ix) under the first paragraph under "-- Events of Default" are concerned, at
any time during the period ending on the 91st day after the date of deposit;
(v) such defeasance or covenant defeasance does not cause the Trustee for the
Notes to have a conflicting interest with respect to any securities of the
Company or
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any Guarantor; (vi) such defeasance or covenant defeasance does not result in a
breach or violation of, or constitute a default under, the Indenture; (vii) the
Company delivers to the Trustee an opinion of independent counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (viii) the Company
delivers to the Trustee an officers' certificate stating that the deposit was
not made by the Company with the intent of preferring the holders of the Notes
or any Guarantee over the other creditors of the Company or any Guarantor with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company, any Guarantor or others; (ix) no event or condition exists that would
prevent the Company from making payments of the principal of, premium, if any,
and interest on the Notes on the date of such deposit or at any time ending on
the 91st day after the date of such deposit; and (x) the Company delivers to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to either the defeasance or
the covenant defeasance, as the case may be, have been complied with. (Section
1204).
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (a) either (i)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been canceled or have
been delivered to the Trustee for cancellation or (ii) all Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable, (y) will become due and payable at their Stated Maturity within one
year, or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire Indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, including
principal of, premium, if any, and accrued interest at such Stated Maturity or
redemption date; (b) the Company or any Guarantor has paid or caused to be paid
all other sums payable under the Indenture by the Company or any Guarantor; and
(c) the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel each stating that (i) all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with and (ii) such satisfaction and discharge will not result in a
breach or violation of, or constitute a default under, the Indenture. (Section
401).
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of not
less than a majority in aggregate outstanding principal amount of the Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change the
Stated Maturity of the principal of, or any installment of interest on, any
Note or reduce the principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption thereof, or change the coin or currency
in which the principal of any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof; (ii) amend, change or modify
the obligation of the Company to make and consummate an Offer with respect to
any Asset Sale or Asset Sales in accordance with the provisions described under
"-- Certain Covenants -- Limitation on Sale of Assets" or the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control in accordance with the provisions described under "-- Certain
Covenants -- Purchase of Notes Upon a Change of Control," including amending,
changing or modifying any definitions with respect thereto; (iii) reduce the
percentage in principal amount of outstanding Notes, the consent of whose
holders is required for any such supplemental indenture, or the consent of
whose holders is required for any waiver; (iv) modify
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any of the provisions relating to supplemental indentures requiring the consent
of holders or relating to the waiver of past defaults or relating to the waiver
of certain covenants, except to increase the percentage of outstanding Notes
required for such actions or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of
each Note affected thereby; (v) except as otherwise permitted under "--
Consolidation, Merger, Sale of Assets," consent to the assignment or transfer
by the Company or any Guarantor of any of its rights and obligations under the
Indenture; or (vi) amend or modify any of the provisions of the Indenture
relating to any Guarantee in any manner adverse to the holders of the Notes or
any Guarantee. (Section 902).
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1020).
GOVERNING LAW
The Indenture, the Notes and the Guarantees (if any) will be governed by, and
construed in accordance with, the laws of the State of New York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary of the Company or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company or such acquisition. Acquired
Indebtedness will be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Subsidiary of the Company.
"Affiliate" means, with respect to any specified Person, (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (ii) any other Person that
beneficially owns, directly or indirectly, 5% or more of such Person's Capital
Stock or any officer or director of any such Person or other Person or with
respect to any natural Person, any Person having a relationship with such
Person by blood, marriage or adoption not more remote than first cousin or
(iii) any Person 5% or more of the Voting Stock of which is beneficially owned
or held directly or indirectly by such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital
Stock of any Subsidiary of the Company (other than directors' qualifying shares
or shares required to be owned by foreign nationals, to the extent mandated by
applicable law); (ii) all or substantially all of the properties and assets of
any division or line of business of the Company or its Subsidiaries; or (iii)
any other properties or assets of the Company or any of its Subsidiaries, other
than in the ordinary course of business. For the purpose of this definition,
the term "Asset Sale" does not include (A) any transfer of inventory in the
ordinary course of business, (B) any transfer of hydrodesulphurization
equipment originally purchased by the Company to manufacture low sulphur
distillate in the Pasadena Refinery, (C) any transfer of properties and assets
that is by the Company to any Wholly Owned Subsidiary, or by any Subsidiary of
the Company to the Company or any Wholly Owned Subsidiary, in accordance with
the terms of the Indenture, (D) any transfer of properties and assets that is
governed by the provisions under "-- Consolidation, Merger and Sale of Assets"
or (E) transfers of properties and assets in any calendar year with an
aggregate Fair Market Value of less than $500,000.
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"Attributable Indebtedness" means, with respect to any Sale and Leaseback
Transaction, as at the time of determination, the greater of (i) the Fair
Market Value of the property subject to such arrangement and (ii) the present
value (discounted at a rate equivalent to the Company's then current weighted
average cost of funds for borrowed money, compounded on a semi-annual basis) of
the total obligations of the lessee for rental payments during the remaining
term of the lease included in such transaction (including any period for which
such lease has been extended).
"Average Life to Stated Maturity" means, as of the date of determination with
respect to any Indebtedness, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar Federal or state law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
"Business Day" means any day on which commercial banks are not authorized or
required by law to close in New York, New York; Baltimore, Maryland; or the
state in which the principal office of the Trustee is located.
"Capital Lease Obligation" means any obligation of the Company and its
Subsidiaries on a Consolidated basis under any capital lease of real or
personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America is pledged in
support thereof); (ii) certificates of deposit or acceptances with a maturity
of 180 days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided
profits of not less than $250.0 million; and (iii) commercial paper with a
maturity of 180 days or less issued by a corporation that is not an Affiliate
of the Company and is organized under the laws of any state of the United
States of America or the District of Columbia and rated "A-1" (or higher) by
S&P or "P-1" (or higher) by Moody's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means Crown Central Petroleum Corporation, a corporation
incorporated under the laws of Maryland, until a successor Person has become
such pursuant to the applicable provisions of the Indenture, and thereafter
"Company" will mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss),
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Net Income (Loss), in each
case, for such period, of the Company and its Subsidiaries on a Consolidated
basis, all
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determined in accordance with GAAP to (b) the sum of (i) Consolidated Interest
Expense and (ii) cash and non-cash dividends on Preferred Stock paid by the
Company or any of its Subsidiaries (to any Person other than the Company and
its Wholly Owned Subsidiaries), in each case for such period; provided that (x)
in making such computation, the Consolidated Interest Expense attributable to
interest on any Indebtedness computed on a pro forma basis and (A) bearing a
floating interest rate, will be computed as if the rate in effect on the date
of computation had been the applicable rate for the entire period and (B) which
was not outstanding during the period for which the computation is being made
but which bears, at the option of the Company, a fixed or floating rate of
interest, will be computed by applying at the option of the Company, either the
fixed or floating rate and (y) in making such computation, the Consolidated
Interest Expense of the Company attributable to interest on any Indebtedness
under a revolving credit facility computed on a pro forma basis will be
computed based upon the average daily balance of such Indebtedness during the
applicable period; provided further that, notwithstanding the foregoing, the
interest rate with respect to any Indebtedness covered by any Hedging
Obligation will be deemed to be the effective interest rate with respect to
such Indebtedness after taking into account such Hedging Obligation.
"Consolidated Income Tax Expense" means for any period, as applied to the
Company, the provision for Federal, state, local and foreign income and
franchise taxes of the Company and its Consolidated Subsidiaries for such
period as determined in accordance with GAAP on a Consolidated basis.
"Consolidated Interest Expense" of the Company means, without duplication,
for any period, the sum of (a) the interest expense of the Company and its
Consolidated Subsidiaries for such period, on a Consolidated basis, including,
without limitation or duplication, (i) amortization of debt discount, (ii) the
net cost or payments under Hedging Obligations (including fees and amortization
of discounts), (iii) the interest portion of any deferred payment obligation,
(iv) payments or fees with respect to letters of credit, bankers' acceptances
or similar facilities, and (v) accrued interest plus (b) (i) the interest
component of the Capital Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company during such period and (ii) all capitalized
interest of the Company and its Consolidated Subsidiaries, in each case as
determined in accordance with GAAP on a Consolidated basis.
"Consolidated Net Income (Loss)" of the Company means, for any period, the
net income (or loss) of the Company and its Consolidated Subsidiaries for such
period as determined in accordance with GAAP on a Consolidated basis, adjusted,
to the extent included in calculating such net income (loss), by excluding,
without duplication, (i) all extraordinary gains or losses (less all fees and
expenses relating thereto), (ii) the portion of net income (or loss) of the
Company and its Consolidated Subsidiaries allocable to minority interests owned
by the Company and its Consolidated Subsidiaries in unconsolidated Persons, to
the extent that cash dividends or distributions have not actually been received
by the Company or one of its Consolidated Subsidiaries, (iii) net income (or
loss) of any Person combined with the Company or any of its Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes realized upon the termination
of any employee pension benefit plan, (v) net gains (but not losses) (less all
fees and expenses relating thereto) in respect of dispositions of assets other
than in the ordinary course of business, and (vi) the net income of any
Subsidiary of the Company to the extent that the declaration of dividends or
similar distributions by such Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to such Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the Consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its
Subsidiaries, as determined in accordance with GAAP on a Consolidated basis.
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"Consolidated Non-cash Charges" of the Company means, for any period, the
aggregate depreciation, amortization and other non-cash charges of the Company
and its Consolidated Subsidiaries for such period, as determined in accordance
with GAAP on a Consolidated basis (including the writedown to an estimated net
realizable salvage value of hydrodesulphurization equipment originally
purchased by the Company to manufacture low sulphur distillate in the Pasadena
Refinery, but excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period), and as adjusted for the impact
of the application of the LIFO Accounting Method for such period as determined
in accordance with GAAP on a Consolidated basis, which adjustment will be made
by (x) adding to the amount of "Consolidated Non-cash Charges" for such period
the amount of LIFO provision, if any, which had the effect of decreasing the
Consolidated Net Income (Loss) of the Company for such period or (y)
subtracting from the amount of "Consolidated Non-cash Charges" for such period
the amount of LIFO recovery, if any, which had the effect of increasing the
Consolidated Net Income (Loss) of the Company for such period.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its Subsidiaries if and to the extent the
accounts of such Person and each of its Subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" has a similar meaning.
"Credit Facility" means the unsecured Credit Agreement, dated as of May 10,
1993, among the Company and the lenders named therein and The Chase Manhattan
Bank, N.A., as agent, and any successor lenders and/or agents party thereto,
including any ancillary documents executed in connection therewith, as such
agreement may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from time to time
(including, without limitation, any successive amendments, renewals,
extensions, substitutions, refinancings, restructurings, replacements,
supplementations or other modifications of the foregoing). For all purposes
under the Indenture, "Credit Facility" includes any amendments, renewals,
extensions, substitutions, refinancings, restructurings, replacements,
supplements or any other modifications that increase the principal amount of
the Indebtedness or the commitments to lend thereunder and have been made in
compliance with the provisions described under "-- Certain Covenants --
Limitation on Indebtedness." If all or a portion of the Credit Facility
becomes available to the Company as liquidity support or credit enhancement for
a commercial paper program established by the Company, the amount of
Indebtedness thereunder in respect of such support or enhancement will be the
aggregate principal amount thereunder that is then available to support or
enhance outstanding commercial paper of the Company, and the aggregate face
amount of such commercial paper which is outstanding that equals the aggregate
principal amount thereunder that is then available for support or enhancement
of such commercial paper will not be considered to be outstanding for purposes
of the operation of the covenant described under "-- Certain Covenants --
Limitation on Indebtedness."
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Excess Proceeds" has the meaning described under "-- Certain Covenants --
Limitation on Sale of Assets."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no undue pressure or compulsion to sell and an
informed and willing buyer under no undue pressure or compulsion to buy. Fair
Market Value of assets or property in excess of $1.0 million will be determined
by a majority of the members of the Board of Directors of the Company, and a
majority of the disinterested members of
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such Board of Directors, if any, acting in good faith and of assets or property
in excess of $1.0 million be evidenced by a duly and properly adopted
resolution of the Board of Directors; except that any determination of Fair
Market Value made with respect to any real property or personal property which
is customarily appraised shall be made by an independent qualified appraiser
selected by the Company.
"GAAP" means generally accepted accounting principles in the United States of
America, consistently applied, which are in effect from time to time.
"Guarantee" means the guarantee by any Guarantor of the Company's obligations
under the Indenture pursuant to a guarantee given in accordance with the
Indenture, including any Guarantee delivered pursuant to provisions of "--
Certain Covenants -- Limitation on Issuances of Guarantees of and Pledges for
Indebtedness."
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through
an agreement (i) to pay or purchase such Indebtedness or to advance or supply
funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii)
to supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a
creditor against loss; provided that the term "guarantee" does not include
endorsements for collection or deposit, in either case in the ordinary course
of business.
"Guarantor" means a Subsidiary of the Company that guarantees the Company's
obligations under the Indenture.
"Hedging Obligations" means the obligation of any Person pursuant to any swap
or cap agreement, collar agreement, option, futures or forward hedging
contract, derivative instrument or other similar agreement or arrangement
designed to protect such Person against fluctuations in interest rates or in
the price of crude oil, other feed stocks and refined products, as the case may
be.
"incur" has the meaning ascribed thereto in the "Limitation on Indebtedness"
covenant; provided that with respect to any Indebtedness of any Subsidiary of
the Company that is owing to the Company or another Subsidiary of the Company,
(a) any disposition, pledge or transfer of such Indebtedness to any Person
(other than the Company or a Wholly Owned Subsidiary) will be deemed to be an
incurrence of such Indebtedness and (b) any transaction pursuant to which a
Wholly Owned Subsidiary (which is an obligor on Indebtedness) ceases to be a
Wholly Owned Subsidiary will be deemed to be an incurrence of such
Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments,
(iii) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person
(even if the rights and remedies of the seller or lender under such agreement
in the event of default are limited to repossession or sale of such property),
but excluding trade payables arising in the ordinary course of business, (iv)
all Hedging Obligations of such Person, (v) all Capital Lease Obligations of
such Person, (vi) all Indebtedness referred to in clauses (i)
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through (v) above of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
or with respect to property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness, (vii) all Guaranteed
Debt of such Person, and (viii) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness is required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value is to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock. As used herein, Indebtedness with respect to any
Hedging Obligation shall mean, with respect to any specified Person on any
date, the net amount (if any) that would be payable by such specified Person
upon the liquidation, close-out or early termination on such date of such
Hedging Obligation. For purposes hereof, any settlement amount payable upon the
liquidation, close-out or early termination of a Hedging Obligation will be
calculated by the Company in good faith and in a commercially reasonable manner
on the basis that such liquidation, close-out or early termination results from
an event of default or other similar event with respect to such specified
Person.
"Independent Director" means a director of the Company other than a director
(i) who (apart from being a director of the Company or any of its Subsidiaries)
is an employee, insider, associate or Affiliate of the Company or any of its
Subsidiaries or has held any such position during the previous five years or
(ii) who is a director, an employee, insider, associate or Affiliate of another
party to the transaction in question.
"Investments" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees) or other extension of credit or capital
contribution to any other Person (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities issued by any other
Person and all other items that would be classified as investments on a balance
sheet prepared in accordance with GAAP.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
security interest, hypothecation or other encumbrance upon or with respect to
any property of any kind (including any conditional sale or other title
retention agreement, any leases in the nature thereof, and any agreement to
give any security interest), real or personal, movable or immovable, now owned
or hereafter acquired.
"LIFO Accounting Method" means the last-in, first-out (LIFO) accounting
method used by the Company to value its crude oil, refined products,
convenience store merchandise and gasoline and other inventory.
"Maturity" when used with respect to any Note means the date on which the
principal of such Note becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
Redemption Date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except
73
<PAGE>
to the extent that such obligations are financed or sold with recourse to the
Company or any of its Subsidiaries) net of (i) brokerage commissions and other
actual fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a
result of such Asset Sale, (iii) payments made to retire Indebtedness where
payment of such Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any Person (other than
the Company or any of its Subsidiaries) owning a beneficial interest in the
assets subject to such Asset Sale and (v) appropriate amounts to be provided by
the Company or any of its Subsidiaries, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any of its Subsidiaries, as the case may be,
after such Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters
and liabilities under any indemnification obligations associated with such
Asset Sale, all as reflected in an officers' certificate delivered to the
Trustee and (b) with respect to any issuance or sale of Capital Stock or
options, warrants or rights to purchase Capital Stock, or debt securities or
Capital Stock that have been converted into or exchanged for Capital Stock, as
referred to under "-- Certain Covenants -- Limitation on Restricted Payments,"
the proceeds of such issuance or sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed for, cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any of its Subsidiaries), net of attorneys'
fees, accountants' fees and brokerage, consultation, underwriting and other
fees and expenses actually incurred in connection with such issuance or sale
and net of taxes paid or payable as a result thereof.
"Permitted Indebtedness" has the meaning described under "-- Certain
Covenants -- Limitation on Indebtedness."
"Permitted Investments" means (i) Investments in any of the Notes; (ii)
Temporary Cash Investments; (iii) Investments in existence on the date of the
Indenture; (iv) intercompany notes permitted under the definition of "Permitted
Indebtedness"; (v) Investments in any Wholly Owned Subsidiary or any Person
which, as a result of such Investment, becomes a Wholly Owned Subsidiary;
provided that such Wholly Owned Subsidiary is engaged in a business that is
reasonably related to the business of the Company and its Consolidated
Subsidiaries on the date of the Indenture; and (vi) other Investments that do
not exceed $15.0 million at any one time outstanding in joint ventures,
corporations, limited liability companies or partnerships engaged in a business
that is reasonably related to the business of the Company and its Consolidated
Subsidiaries on the date of the Indenture.
"Permitted Liens" has the meaning described under "-- Certain Covenants --
Limitation on Liens."
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" means with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred stock whether now outstanding or issued after the date of
the Indenture, and including, without limitation, all classes and series of
preferred or preference stock.
"Public Equity Offering" means an underwritten sale of common stock of the
Company pursuant to a registration statement (other than Form S-8 or a
registration statement relating to securities issuable by any benefit plan of
the Company or any of its Subsidiaries) that is declared effective by the
Commission.
74
<PAGE>
"Purchase Money Indebtedness" means (i) Indebtedness of a Person incurred to
finance the cost (including the cost of improvement) of acquisition or
construction in the ordinary course of business of real or tangible personal
property or (ii) Indebtedness of such Person incurred to refinance Indebtedness
described in clause (i) of this definition.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its terms
or by the terms of any security into which it is convertible or exchangeable or
otherwise, is or upon the happening of an event or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
Notes or is redeemable at the option of the holder thereof at any time prior to
any such Stated Maturity, or is convertible or exchangeable for debt securities
at any time prior to any such Stated Maturity at the option of the holder
thereof.
"Sale and Leaseback Transaction" with respect to any Person, means any
arrangement with another Person for the leasing of any real or tangible
personal property, which property has been or is to be sold or transferred by
such Person to such other Person in contemplation of such leasing.
"Securities Act" means the Securities Act of 1993, as amended.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill
Inc., or any successor rating agency.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor
subordinated in right of payment to the Notes or a Guarantee, as the case may
be.
"Subsidiary" means, with respect to any Person, (i) any corporation of which
at least a majority of the shares of Voting Stock is at the time owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof, or (ii) any
other Person of which at least a majority of voting interest is at the time,
directly or indirectly, owned by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof.
"Temporary Cash Investments" means (i) any evidence of Indebtedness, maturing
not more than one year after the date of acquisition, issued by the United
States of America or an instrumentality or agency thereof and guaranteed fully
as to principal, premium, if any, and interest by the United States of America,
(ii) any certificate of deposit, maturing not more than one year after the date
of acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital
and surplus and undivided profits of at least $250.0 million, whose debt has a
rating, at the time as of which any investment therein is made, of "P-2" (or
higher) according to Moody's or "A-2" (or higher) according to S&P, (iii)
commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-2" (or higher) according to Moody's or "A-2" (or higher) according to
S&P, (iv) any money market deposit accounts issued or offered by a domestic
commercial bank having combined capital and surplus of at least $250.0 million,
(v) Eurodollar time deposits rated "P-2" (or higher) according to Moody's or
"A-2" (or higher) according to S&P in an amount not exceeding $10.0 million;
(vi) municipal bonds or notes with maturities of six months or less
75
<PAGE>
rated "A" (or higher) according to Moody's or S&P or guaranteed by one or more
banks rated "Aaa" according to Moody's or "AAA" according to S&P; and (vii) any
shares in an open-end mutual fund organized by a bank or financial institution
having combined capital and surplus of at least $100.0 million investing solely
in Investments permitted by the foregoing clauses (i), (ii), (iii), (v) and
(vi).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Voting Stock" means Capital Stock of a Person of the class or classes
pursuant to which the holders thereof have voting power under ordinary
circumstances for the election of directors, managers or trustees of such
Person (irrespective of whether or not at the time stock of any other class or
classes has or might have voting power by reason of the happening of any
contingency).
"Wholly Owned Subsidiary" means a Subsidiary of the Company all the Capital
Stock of which (other than directors' qualifying shares or shares required to
be owned by foreign nationals under applicable law) is owned by the Company or
another Wholly Owned Subsidiary.
CONCERNING THE TRUSTEE
The First National Bank of Boston ("FNBB") will be the Trustee under the
Indenture. FNBB is also a lender under the Credit Facility.
UNDERWRITING
Chase Securities, Inc. and NationsBanc Capital Markets, Inc. (together, the
"Underwriters") have each agreed, subject to the terms and conditions set forth
in an underwriting agreement (the "Underwriting Agreement") between the Company
and the Underwriters, to purchase the principal amount of the Notes set forth
opposite its name below. Pursuant to the Underwriting Agreement, the
Underwriters will be obligated to purchase all of the Notes if they purchase
any of them.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
------------ ------------
<S> <C>
Chase Securities, Inc...................................... $
NationsBanc Capital Markets, Inc...........................
------------
Total.................................................... $125,000,000
============
</TABLE>
The several Underwriters propose to offer the Notes to the public at the
public offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of % of the
principal amount of the Notes. The Underwriters may allow, and such dealers may
reallow, a discount not in excess of % of the principal of the Notes to
certain other dealers. After the initial public offering, the public offering
price concession and discount may be changed.
There is currently no public market for the Notes, and the Company does not
intend to apply for listing of the Notes on any national securities exchange,
or for inclusion of the Notes on any automated inter-dealer quotation system.
The Underwriters have advised the Company that, following the completion of the
offering of the Notes, the Underwriters presently intend to make a market in
the Notes, but they are not obligated to do so, and any such market making may
be discontinued at any time, without notice. Accordingly, there is no assurance
that any market will develop for the Notes or, if developed, that any trading
market will be sustained. If an active public market does not develop or is not
maintained, the market price and liquidity of the Notes may be adversely
affected.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed that, without prior written consent of Chase
Securities, Inc., it will not for a period of 180 days after the date of this
Prospectus issue or sell debt securities, other than the Notes.
76
<PAGE>
The Chase Manhattan Bank, N.A., an affiliate of Chase Securities, Inc. is a
lender and agent under the Credit Facility. Michael F. Dacey, a director of
the Company, was formerly an Executive Vice President of The Chase Manhattan
Corporation and The Chase Manhattan Bank, N.A. In the ordinary course of
business, the Company and its subsidiaries maintain relationships and enter
into transactions with The Chase Manhattan Bank, N.A., including bank
accounts, borrowings and interest rate swaps. NationsBank of Texas, N.A. and
NationsBank, N.A., affiliates of NationsBanc Capital Markets, Inc., are
lenders under the Credit Facility. William L. Jews, a director of the Company,
is a director of NationsBank, N.A.
The Underwriters have advised the Company that they do not intend to confirm
sales in excess of 5% of the Notes offered hereby to any accounts over which
they exercise discretionary authority.
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the Company
by McGuire, Woods, Battle & Boothe, L.L.P., Baltimore, Maryland. McGuire,
Woods, Battle & Boothe, L.L.P. has from time to time represented, and is
currently representing, several affiliates of NationsBanc Capital Markets,
Inc. on unrelated matters. John S. Graham, III, a partner of McGuire, Woods,
Battle & Boothe, L.L.P., is a director of ATAPCO, the controlling stockholder
of the Company. Members of McGuire, Woods, Battle & Boothe, L.L.P.
beneficially own in the aggregate 200 shares of Class A Common Stock of the
Company. Certain legal matters in connection with the offering of the Notes
will be passed upon for the Underwriters by Milbank, Tweed, Hadley & McCloy,
New York, New York.
EXPERTS
The consolidated financial statements of Crown Central Petroleum Corporation
and subsidiaries appearing or incorporated by reference (including schedules
incorporated by reference) in this Prospectus and elsewhere in the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, to the extent indicated in their reports thereon also appearing
elsewhere herein and in the Registration Statement or incorporated by
reference. Such consolidated financial statements have been included herein or
incorporated herein by reference (including schedules incorporated by
reference) in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
Crown Central Petroleum Corporation is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports,
proxy statements and other information with the Commission. Such reports,
proxy statements and other information filed by the Company can be inspected
and copied at the Public Reference Room of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at the Commission's regional offices at Seven
World Trade Center, 13th Floor, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Reports, proxy statements and other information concerning the
Company can also be inspected and copied at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
77
<PAGE>
relating thereto for further information with respect to the Company and the
securities offered hereby. Any statement contained or incorporated by reference
herein concerning the provisions of any document is not necessarily complete,
and in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference
in this Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 and (ii) the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1994 and June 30, 1994, and the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 as
amended on Form 10-Q/A.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed to be
incorporated by reference herein. 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 incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
No person has been authorized in connection with the offering made hereby to
give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person or by anyone in any jurisdiction in
which it is unlawful to make such offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any date subsequent to the date hereof.
The Company will provide without charge to any person to whom this Prospectus
is delivered, at the request of such person, a copy of any or all of the
foregoing documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are incorporated by reference therein).
Requests should be directed to the attention of Dolores B. Rawlings, Secretary,
Crown Central Petroleum Corporation, One North Charles Street, Baltimore,
Maryland 21201, or by telephone at (410) 539-7400.
78
<PAGE>
GLOSSARY
The following are definitions of certain terms used in this Prospectus:
<TABLE>
<C> <S>
alkylation.............. A process of combining hydrocarbon molecules to form
alkylates, which are used as a gasoline blending
component
aromatics............... Pleasant smelling hydrocarbon fractions that form the
basis of most organic chemicals
atmospheric column...... Also known as an atmospheric distillation unit, this
refinery unit is a tall, cylindrical steel column
into which heated crude oil is pumped and separated
into various fractions through distillation
barrel.................. Common unit of measure in the oil industry equal to
42 U.S. gallons
bbl..................... Barrel
benzene................. An aromatic solvent
BPD or bbl/day.......... Barrels per day
coking unit............. A refinery unit which takes the lowest value
component of crude oil remaining after most higher
value products are removed, further extracts more
valuable products and converts the remainder into
petroleum coke
depropanizer unit....... A refinery unit where propane, a liquid hydrocarbon,
is separated from natural gas
distillates............. Refined petroleum products including diesel, home
heating oil, jet fuel and kerosene
downstream margin....... The combined gross margin attributable to refinery
and retail petroleum marketing operations
EBITDAAL................ Represents operating income (loss) before
depreciation and amortization, and (gain) loss on
sales and abandonments of property, plant and
equipment, including the impact on operating income
(loss) of accounting for inventory under the LIFO
valuation method as compared to the FIFO valuation
method
ethanol................. An oxygenated compound which can be blended with
gasoline to lower carbon monoxide emissions
feedstocks.............. Hydrocarbon compounds, which are purchased for input
into various refinery units to produce refined
products
fluid catalytic cracking This unit takes low grade products from the crude
unit................... unit and converts them to higher margin
transportation fuels through a chemical process using
catalysts
gal..................... U. S. gallon
high-conversion A refinery that is capable of converting a high
refinery............... percentage of a barrel of crude oil into higher
margin fuels, such as transportation fuels
</TABLE>
79
<PAGE>
<TABLE>
<C> <S>
highway diesel.......... Diesel fuel that meets environmental requirements for
on-highway use
hydrotreating or
hydrodesulphurization.. A process which purifies petroleum products by
removing sulphur and nitrogen compounds
isomerization........... A reforming process in which hydrocarbon molecules
are rearranged to form isobutane and other feedstocks
m....................... Thousands
mm...................... Millions
mm bbls................. One million barrels
m gals.................. One thousand gallons
naphtha................. Natural or unrefined gasoline with a low octane
rating that is separated out of the crude oil during
the refining process
oxygenate............... A compound such as methyl tertiary-butyl ether, ethyl
tertiary-butyl ether, or ethanol which contains high
levels of oxygen and which, when blended with
gasoline, produces relatively low carbon monoxide
emissions
propane................. An odorless, colorless, and highly volatile gas used
as a household fuel
propylene............... A flammable gaseous hydrocarbon obtained by cracking
petroleum hydrocarbons
rated crude capacity.... The crude oil processing capacity of a refinery that
is established by engineering design
reforming............... A process in which heat and catalysts are used to
rearrange hydrocarbon molecules to convert low-octane
gasoline fractions or naphthas into higher-octane
stocks suitable for blending into finished gasoline
slurry oil.............. Heavy black oil remaining at the end of certain
refining processes
sour crude oil.......... A crude oil that is relatively high in sulphur
content and requires more processing to remove
sulphur
sweet crude oil......... A crude oil that is relatively low in sulphur content
and requires less processing to remove sulphur
tank bottoms............ Heavy residual product which accumulates at the
bottom of storage tanks and processing units
throughput.............. The volume of crude oil and/or feedstocks processed
through a refinery
turnaround.............. A periodically required standard procedure to
refurbish and maintain a refinery that involves the
shutdown and inspection of major processing units and
occurs generally every two and one-half to five years
vacuum distillation..... A process by which reduced crude oil is distilled
under a vacuum
West Texas Intermediate A light, sweet crude oil that is used as a benchmark
crude oil.............. for the other crude oil types; typically abbreviated
"WTI"
yield................... The percentage of refined products produced from
crude oil and feedstocks
</TABLE>
80
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors.......................................... F-3
Consolidated Balance Sheets as of December 31, 1993 and 1992............ F-4
Consolidated Statements of Operations for the years ended December 31,
1993, 1992 and 1991.................................................... F-6
Consolidated Statements of Changes in Common Stockholders' Equity for
the years ended December 31, 1993, 1992 and 1991....................... F-7
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1992 and 1991.................................................... F-8
Notes to Consolidated Financial Statements.............................. F-9
UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets as of September 30, 1994
(Unaudited) and December 31, 1993...................................... F-20
Unaudited Consolidated Condensed Statements of Operations for the three
and nine months ended September 30, 1994 and 1993...................... F-22
Unaudited Consolidated Condensed Statements of Cash Flows for the nine
months ended September 30, 1994 and 1993............................... F-23
Notes to Unaudited Consolidated Condensed Financial Statements.......... F-24
</TABLE>
F-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders
Crown Central Petroleum Corporation
We have audited the accompanying consolidated balance sheets of Crown Central
Petroleum Corporation and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of operations, changes in common
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Crown Central Petroleum Corporation and subsidiaries at December 31, 1993
and 1992, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in Notes D and F of the consolidated financial statements,
effective January 1, 1992, the Company changed its method of accounting for
income taxes and postretirement benefits other than pensions.
Ernst & Young llp
Baltimore, Maryland
February 24, 1994
F-3
<PAGE>
CONSOLIDATED BALANCE SHEETS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1993 1992
-------- --------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents.................................. $ 52,021 $ 55,504
Accounts receivable, less allowance for doubtful accounts
(1993--$1,760; 1992--$1,392).............................. 91,413 112,920
Recoverable income taxes................................... 2,690
Inventories................................................ 86,811 73,454
Other current assets....................................... 762 1,403
-------- --------
Total Current Assets..................................... 231,007 245,971
Investments and Deferred Charges............................. 42,908 53,616
Property, Plant and Equipment
Land....................................................... 44,433 45,251
Petroleum refineries....................................... 428,567 409,832
Marketing facilities....................................... 182,473 177,911
Pipelines and other equipment.............................. 20,932 19,247
-------- --------
676,405 652,241
Less allowance for depreciation........................... 294,142 276,491
-------- --------
Net Property, Plant and Equipment........................ 382,263 375,750
-------- --------
$656,178 $675,337
======== ========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
CONSOLIDATED BALANCE SHEETS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1993 1992
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable:
Crude oil and refined products................................ $104,166 $134,416
Other......................................................... 20,500 17,787
Accrued liabilities............................................ 50,145 48,522
Income taxes payable........................................... 3,264
Current portion of long-term debt.............................. 1,094 357
-------- --------
Total Current Liabilities.................................... 179,169 201,082
Long-Term Debt................................................... 65,579 61,220
Deferred Income Taxes............................................ 81,217 81,588
Other Deferred Liabilities....................................... 31,860 28,173
Common Stockholders' Equity
Class A Common Stock--par value $5 per share:
Authorized--8,500,000 shares; issued and outstanding shares--
4,817,392 in 1993 and 1992................................... 24,087 24,087
Class B Common Stock--par value $5 per share:
Authorized--6,500,000 shares; issued and outstanding shares--
5,015,206 in 1993 and 1992................................... 25,076 25,076
Additional paid-in capital..................................... 91,870 91,870
Retained earnings.............................................. 157,320 162,241
-------- --------
Total Common Stockholders' Equity............................ 298,353 303,274
-------- --------
$656,178 $675,337
======== ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Sales and operating revenues (including
excise taxes of 1993--$296,228; 1992--
$218,944; 1991--$214,716). . $1,747,411 $1,795,259 $1,857,711
Operating Costs and Expenses
Costs and operating expenses............ 1,604,696 1,659,796 1,718,066
Selling and administrative expenses..... 91,714 102,805 112,131
Depreciation and amortization........... 41,873 41,526 33,346
Sales of property, plant and equipment.. 2,331 1,264 (20)
---------- ---------- ----------
1,740,614 1,805,391 1,863,523
---------- ---------- ----------
Operating Income (Loss)................... 6,797 (10,132) (5,812)
Interest and other income................. 1,461 3 4,713
Non-operating gains....................... 3,674
Interest expense.......................... (7,451) (6,826) (7,908)
---------- ---------- ----------
Income (Loss) Before Income Taxes and
Cumulative Effect of Changes in
Accounting Principles.................... 807 (16,955) (5,333)
Income Tax Expense (Benefit).............. 5,107 (3,677) 693
---------- ---------- ----------
(Loss) Before Cumulative Effect of Changes
in Accounting Principles................. (4,300) (13,278) (6,026)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Postretirement
Benefits Other Than Pensions (Net of Tax
Benefit of $3,308)....................... (5,631)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Income Taxes.... 13,403
---------- ---------- ----------
Net (Loss)................................ $ (4,300) $ (5,506) $ (6,026)
========== ========== ==========
Net (Loss) Per Share:
(Loss) Before Cumulative Effect of Changes
in Accounting Principles................. $ (.44) $ (1.35) $ (.61)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Postretirement
Benefits Other Than Pensions............. (.57)
Cumulative Effect to January 1, 1992 of
Change in Accounting for Income Taxes.... 1.36
---------- ---------- ----------
Net (Loss) Per Share...................... $ (.44) $ (.56) $ (.61)
========== ========== ==========
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL
----------------- ----------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ------- --------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1991................... 4,817,392 $24,087 5,015,206 $25,076 $91,870 $183,606
Net (loss) for 1991..... (6,026)
Cash dividends:
Class A Common Stock--
$.80 per share....... (3,854)
Class B Common Stock--
$.80 per share....... (4,012)
--------- ------- --------- ------- ------- --------
Balance at December 31,
1991................... 4,817,392 24,087 5,015,206 25,076 91,870 169,714
Net (loss) for 1992..... (5,506)
Cash dividends:
Class A Common Stock--
$.20 per share....... (964)
Class B Common Stock--
$.20 per share....... (1,003)
--------- ------- --------- ------- ------- --------
Balance at December 31,
1992................... 4,817,392 24,087 5,015,206 25,076 91,870 162,241
Net (loss) for 1993..... (4,300)
Adjustment to record
minimum pension
liability, net of
deferred income tax
benefit of $335........ (621)
--------- ------- --------- ------- ------- --------
Balance at December 31,
1993................... 4,817,392 $24,087 5,015,206 $25,076 $91,870 $157,320
========= ======= ========= ======= ======= ========
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net (loss)...................................... $ (4,300) $ (5,506) $ (6,026)
Reconciling items from net (loss) to net cash
provided by operating activities:
Depreciation and amortization................. 41,873 41,526 33,346
Loss (gain) on sales of property, plant and
equipment.................................... 2,331 1,264 (20)
Equity (earnings) loss in unconsolidated sub-
sidiaries.................................... (651) 1,028 (237)
Deferred income taxes......................... (36) (841) 11,125
Other deferred items.......................... 830 715 5,608
Cumulative effect of changes in accounting
principles................................... (7,772)
Changes in assets and liabilities
Accounts receivable........................... 21,507 (1,506) 50,001
Recoverable income taxes...................... 2,690 6,742 (9,432)
Inventories................................... (13,357) 31,953 5,832
Other current assets.......................... 641 330 (1,130)
Crude oil and refined products payable........ (30,250) (13,303) (76,562)
Other accounts payable........................ 2,713 (2,555) 1,335
Accrued liabilities........................... 1,623 876 (5,155)
Income taxes payable.......................... 3,264 (8,156)
-------- -------- --------
Net Cash Provided by Operating Activities... 28,878 52,951 529
-------- -------- --------
Cash Flows From Investment Activities
Capital expenditures.......................... (40,860) (38,003) (64,782)
Contract settlement regarding acquisition of
La Gloria Oil and Gas Company................ 8,000
Proceeds from sales of property, plant and
equipment.................................... 5,515 4,072 4,619
Investment in subsidiaries.................... (4) (177) 742
Deferred turnaround maintenance and other..... (4,678) (19,675) (21,333)
-------- -------- --------
Net Cash (Used in) Investment Activities.... (40,027) (45,783) (80,754)
-------- -------- --------
Cash Flows From Financing Activities
Net (repayments) borrowings on loan agree-
ments........................................ (376) (27,339) 86,333
Proceeds from purchase money lien............. 5,472
Proceeds from interest rate swap terminations. 2,403
Net repayments (issuances) of long-term notes
receivable................................... 167 (499) (2,637)
Cash dividends................................ (1,967) (7,866)
-------- -------- --------
Net Cash Provided by (Used in) Financing Ac-
tivities................................... 7,666 (29,805) 75,830
-------- -------- --------
Net (Decrease) in Cash and Cash Equivalents..... (3,483) (22,637) (4,395)
Cash and Cash Equivalents at Beginning of Year.. 55,504 78,141 82,536
-------- -------- --------
Cash and Cash Equivalents at End of Year........ $ 52,021 $ 55,504 $ 78,141
======== ======== ========
Supplemental Disclosures of Cash Flow Informa-
tion
Cash paid during the year for:
Interest (net of amount capitalized).......... $ 4,249 $ 5,610 $ 3,824
Income taxes.................................. 4,329 1,023 5,858
</TABLE>
See notes to consolidated financial statements
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTE A--DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Description of Business: Crown Central Petroleum Corporation and subsidiaries
(the Company) operates primarily in one business segment as an independent
refiner and marketer of petroleum products, including petrochemical feedstocks.
The Company operates two refineries, one located near Houston, Texas with a
rated capacity of 100,000 barrels per day and another in Tyler, Texas with a
rated capacity of 50,000 barrels per day. Its principal business is the
wholesale and retail sale of its products in the Mid-Atlantic, Southeastern and
Midwestern United States.
Locot Corporation, a wholly-owned subsidiary of the Company, is the parent
company of La Gloria Oil and Gas Company (La Gloria) which operates the Tyler
refinery, a pipeline gathering system in Texas and product terminals located
along the Texas Eastern Pipeline system.
F Z Corporation, a wholly-owned subsidiary of the Company, is the parent
company of two convenience store chains operating in seven states, retailing
both merchandise and gasoline.
The following summarizes the significant accounting policies and practices
followed by the Company:
Principles of Consolidation: The consolidated financial statements include
the accounts of Crown Central Petroleum Corporation and all significant
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Due to immateriality, the Company's
investment in Tongue, Brooks & Company, Inc. and Tiara Insurance Company, two
wholly-owned insurance subsidiaries, are accounted for using the equity method.
Cash and Cash Equivalents: Cash in excess of daily requirements is invested
in marketable securities with maturities of three months or less. Such
investments are deemed to be cash equivalents for purposes of the statements of
cash flows. The carrying amount reported in the balance sheet for cash and cash
equivalents represents its fair value.
Accounts Receivable: The majority of the Company's accounts receivable relate
to sales of petroleum products to third parties operating in the petroleum
industry. The carrying amount reported in the balance sheet for accounts
receivable represents its fair value.
Inventories: The Company's crude oil, refined products, and convenience store
merchandise and gasoline inventories are valued at the lower of cost (last-in,
first-out) or market with the exception of crude oil inventory held for resale
which is valued at the lower of cost (first-in, first-out) or market. Materials
and supplies inventories are valued at cost. Incomplete exchanges of crude oil
and refined products due the Company or owing to other companies are reflected
in the inventory accounts.
Property, Plant and Equipment: Property, plant and equipment is carried at
cost. Costs assigned to property, plant and equipment of acquired businesses
are based on estimated fair value at the date of acquisition. Depreciation and
amortization of plant and equipment are primarily provided using the straight-
line method over estimated useful lives. Construction in progress is recorded
in property, plant and equipment.
Expenditures which materially increase values, change capacities or extend
useful lives are capitalized in property, plant and equipment. Routine
maintenance, repairs and replacement costs are charged against current
operations. At intervals of two or more years, the Company conducts a
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
complete shutdown and inspection of significant units (turnaround) at its
refineries to perform necessary repairs and replacements. Costs associated with
these turnarounds are deferred and amortized over the period until the next
planned turnaround.
Upon sale or retirement, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and any resulting gain
or loss is included in income.
Environmental Costs: The Company conducts environmental assessments and
remediation efforts at multiple locations, including operating facilities, and
previously owned or operated facilities. The Company accrues environmental and
clean-up related costs of a non-capital nature when it is both probable that a
liability has been incurred and that the amount can be reasonably estimated.
Costs are charged to expense if they relate to the remediation of existing
conditions caused by past operations or if they are not expected to contribute
to future operations. Estimated costs are recorded at undiscounted amounts
based on experience and assessments, and are adjusted periodically as
additional or new information is available.
Sales and Operating Revenues: Sales and operating revenues include excise and
other similar taxes. Resales of crude oil are recorded net of the related crude
oil cost (first-in, first-out) in sales and operating revenues.
Income Taxes: As discussed in Note D of Notes to Consolidated Financial
Statements, effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a liability approach for measuring deferred taxes based
on temporary differences between the financial statement and tax bases of
assets and liabilities existing at each balance sheet date using enacted tax
rates for years in which taxes are expected to be paid or recovered. In 1993
and 1992, deferred tax liabilities reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Interest Capitalization: Interest costs incurred during the construction and
preoperating stages of significant construction or development projects is
capitalized and subsequently amortized by charges to earnings over the useful
lives of the related assets.
Amortization of Goodwill: The excess purchase price of acquisitions of
businesses over the estimated fair value of assets acquired is being amortized
on a straight-line basis over 20 years.
Forward and Option Contracts: The Company selectively enters into forward
hedging and option contracts to minimize price fluctuations for a portion of
its crude oil and refined products. All realized and unrealized gains and
losses on such hedging and option contracts are deferred and recognized in the
period when the hedged materials are sold. Cash flows from forward hedging and
option contracts are classified as operating activities for purposes of the
statements of cash flows.
Non-operating Gains and Losses: Non-operating gains and losses include
significant transactions that, in the judgement of management, are not directly
related to normal current operations.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTE B--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Crude oil............................................ $ 38,989 $ 40,897
Refined products..................................... 60,519 72,915
----------- -----------
Total inventories at FIFO (approximates current
costs)............................................ 99,508 113,812
LIFO allowance....................................... (25,828) (53,298)
----------- -----------
Total crude oil and refined products............... 73,680 60,514
----------- -----------
Merchandise inventory at FIFO (approximates current
cost)............................................... 7,200 7,509
LIFO allowance....................................... (2,387) (2,569)
----------- -----------
Total merchandise.................................. 4,813 4,940
----------- -----------
Materials and supplies inventory at FIFO............. 8,318 8,000
----------- -----------
Total Inventory.................................... $ 86,811 $ 73,454
=========== ===========
</TABLE>
In 1992, inventory quantities were reduced. This reduction resulted in a
liquidation of LIFO inventory quantities carried at higher costs prevailing in
prior years as compared with the cost of 1992 purchases. As a result of this
liquidation in 1992, the net (loss) increased $1,406,000 ($.14 per share).
NOTE C--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Unsecured 10.42% Senior Notes.......................... $ 60,000 $ 60,000
Purchase Money Lien.................................... 5,472
Other obligations...................................... 1,201 1,577
----------- -----------
66,673 61,577
Less current portion................................... 1,094 357
----------- -----------
Long-Term Debt......................................... $ 65,579 $ 61,220
=========== ===========
</TABLE>
The aggregate maturities of long-term debt through 1998 are as follows (in
thousands): 1994--$1,094; 1995--$9,694; 1996--$9,730; 1997--$9,798; 1998--
$9,849.
The unsecured 10.42% Senior Notes dated January 3, 1991, as amended (Notes)
limit the payment of cash dividends on common stocks and require the
maintenance of various covenants including minimum working capital, minimum
fixed charge coverage ratio, and minimum consolidated tangible net worth, all
as defined. The principal will be repaid in seven equal annual installments
commencing January 3, 1995. The Notes are repayable, at a premium, in whole or
in part at any time at the option of the Company.
As of December 31, 1993, the Company has entered into interest rate swap
agreements to effectively convert $17,500,000 of its 10.42% Notes to variable
interest rates with maturities ranging
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
from 1996 to 1998. During 1993, the Company terminated certain interest rate
swap agreements associated with its 10.42% Notes resulting in deferred gains of
$1.9 million at December 31, 1993, which will be recognized as a reduction of
interest expense over the remaining swap periods, which range from 1996 to
1997. As a result of its interest rate swap program, the Company's effective
interest rate on the Notes for 1993 was reduced from approximately 10.5% to
approximately 9.2% per annum. The Company is exposed to credit risk to the
extent of nonperformance by the counterparties to the interest rate swap
agreements; however, management considers the risk of default to be remote.
Under the terms of the Unsecured Credit Agreement dated May 10, 1993, (Credit
Agreement) nine banks have committed a maximum of $125,000,000 to the Company
for cash borrowings and letters of credit. There is a limitation of $50,000,000
for cash borrowings under the agreement. The Credit Agreement, which expires
May 10,1996, but contains a one year renewal option, allows for interest on
outstanding borrowings to be computed under one of three methods based on the
Base Rate, the London Interbank Offered Rate, or the Certificates of Deposit
Rate (all as defined). The Credit Agreement limits the Company's borrowings
outside the Agreement to a maximum of $90,000,000 in unsecured senior notes.
The Credit Agreement limits indebtedness (as defined), cash dividends on common
stocks and capital expenditures and requires the maintenance of various
covenants including, but not limited to, minimum working capital, minimum
consolidated tangible net worth, and a borrowing base, all as defined. Under
the terms of the Notes and Credit Agreement, at December 31, 1993, the Company
was limited to paying additional cash dividends of $9,833,000.
At December 31, 1993, the Company was in compliance with all covenants and
provisions of the Notes and Credit Agreement. The Company expects to continue
to be in compliance with the covenants imposed by the Notes and Credit
Agreement over the next twelve months. Meeting the covenants imposed by the
Notes and Credit Agreement is dependent, among other things, upon the level of
future earnings and the rate of capital spending.
As of December 31, 1993, the Company had outstanding irrevocable standby
letters of credit in the principal amount of $30,709,000 and an outstanding
documentary letter of credit in the principal amount of $12,600,000 for normal
operations. Unused commitments under the terms of the Credit Agreement totaling
$81,691,000 were available for future borrowings (subject to the $50,000,000
limitation described above) and issuance of letters of credit at December 31,
1993. The Company pays an annual commitment fee on the unused portion of the
credit line.
Effective December 1, 1993, the Company entered into a Purchase Money Lien
(Money Lien) for the financing of certain service station and terminal
equipment and office furnishings. The effective rate for the Money Lien is
6.65%. Ninety percent of the principal is repayable in 60 monthly installments
and a balloon payment of 10% of the principal is payable in January 1999. The
Money Lien is secured by the service station equipment and office furnishings
having a cost basis of $5,472,000. The Money Lien allows for a maximum drawdown
of $6,500,000 by January 31, 1994 and it is the Company's intention to draw the
remaining balance.
The following interest costs were charged to pretax income:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1993 1992 1991
-------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Total interest costs incurred...................... $ 7,712 $ 7,754 $ 8,190
Less: Capitalized interest......................... 261 928 282
-------- ------- -------
Interest Expense............................... $ 7,451 $ 6,826 $ 7,908
======== ======= =======
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
The approximate fair value of the Company's Long-term Debt at December 31,
1993 was $65,929,000, which was estimated using a discounted cash flow
analysis, based on the Company's assumed incremental borrowing rates for
similar types of borrowing arrangements. The fair value at December 31, 1993 of
the Company's interest rate swap agreements is estimated to be $207,000 which
was estimated using a discounted cash flow analysis, based on current interest
rates.
NOTE D--INCOME TAXES
As discussed in Note A of Notes to Consolidated Financial Statements,
effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The
1991 financial statements have not been restated for the effects of applying
SFAS 109.
The $13,403,000 cumulative effect benefit of applying SFAS 109 reduced the
net loss for 1992. One of the requirements of SFAS 109 is that deferred taxes
be recorded for the tax effects of differences between assigned values and the
tax bases of assets acquired in purchase business acquisitions. Previously,
under the provisions of Accounting Principles Board Opinion No. 11 "Accounting
for Income Taxes", acquired assets were recorded net of such tax effects. The
adoption of SFAS 109 in 1992 resulted in total increases in inventory and net
property, plant and equipment of $38 million relating to the acquisitions of
the Fast Fare and Zippy Mart convenience store chains and La Gloria Oil and Gas
Company, with related increases in the liability for deferred income taxes. The
write-up of net property, plant and equipment is depreciated over the remaining
life of the related assets and such depreciation is offset by a credit to the
deferred tax provision. The adoption of SFAS 109 resulted in a decrease of
$2,335,000 in the 1993 income before income taxes and cumulative effect of
changes in accounting principles and an increase of $2,388,000 in the 1992 loss
before income taxes and cumulative effect of changes in accounting principles,
respectively, due to increased depreciation expense for the write-up of
property, plant and equipment.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization...................... $ (58,095) $ (59,015)
Difference between book and tax basis of property,
plant and equipment............................... (30,945) (32,499)
Other.............................................. (16,768) (10,012)
----------- -----------
Total deferred tax liabilities................... (105,808) (101,526)
Deferred tax assets:
Postretirement and pension obligations............. 5,596 4,672
Environmental, litigation and other accruals....... 9,734 6,982
Tax credits, contribution and net operating loss
carryover......................................... 379 1,893
Construction and inventory cost not currently
deductible........................................ 1,436 1,344
Other.............................................. 7,446 5,047
----------- -----------
Total deferred tax assets........................ 24,591 19,938
----------- -----------
Net deferred tax liabilities................... $ (81,217) $ (81,588)
=========== ===========
</TABLE>
No valuation allowance is considered necessary for the above deferred tax
assets. The company has tax credit carryforwards of $109,269 which expire in
the year 2005.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
Significant components of the income tax provision (benefit) for the years
ended December 31 follows. With the passage of the Tax Act of 1993, the
Company's federal statutory income tax rate increased from 34% to 35% effective
January 1, 1993. The effect of the change in statutory rate was to increase the
1993 net (loss) for 1993 by $2,252,000 or $.23 per share.
<TABLE>
<CAPTION>
LIABILITY DEFERRED
METHOD METHOD
---------------- --------
1993 1992 1991
------- ------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current:
Federal........................................ $5,278 $(3,230) $(4,103)
State.......................................... 1,779 872 (462)
------- ------- -------
Total Current................................ 7,057 (2,358) (4,565)
Deferred:
Federal........................................ (3,642) (1,485) 5,278
State.......................................... (560) 166 (20)
------- ------- -------
Total Deferred............................... (4,202) (1,319) 5,258
Federal tax rate increase........................ 2,252
------- ------- -------
Income Tax Expense (Benefit)................... $5,107 $(3,677) $ 693
======= ======= =======
</TABLE>
Current state tax provision includes franchise taxes of $1,275,000,
$1,300,000 and $1,146,000 for the years 1993, 1992 and 1991, respectively.
The components of the deferred income tax provision for the year ended
December 31, 1991 is as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C>
Refinery turnaround costs............................ $ 4,789
Difference between book and tax depreciation and am-
ortization.......................................... 4,342
Gain on disposal..................................... 588
State income taxes................................... (20)
Litigation and accruals.............................. (66)
Difference between book and tax basis of property
disposals........................................... (478)
Effect of tax leases................................. (1,427)
Unrealized insurance proceeds........................ (1,540)
Other................................................ (930)
-------
Deferred income tax provision...................... $ 5,258
=======
</TABLE>
The following is a reconciliation of the statutory federal income tax rate to
the actual effective income tax rate for the years ended December 31:
<TABLE>
<CAPTION>
LIABILITY DEFERRED
METHOD METHOD
-------------- --------
1993 1992 1991
------ ------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Income tax expense (benefit) calculated at the
statutory federal income tax rate................ $ 282 $(5,765) $(1,813)
Amortization of goodwill and purchase adjustments. 330 321 1,927
State taxes (net of federal benefit).............. 798 685 291
Federal tax rate increase......................... 2,252
Other............................................. 1,445 1,082 288
------ ------- -------
Income Tax Expense (Benefit).................... $5,107 $(3,677) $ 693
====== ======= =======
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTE E--CAPITAL STOCK AND NET INCOME PER COMMON SHARE
Class A Common stockholders are entitled to one vote per share and have the
right to elect all directors other than those to be elected by other classes of
stock. Class B Common stockholders are entitled to one-tenth vote per share and
have the right to elect two directors. Net (loss) per share for 1993, 1992 and
1991 is based upon the 9,832,598 common shares outstanding for all years.
NOTE F--EMPLOYEE BENEFIT OBLIGATIONS
In 1993, the Company merged its two defined benefit pension plans covering
the majority of full-time employees into one plan. The Company also has several
defined benefit plans covering only certain senior executives. Plan benefits
are generally based on years of service and employees' average compensation.
The Company's policy is to fund the pension plans in amounts which comply with
contribution limits imposed by law. Plan assets consist principally of fixed
income securities and stocks.
Net periodic pension costs consisted of the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1993 1992 1991
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost--benefit earned during the year...... $ 4,002 $ 3,672 $ 3,221
Interest cost on projected benefit obligations.... 6,326 5,895 5,595
Actual (return) loss on plan assets............... (11,738) (10,217) (10,626)
Total amortization and deferral................... 5,324 4,875 6,376
-------- -------- --------
Net periodic pension costs........................ $ 3,914 $ 4,225 $ 4,566
======== ======== ========
</TABLE>
Assumptions used in the accounting for the defined benefit plans as of
December 31 were:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rates............................... 7.25% 8.25% 8.25%
Rates of increase in compensation levels...................... 4.00% 5.00% 5.00%
Expected long-term rate of return on assets................... 9.50% 9.50% 9.50%
</TABLE>
The following table sets forth the funded status of the plans in which assets
exceed accumulated benefits:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $ 68,817 $ 58,064
----------- -----------
Accumulated benefit obligation..................... $ 71,552 $ 60,226
----------- -----------
Projected benefit obligation....................... $ 86,728 $ 73,863
Plan assets at fair value............................ 78,573 69,081
----------- -----------
Projected benefit obligation (in excess of) plan as-
sets................................................ (8,155) (4,782)
Unrecognized net loss................................ 9,532 2,872
Prior service (benefit) cost not yet recognized in
net periodic pension cost........................... (1,081) 2,132
Unrecognized net (asset) at beginning of year, net of
amortization........................................ (2,495) (2,762)
----------- -----------
Net pension liability................................ $ (2,199) $ (2,540)
=========== ===========
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
The following table sets forth the funded status of the plans in which
accumulated benefits exceed assets:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................... $ 5,339 $ 4,146
----------- -----------
Accumulated benefit obligation..................... $ 5,339 $ 4,154
----------- -----------
Projected benefit obligation....................... $ 5,376 $ 4,300
Plan assets at fair value............................ 0 0
----------- -----------
Projected benefit obligation (in excess of) plan
assets.............................................. (5,376) (4,300)
Unrecognized net loss................................ 1,224 335
Prior service (benefit) cost not yet recognized in
net periodic pension cost........................... (231) (248)
Unrecognized net obligation at beginning of year, net
of amortization..................................... 1,834 2,064
Adjustment required to recognize minimum liability... (2,790) (2,004)
----------- -----------
Net pension liability................................ $ (5,339) $ (4,153)
=========== ===========
</TABLE>
In addition to the defined benefit pension plan, the Company provides certain
health care and life insurance benefits for eligible employees who retire from
active service. The postretirement health care plan is contributory, with
retiree contributions consisting of copayment of premiums and other cost
sharing features such as deductibles and coinsurance. Beginning in 1998, the
Company will "cap" the amount of premiums that it will contribute to the
medical plans. Should costs exceed this cap, retiree premiums would increase to
cover the additional cost. Effective January 1, 1992, the Company adopted
Statement of Financial Accounting Standards No. 106 "Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106). SFAS 106 requires the
accrual of the expected costs of providing these postretirement benefits during
the years that the employee renders the necessary service. Prior year financial
statements have not been restated for the effects of applying SFAS 106.
The $5,631,000 cumulative effect charge of adoption of SFAS 106 on prior
years (after reduction for the income tax benefit of $3,308,000) is included in
the net loss for 1992. The adoption of SFAS 106 resulted in increases in the
1993 and 1992 loss before cumulative effect of changes in accounting principles
of $167,000 ($.02 per share) and $300,000 ($.03 per share), respectively, and
increases in the 1993 and 1992 net loss of $167,000 ($.02 per share) and
$5,931,000 ($.60 per share), respectively.
The following table sets forth the accrued postretirement benefit cost of
these plans recognized in the Company's Balance Sheet:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees............................................ $ 5,491 $ 6,076
Fully eligible active plan participants............. 1,460 1,419
Other active plan participants...................... 2,186 1,836
Unrecognized net loss (gain)........................ 4 (109)
Unrecognized prior service cost..................... 353
----------- -----------
Accrued postretirement benefit cost............... $ 9,494 $ 9,222
=========== ===========
</TABLE>
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
The weighted average discount rate used in determining the APBO was 7.25% and
8.5% in 1993 and 1992, respectively.
Net periodic postretirement benefit cost include the following components:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
1993 1992
----- -----
(THOUSANDS
OF DOLLARS)
<S> <C> <C>
Service cost................................................... $161 $161
Interest cost on accumulated postretirement benefit obligation. 765 756
----- -----
Net periodic postretirement benefit cost..................... $926 $917
===== =====
</TABLE>
For 1991, the expense for postretirement benefits, which was recorded on a
pay-as-you-go basis and has not been restated, was approximately $631,000. The
Company's policy is to fund postretirement costs on a pay-as-you-go basis as in
prior years.
A 13% increase in the cost of medical care was assumed for 1993. This medical
trend rate is assumed to decrease 1% annually to 9% in 1997, and decrease to 0%
thereafter as a result of the expense cap in 1998. The medical trend rate
assumption affects the amounts reported. For example, a 1% increase in the
medical trend rate would increase the APBO by $674,000, and the net periodic
cost by $72,000 for 1993.
In 1993, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits" (SFAS 112). SFAS 112 requires the accrual of the expected costs of
providing certain benefits after employment, but before retirement, such as
health care continuation coverage. The adoption of SFAS 112 did not materially
affect the 1993 net loss.
NOTE G--LITIGATION AND CONTINGENCIES
The Company has been named as a defendant in various matters of litigation,
some of which are for substantial amounts, and involve alleged personal injury
and property damage from prolonged exposure to petroleum, petroleum related
products and substances used at its refinery or in the petroleum refining
process. The Company is a co-defendant with numerous other defendants in a
number of these suits. The Company is vigorously defending these actions,
however, the process of resolving these matters could take several years. The
liability, if any, associated with these cases was either accrued in accordance
with generally accepted accounting principles or was not determinable at
December 31, 1993. The Company has consulted with counsel with respect to each
such preceding or large claim which is pending or threatened. While litigation
can contain a high degree of uncertainty and the risk of an unfavorable
outcome, in the opinion of management, there is no reasonable basis to believe
that the eventual outcome of any such matter or group of related matters will
have a material adverse effect on the Company.
The Company's income tax returns for the 1988 and 1989 fiscal years are
currently under examination by the Internal Revenue Service. The Company's
income tax returns for the 1984 to 1987 fiscal years have been examined by the
Internal Revenue Service and a Revenue Agent's Report has
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
been received. The Company has filed a written protest in response to certain
proposed adjustments with the Office of Regional Director of Appeals relating
to these proposed adjustments. In management's opinion, the ultimate
disposition of the Report will not have a material adverse effect on the
Company.
Like other petroleum refiners and marketers, the Company's operations are
subject to extensive and rapidly changing federal and state environmental
regulations governing air emissions, waste water discharges, and solid and
hazardous waste management activities. The Company's policy is to accrue
environmental and clean-up related costs of a non-capital nature when it is
both probable that a liability has been incurred and the amount can be
reasonably estimated. While it is often extremely difficult to reasonably
quantify future environmental related expenditures, the Company anticipates
that a substantial capital investment will be required over the next several
years to comply with existing regulations. The Company had recorded a liability
of approximately $16.8 million as of December 31, 1993 relative to the
estimated costs of compliance with environmental regulations.
Environmental liabilities are subject to considerable uncertainties which
affect the Company's ability to estimate its ultimate cost of remediation
efforts. These uncertainties include the exact nature and extent of the
contamination at each site, the extent of required cleanup efforts, varying
costs of alternative remediation strategies, changes in environmental
remediation requirements, the number and financial strength of other
potentially responsible parties at multi-party sites, and the identification of
new environmental sites. As a result, charges to income for environmental
liabilities could have a material effect on results of operations in a
particular quarter or year as assessments and remediation efforts proceed or as
new claims arise. However, management is not aware of any matters which would
be expected to have a material adverse effect on the Company.
NOTE H--NONCANCELLABLE LEASE COMMITMENTS
The Company has noncancellable operating lease commitments for refinery
equipment, service station and convenience store properties, autos, trucks, an
airplane, office and other equipment. Lease terms range from 60 to 96 months
for automotive and transportation equipment. Property leases typically have a
five-year term with renewal options for additional periods. Certain other
leases also carry renewal provisions. The Corporate Headquarters office
building lease which commenced in 1993 has a lease term of 10 years. The
airplane lease which commenced in 1992 has a lease term of 7 years. The
majority of service station properties have a lease term of 20 years. The
average lease term of convenience stores is approximately 12 years.
Future minimum rental payments under noncancellable operating lease
agreements as of December 31, 1993 are as follows (in thousands):
<TABLE>
<S> <C>
1994................................................................. $10,799
1995................................................................. 9,835
1996................................................................. 9,547
1997................................................................. 8,407
1998................................................................. 8,062
After 1998........................................................... 48,644
-------
Total Minimum Rental Payments.................................... $95,294
=======
</TABLE>
Rental expense for the years ended December 31, 1993, 1992 and 1991 was
$14,620,000, $16,487,000 and $16,438,000, respectively.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTE I--INVESTMENTS AND DEFERRED CHARGES
Investments and deferred charges consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1993 1992
----------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred turnarounds................................. $15,844 $24,454
Goodwill............................................. 10,883 11,859
Investments in subsidiaries.......................... 6,601 5,976
Long-term notes receivable........................... 2,969 3,136
Intangible pension asset............................. 1,834 2,004
Deferred financing costs............................. 1,121 1,324
Deferred proceeds--tax exchanges..................... 1,067 2,428
Other................................................ 2,589 2,435
----------- -----------
Investments and Deferred Charges................... $42,908 $53,616
=========== ===========
</TABLE>
Accumulated amortization of goodwill was $5,974,000 and $4,998,000 at
December 31, 1993 and 1992, respectively. The fair value of the Company's long-
term notes receivable at December 31, 1993 was $2,913,000, which was estimated
using a discounted cash flow analysis, based on the assumed interest rates for
similar types of arrangements.
NOTE J--NON-OPERATING GAINS
Non-operating gains in 1991 consist of litigation and insurance settlements.
There were no material net non-operating gains or losses which impacted income
in 1993 and 1992.
F-19
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
------------ -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents............................ $ 21,165 $ 52,021
Accounts receivable--net............................. 81,670 91,413
Recoverable income taxes............................. 14,996
Inventories.......................................... 90,440 86,811
Other current assets................................. 3,412 762
-------- --------
Total Current Assets............................... 211,683 231,007
Investments and Deferred Charges....................... 29,766 42,908
Property, Plant and Equipment.......................... 689,427 676,405
Less allowance for depreciation...................... 326,632 294,142
-------- --------
Net Property, Plant and Equipment................... 362,795 382,263
-------- --------
$604,244 $656,178
======== ========
</TABLE>
See notes to unaudited consolidated condensed financial statements
F-20
<PAGE>
CONSOLIDATED CONDENSED BALANCE SHEETS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
------------ -----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable:
Crude oil and refined products..................... $ 97,879 $104,166
Other.............................................. 16,604 20,500
Accrued liabilities................................. 46,787 50,145
Income taxes payable................................ 3,264
Current portion of long-term debt................... 10,053 1,094
-------- --------
Total Current Liabilities......................... 171,323 179,169
Long-Term Debt........................................ 56,955 65,579
Deferred Income Taxes................................. 73,960 81,217
Other Deferred Liabilities............................ 31,621 31,860
Common Stockholders' Equity
Common stock, Class A--par value $5 per share:
Authorized 7,500,000 shares; issued and outstanding
shares--4,817,392 in 1994 and 1993................ 24,087 24,087
Common stock, Class B--par value $5 per share:
Authorized 7,500,000 shares; issued and outstanding
shares--4,984,806 in 1994 and 5,015,206 in 1993... 24,924 25,076
Additional paid-in capital.......................... 91,014 91,870
Retained earnings................................... 132,086 157,320
Unearned restricted stock........................... (1,726)
-------- --------
Total Common Stockholders' Equity................. 270,385 298,353
-------- --------
$604,244 $656,178
======== ========
</TABLE>
See notes to unaudited consolidated condensed financial statements
F-21
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- ----------------------
1994 1993 1994 1993
--------- -------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Sales and operating revenues
(including excise taxes of
$97,012, $69,003, $295,131 and
$207,289)...................... $ 468,275 $455,691 $1,315,284 $1,316,770
--------- -------- ---------- ----------
Operating Costs and Expenses:
Costs and operating expenses.... 456,997 421,714 1,234,556 1,222,371
Selling and administrative ex-
penses......................... 21,379 23,693 62,564 69,723
Depreciation and amortization... 12,665 10,537 33,734 31,307
Sales and abandonments of prop-
erty, plant and equipment...... 16,899 169 16,554 (108)
--------- -------- ---------- ----------
507,940 456,113 1,347,408 1,323,293
--------- -------- ---------- ----------
Operating (Loss).................. (39,665) (422) (32,124) (6,523)
Interest and other income......... 283 179 1,152 398
Interest expense.................. (1,979) (1,894) (5,836) (5,514)
--------- -------- ---------- ----------
(Loss) Before Income Taxes........ (41,361) (2,137) (36,808) (11,639)
Income Tax (Benefit) Expense...... (14,753) 1,119 (11,574) (397)
--------- -------- ---------- ----------
Net (Loss)........................ $ (26,608) $ (3,256) $ (25,234) $ (11,242)
========= ======== ========== ==========
Net (Loss) Per Share.............. $ (2.71) $ (.33) $ (2.57) $ (1.14)
========= ======== ========== ==========
</TABLE>
See notes to unaudited consolidated condensed financial statements
F-22
<PAGE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
--------------------------------
1994 1993
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Net Cash Flows From Operating Activities
Net cash from operations before changes in
working
capital................................... $ 17,888 $ 20,060
Net changes in working capital............. (28,337) (10,713)
--------------- ---------------
Net Cash (Used in) Provided by Operating
Activities.............................. (10,449) 9,347
--------------- ---------------
Cash Flows From Investment Activities
Capital expenditures....................... (21,121) (29,797)
Proceeds from sale of property, plant and
equipment................................. 3,369 2,782
Deferred turnaround maintenance and other.. (103) (3,522)
--------------- ---------------
Net Cash (Used in) Investment Activities. (17,855) (30,537)
--------------- ---------------
Cash Flows From Financing Activities
Net cash flows from long-term debt......... (101) (255)
Net proceeds from purchase money lien...... 437
Proceeds from interest rate swap termina-
tions..................................... 2,403
Net cash flows from long-term notes receiv-
able...................................... (154) (53)
Purchases of Class B Common Stock.......... (2,734)
--------------- ---------------
Net Cash (Used in) Provided by Financing
Activities.............................. (2,552) 2,095
--------------- ---------------
Net (Decrease) in Cash and Cash Equivalents.. $ (30,856) $ (19,095)
=============== ===============
</TABLE>
See notes to unaudited consolidated condensed financial statements
F-23
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1994
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments considered necessary for a fair and comparable presentation have
been included. Operating results for the three and nine months ended September
30, 1994 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1994. The enclosed financial statements should be
read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1993.
Cash and Cash Equivalents--Cash in excess of daily requirements is invested
in marketable securities with maturities of three months or less. Such
investments are deemed to be cash equivalents for purposes of the statements of
cash flows.
Inventories--The Company's crude oil, refined products, and convenience store
merchandise and gasoline inventories are valued at the lower of cost (last-in,
first-out) or market with the exception of crude oil inventory held for resale
which is valued at the lower of cost (first-in, first-out) or market. Materials
and supplies inventories are valued at cost. Incomplete exchanges of crude oil
and refined products due the Company or owing to other companies are reflected
in the inventory accounts.
At September 30, 1994, approximately .4 million barrels of crude oil and
refined products, or approximately $7.5 million of inventory, were held in
excess of anticipated quantities and were valued at the lower of cost (first-
in, first-out) or market. An actual valuation of inventory under the LIFO
method can be made only at the end of each year based on the inventory levels
and costs at that time. Accordingly, interim LIFO projections must be based on
Management's estimates of expected year-end inventory levels and values.
Environmental Costs--The Company conducts environmental assessments and
remediation efforts at multiple locations, including operating facilities, and
previously owned or operated facilities. Estimated closure and post-closure
costs for active, operated refinery and finished product terminal facilities
are not recognized until a decision for closure is made. Estimated closure and
post-closure costs for active and operated retail marketing facilities and
costs of environmental matters related to ongoing refinery, terminal and retail
marketing operations are recognized as described below. Expenditures for
equipment necessary for environmental issues relating to ongoing operations are
capitalized. The Company accrues environmental and clean-up related costs of a
non-capital nature when it is both probable that a liability has been incurred
and that the amount can be reasonably estimated. Accruals for losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Estimated costs, which are based
upon experience and assessments, are recorded at undiscounted amounts without
considering the impact of inflation, and are adjusted periodically as
additional or new information is available.
Income Taxes--The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes." The income tax provision for the three and nine months ended September
30, 1994 has been computed based upon the Company's estimated effective tax
rate for the year, after recognizing permanent tax differences, to which the
F-24
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1994
federal statutory rate of 35%, state income taxes of approximately 4% and state
franchise taxes have been applied. Certain state franchise taxes are calculated
based on the Company's net assets and not as a percentage of income.
Financial Instruments and Hedging Activities--The Company periodically enters
into interest rate swap agreements to effectively manage the cost of
borrowings. All interest rate swaps are only subject to market risk as interest
rates fluctuate. For interest rate swaps designated to the Company's long-term
debt and accounted for as a hedge, the net amounts payable or receivable from
periodic settlements under outstanding interest rate swaps are included in
interest expense. Realized gains and losses from terminated interest rate swaps
are deferred and amortized into interest expense over the remaining term of the
original swap agreement. Settlement of interest rate swaps involves the receipt
or payment of cash on a periodic basis during the duration of the contract, or
upon the Company's termination of the contract, for the differential of the
interest rates swapped over the term of the contract.
Other instruments are used to minimize the exposure of the Company's refining
margins to crude oil and refined product price fluctuations. Hedging strategies
used to minimize this exposure include fixing a future margin between crude oil
and certain finished products and also hedging fixed price purchase and sales
commitments of crude oil and refined products. Futures, forwards and exchange
traded options entered into with commodities brokers and other integrated oil
and gas companies are utilized to execute the Company's strategies. These
instruments generally allow for settlement at the end of their term in either
cash or product.
Net realized gains and losses from these hedging strategies are recognized in
costs and operating expenses when the associated refined products are sold.
Unrealized gains and losses represent the difference between the market price
of refined products and the price of the instrument, inclusive of refining
costs. Individual transaction unrealized gains and losses are deferred in
inventory and other current assets and liabilities to the extent that the
associated refined products have not been sold. A hedging strategy position
generating an overall net unrealized loss is recognized in costs and operating
expenses. While the Company's hedging activities are intended to reduce
volatility while providing an acceptable profit margin on a portion of
production, the use of such a program can limit the Company's ability to
participate in an improvement in related product profit margins.
The Company is exposed to credit risk in the event of non-performance by
counterparties on interest rate swaps, and futures, forwards and exchange
traded options for crude and finished products, but the Company does not
anticipate non-performance by any of these counterparties. The amount of such
exposure is generally the unrealized gains in such contracts.
Statements of Cash Flows--Net changes in working capital items presented in
the Consolidated Condensed Statements of Cash Flows reflects changes in all
current assets and current liabilities with the exception of cash and cash
equivalents and the current portion of long-term debt.
Reclassifications--Deferred gains from interest rate swap terminations for
the nine months ended September 30, 1993 have been reclassified on the
Consolidated Condensed Statements of Cash Flows as a cash inflow from financing
activities consistent with the presentation in the Consolidated Statements of
Cash Flows in the Annual Report on Form 10-K for the fiscal year ended December
31, 1993. These deferred gains had previously been reported as a cash inflow
from operations in the Company's Form 10-Q for the period ended September 30,
1993. This reclassification had no effect on the net decrease in cash and cash
equivalents for the nine months ended September 30, 1993.
F-25
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1994
NOTE B--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
------------ -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Crude oil............................................. $ 47,859 $ 38,989
Refined products...................................... 73,152 60,519
-------- --------
Total inventories at FIFO (approximates current
cost).............................................. 121,011 99,508
LIFO allowance........................................ (43,756) (25,828)
-------- --------
Total crude oil and refined products................ 77,255 73,680
-------- --------
Merchandise inventory at FIFO (approximates current
cost)................................................ 7,662 7,200
LIFO allowance........................................ (2,387) (2,387)
-------- --------
Total merchandise................................... 5,275 4,813
-------- --------
Materials and supplies inventory at FIFO.............. 7,910 8,318
-------- --------
Total Inventory..................................... $ 90,440 $ 86,811
======== ========
</TABLE>
NOTE C--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
As of September 30, 1994, the Company has entered into interest rate swap
agreements with various financial institutions to effectively convert $47.5
million of its fixed rate debt to variable interest rate debt for remaining
periods ranging from 1996 to 1998.
The following is a summary, by year of maturity, of the Company's outstanding
interest rate swap agreements:
<TABLE>
<CAPTION>
INSTRUMENTS EXPECTED TO
MATURE IN
-------------------------
1996 1997 1998
------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Interest rate swaps................................. $17,500 $15,000 $15,000
Average pay rates assuming current market
conditions......................................... 5.86% 5.70% 5.73%
Average fixed rate received......................... 5.14% 5.36% 5.67%
</TABLE>
The variable interest rates to be paid by the Company are reset on various
predetermined dates which range from November 1994 to March 1998 and are based
upon the London Interbank Offered Rate (LIBOR).
The termination of existing interest rate swap agreements as of September 30,
1994 would result in a loss of approximately $2 million. During 1993, the
Company terminated certain other interest rate swap agreements resulting in
deferred gains of $1.4 million at September 30 1994, which will be recognized
as a reduction of interest expense over the remaining portion of the original
swap periods which range from 1996 to 1997.
Effective as of September 30, 1994, the Company executed amendments to the
Credit Agreement dated as of May 10, 1993 and the Note Purchase Agreement dated
January 3, 1991. These amendments, which are included as Exhibits 4(a) and 4(b)
to the Company's Quarterly Report on Form
F-26
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1994
10-Q for the quarter ended September 30, 1994, establish new financial
covenants which became necessary due to decreased refining margins in 1994, and
the write-down of the refinery equipment as discussed in the Results of
Operations section of Management's Discussion and Analysis of Financial
Condition and Results of Operations. In addition, subject to certain
conditions, the amendment to the Credit Agreement increases the limit of
additional indebtedness which can be incurred by the Company in the form of
notes in an aggregate principal amount not exceeding $125.0 million.
At September 30, 1994, the Company was in compliance with all amended
covenants and provisions of the Credit and Note Purchase Agreements. Meeting
the covenants imposed by the Credit and Note Purchase Agreements is dependent,
among other things, upon the level of future earnings and the rate of capital
spending. The Company reasonably expects to continue to be in compliance with
the covenants imposed by the Credit and Note Purchase Agreements over the next
twelve months.
NOTE D--CRUDE OIL AND REFINED PRODUCT HEDGING ACTIVITIES
The net deferred loss from hedging strategies at September 30, 1994 was $.2
million. Included in these hedging strategies are contracts maturing from
October 1994 through January 1995. The effect of these contracts was
effectively to hedge approximately 31% of its crude requirements, and
approximately 22% of its refined products, for the aforementioned period, at
current related market prices. The Company is exposed to credit risk to the
extent of counterparty non-performance on forward contracts. Management
monitors this credit risk by evaluating counterparties prior to and during
their contractual obligation. Management considers non-performance credit risk
to be remote.
NOTE E--LONG-TERM INCENTIVE PLAN
At the Annual Meeting held April 24, 1994, stockholders approved the 1994
Long-Term Incentive Plan (Plan). Under the Plan, the Company may distribute to
selected employees restricted shares of the Company's Class B Common Stock and
options to purchase Class B Common Stock. Up to 1.1 million shares of Class B
Common Stock may be distributed under the Plan over a five year period. During
the second quarter of 1994, the Company acquired 135,000 shares of Class B
Common Stock at a cost of $2,734,000 which could be required for use in
connection with the awards of stock and options under the Plan during the first
year. The balance sheet caption "Unearned restricted stock" is charged for the
market value of restricted shares issued, and is shown as a reduction of
stockholders' equity.
NOTE F--CALCULATION OF NET (LOSS) PER COMMON SHARE
Net (loss) per common share for the three and nine months ended September 30,
1994 is based upon the number of common shares outstanding of 9,802,198. Net
(loss) per common share for the three and nine months ended September 30, 1993
is based upon the number of common shares outstanding of 9,832,598.
NOTE G--LITIGATION AND CONTINGENCIES
Like other petroleum refiners and marketers, the Company's operations are
subject to extensive and rapidly changing federal and state environmental
regulations governing air emissions, waste water discharges, and solid and
hazardous waste management activities. The Company's policy is to accrue
environmental and clean-up related costs of a non-capital nature when it is
both probable that a liability has been incurred and that the amount can be
reasonably estimated. While it is often extremely difficult to reasonably
quantify future environmental related expenditures, the Company anticipates
that a substantial capital investment will be required over the next several
years to comply with existing
F-27
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN CENTRAL PETROLEUM CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1994
regulations. The Company had recorded a liability of approximately $16.3
million as of September 30, 1994 relative to the estimated costs of a non-
capital nature related to compliance with environmental regulations. This
liability is anticipated to be expended over the next five years and is
included in the balance sheet as a noncurrent liability. No amounts have been
accrued as receivables for potential reimbursement or recoveries to offset this
liability. Included in costs and operating expenses in the statements of
operations for the nine months ended September 30, 1994 and 1993 were costs
related to environmental remediation in the amount of $2.4 million and $3.5
million, respectively.
Environmental liabilities are subject to considerable uncertainties which
affect the Company's ability to estimate its ultimate cost of remediation
efforts. These uncertainties include the exact nature and extent of the
contamination at each site, the extent of required cleanup efforts, varying
costs of alternative remediation strategies, changes in environmental
remediation requirements, the number and strength of other potentially
responsible parties at multi-party sites, and the identification of new
environmental sites. It is possible that the ultimate cost, which cannot be
determined at this time, could exceed the Company's recorded liability. As a
result, charges to income for environmental liabilities could have a material
effect on results of operations in a particular quarter or year as assessments
and remediation efforts proceed or as new claims arise. However, management is
not aware of any matters which would be expected to have a material adverse
effect on the Company.
As disclosed in Note G of Notes to Consolidated Financial Statements in the
Annual Report on Form 10-K for the fiscal year ended December 31, 1993, the
Company's federal income tax returns for the years 1988 and 1989 are currently
being examined by the Internal Revenue Service. In conjunction with this
examination, certain Notices of Proposed Adjustments have been received
recently. The Company is currently evaluating these matters, but while an
estimate cannot be determined at this time, the Company does not believe that
the ultimate resolution of these matters will have a material adverse effect on
the Company. There have been no other material changes in the status of
contingencies as discussed in Note G.
F-28
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THE NOTES IN ANY JURISDICTION 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 AN IMPLICATION THAT
THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Investment Considerations................................................. 9
The Company............................................................... 12
Use of Proceeds........................................................... 12
Capitalization............................................................ 13
Selected Financial and Other Data......................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 25
Management................................................................ 43
Principal Stockholders.................................................... 48
Description of Other Indebtedness......................................... 49
Description of the Notes.................................................. 50
Underwriting.............................................................. 76
Legal Matters............................................................. 77
Experts................................................................... 77
Available Information..................................................... 77
Incorporation of Certain Documents by Reference........................... 78
Glossary.................................................................. 79
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$125,000,000
[LOGO OF CROWN APPEARS HERE]
CROWN CENTRAL
PETROLEUM CORPORATION
% SENIOR NOTES DUE 2005
-------------------
PROSPECTUS
-------------------
CHASE SECURITIES, INC.
NATIONSBANC CAPITAL MARKETS, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with this offering are as follows:
<TABLE>
<CAPTION>
AMOUNT TO BE PAID
-----------------
<S> <C>
SEC Registration Fee..................................... $ 43,104
NASD Filing Fee.......................................... 13,000
Blue Sky Fees and Expenses............................... 10,000
Fees of Rating Agencies.................................. 60,000
Legal Fees and Expenses.................................. 300,000
Accounting Fees and Expenses............................. 150,000
Printing and Engraving Expenses.......................... 185,000
Fees and Expenses of Trustee............................. 8,000
Miscellaneous............................................ 30,896
--------
TOTAL.................................................. $800,000
========
</TABLE>
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-laws and the Maryland General Corporation Law authorize
indemnification of directors, officers, employees and agents of the Company and
of persons serving at the Company's request in similar capacities or as a
partner, trustee or fiduciary of another entity, who is made a party defendant
to any proceeding, unless it is proved that the act or omission of such person
was material to the cause of action and that (1) such act or omission (A) was
committed in bad faith or (B) was the result of active and deliberate
dishonesty, or (2) such person actually received an improper personal benefit
in money, property or services, or (3) in the case of any criminal proceeding,
such person had reasonable cause to believe the act or omission was unlawful.
If the proceeding is by or in the right of the Company, indemnification may not
be made in respect of any proceeding in which such person is adjudged liable to
the Company. Payment or reimbursement of reasonable expenses in advance of the
final disposition of any proceeding may be allowed if the Company receives (1)
a written affirmation by such person of such person's good faith belief that
the standard of conduct necessary for indemnification has been met, and (2) a
written undertaking by or on behalf of such person to repay all amounts so paid
or reimbursed if it is ultimately determined that such standard of conduct has
not been met. The Maryland General Corporation Law also permits the purchase of
insurance on behalf of directors, officers, employees and agents against
liabilities whether or not the Company would have the power to indemnify
against such liabilities under the provisions of the statute.
As permitted by Sections 2-104(b)(8) and 2-405.2 of the Maryland General
Corporation Law, and Section 5-349 of the Courts and Judicial Proceedings
Article of the Annotated Code of Maryland, the Company's Charter contains
provisions eliminating a director's or officer's personal liability for money
damages to the Company or any of its stockholders in connection with any action
or failure to act subsequent to February 18, 1988 in his or her capacity as a
director or officer, except to the extent that it is proved that such person
actually received an improper benefit or profit in money, property or services,
for the amount of such benefit or profit, or to the extent that a final
adjudication adverse to such person is entered in a proceeding based on a
finding that such person's action or failure to act was the result of active
and deliberate dishonesty and was material to the cause of action.
II-1
<PAGE>
ITEM 16: EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Form of Underwriting Agreement*
4.1 Form of Indenture For Notes*
4.2 Credit Agreement dated as of May 10, 1993 between the Registrant and
various banks (previously filed with the Registrant's Form 8-K dated
May 19, 1993 and incorporated herein by reference). Certain portions
of this document were omitted because of their confidential nature,
and have been filed separately with the Securities and Exchange
Commission marked "Confidential Treatment".**
4.3 Amendment dated December 20, 1993 to the Credit Agreement dated as of
May 10, 1993 (previously filed as Exhibit 4(b) to the Registrant's
Form 10-K for the year ended December 31, 1993 and incorporated herein
by reference).**
4.4 Amendment effective as of September 30, 1994 to the Credit Agreement
dated as of May 10, 1993 (previously filed as Exhibit 4(a) to the
Registrant's Form 10-Q for the quarter ended September 30, 1994 and
incorporated herein by reference).**
4.5 Note Purchase Agreement dated January 3, 1991 between the Registrant
and a group of institutional lenders (previously filed with the
Registrant's Form 8-K dated January 3, 1991 and incorporated herein by
reference).**
4.6 Amendment dated as of February 14, 1992 to the Note Purchase Agreement
dated January 3, 1991 (previously filed as Exhibit 19(c) to the
Registrant's Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference). Certain portions of this document
were omitted because of their confidential nature, and have been filed
separately with the Securities and Exchange Commission marked
"Confidential Treatment".**
4.7 Amendment dated as of November 10, 1992 to the Note Purchase Agreement
dated January 3, 1991 (previously filed as Exhibit 19(d) to the
Registrant's Form 10-Q for the quarter ended September 30, 1992 and
incorporated herein by reference).**
4.8 Amendment dated as of September 30, 1994 to the Note Purchase
Agreement dated January 3, 1991 (previously filed as Exhibit 4(b) to
the Registrant's Form 10-Q for the quarter ended September 30, 1994
and incorporated herein by reference).**
5 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. Re Legality of
Notes*
12 Statement Re Computation of Ratios**
23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included in
opinion filed as Exhibit 5)*
23.2 Consent of Ernst & Young LLP*
24 Power of Attorney (Included in Part II)**
25 Statement Re Eligibility of Trustee**
</TABLE>
- --------
* Filed herewith
** Previously filed
ITEM 17: UNDERTAKINGS
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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's
II-2
<PAGE>
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than 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 Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BALTIMORE, MARYLAND, ON JANUARY 16, 1995.
Crown Central Petroleum Corporation
By /s/ Thomas L. Owsley
-----------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT OR AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Henry A. Rosenberg, Jr.* Director, Chairman January 16, 1995
- ------------------------------------ of the Board and
HENRY A. ROSENBERG, JR. Chief Executive
Officer (Principal
Executive Officer)
/s/ Charles L. Dunlap* Director, President January 16, 1995
- ------------------------------------ and Chief
CHARLES L. DUNLAP Operating Officer
/s/ Phillip W. Taff* Senior Vice January 16, 1995
- ------------------------------------ President--
PHILLIP W. TAFF Finance and Chief
Financial Officer
(Principal
Financial Officer)
Senior Vice January 16, 1995
/s/ John E. Wheeler, Jr.* President--
- ------------------------------------ Treasurer and
JOHN E. WHEELER, JR. Controller
(Principal
Accounting
Officer)
/s/ Jack Africk* Director January 16, 1995
- ------------------------------------
JACK AFRICK
/s/ George L. Bunting, Jr.* Director January 16, 1995
- ------------------------------------
GEORGE L. BUNTING, JR.
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ Michael F. Dacey* Director January 16, 1995
- -------------------------------------
MICHAEL F. DACEY
/s/ Robert M. Freeman* Director January 16, 1995
- -------------------------------------
ROBERT M. FREEMAN
/s/ Thomas M. Gibbons* Director January 16, 1995
- -------------------------------------
THOMAS M. GIBBONS
/s/ Patricia A. Goldman* Director January 16, 1995
- -------------------------------------
PATRICIA A. GOLDMAN
/s/ William L. Jews* Director January 16, 1995
- -------------------------------------
WILLIAM L. JEWS
/s/ Malcolm McNair* Director January 16, 1995
- -------------------------------------
MALCOLM MCNAIR
/s/ Thomas L. Owsley
* By: _______________________________
THOMAS L. OWSLEY
AS ATTORNEY-IN-FACT
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Form of Underwriting Agreement*
4.1 Form of Indenture For Notes*
4.2 Credit Agreement dated as of May 10, 1993 between the Registrant and
various banks (previously filed with the Registrant's Form 8-K dated
May 19, 1993 and incorporated herein by reference). Certain portions
of this document were omitted because of their confidential nature,
and have been filed separately with the Securities and Exchange Com-
mission marked "Confidential Treatment".**
4.3 Amendment dated December 20, 1993 to the Credit Agreement dated as of
May 10, 1993 (previously filed as Exhibit 4(b) to the Registrant's
Form 10-K for the year ended December 31, 1993 and incorporated herein
by reference).**
4.4 Amendment effective as of September 30, 1994 to the Credit Agreement
dated as of May 10, 1993 (previously filed as Exhibit 4(a) to the Reg-
istrant's Form 10-Q for the quarter ended September 30, 1994 and in-
corporated herein by reference).**
4.5 Note Purchase Agreement dated January 3, 1991 between the Registrant
and a group of institutional lenders (previously filed with the Regis-
trant's Form 8-K dated January 3, 1991 and incorporated herein by ref-
erence).**
4.6 Amendment dated as of February 14, 1992 to the Note Purchase Agreement
dated January 3, 1991 (previously filed as Exhibit 19(c) to the Regis-
trant's Form 10-K for the year ended December 31, 1991 and incorpo-
rated herein by reference). Certain portions of this document were
omitted because of their confidential nature, and have been filed sep-
arately with the Securities and Exchange Commission marked "Confiden-
tial Treatment".**
4.7 Amendment dated as of November 10, 1992 to the Note Purchase Agreement
dated January 3, 1991 (previously filed as Exhibit 19(d) to the Regis-
trant's Form 10-Q for the quarter ended September 30, 1992 and incor-
porated herein by reference).**
4.8 Amendment dated as of September 30, 1994 to the Note Purchase Agree-
ment dated January 3, 1991 (previously filed as Exhibit 4(b) to the
Registrant's Form 10-Q for the quarter ended September 30, 1994 and
incorporated herein by reference).**
5 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. Re Legality of
Notes*
12 Statement Re Computation of Ratios**
23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included in opin-
ion filed as Exhibit 5)*
23.2 Consent of Ernst & Young LLP*
24 Power of Attorney (Included in Part II)**
25 Statement Re Eligibility of Trustee**
</TABLE>
- --------
*Filed herewith
**Previously filed
<PAGE>
EXHIBIT 1
MTHM DRAFT
1/13/95
$125,000,000
CROWN CENTRAL PETROLEUM CORPORATION
(a Maryland corporation)
___% Senior Notes due 2005
UNDERWRITING AGREEMENT
January __, 1995
<PAGE>
UNDERWRITING AGREEMENT
January __, 1995
CROWN CENTRAL PETROLEUM CORPORATION
One North Charles Street
Baltimore, Maryland 21201
Ladies and Gentlemen:
This confirms the agreement of Crown Central Petroleum Corporation, a
corporation organized pursuant to the laws of the State of Maryland (the
"Issuer"), with Chase Securities, Inc. and NationsBanc Capital Markets, Inc.
(the "Underwriters"). On the terms and subject to the conditions contained
herein, the Issuer proposes to issue, pursuant to an Indenture to be dated as of
January __, 1995 (the "Indenture") between the Issuer and The First National
Bank of Boston, as Trustee (the "Trustee"), which will be substantially in the
form of the Indenture filed as an exhibit to the Registration Statement referred
to below, and to sell to the several Underwriters, $125,000,000 in aggregate
principal amount of its ___% Senior Notes due 2005 (the "Securities").
Capitalized terms used herein and not otherwise defined herein are used as
defined in the Indenture.
Section 1. Registration Statement. The Issuer represents and
----------------------
warrants that: a registration statement (File No. 33-56429) on Form S-3
("Form S-3") with respect to the Securities, including a preliminary prospectus,
Amendment No. 1, Amendment No. 2 and Amendment No. 3 to such registration
statement, and as a part of each such amendment a preliminary prospectus, has
been filed by the Issuer with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), and the published rules and regulations under said Act (the "Securities
Act Rules and Regulations"), in the form heretofore delivered to the
Underwriters; no other amendment thereto or document incorporated by reference
therein has heretofore been filed with the Commission; and either (a) Amendment
No. __ to such registration statement, and as a part thereof a final prospectus,
in the form heretofore delivered to the Underwriters is now proposed to be filed
with the Commission; or (b) if the Issuer has elected to rely upon Rule 430A
("Rule 430A") of the Securities Act Rules and Regulations, the Issuer will
prepare and file a prospectus, in accordance with the provisions of Rule 430A
and Rule 424(b) ("Rule 424(b)") of the Securities Act Rules and Regulations,
promptly after execution and delivery of this Agreement (the information, if
any, included in such prospectus that was omitted from the prospectus included
in such registration statement at the time it becomes effective but that
<PAGE>
is deemed, pursuant to Rule 430A(b), to be part of such registration statement
at the time it becomes effective is referred to herein as the "Rule 430A
Information"). No amendment thereto other than those described above or to any
document incorporated by reference therein will be filed prior to the time such
registration statement becomes effective which shall have been disapproved by
the Underwriters promptly after reasonable written notice thereof. The Issuer
has also filed the Indenture with the Commission pursuant to the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), and the published rules and
regulations under the Trust Indenture Act (together with the Securities Act
Rules and Regulations, the "Rules and Regulations"). As used in this Agreement,
the term "Preliminary Prospectus" means each preliminary prospectus filed with
such registration statement before it becomes effective and any prospectus that
omits the Rule 430A Information that is used after such effectiveness and prior
to the execution and delivery of this Agreement; the term "Registration
Statement" means such registration statement including all exhibits and
financial statements and schedules thereto (but excluding Form T-1) and all
documents incorporated or deemed to be incorporated by reference in the
prospectus included in such registration statement as amended at the time when
it becomes effective and including, if applicable, the Rule 430A Information;
and the term "Prospectus" means the final prospectus included in the
Registration Statement at the time the Registration Statement becomes effective
except that, if the final prospectus first furnished to the Underwriters after
the execution of this Agreement for use in connection with the offering of the
Securities differs from the prospectus included in the Registration Statement at
the time it becomes effective (whether or not such prospectus is required to be
filed pursuant to Rule 424(b)), the term "Prospectus" shall refer to the final
prospectus first furnished to the Underwriters for such use. References herein
to the "Exchange Act" mean the Securities Exchange Act of 1934, as amended, and
references to the "Exchange Act Rules and Regulations" mean the published rules
and regulations under the Exchange Act. Any reference to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be, and in the case of any reference to the
Prospectus also shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12(b) of Form S-3, and any
supplement or amendment thereto, filed with the Commission after the date of
filing of the Prospectus under Rule 424(b) and prior to the termination of the
offering of the Notes by the Underwriters. As used in this Agreement, the term
"Incorporated Documents" means the documents which at the time are incorporated
by reference pursuant to Item 12 of Form S-3 into the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto.
2
<PAGE>
Section 2. Sale and Delivery of the Securities; Default by
------------------------------------ ----------
Underwriters. (a) On the basis of the representations, warranties, agreements
- ------------
and covenants herein contained and subject to the terms and conditions herein
set forth, the Issuer agrees to issue and sell to each of the Underwriters, and
each of the Underwriters, severally and not jointly, agrees to purchase from the
Issuer, at a purchase price of ______% of the principal amount thereof, plus
accrued interest from January __, 1995 to the Closing Date (as defined in
Section 2(b) hereof), the respective principal amount of the Securities set
forth opposite the name of such Underwriter in Schedule I hereto.
(b) The Securities which each Underwriter has agreed to purchase
hereunder, in definitive form, shall be delivered by or on behalf of the Issuer
to the Underwriters for the account of such Underwriter against payment by such
Underwriter or on its behalf of the purchase price therefor by certified or
official bank check or checks in New York Clearing House (next day) funds to the
order of the Issuer at the offices of Milbank, Tweed, Hadley & McCloy, One Chase
Manhattan Plaza, New York, New York 10005, at 10 A.M., New York City time, on
January __, 1995 or at such other time and place not later than the fifth full
business day thereafter as the Underwriters and the Issuer may determine, such
time of delivery against payment being herein referred to as the "Closing Date."
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition to the obligations of each
Underwriter hereunder. The Securities so to be delivered will be in such
denominations and registered in such names as requested by the Underwriters not
less than 48 hours prior to the Closing Date. Such Securities will be made
available for checking and packaging at the offices of Chase Securities, Inc.,
One Chase Manhattan Plaza, New York, New York 10081, at least 24 hours prior to
the Closing Date or at such other time and place as may be agreed by the
Underwriters.
(c) If any Underwriter shall fail to purchase and pay for any of the
Securities agreed to be purchased by such Underwriter hereunder and such failure
to purchase shall constitute a default in the performance of its obligations
under this Agreement, the remaining Underwriter shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriter does not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Issuer. In the event of any such default that does not result in a
termination of this Agreement, either the Underwriters or the Issuer shall have
the right to postpone the Closing Date for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements and the Company agrees to file
promptly any amendments to the Registration Statement or the Prospectus which in
the opinion of
3
<PAGE>
the Underwriters may thereby be made necessary. No action taken pursuant to
this Section shall relieve any defaulting Underwriter from liability in respect
of its default.
Section 3. Offering by the Underwriters. After the Registration
----------------------------
Statement becomes effective, the several Underwriters propose to offer the
Securities for sale to the public upon the terms set forth in the Prospectus.
Section 4. Conditions to the Obligations of the Underwriters. The
------------------------------------ ------------
obligations of the several Underwriters to purchase and pay for the Securities
shall be subject to the accuracy of the representations and warranties of the
Issuer herein as of the date hereof and as of the Closing Date as if made on and
as of the Closing Date, to the accuracy of the statements of the officers of the
Issuer made in any certificate delivered to the Underwriters or their counsel
pursuant to the provisions hereof, to the performance by the Issuer of its
obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective and the
Underwriters shall have received a notice thereof, not later than 5:30
P.M., New York City time, on the date of this Agreement, or such later time
and date as to which the Underwriters shall have consented; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Issuer or the
Underwriters, shall have been threatened or shall be contemplated by the
Commission; and all requests of the Commission for additional information
(to be included in the Registration Statement or Prospectus or otherwise)
shall have been complied with to the reasonable satisfaction of the
Underwriters or withdrawn; and the Issuer shall not have filed with the
Commission the Prospectus or any amendment or supplement to the
Registration Statement or Prospectus or any document which, upon filing,
becomes an Incorporated Document, without the consent of the Underwriters.
If the Issuer has elected to rely upon Rule 430A, a prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with
the requirements of Rule 43OA).
(b) The Underwriters shall have received an opinion, dated the
Closing Date, of each of McGuire, Woods, Battle & Boothe, L.L.P. and Thomas
L. Owsley, Esq., counsel for the Issuer, in form and substance satisfactory
to the Underwriters to the effect set forth respectively in Exhibits A-1
and A-2 hereto.
4
<PAGE>
(c) The Underwriters shall have received an opinion, dated the
Closing Date, of Milbank, Tweed, Hadley & McCloy, counsel for the several
Underwriters, to the effect that each the opinions delivered pursuant to
Section 4(b) hereof appears on its face to be appropriately responsive to
the requirements of this Agreement except, specifying the same, to the
extent waived by the Underwriters, and with respect to the Securities, this
Agreement and the Indenture, the legal existence of the Issuer, and such
other related matters as the Underwriters may require. In giving such
opinion, such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the Federal law of the United States, the law of
the State of New York and the General Corporation Law of the State of
Delaware, upon opinions of counsel satisfactory to the Underwriters. Such
counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers or other appropriate representatives of the Issuer
and certificates of public officials.
(d) On the effective date of this Agreement and also on the Closing
Date, the Issuer shall have furnished to the Underwriters letters, dated
the date of delivery thereof, of Ernst & Young LLP addressed to the
Underwriters in form and substance satisfactory to the Underwriters, to the
effect set forth in Exhibit B hereto.
(e) Neither of the following events shall have occurred on any date
during the period subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus:
(i) the Issuer or any of its subsidiaries shall have sustained
any loss or interference with its business or properties from fire,
explosion, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or any court or
governmental action, order or decree; or
(ii) there shall have been any change in the capital stock
(other than as a result of the exercise of the Issuer's outstanding
stock options or vesting of its performance vested restricted stock
awards) or long-term debt of the Issuer or any of its subsidiaries, or
any other change, or any development involving a prospective change,
in or affecting the business, management, results of operations,
assets, condition (financial or otherwise), stockholders' equity or
prospects of the Issuer and its subsidiaries considered as a whole;
except in each case as described in or contemplated by the Prospectus, the
effect of which in any such case described
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in clauses (i) or (ii) is, in the judgment of the Underwriters, so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or delivery of the Securities on the terms and in the
manner contemplated in the Prospectus; and the Underwriters shall have
received a certificate, dated the Closing Date, of the chief executive or
operating officer and the chief financial officer of the Issuer to the
effect that, to the best of their knowledge and belief after reasonable
investigation, (A) none of such events has occurred, (B) all of the
representations and warranties of the Issuer in this Agreement are true and
correct as if made on and as of the Closing Date and (C) the Issuer has
performed all obligations and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date.
(f) At the Closing Date, the Underwriters shall have received a
certificate of the chief financial officer of the Issuer as to certain
agreed upon financial matters.
(g) At the Closing Date, counsel for the Underwriters shall have
been furnished with all such documents (including any consents under any
agreements to which the Issuer is a party), certificates and opinions as
they may reasonably request for the purpose of enabling them to pass upon
the issuance and sale of the Securities as contemplated in this Agreement
and the matters referred to in Sections 4(b) and (c) hereof and in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements of the Issuer, the performance of the covenants of
the Issuer, or the fulfillment of any of the conditions herein contained;
and all proceedings taken by the Issuer at or prior to the Closing Date in
connection with the authorization, issuance and sale of the Securities and
the authorization and delivery of the Indenture and any other operative
document, each as contemplated in this Agreement, shall be satisfactory in
form and substance to the Underwriters and to counsel for the Underwriters.
The Issuer shall furnish to the Underwriters such conformed copies of
such opinions, certificates, letters and documents in such quantities as
the Underwriters shall reasonably request. If any of the conditions
specified in this Section 4 shall not have been fulfilled when and as
required by this Agreement to be fulfilled, this Agreement may be
terminated by the Underwriters on notice to the Issuer at any time at or
prior to the Closing Date, and such termination shall be without liability
of either party to any other party, except as provided in Section 7 hereof.
Notwithstanding any such termination, the provisions of Section 8 hereof
shall remain in effect.
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Section 5. Representations and Warranties of the Issuer. The Issuer
------------------------------------- ------
represents and warrants to, and agrees with each of the several Underwriters
that:
(a) The Issuer and the transactions contemplated by this Agreement
meet the requirements for the use of Form S-3 and the Issuer has filed with
the Commission under the Securities Act in conformity with such Act, the
Trust Indenture Act and the Rules and Regulations a registration statement
as described in Section 1 hereof, including a Preliminary Prospectus; one
or more amendments to or changes in such registration statement have been
or may be so filed; and either (i) the Issuer proposes to file prior to the
effectiveness of such registration statement an additional amendment,
copies of which have heretofore been delivered to the Underwriters or (ii)
if the Issuer elects to rely upon Rule 430A, the Issuer proposes to file a
final Prospectus with the Commission pursuant to Rule 424(b) of the
Securities Act Rules and Regulations.
(b) The Registration Statement and the Prospectus and any amendments
or supplements thereto, as of their respective effective or issue dates,
complied or will comply as to form in all material respects with the
requirements of the Securities Act, the Trust Indenture Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations.
(c) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus, at
the time of filing thereof, complied in all material respects with the
requirements of the Securities Act, the Trust Indenture Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations
and did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that this representation and
warranty shall not apply to any statement or omission made in reliance upon
and in conformity with information furnished in writing to the Issuer by
any Underwriter expressly for use therein (the "Underwriter Information").
When the Registration Statement becomes effective and at all times
subsequent thereto up to and including the Closing Date, (A) the
Registration Statement and the Prospectus and any amendments or supplements
thereto will contain all statements which are required to be stated therein
in accordance with, and will comply in all material respects with the
requirements of, the Securities Act, the Trust Indenture Act, the Rules and
Regulations, the Exchange Act and the Exchange Act Rules and Regulations;
(B) neither the Registration Statement nor any amendment or supplement
thereto will include any untrue
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statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading; and (C) neither the Prospectus nor any amendment or supplement
thereto will include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided that this representation and warranty shall not apply to any
statement or omission made in reliance upon and in conformity with the
Underwriter Information. The statements in the Prospectus under the
headings "Prospectus Summary -- The Offering" and "Description of the
Notes" insofar as such statements purport to summarize certain provisions
of the Securities and the Indenture, provide an accurate summary of such
provisions in all material respects.
(d) The Incorporated Documents heretofore filed, at the time they
were filed with the Commission (or if any amendment to any such document
was filed, at the time such amendment was filed), complied in all material
respects with the requirements of the Exchange Act and the Exchange Act
Rules and Regulations, and any further Incorporated Documents so filed
will, when they are filed, comply in all material respects with the
requirements of the Exchange Act and the Exchange Act Rules and
Regulations; when read together with the other information in the
Prospectus, at the time the Registration Statement became effective and at
all times subsequent thereto up to the Closing Date, no such document (or
amendment thereto, if any) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and no such
further document, when it is filed, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(e) The Issuer and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, with
full power and authority (corporate and other) to own their properties and
conduct their respective businesses as described in the Prospectus, and are
duly qualified to transact business as foreign corporations in good
standing under the laws of each jurisdiction where the ownership or leasing
of their respective properties or the conduct of their respective
businesses requires such qualification, except where the failure to so
qualify could not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the business, management, results
of operations,
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assets, condition (financial or otherwise), stockholders' equity or
prospects of the Issuer and its subsidiaries considered as a whole or on
the ability of the Issuer to perform its obligations under this Agreement,
the Indenture or the Securities (a "Material Adverse Effect"); the Issuer
had at the dates indicated an authorized capitalization as set forth in the
Prospectus, and the issued shares of capital stock of the Issuer have been
duly authorized and validly issued and are fully paid and non-assessable,
and the outstanding shares of capital stock of each of the subsidiaries of
the Issuer have been duly authorized and validly issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned
beneficially by the Issuer directly, or indirectly through one or more of
the other subsidiaries, free and clear of all liens, encumbrances, equities
and claims. Neither the Company nor any of its subsidiaries is in
violation of its respective corporate charter or bylaws; and neither the
Company nor any of its subsidiaries is in default (nor has an event
occurred that with notice, lapse of time or both would constitute a
default) in the performance of any obligation, agreement or condition
contained in any agreement, lease, indenture or instrument to which the
Company or any of its subsidiaries is a party or by which any of them or
any of their respective properties is bound, where such default could
reasonably be expected to have a Material Adverse Effect.
(f) The Issuer has full power and authority to enter into and
perform this Agreement and the Indenture and to issue, sell and deliver the
Securities to be sold by it to the several Underwriters as provided herein
and therein. No consent, approval, authorization, order, registration or
qualification of or filing with any court or governmental agency or body is
required for the execution, delivery or performance of this Agreement, the
Indenture and the Securities by the Issuer, or the consummation by the
Issuer of the transactions contemplated hereby and thereby, except such as
have been obtained or, if the Registration Statement has not yet become
effective, will be obtained under the Securities Act and Trust Indenture
Act and such as may be required under state securities or blue sky laws or
by the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the purchase and distribution of the Securities by the
several Underwriters. The issuance, offer, sale and delivery of the
Securities, execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Issuer, and the consummation by the
Issuer of the transactions contemplated hereby and thereby does not and
will not conflict with or result in a breach or violation by the Issuer or
any of its subsidiaries, as the case may be, of any of the terms or
provisions of, constitute a default by the Issuer or any of its
subsidiaries, as the case may be, under, or result in
9
<PAGE>
the creation or imposition of any lien, charge, security interest,
encumbrance, claim or other restriction upon any properties or assets of
the Issuer or any of its subsidiaries, as the case may be, pursuant to the
terms of, any (A) indenture, mortgage, deed of trust, sale/leaseback
agreement, loan agreement, note, bond, debenture, lease or other agreement
or instrument to which the Issuer or any of its subsidiaries, as the case
may be, is a party or to which any of them or any of their respective
properties is subject, (B) the charter or bylaws of the Issuer or any of
its subsidiaries, as the case may be, or (C) any statute, judgment, decree,
order, injunction, rule or regulation of any court, governmental agency or
regulatory agency or body having jurisdiction over the Issuer or any of its
subsidiaries or any of their respective properties or assets.
(g) The execution and delivery of, and the performance by the Issuer
of its obligations under, the Indenture have been duly authorized by all
necessary corporate action of the Issuer. At the Closing Date, the
Indenture will be duly qualified under the Trust Indenture Act and, when
executed and delivered by the Issuer and assuming due authorization,
execution and delivery by the Trustee, will be a legal, valid and binding
agreement of the Issuer, enforceable against the Issuer in accordance with
its terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). The issuance, execution
and delivery of the Securities have been duly authorized by all necessary
corporate action of the Issuer and, when executed, issued and delivered by
the Issuer and authenticated by the Trustee and paid for in accordance with
this Agreement, the Securities will be the legal, valid and binding
obligations of the Issuer, entitled to the benefits of the Indenture, which
will be in substantially the form filed as an exhibit to the Registration
Statement, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). The Securities and the
Indenture will conform to the descriptions thereof in the Prospectus. The
execution and delivery of this Agreement by the Issuer have been duly
authorized by all necessary corporate action, and this Agreement has been
duly executed and delivered by the Issuer and constitutes the legal, valid
and binding agreement of the Issuer, enforceable against the Issuer in
accordance with its terms, except to the extent that
10
<PAGE>
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity), and except as rights to indemnity and contribution hereunder
may be limited by Federal or state securities laws or by policies
underlying such laws.
(h) Except as described or referred to in the Prospectus, there is
not pending, or to the knowledge of the Issuer threatened or contemplated,
any action, suit, proceeding, inquiry or investigation, to which the Issuer
or any of its subsidiaries is a party, or to which the property of the
Issuer or any of its subsidiaries is subject, before or brought by any
court or governmental or administrative agency or body, which, if
determined adversely to the Issuer or any of its subsidiaries, could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or could reasonably be expected to affect
materially and adversely the consummation of the offering of the Securities
pursuant to this Agreement and the transactions contemplated in the
Prospectus under "Use of Proceeds"; all pending legal or governmental
proceedings to which the Issuer or any of its subsidiaries is a party or
that affect any of their respective properties that are not described in
the Prospectus, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result, in the aggregate, in
a Material Adverse Effect.
(i) The consolidated financial statements and the related notes
included or incorporated by reference in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus present fairly the consolidated
financial position, results of operations, cash flows and stockholders'
equity of the Issuer and its subsidiaries as of the dates and for the
periods therein indicated and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent
basis, except as otherwise stated therein. The financial statement
schedules, if any, included in the Registration Statement (or incorporated
by reference therein), present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data,
summary financial data and other financial and statistical data included in
the Registration Statement, in any Preliminary Prospectus or in the
Prospectus present fairly in accordance with the Securities Act Rules and
Regulations the information shown therein and have been compiled on a basis
consistent with that of the audited consolidated financial statements
included in the Registration Statement; and no other financial statements
or pro forma financial statements are required to be included in the
Registration Statement, in any Preliminary Prospectus and in the
Prospectus. Ernst
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& Young LLP, who have certified certain financial statements as set forth
in their reports included in the Registration Statement and Prospectus and
each Preliminary Prospectus, are independent public accountants as required
by the Securities Act and the Rules and Regulations.
(j) Except as described in or contemplated by the Registration
Statement and the Prospectus, subsequent to the respective dates as of
which such information is given in the Registration Statement and the
Prospectus, (i) neither the Issuer nor any of the Subsidiaries has
sustained any loss or interference with its business or properties from
fire, explosion, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree which could reasonably be expected to
have a Material Adverse Effect; and (ii) there has not been any change in
the capital stock (other than as a result of the exercise of the Company's
outstanding stock options or vesting of its performance vested restricted
stock awards) or long-term debt of the Issuer or any of its subsidiaries,
or any other material adverse change, or any development involving a
prospective material adverse change, in or affecting the business,
management, results of operations, assets, condition (financial or
otherwise), stockholders' equity or prospects of the Issuer and its
subsidiaries considered as a whole.
(k) The Issuer and each of its subsidiaries have good and marketable
title to all property (real and personal) and assets, described in the
Prospectus as owned by them, free and clear of all liens, charges, security
interests, encumbrances, claims, or other restrictions, except such as are
described in the Prospectus or do not interfere with the use made and
proposed to be made of such properties by the Issuer and its subsidiaries
and could not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect; and all of the leases and
subleases material to the business of the Issuer and its subsidiaries taken
as a whole, and under which the Issuer or any of its subsidiaries holds
properties described in the Prospectus, are valid, subsisting and
enforceable and neither the Issuer nor any of its subsidiaries has any
notice of any claim of any sort that has been asserted by anyone adverse to
the rights of the Issuer or any of its subsidiaries under such leases or
subleases, or affecting or questioning the rights of the Issuer or any of
its subsidiaries to the continued possession of the leased or subleased
premises under any such lease or sublease, which claims could reasonably be
expected to have a Material Adverse Effect.
(l) Each of the Issuer and its subsidiaries owns or possesses all
governmental licenses, permits, certificates, consents, orders, approvals
and other authorizations
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(including those required by applicable Environmental Laws (as defined
below)) that are or were necessary to own, lease, construct and operate its
properties and to conduct its business as presently conducted by it and
described in the Registration Statement and the Prospectus, except where
the failure to own or possess such licenses, permits, certificates,
consents, orders, approvals and other authorizations could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect (collectively, "Material Licenses"); all of the Material Licenses
are valid and in full force and effect, except where the invalidity of such
Material License or the failure of such Material License to be in full
force and effect could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect; the Issuer and its
subsidiaries have fulfilled and performed all of their respective
obligations with respect to such Material Licenses, and no event has
occurred which allows, or after notice or lapse of time or both would
allow, revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Material Licenses; and
none of the Issuer or any of its subsidiaries has received any notice of
proceedings relating to revocation, modification or termination of any such
Material Licenses which could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(m) Each of the Issuer and its subsidiaries owns or possesses, or
can acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, trademarks, service marks, trade names and know-how
(including trade secrets and other patentable and/or unpatentable
proprietary or confidential information or procedures) (collectively,
"intellectual property") necessary to carry on its business as presently
operated by it, except where the failure to own or possess or have the
ability to acquire any such intellectual property could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect; and none of the Issuer or any of its subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any intellectual property or of
any facts which would render any intellectual property invalid or
inadequate to protect the interest of the Issuer or any of its subsidiaries
therein which infringement or conflict could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
(n) None of the Issuer or any of its subsidiaries has taken, or will
take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of the Securities; and none of the Issuer or any of its
13
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subsidiaries has distributed or will distribute any prospectus (as such
term is defined in the Securities Act and the Rules and Regulations) in
connection with the offering and sale of the Securities other than any
Preliminary Prospectus, the Prospectus, the Registration Statement or other
materials, if any, permitted by the Securities Act or the Rules and
Regulations.
(o) None of the Issuer or any of its subsidiaries is an "investment
company" or an entity "controlled by" an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the published rules and regulations
thereunder.
(p) Except as described in the Prospectus, the Issuer and its
subsidiaries comply in all material respects with all Environmental Laws,
except to the extent that failure to comply with such Environmental Laws
could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect. Except as described in the Prospectus, none of
the Issuer or any of its subsidiaries is the subject of any pending or, to
the knowledge of the Issuer, threatened Federal, state or local
investigation evaluating whether any remedial action by the Issuer or any
of its subsidiaries is needed to respond to a release of any Hazardous
Materials (as defined below) into the environment, resulting from the
Issuer's or any of its subsidiaries' business operations or ownership or
possession of any of their properties or assets or is in contravention of
any Environmental Law that could reasonably be expected to result,
individually or in the aggregate, in a fine or penalty in excess of
$100,000 or in a Material Adverse Effect. Except as described in the
Prospectus, none of the Issuer or any of its subsidiaries has received any
notice or claim, nor are there pending or, to the knowledge of the Issuer,
threatened lawsuits against them, with respect to violations of or
liabilities under an Environmental Law or in connection with any release of
any Hazardous Material into the environment that could reasonably be
expected to result in a Material Adverse Effect. As used herein,
"Environmental Laws" means any Federal, state or local law or regulation
applicable to the Issuer's or any of its subsidiaries' business operations
or ownership or possession of any of their properties or assets relating to
the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants and contaminants, and "Hazardous
Materials" means those substances, wastes, pollutants or contaminants that
are regulated by or form the basis of liability under any Environmental
Laws.
(q) No labor dispute exists with the employees of the Issuer or any
of its subsidiaries or, to the knowledge of
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the Issuer, is imminent; and the Issuer has no reason to believe that the
relationship of the Issuer and its subsidiaries with their unions or
employees could reasonably be expected to have a Material Adverse Effect.
(r) Except as disclosed in the Prospectus, all United States Federal
income tax returns of the Issuer and its subsidiaries required by law to
be filed have been timely filed (taking into account extensions granted by
the applicable Federal governmental agency) and all taxes shown by such
returns or otherwise assessed, which are due and payable, have been paid,
except for such taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided and except for such taxes the
nonpayment of which could not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect. All other
corporate franchise and income tax returns of the Issuer and its
subsidiaries required to be filed pursuant to applicable foreign, state or
local laws have been filed, except insofar as the failure to file such
returns could not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, and all taxes shown on such
returns or otherwise assessed which are due and payable have been paid,
except for such taxes, if any, as are being contested in good faith and as
to which adequate reserves have been provided and except for such taxes the
nonpayment of which could not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
(s) The Issuer and each of its subsidiaries maintain (and in the
future will maintain) a system of internal accounting controls sufficient
to provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(t) The Issuer and each of its subsidiaries is in compliance with,
and each such entity has not received any notice of any outstanding
violation of, all laws, regulations, ordinances and rules (other than
Environmental Laws) applicable to it and its operations, except, in either
case, where any failure by the Issuer or any of its subsidiaries to comply
with any such law, regulation, ordinance or rule could not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect.
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(u) Neither the issuance, sale or delivery of the Securities nor the
application of the proceeds thereof by the Issuer as set forth in the
Registration Statement will violate Regulations G, T, U or X of the Board
of Governors of the Federal Reserve System or any other regulation of such
Board of Governors.
(v) All statutes, governmental regulations and contracts and other
documents required to be described in the Registration Statement, the
Prospectus or any Incorporated Documents included therein or to be filed as
exhibits to the Registration Statement or to the Incorporated Documents
included therein have been described in the Registration Statement, the
Prospectus or the Incorporated Documents included therein, as the case may
be, or filed as exhibits to the Registration Statement or to the
Incorporated Documents included therein, as required.
(w) There are no holders of securities of the Issuer or any of its
subsidiaries who, pursuant to any agreement, understanding or otherwise,
have any right to have securities of the Issuer or any of its subsidiaries
registered under the Securities Act pursuant to the Registration Statement,
other than pursuant to this Agreement.
(x) The Issuer and its subsidiaries maintain insurance, with insurers
of recognized financial responsibility, of the types and in the amounts
that are reasonable for the businesses operated by them in accordance with
customary industry practice, all of which insurance is in full force and
effect.
Any certificate signed by an officer of the Issuer or any of its
subsidiaries and delivered to the Underwriters or to counsel for the
Underwriters at or prior to the Closing Date pursuant to any section of this
Agreement or the transactions contemplated hereby shall be deemed a
representation and warranty by the Issuer or such subsidiary, as the case may
be, to each Underwriter as to the matters covered thereby.
Section 6. Covenants of the Issuer. The Issuer covenants and agrees
-----------------------
with each of the Underwriters that:
(a) The Issuer will use its best efforts to cause the Registration
Statement and any subsequent amendments thereto to become effective as
promptly as possible, and if the Issuer elects to rely on Rule 430A will
comply with the requirements of Rule 430A, and will not file any amendment
to the Registration Statement or any supplement to the Prospectus or, prior
to the end of the period of time referred to in Section 6(d) hereof, file
any document which, upon filing, becomes an Incorporated Document, unless
the Underwriters shall previously have been advised and
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furnished with a copy a reasonable time prior to the proposed filing and
the Underwriters or their counsel shall not have reasonably objected to the
proposed filing. During the time when a Prospectus is required to be
delivered under the Securities Act, the Issuer will comply in all material
respects with all requirements imposed upon it by the Securities Act, the
Trust Indenture Act, the Rules and Regulations, the Exchange Act and the
Exchange Act Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance with
the provisions hereof and of the Prospectus, and the Issuer will prepare
and file with the Commission, promptly upon reasonable request by the
Underwriters, any amendments to the Registration Statement or any
Incorporated Document or supplements to the Prospectus which may be
necessary or advisable in connection with the distribution of the
Securities by the several Underwriters, and will use its best efforts to
cause the same to become effective as promptly as possible. The Issuer
will advise the Underwriters, promptly after it receives notice or obtains
knowledge thereof, of the time when the Registration Statement, any
amendment thereto or to any Incorporated Document or any amended
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed or of
the receipt of any comments from the Commission and will furnish the
Underwriters with copies thereof.
(b) The Issuer will advise the Underwriters, promptly after it
receives notice or obtains knowledge thereof, of (i) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any order directed to the use of any Preliminary
Prospectus or the Prospectus, (ii) the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, (iii) the
institution or threatening of any proceeding for any such purpose or (iv)
any request made by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information; and
each of the Issuer and its subsidiaries will use its best efforts to
prevent the issuance of any such order and, in each such case, if any such
order is issued, to obtain the lifting thereof as promptly as possible.
(c) The Issuer will arrange for the qualification of the Securities
under the blue sky laws of such jurisdictions as the Underwriters may
designate and will continue such qualifications in effect for as long as
may be necessary to complete the distribution of the Securities
contemplated by this Agreement; provided, however, that in connection
therewith the Issuer shall not be required to qualify as a foreign
corporation in any jurisdiction where it is not now so qualified or to
execute a general consent to service of
17
<PAGE>
process in any jurisdiction where it is not now so subject. The Issuer and
the Subsidiaries will file such statements and reports as may be required
by the laws of each state or other jurisdiction in which the Securities
have been qualified as above provided in order to complete the distribution
contemplated by this Agreement. The Issuer will also supply the
Underwriters with such information as is necessary for the determination of
the legality of the Securities for investment under the laws of such
jurisdictions as the Underwriters may reasonably request and for
preparation of a survey thereof.
(d) If, at any time after the effective date of the Registration
Statement when a prospectus relating to the Securities is required to be
delivered under the Securities Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or if it is
necessary during such period to amend or supplement the Prospectus (or to
file under the Exchange Act any document which, upon filing, becomes an
Incorporated Document) to comply with the Securities Act, the Trust
Indenture Act, the Rules and Regulations, the Exchange Act and the Exchange
Act Rules and Regulations, the Issuer will promptly notify the Underwriters
thereof and will prepare and file with the Commission, at its own expense,
an appropriate amendment or supplement (or an appropriate filing under the
Exchange Act) which will correct such statement or omission or which will
effect such compliance. Neither the Underwriters' consent to, nor the
Underwriters' delivery of, any such amendment or supplement or other
document shall constitute a waiver of any of the conditions set forth in
this Agreement.
(e) The Issuer has furnished or will furnish to the Underwriters,
without charge, copies of the Registration Statement (three of which will
be signed and will be accompanied by all exhibits and Incorporated
Documents), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as
available and in such quantities as the Underwriters may reasonably
request, including exhibits and documents filed therewith or incorporated
by reference therein and signed copies of all consents and certificates of
experts. The Issuer has hereby consented to the use of such copies for
purposes permitted by the Securities Act. The Issuer will deliver to each
Underwriter, without charge, as soon as the Registration Statement shall
have become effective (or, if the Issuer and the Subsidiaries have elected
to rely upon Rule 430A, as soon as practicable after this Agreement has
been executed
18
<PAGE>
and delivered) and thereafter from time to time as requested during the
period when the Prospectus is required to be delivered under the Securities
Act, such number of copies of the Prospectus (as supplemented or amended)
as such Underwriter may reasonably request. The Issuer and its
subsidiaries will comply in all material respects with the Securities Act,
the Trust Indenture Act, the Rules and Regulations, the Exchange Act and
the Exchange Act Rules and Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement and in
the Prospectus.
(f) The Issuer will apply the net proceeds from the sale of the
Securities to be sold by it hereunder as set forth under "Use of Proceeds"
in the Prospectus.
(g) The Issuer will make generally available to its security holders
as soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement, an earnings
statement of the Issuer and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Issuer, Rule 158).
(h) The Issuer, during the period when the Prospectus is required to
be delivered under the Securities Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act subsequent to the time the Registration Statement
becomes effective.
(i) For a period of five years after the Closing Date, the Issuer
will furnish to the Underwriters copies of all annual reports, quarterly
reports and current reports filed with the Commission on Forms 10-K, 10-Q
and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall be
furnished by the Issuer to the holders of the Securities or to security
holders of its publicly issued securities generally.
(j) If the Issuer has elected to rely upon Rule 430A, the Issuer
will take such steps as it deems necessary to ascertain promptly whether
the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus.
(k) The Issuer and its subsidiaries will not prior to the expiration
of 180 days after the date of the Prospectus, directly or indirectly,
issue, offer to sell, grant any option for the sale of, or otherwise
dispose of any debt securities of the Issuer or any subsidiary (other than
the
19
<PAGE>
Securities) other than with the prior written consent of Chase Securities,
Inc.
(l) Neither the Issuer nor any affiliate of the Issuer does business
with the government of Cuba or with any person or affiliate located in
Cuba, and the Issuer has complied, and will comply, with all of the
provisions of Florida H.B. 1771, as codified in Sec. 517.075 Florida
Statutes, 1987, as amended, and all regulations promulgated thereunder.
Section 7. Expenses. (a) The Issuer agrees with the several
--------
Underwriters that: (i) whether or not the transactions contemplated in this
Agreement are consummated or this Agreement becomes effective or is terminated,
the Issuer will pay all fees and expenses incident to the performance of its
obligations hereunder, including, but not limited to, (A) the Commission's
registration fee, (B) the expenses of printing, filing and distributing the
Master Agreement Among Underwriters, this Agreement, the Underwriters'
Questionnaire, the Master Selected Dealer Agreement, the Registration Statement
(including exhibits), the Indenture, each Preliminary Prospectus, the Prospectus
and any amendments or supplements thereto, and the blue sky and legal investment
memoranda and any supplements thereto, and any other document in connection with
the offering, purchase, sale and delivery of the Securities, (C) fees and
expenses of accountants and counsel for the Issuer, (D) expenses of
qualification of the Securities under state blue sky and securities laws and in
connection with blue sky and legal investment surveys, including the fees and
disbursements of counsel to the several Underwriters in connection therewith,
(E) fees in connection with filings with the NASD, including filing fees and the
fees and disbursements of counsel to the several Underwriters in connection
therewith, (F) fees and expenses of the Trustee and any agent of the Trustee and
the fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities, (G) any fees charged by securities rating services
for rating the Securities, (H) all miscellaneous expenses referred to in Item 14
of the Registration Statement, (I) the delivery of the Securities to the
Underwriters and (J) all other costs and expenses incident to the performance of
its obligations hereunder which are not specifically provided for in this
Section 7; (ii) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, incurred by the several Underwriters in connection
with investigating, preparing to market and marketing the Securities and
proposing to purchase and purchasing the Securities under this Agreement will be
borne and paid by the Issuer if this Agreement is terminated by the Underwriters
on account of the failure, refusal or inability on the part of the Issuer to
perform all obligations and satisfy all conditions to the obligations of the
Underwriters set forth in Section 4; and (iii) the Issuer will pay the costs and
charges of its transfer agent and registrar and the cost of preparing the
certificates for the Securities.
20
<PAGE>
(b) Except as otherwise expressly provided in this Section 7, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Securities and proposing to
purchase and purchasing the Securities under this Agreement, including the fees
and expenses of their counsel, and any advertising expenses incurred by them in
making offers and sales of the Securities.
Section 8. Indemnification and Contribution. (a) The Issuer agrees
--------------------------------
to indemnify and hold harmless each Underwriter, each person, if any, who
controls any Underwriter within the meaning of the Securities Act and the
Exchange Act and each of their respective directors and officers against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter, such controlling person or such director or officer may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, the Rule 430A Information, if applicable, or any amendment or
supplement thereto and all Incorporated Documents, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter, each such controlling person and each such
director or officer for any legal or other expenses reasonably incurred by such
person in connection with investigating, defending or preparing to defend any
such loss, claim, damage, liability or action; provided, however, that the
Issuer will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, the Rule
430A Information or any such amendment or such supplement or such Incorporated
Document, in reliance upon and in conformity with any Underwriter Information;
provided further, the foregoing indemnity with respect to any untrue statement
contained in or omission from a Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter or any
director or officer of such Underwriter or controlling person) from whom the
person asserting any such loss, claim, damage or liability purchased any of the
Securities if a copy of the final Prospectus (as then amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of the Underwriter to such person, if a court of
competent jurisdiction determines, in a judgment not subject to appeal or final
review, that (i) such is required by law, at or prior to the written
confirmation of the sale of such Securities to such person, (ii) the final
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage or liability and (iii) such failure to deliver
the Prospectus was
21
<PAGE>
not a result of noncompliance by the Issuer with the first and third sentences
of Section 6(e) hereof. This indemnity agreement will be in addition to any
liability which the Issuer may otherwise have. The Issuer shall not, without
the prior written consent of each Underwriter, effect any settlement of any
pending or threatened proceeding in respect of which any Underwriter is or could
have been a party and indemnity could have been sought hereunder by such
Underwriter, unless such settlement includes an unconditional release of such
Underwriter from all liability on claims that are the subject matter of such
proceeding.
(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Issuer, each of its directors, its officers who signed the
Registration Statement and each person, if any, who controls the Issuer within
the meaning of the Securities Act and the Exchange Act against any losses,
claims, damages or liabilities to which the Issuer or any such director, officer
or controlling person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, the Rule 430A Information, if applicable, or any
amendment or supplement thereto and all Incorporated Documents, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, the Rule 430A Information or any such amendment or supplement or
such Incorporated Document, in reliance upon and in conformity with any
Underwriter Information furnished to the Issuer by such Underwriter; and will
reimburse any legal or other expenses reasonably incurred by the Issuer or any
such director, officer or controlling person in connection with investigating,
defending or preparing to defend any such loss, claim, damage, liability or
action. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other
22
<PAGE>
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party). After notice from the indemnifying party to such indemnified party of
its election so to assume the defense of such claim or action, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party or a conflict or potential conflict exists,
the indemnified party or parties shall have the right to select separate counsel
to assert such legal defenses and to otherwise participate in the defense of
such action on behalf of such indemnified party or parties, provided, further,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel for all indemnified parties unless (1) the
employment of more than one counsel by the indemnified party has been authorized
in writing by the indemnifying party or (2) it is necessary (based on advice of
counsel to the indemnified party) for an indemnified party to employ additional
local counsel in particular jurisdictions. No indemnifying party shall be
liable for any settlement of any action or claim for monetary damages which an
indemnified party may effect without the consent of the indemnifying party,
which consent shall not be unreasonably withheld. The indemnification
obligations hereunder are payable as they are incurred.
(d) If the indemnification provided for in Section 8(a) or (b) hereof
is for any reason, other than as specified in such provisions, unavailable to or
insufficient to hold harmless an indemnified party, then each indemnifying party
shall contribute to the amount paid or payable by each indemnified party in
respect of losses, claims, damages or liabilities (or actions in respect
thereof) referred to in Section 8(a) or (b) hereof (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand and the Underwriters on the other hand from the offering of the Securities
or, (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Issuer on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Issuer on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before
23
<PAGE>
deducting expenses) received by the Issuer bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Issuer on the one hand and the Underwriters on the other shall by determined
by reference to, among other things, whether the untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Issuer or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Issuer and the Underwriters agree that it would not
be just and equitable if their respective obligations to contribute pursuant to
this Section 8(d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one for this purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 8(d). For purposes of this Section 8(d), the term
"damages" shall include any legal or other expenses reasonably incurred by the
Issuer or the Underwriters in connection with investigating or defending against
any action or claim which is the subject of the contribution provisions of this
Section 8(d). Notwithstanding this Section 8(d), in no event shall any
Underwriter be required to contribute any amount in excess of the amount by
which the total underwriting discount received by such Underwriter with respect
to the Securities underwritten by such Underwriter exceeds the amount of any
damages that such Underwriter has otherwise been required to pay pursuant to
Section 8(a), (b) and (c) hereof. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Underwriters in this
Section 8(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 8(d), each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Underwriter, and each director of the Issuer, each officer
of the Issuer who signed the Registration Statement, and each person, if any,
who controls the Issuer within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
the Issuer.
Section 9. Termination. (a) This Agreement may be terminated by the
-----------
Underwriters by notice to the Issuer prior to delivery of and payment for the
Securities, (i) in the event that the Issuer shall have failed, refused or been
unable to perform all obligations hereunder and satisfy all conditions on its
part to be performed or satisfied in Section 4 hereof on or prior to the Closing
Date, (ii) if on any date during the period from and including the date hereof
to and including the Closing Date, (A) trading in securities on the New York
Stock Exchange or the American Stock Exchange or in the over-the-counter market
shall have been suspended or materially limited or minimum or maximum
24
<PAGE>
prices shall have been established by either of such Exchanges or by order of
the Commission, the NASD or any other governmental authority, (B) a banking
moratorium shall have been declared by New York, Maryland, Texas or United
States authorities or (C) there shall have been any material adverse change in
the financial markets in the United States or any outbreak of hostilities or an
escalation thereof between the United States and any foreign entity, or of any
other insurrection or armed conflict involving the United States, any
declaration of war by Congress or any other substantial national or
international calamity or emergency which, in the opinion of the Underwriters,
makes it impracticable or inadvisable to offer or sell the Securities on the
terms and in the manner contemplated by the Prospectus or enforce contracts for
the sale of the Securities.
(b) Termination of this Agreement pursuant to this Section 9 shall be
without liability of any party to any other party. Notwithstanding any
termination, the provisions of Sections 7 and 8 hereof shall remain in effect.
Section 10. Survival. The respective representations, warranties,
--------
agreements, covenants, indemnities and other statements of the Issuer, its
officers and the several Underwriters set forth in this Agreement or in any
certificate issued pursuant to or in connection with this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall remain in
full force and effect, regardless of (a) any investigation (or any statement as
to the results thereof) made by or on behalf of the Issuer, any of its officers
or directors, any Underwriter or any controlling person, (b) any termination of
this Agreement and (c) delivery of and payment for the Securities.
Section 11. Notices. All communications hereunder shall be in
-------
writing and, if sent to the Underwriters, shall be mailed or delivered or sent
by telecopy to Chase Securities, Inc., One Chase Manhattan Plaza, New York, New
York 10081, Attention: High Yield Finance; Telecopier: (212) 552-3061; with
copies to NationsBank Corporate Center, 6th Floor, 100 North Tryon Street,
Charlotte, North Carolina 28255, Attention: Syndicate, Telecopier: (704) 388-
9212, and to Milbank, Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New
York, New York 10005, Attention: Arnold B. Peinado, III, Esq.; Telecopier:
212-530-5219; if sent to the Issuer, shall be mailed or delivered or sent by
telex or telecopy to the Issuer at One North Charles Street, Baltimore, Maryland
21201, Attention: Thomas L. Owsley, Esq.; Telecopier: 410-659-4747; with a
copy to McGuire, Woods, Battle & Boothe, L.L.P., One North Charles Street,
Baltimore, Maryland 21201, Attention: John S. Graham, III, Esq.; Telecopier:
410-659-4599. Any such communication so delivered shall be deemed to have been
duly given.
Section 12. Miscellaneous. This Agreement shall inure to the benefit
-------------
of and shall be binding upon the several
25
<PAGE>
Underwriters, the Issuer and their respective successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (a) the representations,
warranties, indemnities and agreements of the Issuer contained in this Agreement
shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and (b) the indemnities by the Underwriters shall also be
for the benefit of the directors of the Issuer, the officers of the Issuer who
have signed the Registration Statement and any person or persons who control the
Issuer within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act. No purchaser of Securities from any Underwriter shall be
deemed a successor because of such purchase. All of the obligations of the
Underwriters hereunder are several and not joint. The validity and
interpretation of this Agreement shall be governed by the laws of the State of
New York. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
26
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Issuer
and each of the several Underwriters.
Very truly yours,
CHASE SECURITIES, INC.
NATIONSBANC CAPITAL MARKETS, INC.
By CHASE SECURITIES, INC.
By
-------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
CROWN CENTRAL PETROLEUM CORPORATION
By
---------------------------------
Name:
Title:
27
<PAGE>
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Aggregate Principal
Amount of
Securities to be
Purchased
---------
Underwriter
- -----------
<S> <C>
Chase Securities, Inc. . . . . . . . . . . . . . . $
NationsBanc Capital Markets, Inc. . . . . . . . . .
------------
Total. . . . . . . . . . . . . . . . . . . . . $125,000,000
============
</TABLE>
28
<PAGE>
EXHIBIT A-1
Form of Issuer's Counsel Opinion
to be given by
McGuire, Woods, Battle & Boothe, L.L.P.
pursuant to Section 4(b) of the Underwriting Agreement
(Capitalized terms have the meaning given to them
in the Underwriting Agreement)
(i) The Issuer has been duly incorporated, is validly existing and in good
standing under the laws of the State of Maryland. Each of the subsidiaries of
the Company listed on Schedule A hereto (each, a "Specified Subsidiary") is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation, as such jurisdiction of
incorporation is listed beside the name of each such Specified Subsidiary in
Schedule A hereto. The Issuer and each Specified Subsidiary is duly qualified
and in good standing as a foreign corporation in each jurisdiction listed as a
"Foreign Jurisdiction" beside the name of the Company and each Specified
Subsidiary in Schedule A hereto. The Issuer and each Specified Subsidiary has
all requisite power and authority under the corporate law of the state of its
incorporation to own, lease and license its respective properties and conduct
its business as now being conducted and as described in the Registration
Statement and the Prospectus.
(ii) All of the issued and outstanding capital stock of each Specified
Subsidiary is, to the best knowledge of such counsel, owned by the Issuer
directly, or indirectly through one or more of the other subsidiaries of the
Issuer, free and clear of any lien, encumbrance, equity, claim, security
interest, restriction on transfer, shareholders' agreement, voting trust or
other defect of title whatsoever.
(iii) The Issuer has full power and authority to execute, deliver and
perform all of its obligations under the Underwriting Agreement, the Indenture
and the Securities and to issue, sell and deliver the Securities as contemplated
therein. No consent, approval, authorization, order, registration or
qualification of or filing with any court or governmental agency or body is
required for the execution, delivery or performance of the Underwriting
Agreement, the Indenture and the Securities by the Issuer, except (A) such as
have been filed and obtained under the Securities Act and the Trust Indenture
Act and (B) such as may be required under state securities or blue sky laws or
as may be required by the NASD in connection with the purchase and distribution
of the Securities by the several Underwriters (as to each of which such counsel
expresses no opinion).
A-1
<PAGE>
(iv) The issuance, offer, sale and delivery of the Securities, the
execution, delivery and performance of the Underwriting Agreement, the Indenture
and the Securities by the Issuer, and the application of the net proceeds from
the sale of the Securities in the manner described in the Prospectus under the
caption "Use of Proceeds", does not and will not (A) conflict with the charter
or by-laws of the Issuer, (B) to the best knowledge of such counsel after due
inquiry, conflict with, constitute a breach or violation of, or a default by the
Issuer under, or result in the creation or imposition of any lien, charge,
security interest, encumbrance, claim or other restriction upon any properties
or assets of the Issuer or any of its subsidiaries, as the case may be, pursuant
to the terms of any indenture, mortgage, deed of trust, sale/leaseback
agreement, loan agreement, note, bond, debenture, lease or other agreement or
instrument to which the Issuer or any of its subsidiaries is a party, or by
which any of them or any of their respective properties is subject, (C)
contravene any statute, rule or regulation applicable to the Issuer or any of
its subsidiaries or any of their respective properties or assets, except with
regard to state securities or blue sky laws, as to which such counsel need
express no opinion, or (D) to the best knowledge of such counsel after due
inquiry, conflict with or violate any judgment, decree, order or injunction of
any court or governmental agency or regulatory agency or body having
jurisdiction over the Issuer or any of its subsidiaries or any of their
respective properties or assets.
(v) Neither the Issuer nor any of the Specified Subsidiaries is in
violation of its charter or by-laws or, to the best knowledge of such counsel
after due inquiry, in default in the performance or observance of any material
obligation, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which it is a
party or to which it or any of its properties is subject.
(vi) The execution and delivery of, and the performance by the Issuer
of its obligations under, the Indenture and the Underwriting Agreement have been
duly authorized by all necessary corporate action of the Issuer. The Indenture
and the Underwriting Agreement have been duly executed and delivered by the
Issuer. The sale and the issuance of the Securities and the execution and
delivery thereof have been duly authorized by all necessary corporate action of
the Issuer. The Securities have been duly executed by the Issuer and have been
duly delivered to the Underwriters by the Issuer.
(vii) The Indenture is a legal, valid and binding agreement,
enforceable against the Issuer in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and general principles of equity
(regardless of whether enforceability is considered in a
A-2
<PAGE>
proceeding at law or in equity). When the Securities have been authenticated in
accordance with the terms of the Indenture, the Securities will be legal, valid
and binding obligations of the Issuer, entitled to the benefits of the Indenture
and enforceable against the Issuer in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
(viii) The Securities and the Indenture conform in all material
respects to the descriptions thereof under the caption "Description of the
Notes" in the Prospectus. The statements made in the Prospectus under the
caption "Description of Other Indebtedness," insofar as they describe certain
provisions of the agreements related to the indebtedness described therein, are
accurate in all material respects.
(ix) The descriptions in the Registration Statement and Prospectus of
Material Licenses, contracts and other documents present fairly in all material
respects the information required to be shown; to such counsel's knowledge,
without having made any inquiry in connection therewith, the descriptions in the
Registration Statement and Prospectus of the statutes, regulations, or pending
or threatened legal or governmental proceedings (other than Environmental Laws
or arising in connection with Environmental Laws, as to which such counsel need
express no opinion) present fairly in all material respects the information
required to be shown; and such counsel does not know of any Material Licenses,
contracts or documents, or, without having made any inquiry in connection
therewith, any statutes, regulations, or pending or threatened legal or
governmental proceedings (other than Environmental Laws or arising in connection
with Environmental Laws, as to which such counsel need express no opinion) of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement which are
not described or filed as required.
(x) To the best knowledge of such counsel after due inquiry, except
as described or referred to in the Prospectus, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Issuer or any of its subsidiaries is a party, or to which the property of the
Issuer or any of its subsidiaries is subject, before or brought by any court or
governmental or administrative agency or body, which, if determined adversely to
the Issuer or any of its subsidiaries, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or could reasonably
be expected to affect materially and adversely the consummation of the
transactions contemplated by the Registration Statement.
A-3
<PAGE>
(xi) Each of the Incorporated Documents, at the time it was filed
with the Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the Exchange Act Rules and Regulations,
except that such counsel need not express any opinion as to the financial
statements, schedules and other financial data included therein or incorporated
by reference therein, or excluded therefrom or the exhibits thereto.
(xii) Such counsel has been advised by the Commission that the
Registration Statement has become effective under the Securities Act at
a.m. on January __, 1995; to the best knowledge of such counsel after due
inquiry any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and, to
the best knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened by the Commission.
The Indenture has been duly qualified under the Trust Indenture Act.
(xiii) The Registration Statement (including the Rule 430A
Information, if applicable), as of its effective date, and the Prospectus, as of
its date, appeared on their face to be appropriately responsive in all material
respects to the requirements of the Securities Act, the Trust Indenture Act and
the Rules and Regulations, except that such counsel may not express any opinion
as to the financial statements, schedules and other financial data included
therein or incorporated by reference in, or excluded therefrom or the exhibits
to the Registration Statement (except to the extent set forth in paragraph (ix)
of this opinion), or the Form T-1, and such counsel need not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus except to the extent
set forth in paragraph (ix) of this opinion.
(xiv) None of the Issuer or any of its subsidiaries is an "investment
company" or an entity "controlled by" an "investment company" as such terms are
defined in the Investment Company Act.
In addition, such opinion shall state such counsel has participated in
conferences with officers and representatives of the Issuer, representatives of
Ernst & Young LLP, independent auditors for the Issuer and representatives of
the Underwriters and Underwriters' counsel at which the contents of the
Registration Statement and the Prospectus were discussed, and although such
counsel is not required to investigate or verify independently, and is not
required to assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus (other than as contemplated in paragraph (ix) of this opinion), and
such counsel did not participate in the preparation of the Incorporated
Documents, such counsel shall state that, based upon the foregoing, no facts
have come to their attention which would
A-4
<PAGE>
lead them to believe that (a) as of its effective date and as of the Closing
Date, the Registration Statement (including the Rule 430A Information, if
applicable), contained or contains an untrue statement of a material fact or
omitted or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (b) the Prospectus as
of its date and as of the Closing Date contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Such counsel need express no opinion or belief
as to (i) the financial statements, financial data and statistical data included
in or omitted from the Registration Statement or the Prospectus or (ii) the
Statement of Eligibility of the Trustee on Form T-1.
In giving such opinion, such counsel may state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers or other appropriate representatives of
the Issuer and certificates of public officials. Such counsel may limit its
opinion to the Federal laws of the United States of America, the laws of the
State of Maryland, the General Corporation Law of the State of Delaware and,
with respect to the matters set forth in paragraph (vii) above, and subject to
the limitations set forth in the following sentence, paragraph (iii) and clause
(C) of paragraph (iv) above, the laws of the State of New York. With respect to
matters of New York law as it relates to the opinions set forth in paragraph
(iii) and clause (C) of paragraph (iv) above, the opinions may be given to the
best of such counsel's knowledge.
A-5
<PAGE>
EXHIBIT A-2
Form of Issuer's Counsel Opinion
to be given by
Thomas L. Owsley, Esq.,
Vice President - Legal of the Issuer
pursuant to Section 4(b) of the Underwriting Agreement
(Capitalized terms have the meaning given to them
in the Underwriting Agreement)
(i) The Issuer has been duly incorporated, is validly existing and in
good standing under the laws of the State of Maryland. Each of the subsidiaries
of the Company listed on Schedule A hereto (each, a "Specified Subsidiary") is a
corporation duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation, as such jurisdiction of
incorporation is listed beside the name of each such Specified Subsidiary in
Schedule A hereto. The Issuer and each Specified Subsidiary is duly qualified
and in good standing as a foreign corporation in each jurisdiction listed as a
"Foreign Jurisdiction" beside the name of the Company and each Specified
Subsidiary in Schedule A hereto. The Issuer and each Specified Subsidiary has
all requisite power and authority under the corporate law of the state of its
incorporation to own, lease and license its respective properties and conduct
its business as now being conducted and as described in the Registration
Statement and the Prospectus.
(ii) The Issuer has an authorized capitalization as set forth in the
Prospectus and all of the outstanding shares of capital stock of the Issuer have
been duly authorized and validly issued and are fully paid and non-assessable
and were not issued in violation of any preemptive or similar rights of
stockholders of the Issuer arising under the Maryland General Corporation Law,
under the charter or bylaws of the Issuer or, to the best of such counsel's
knowledge, under any agreement to which the Issuer is a party. All of the
issued and outstanding capital stock of each Specified Subsidiary is, to the
best knowledge of such counsel, owned by the Issuer directly, or indirectly
through one or more of the other subsidiaries of the Issuer, free and clear of
any lien, encumbrance, equity, claim, security interest, restriction on
transfer, shareholders' agreement, voting trust or other defect of title
whatsoever.
(iii) The issuance, offer, sale and delivery of the Securities, the
execution, delivery and performance of the Underwriting Agreement, the Indenture
and the Securities by the Issuer, and the application of the net proceeds from
the sale of the Securities in the manner described in the Prospectus under the
caption "Use of Proceeds", does not and will not (A) conflict with the charter
or by-laws of the Issuer, (B) to the best
A-6
<PAGE>
knowledge of such counsel after due inquiry, conflict with, constitute a breach
or violation of, or a default by the Issuer under, or result in the creation or
imposition of any lien, charge, security interest, encumbrance, claim or other
restriction upon any properties or assets of the Issuer or any of its
subsidiaries, as the case may be, pursuant to the terms of any indenture,
mortgage, deed of trust, sale/leaseback agreement, loan agreement, note, bond,
debenture, lease or other agreement or instrument to which the Issuer or any of
its subsidiaries is a party, or by which any of them or any of their respective
properties is subject, (C) contravene any statute, rule or regulation applicable
to the Issuer or any of its subsidiaries or any of their respective properties
or assets, except with regard to state securities or blue sky laws, as to which
such counsel need express no opinion, or (D) to the best knowledge of such
counsel after due inquiry, conflict with or violate any judgment, decree, order
or injunction of any court or governmental agency or regulatory agency or body
having jurisdiction over the Issuer or any of its subsidiaries or any of their
respective properties or assets.
(iv) Neither the Issuer nor any of the Specified Subsidiaries is in
violation of its charter or by-laws or, to the best knowledge of such counsel
after due inquiry, in default in the performance or observance of any material
obligation, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which it is a
party or to which it or any of its properties is subject.
(v) The descriptions in the Registration Statement and Prospectus of the
Material Licenses, contracts and other documents and, to the best of such
counsel's knowledge, the Environmental Laws, other statutes and regulations and
legal and governmental proceedings, present fairly in all material respects the
information required to be shown; and such counsel does not know of any laws,
statutes or regulations or any pending or threatened legal or governmental
proceedings required to be described in the Prospectus which are not described
as required, nor of any Material Licenses, contracts or documents of a character
required to be described in the Registration Statement or the Prospectus or any
Incorporated Documents or to be filed as exhibits to the Registration Statement
or any Incorporated Documents which are not described or filed as required.
(vi) To the best knowledge of such counsel after due inquiry, except as
described or referred to in the Prospectus, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Issuer or
any of its subsidiaries is a party, or to which the property of the Issuer or
any of its subsidiaries is subject, before or brought by any court or
governmental or administrative agency or body, which, if determined adversely to
the Issuer or any of its subsidiaries, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or could reasonably
be
A-7
<PAGE>
expected to affect materially and adversely the consummation of the transactions
contemplated by the Registration Statement.
(vii) Each of the Incorporated Documents, at the time it was filed with
the Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the Exchange Act Rules and Regulations, and
such counsel has no reason to believe that any of such documents (in each case
as amended through the date hereof), at the time it (or, if amended, the most
recent amendment to it) was filed with the Commission, 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 that such counsel need not express
any opinion as to the financial statements, schedules and other financial data
included therein or incorporated by reference therein, or excluded therefrom or
from the exhibits thereto (except to the extent set forth in the next sentence
of this paragraph). To such counsel's knowledge, there were no contracts or
documents required to be filed as exhibits to any of the Incorporated Documents
on the date each was filed which were not so filed.
In addition, such opinion shall state such counsel has participated in
conferences with officers and other representatives of the Issuer,
representatives of Ernst & Young LLP, independent auditors for the Issuer and
representatives of the Underwriters and Underwriters' counsel at which the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and although such counsel is not required to investigate or
verify independently, and is not required to assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement, the Prospectus or the Incorporated Documents (other than
as contemplated in paragraph (v) of this opinion), such counsel shall state
that, based upon the foregoing, no facts have come to his attention which would
lead him to believe that (a) as of its effective date and as of the Closing
Date, the Registration Statement (including the Rule 430A Information, if
applicable and the Incorporated Documents, except to the extent statements
contained in such documents have been modified or superseded by statements
contained in the Prospectus), contained or contains an untrue statement of a
material fact or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or (b)
the Prospectus (including the Incorporated Documents except to the extent
statements contained therein have been modified or superseded by statements
contained in the Prospectus) as of its date and as of the Closing Date contained
or contains an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Such counsel need
express no opinion or belief as to (i) the financial statements, financial data
and statistical data included in or omitted from the Registration Statement or
the
A-8
<PAGE>
Prospectus or (ii) the Statement of Eligibility of the Trustee on Form T-1.
In giving such opinion, such counsel may state that, insofar as such
opinion involves factual matters, he has relied, to the extent he deems proper,
upon certificates of officers or other appropriate representatives of the
Issuer, certificates of public officials and, with respect to the matters in
paragraph (iv) only, upon representations and warranties of the Company
contained in the Underwriting Agreement. Such counsel may limit his opinion to
the Federal laws of the United States of America and the laws of the State of
Maryland.
A-9
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Name of Foreign Jurisdiction
Company or Jurisdiction in which Qualified
Subsidiary of Incorporation (if any)
- ---------- ---------------- --------------------
<S> <C> <C>
Crown Central Petroleum Maryland Alabama
Corporation Delaware
Florida
Georgia
Indiana
New York
New Jersey
North Carolina
Oklahoma
Pennsylvania
South Carolina
Texas
Virginia
Washington, D.C.
West Virginia
Crown Central Holding Maryland None
Corporation
Crown Stations, Inc. Maryland Alabama
Georgia
North Carolina
Pennsylvania
South Carolina
Virginia
</TABLE>
A-10
<PAGE>
<TABLE>
<S> <C> <C>
Fast Fare, Inc. Delaware Alabama
Florida
Georgia
Indiana
Maryland
North Carolina
South Carolina
Texas
Virginia
West Virginia
FZ Corporation Maryland None
Locot, Inc. Maryland None
La Gloria Oil and Gas Delaware Arkansas
Company Illinois
Indiana
Louisiana
Mississippi
Ohio
Oklahoma
Texas
McMurrey Pipe Line Texas None
Company
Tiara Insurance Company Vermont None
</TABLE>
A-11
<PAGE>
EXHIBIT B
Form of Accountant's Comfort Letters
Pursuant to Section 4(d) of the Underwriting Agreement
(Capitalized terms have the meaning given to them
in the Underwriting Agreement)
On the date of the Underwriting Agreement, the Underwriters shall have
received from Ernst & Young LLP, a letter, dated such date, in form and
substance satisfactory to the Underwriters, confirming that Ernst & Young LLP,
are independent public accountants with respect to the Issuer and its
subsidiaries within the meaning of the Securities Act and the Securities Act
Rules and Regulations, and stating in effect that:
(i) in their opinion, the audited consolidated financial statements
and the related financial statement schedules of the Issuer and its
subsidiaries included and incorporated by reference in the Registration
Statement and the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and the
Securities Act Rules and Regulations, or the Exchange Act and the Exchange
Act Rules and Regulations, as applicable;
(ii) on the basis of procedures (but not an examination in accordance
with generally accepted auditing standards) consisting of a reading of the
unaudited consolidated financial statements of the Issuer and its
subsidiaries and other information referred to below, performing the
procedures specified by the American Institute of Certified Public
Accountants for a review of interim financial information as described in
Statement of Auditing Standards No. 71 on such unaudited consolidated
financial statements, a reading of the latest available interim financial
statements of the Issuer and its subsidiaries, a reading of the minutes of
all meetings of the stockholders and directors of the Issuer and the
Executive Committee and Audit Committee of the board of directors of each
of the Issuer and its subsidiaries through __, 1995 [a specified date not
more than five days prior to the date of the Underwriting Agreement],
inquiries of certain officials of the Issuer responsible for financial and
accounting matters, and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited consolidated condensed balance sheets,
unaudited consolidated condensed statements of operations and
unaudited consolidated condensed statements of cash flows included and
incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements
of the Securities Act and the Securities Act Rules and Regulations, or
the Exchange Act and the Exchange Act Rules and Regulations, as
applicable; or
(B) at ___, 1994 [the nearest month end for which financial
statements are available] and at January ___, 1995 [a specified date
not more than five days prior to the date of the Underwriting
Agreement], there was any change in the consolidated common stock
(other than as a result of the exercise of the Issuer's outstanding
stock options or the vesting of its performance vested restricted
stock awards), increase in consolidated long-term debt or consolidated
current liabilities, or decrease in consolidated net current assets or
in consolidated common stockholders' equity or consolidated net
assets, of the Issuer and its subsidiaries on a consolidated basis, in
each case as compared with the amounts shown in the latest balance
sheet included in the Registration Statement; or
(C) for the period from October 1, 1994 to ___, 1994 [the nearest
month end for which financial statements are available] and to January
___, 1995 [a specified date not more than five days prior to the date
of the Underwriting Agreement], there was any decrease in the case of
net income or increase in the case of net loss in the amount of
consolidated revenues, consolidated operating income (loss), or total
consolidated net income (loss), of the Issuer and its subsidiaries on
a consolidated basis, in each case as compared with the corresponding
period in the preceding year, except in each case for any increases or
decreases that the Registration Statement discloses have occurred or
may occur; and
(iii) in addition to the procedures referred to in clause (ii) above,
they have performed other specified procedures, not constituting an audit,
with respect to certain amounts, percentages, numerical data and financial
information appearing in the Registration Statement, which have previously
been specified by the Underwriters and which shall be specified in such
letter, and have compared certain of such items with, and have found such
items to be in agreement with, the accounting and financial records of the
Issuer and its subsidiaries.
On the Closing Date, the Underwriters shall have received a letter
from Ernst & Young LLP, in form and substance satisfactory to the Underwriters
and dated as of the Closing Date, to the effect that they reaffirm the
statements made in the letter furnished on the date of the Underwriting
Agreement except that (i) the specified date referred to above shall be a date
not more than five days prior to the Closing Date and (ii) the date ___, 199_
referred to in paragraphs (ii) (B) and (C) shall be updated to ____________,
199_ [the nearest month and for which financial statements are available]. In
the event the Issuer relies on Rule 430A and the final Prospectus furnished to
the Underwriters in connection with the offering of the Securities differs from
the Prospectus included in the Registration Statement at the time of
effectiveness, such letter shall update the procedures referred to in clauses
(ii) and (iii) above to encompass such Prospectus.
B-1
<PAGE>
EXHIBIT 4.1
MTHM DRAFT
1/13/95
- --------------------------------------------------------------------------------
CROWN CENTRAL PETROLEUM CORPORATION,
as Issuer
AND
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
---------------
Indenture
Dated as of January __, 1995
---------------
$125,000,000
______% Senior Notes
due 2005
- --------------------------------------------------------------------------------
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of January __, 1995
Trust Indenture
Act Section Indenture Section
(S) 310(a)(1).............................................. 608
(a)(2).............................................. 608
(b) ............................................... 607
(S) 311(a) ............................................... 612
(b) ............................................... 612
(S) 312(a) ............................................... 701, 702(a)
(b) ............................................... 702(b)
(c) ............................................... 702(c)
(S) 313(a) ............................................... 703(a)
(c) ............................................... 703(a)
(d) ............................................... 703(b)
(S) 314(a) ............................................... 704, 1018(a)
(a)(4).............................................. 1019(a)
(c)(1).............................................. 102
(c)(2).............................................. 102
(e) ............................................... 102
(S) 315(a) ............................................... 602(a)
(b) ............................................... 601
(c) ............................................... 602(j)
(e) ............................................... 515
(S) 316(a)(last
sentence)........................................... 101 ("Outstanding")
(a)(l)(A)........................................... 502, 512
(a)(l)(B)........................................... 513
(b) ............................................... 508
(c) ............................................... 104(d)
(S) 317(a)(1).............................................. 503
(a)(2).............................................. 504
(b) ............................................... 1003
(S) 318(a) ............................................... 107
- --------------------------
This reconciliation and tie shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE>
Table of Contents
Page
RECITALS OF THE COMPANY.............. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION.................. 1
SECTION 101. Definitions................................ 1
SECTION 102. Compliance Certificates and Opinions....... 18
SECTION 103. Form of Documents Delivered to Trustee..... 19
SECTION 104. Acts of Holders............................ 19
SECTION 105. Notices, etc., to Trustee and Company...... 21
SECTION 106. Notice to Holders; Waiver.................. 21
SECTION 107. Conflict with Trust Indenture Act.......... 22
SECTION 108. Effect of Headings and Table of
Contents.................................. 22
SECTION 109. Successors and Assigns..................... 22
SECTION 110. Separability Clause........................ 22
SECTION 111. Benefits of Indenture...................... 22
SECTION 112. Governing Law.............................. 23
SECTION 113. Legal Holidays............................. 23
SECTION 114. Schedules and Exhibits..................... 23
SECTION 115. Counterparts............................... 23
ARTICLE TWO
SECURITY FORMS.................. 23
SECTION 201. Forms Generally............................ 23
ARTICLE THREE
THE SECURITIES.................. 24
SECTION 301. Title and Terms............................ 24
SECTION 302. Denominations.............................. 25
SECTION 303. Execution, Authentication, Delivery
and Dating................................ 25
SECTION 304. Temporary Securities....................... 26
SECTION 305. Registration, Registration of Transfer
and Exchange.............................. 27
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities................................ 28
SECTION 307. Payment of Interest; Interest Rights
Preserved................................. 29
SECTION 308. Persons Deemed Owners...................... 30
SECTION 309. Cancellation............................... 30
SECTION 310. Computation of Interest.................... 31
<PAGE>
ARTICLE FOUR
SATISFACTION AND DISCHARGE................. 31
SECTION 401. Satisfaction and Discharge of Indenture.... 31
SECTION 402. Application of Trust Money................. 32
ARTICLE FIVE
REMEDIES................... 32
SECTION 501. Events of Default.......................... 32
SECTION 502. Acceleration of Maturity; Rescission
and Annulment............................. 35
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.................... 36
SECTION 504. Trustee May File Proofs of Claim........... 37
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities.................. 37
SECTION 506. Application of Money Collected............. 38
SECTION 507. Limitation on Suits........................ 38
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest........... 39
SECTION 509. Restoration of Rights and Remedies......... 39
SECTION 510. Rights and Remedies Cumulative............. 39
SECTION 511. Delay or Omission Not Waiver............... 40
SECTION 512. Control by Holders......................... 40
SECTION 513. Waiver of Past Defaults.................... 40
SECTION 514. Waiver of Stay or Extension Laws........... 41
SECTION 515. Undertaking for Costs...................... 41
ARTICLE SIX
THE TRUSTEE................. 41
SECTION 601. Notice of Defaults......................... 41
SECTION 602. Certain Rights of Trustee.................. 42
SECTION 603. Trustee Not Responsible for Recitals
or Issuance of Securities................. 43
SECTION 604. May Hold Securities........................ 43
SECTION 605. Money Held in Trust........................ 44
SECTION 606. Compensation and Reimbursement............. 44
SECTION 607. Conflicting Interests...................... 45
SECTION 608. Corporate Trustee Required; Eligibility.... 45
SECTION 609. Resignation and Removal; Appointment
of Successor.............................. 45
SECTION 610. Acceptance of Appointment by Successor..... 47
SECTION 611. Merger, Conversion Consolidation or
Succession to Business.................... 47
SECTION 612. Preferential Collection of Claims
Against Company........................... 48
ii
<PAGE>
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY..... 48
SECTION 701. Company to Furnish Trustee Names
and Addresses of Holders.................. 48
Section 702. Preservation of Information;
Communications to Holders; Disclosure of
Names and Addresses of Holders............ 48
SECTION 703. Reports by Trustee......................... 49
SECTION 704. Reports by Company......................... 49
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS........... 49
SECTION 801. Company and its Subsidiaries May
Consolidate, etc., Only on Certain Terms.. 49
SECTION 802. Successor Substituted...................... 52
ARTICLE NINE
SUPPLEMENTAL INDENTURES.................. 52
SECTION 901. Supplemental Indentures Without
Consent of Holders........................ 52
SECTION 902. Supplemental Indentures with Consent
of Holders................................ 53
SECTION 903. Execution of Supplemental Indentures....... 54
SECTION 904. Effect of Supplemental Indentures.......... 55
SECTION 905. Conformity with Trust Indenture Act........ 55
SECTION 906. Reference in Securities to
Supplemental Indentures................... 55
SECTION 907. Notice of Supplemental Indentures.......... 55
ARTICLE TEN
COVENANTS.................. 55
SECTION 1001. Payment of Principal, Premium, if any,
and Interest.............................. 55
SECTION 1002. Maintenance of Office or Agency........... 56
SECTION 1003. Money for Security Payments to Be
Held in Trust............................. 56
SECTION 1004. Corporate Existence....................... 58
SECTION 1005. Payment of Taxes and Other Claims......... 58
SECTION 1006. Maintenance of Properties................. 58
SECTION 1007. Maintenance of Insurance.................. 59
SECTION 1008. Limitation on Indebtedness................ 59
SECTION 1009. Limitation on Restricted Payments......... 62
SECTION 1010. Limitation on Transactions with
Affiliates................................ 65
SECTION 1011. Limitation on Sale of Assets.............. 66
iii
<PAGE>
SECTION 1012. Limitation on Liens....................... 68
SECTION 1013. Limitation on Issuances of Guarantees
of and Pledges for Indebtedness........... 70
SECTION 1014. Purchase of Securities Upon a Change
of Control................................ 72
SECTION 1015. Limitation on Sale and Leaseback\
Transactions.............................. 73
SECTION 1016. Limitation on Subsidiary Capital Stock.... 74
SECTION 1017. Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.............................. 74
SECTION 1018. Provision of Financial Statements......... 75
SECTION 1019. Statement by Officers As to Default;
Compliance Certificates................... 75
SECTION 1020. Waiver of Certain Covenants............... 76
ARTICLE ELEVEN
REDEMPTION OF SECURITIES................. 76
SECTION 1101. Right of Redemption....................... 76
SECTION 1102. Applicability of Article.................. 77
SECTION 1103. Election to Redeem; Notice to Trustee..... 77
SECTION 1104. Selection by Trustee of Securities
to Be Redeemed............................ 77
SECTION 1105. Notice of Redemption...................... 78
SECTION 1106. Deposit of Redemption Price............... 78
SECTION 1107. Securities Payable on Redemption Date..... 78
SECTION 1108. Securities Redeemed in Part............... 79
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE............. 79
SECTION 1201. Company's Option to Effect Defeasance
or Covenant Defeasance.................... 79
SECTION 1202. Defeasance and Discharge.................. 79
SECTION 1203. Covenant Defeasance....................... 80
SECTION 1204. Conditions to Defeasance or Covenant
Defeasance................................ 80
Schedule 1 - Permitted Holders
Schedule 2 - Outstanding Indebtedness
EXHIBIT A - Form of Securities, Trustee's Certificate of Authentication
EXHIBIT B - Form of Intercompany Note
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INDENTURE, dated as of January __, 1995 between CROWN CENTRAL
PETROLEUM CORPORATION, a corporation duly organized and existing under the laws
of the State of Maryland (herein called the "Company"), having its principal
office at One North Charles Street, Baltimore, Maryland, and THE FIRST NATIONAL
BANK OF BOSTON, a national banking association, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of ______%
Senior Notes due 2005 (herein called the "Securities"), of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, that are required to be part of this Indenture and shall,
to the extent applicable, be governed by such provisions.
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined) thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
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For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
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(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them in the Trust Indenture Act, and the terms "cash
transaction" and "self-liquidating paper," as used in the Trust Indenture
Act Section 311, shall have the meanings assigned to them in the rules of
the Commission adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall have the meaning ascribed to "GAAP"
in this Article; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary of the Company or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company or such acquisition. Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Subsidiary of the Company.
"Act" has the meaning specified in Section 104 hereof.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
beneficially owns, directly or indirectly, 5% or more of such Person's Capital
Stock or any officer or director of any such Person or other Person or with
respect to any natural Person, any Person having a relationship with such Person
by blood, marriage or adoption not more remote than first cousin or (iii) any
Person 5% or more of the Voting Stock of which is beneficially owned or held
directly or indirectly by such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
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"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of any Subsidiary of the Company (other than directors' qualifying shares or
shares required to be owned by foreign nationals, to the extent mandated by
applicable law); (ii) all or substantially all of the properties and assets of
any division or line of business of the Company or its Subsidiaries; or (iii)
any other properties or assets of the Company or any of its Subsidiaries, other
than in the ordinary course of business. For the purpose of this definition,
the term "Asset Sale" does not include (A) any transfer of inventory in the
ordinary course of business, (B) any transfer of hydrodesulphurization equipment
originally purchased by the Company to manufacture low sulphur distillate in the
Pasadena Refinery, (C) any transfer of properties and assets that is by the
Company to any Wholly Owned Subsidiary, or by any Subsidiary of the Company to
the Company or any Wholly Owned Subsidiary, in accordance with the terms hereof,
(D) any transfer of properties and assets that is governed by Article Eight
hereof or (E) transfers of properties and assets in any calendar year with an
aggregate Fair Market Value of less than $500,000.
"Attributable Indebtedness" means, with respect to any Sale and Leaseback
Transaction, as at the time of determination, the greater of (i) the Fair Market
Value of the property subject to such arrangement and (ii) the present value
(discounted at a rate equivalent to the Company's then current weighted average
cost of funds for borrowed money, compounded on a semi-annual basis) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such transaction (including any period for which such
lease has been extended).
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar Federal or state law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have
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been duly adopted by the Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Business Day" means any day on which commercial banks are not authorized
or required by law to close in New York, New York, Baltimore, Maryland or the
state in which the principal office of the Trustee is located.
"Capital Lease Obligation" means any obligation of the Company and its
Subsidiaries on a Consolidated basis under any capital lease of real or personal
property which, in accordance with GAAP, has been recorded as a capitalized
lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
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the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of 180
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $250,000,000; and (iii) commercial paper with a maturity of 180 days
or less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States of America or the
District of Columbia and rated "A-1" (or higher) by S&P or "P-1" (or higher) by
Moody's.
"Change of Control" means the occurrence of any of the following events;
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person will be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 35% of the voting power of the total outstanding Voting Stock of the
Company voting as one class; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election to such
Board or whose nomination for election by the shareholders of the Company was
approved by a vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) for any reason cease to constitute a
majority of such Board of Directors then in office; (iii) the Company
consolidates with or
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merges with or into any Person or conveys, transfers or leases all or
substantially all of its assets to any Person, or any corporation consolidates
with or merges into or with the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such
transaction where (A) the outstanding Voting Stock of the Company is changed
into or exchanged for (x) Voting Stock of the surviving corporation which is not
Redeemable Capital Stock or (y) cash, securities and other property (other than
Capital Stock of the surviving corporation which is not Redeemable Capital
Stock) in an amount which could be paid by the Company as a Restricted Payment
in accordance with Section 1009 hereof (and such amount will be treated as a
Restricted Payment subject to Section 1009 hereof) and (B) no "person" or
"group," other than Permitted Holders, beneficially owns immediately after such
transaction, directly or indirectly, more than 35% of the voting power of the
total outstanding Voting Stock of the surviving corporation voting as one class;
or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution other than in a transaction which complies with Article Eight
hereof.
"Change of Control Offer," "Change of Control Purchase Date" and "Change of
Control Purchase Price" have the respective meanings specified in Section 1014
hereof.
"Closing Date" means January __, 1995.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means Crown Central Petroleum Corporation, a corporation
incorporated under the laws of Maryland, until a successor Person has become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" will mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of the following: its Chairman, its
President, any Senior Vice President or any Vice President, and delivered to the
Trustee.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in
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computing Consolidated Net Income (Loss), in each case, for such period, of the
Company and its Subsidiaries on a Consolidated basis, all determined in
accordance with GAAP to (b) the sum of (i) Consolidated Interest Expense and
(ii) cash and non-cash dividends on Preferred Stock paid by the Company or any
of its Subsidiaries (to any Person other than the Company and its Wholly Owned
Subsidiaries), in each case for such period; provided that (x) in making such
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computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (A) bearing a floating interest
--- -----
rate, will be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (B) which was not outstanding
during the period for which the computation is being made but which bears, at
the option of the Company, a fixed or floating rate of interest, will be
computed by applying at the option of the Company, either the fixed or floating
rate and (y) in making such computation, the Consolidated Interest Expense of
the Company attributable to interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis will be computed based upon the
--- -----
average daily balance of such Indebtedness during the applicable period;
provided further that, notwithstanding the foregoing, the interest rate with
- -------- -------
respect to any Indebtedness covered by any Hedging Obligation will be deemed to
be the effective interest rate with respect to such Indebtedness after taking
into account such Hedging Obligation.
"Consolidated Income Tax Expense" means for any period, as applied to the
Company, the provision for Federal, state, local and foreign income and
franchise taxes of the Company and its Consolidated Subsidiaries for such period
as determined in accordance with GAAP on a Consolidated basis.
"Consolidated Interest Expense" of the Company means, without duplication,
for any period, the sum of (a) the interest expense of the Company and its
Consolidated Subsidiaries for such period, on a Consolidated basis, including,
without limitation or duplication, (i) amortization of debt discount, (ii) the
net cost or payments under Hedging Obligations (including fees and amortization
of discounts), (iii) the interest portion of any deferred payment obligation,
(iv) payments or fees with respect to letters of credit, bankers' acceptances or
similar facilities, and (v) accrued interest plus (b) (i) the interest component
of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company during such period and (ii) all capitalized interest of
the Company and its Consolidated Subsidiaries, in each case as determined in
accordance with GAAP on a Consolidated basis.
"Consolidated Net Income (Loss)" of the Company means, for any period, the
net income (or loss) of the Company and its Consolidated Subsidiaries for such
period as determined in accordance with GAAP on a Consolidated basis, adjusted,
to the extent included in calculating such net income (loss), by
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excluding, without duplication, (i) all extraordinary gains or losses (less all
fees and expenses relating thereto), (ii) the portion of net income (or loss) of
the Company and its Consolidated Subsidiaries allocable to minority interests
owned by the Company and its Consolidated Subsidiaries in unconsolidated
Persons, to the extent that cash dividends or distributions have not actually
been received by the Company or one of its Consolidated Subsidiaries, (iii) net
income (or loss) of any Person combined with the Company or any of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss, net of taxes, realized upon
the termination of any employee pension benefit plan, (v) net gains (but not
losses) (less all fees and expenses relating thereto) in respect of dispositions
of assets other than in the ordinary course of business, and (vi) the net income
of any Subsidiary of the Company to the extent that the declaration of dividends
or similar distributions by such Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to such Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the Consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its Subsidiaries,
as determined in accordance with GAAP on a Consolidated basis.
"Consolidated Non-cash Charges" of the Company means, for any period, the
aggregate depreciation, amortization and other non-cash charges of the Company
and its Consolidated Subsidiaries for such period, as determined in accordance
with GAAP on a Consolidated basis (including the writedown to an estimated net
realizable salvage value of hydrodesulphurization equipment originally purchased
by the Company to manufacture low sulphur distillate in the Pasadena Refinery,
but excluding any non-cash charge which requires an accrual or reserve for cash
charges for any future period), and as adjusted for the impact of the
application of the LIFO Accounting Method for such period as determined in
accordance with GAAP on a Consolidated basis, which adjustment will be made by
(x) adding to the amount of "Consolidated Non-cash Charges" for such period the
amount of LIFO provision, if any, which had the effect of decreasing the
Consolidated Net Income (Loss) of the Company for such period or (y) subtracting
from the amount of "Consolidated Non-cash Charges" for such period the amount of
LIFO recovery, if any, which had the effect of increasing the Consolidated Net
Income (Loss) of the Company for such period.
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its Subsidiaries if and to the extent the
accounts of such Person and each of its Subsidiaries would normally be
consolidated with
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those of such Person, all in accordance with GAAP. The term "Consolidated" has
a similar meaning.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee, at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at 150 Royall Street, Canton, Massachusetts 02021, except that with respect to
presentation of Securities for registration of transfer or exchange, such term
shall mean the office or agency of the Trustee located at 55 Broadway, 3rd
Floor, New York, New York 10006.
"covenant defeasance" has the meaning specified in Section 1203 hereof.
"Credit Facility" means the unsecured Credit Agreement, dated as of May 10,
1993, among the Company and the lenders named therein and The Chase Manhattan
Bank, N.A., as agent, and any successor lenders and/or agents party thereto
including any ancillary documents executed in connection therewith, as such
agreement may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from time to time
(including, without limitation, any successive amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). For all purposes under this Indenture,
"Credit Facility" includes any amendments, renewals, extensions, substitutions,
refinancings, restructurings, replacements, supplements or any other
modifications that increase the principal amount of the Indebtedness or the
commitments to lend thereunder and have been made in compliance with Section
1008 hereof. If all or a portion of the Credit Facility becomes available to
the Company as liquidity support or credit enhancement for a commercial paper
program established by the Company, the amount of Indebtedness thereunder in
respect of such support or enhancement shall be the aggregate principal amount
thereunder that is then available to support or enhance outstanding commercial
paper of the Company, and the aggregate face amount of such commercial paper
which is outstanding that equals the aggregate principal amount thereunder that
is then available for support or enhancement of such commercial paper shall not
be considered to be outstanding for purposes of the operation of the covenant
set forth in Section 1008 hereof.
"Default" means any event which is, or after notice of passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307 hereof.
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"defeasance" has the meaning specified in Section 1202 hereof.
"Defeasance Redemption Date" has the meaning specified in Section 1204
hereof.
"Deficiency" has the meaning specified in Section 1011 hereof.
"Event of Default" has the meaning specified in Section 501 hereof.
"Excess Proceeds" has the meaning specified in Section 1011 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no undue pressure or compulsion to sell and an informed
and willing buyer under no undue pressure or compulsion to buy. Fair Market
Value of assets or property in excess of $1,000,000 will be determined by a
majority of the members of the Board of Directors of the Company, and a majority
of the disinterested members of such Board of Directors, if any, acting in good
faith and of assets or property in excess of $1,000,000 be evidenced by a duly
and properly adopted resolution of the Board of Directors; except that any
determination of Fair Market Value made with respect to any real property or
personal property which is customarily appraised shall be made by an independent
qualified appraiser selected by the Company.
"GAAP" means generally accepted accounting principles in the United States
of America, consistently applied, which are in effect from time to time.
"Guarantee" means the guarantee by any Guarantor of the Company's
obligations under this Indenture pursuant to a guarantee given in accordance
with this Indenture, including any Guarantee delivered pursuant to Section 1013
hereof.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds
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to, or in any other manner invest in, the debtor (including any agreement to pay
for property or services without requiring that such property be received or
such services be rendered), (iv) to maintain working capital or equity capital
of the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (v) otherwise to assure a creditor against
loss; provided that the term "guarantee" does not include endorsements for
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collection or deposit, in either case in the ordinary course of business.
"Guarantor" means a Subsidiary of the Company that guarantees the Company's
obligations under this Indenture.
"Hedging Obligations" means the obligation of any Person pursuant to any
swap or cap agreement, collar agreement, option, futures or forward hedging
contract, derivative instrument or other similar agreement or arrangement
designed to protect such Person against fluctuations in interest rates or in the
price of crude oil, other feed stocks and refined products, as the case may be.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"incur" has the meaning ascribed thereto in Section 1008 hereof; provided
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that with respect to any Indebtedness of any Subsidiary of the Company that is
owing to the Company or another Subsidiary of the Company, (a) any disposition,
pledge or transfer of such Indebtedness to any Person (other than the Company or
a Wholly Owned Subsidiary) shall be deemed to be an incurrence of such
Indebtedness and (b) any transaction pursuant to which a Wholly Owned Subsidiary
(which is an obligor on Indebtedness) ceases to be a Wholly Owned Subsidiary
shall be deemed to be an incurrence of such Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (iii)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables arising in the ordinary course of business, (iv) all
Hedging Obligations of such Person, (v) all Capital Lease Obligations of such
Person, (vi)
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all Indebtedness referred to in clauses (i) through (v) above of other Persons
and all dividends of other Persons, the payment of which is secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or with respect to property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (vii) all Guaranteed Debt of such Person, and (viii) all
Redeemable Capital Stock valued at the greater of its voluntary or involuntary
maximum fixed repurchase price plus accrued and unpaid dividends. For purposes
hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock
which does not have a fixed repurchase price will be calculated in accordance
with the terms of such Redeemable Capital Stock as if such Redeemable Capital
Stock were purchased on any date on which Indebtedness is required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair
Market Value is to be determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock. As used herein, Indebtedness with
respect to any Hedging Obligation shall mean, with respect to any specified
Person on any date, the net amount (if any) that would be payable by such
specified Person upon the liquidation, close-out or early termination on such
date of such Hedging Obligation. For purposes hereof, any settlement amount
payable upon the liquidation, close-out or early termination of a Hedging
Obligation will be calculated by the Company in good faith and in a commercially
reasonable manner on the basis that such liquidation, close-out or early
termination results from an event of default or other similar event with respect
to such specified Person.
"Independent Director" means a director of the Company other than a
director (i) who (apart from being a director of the Company or any of its
Subsidiaries) is an employee, insider, associate or Affiliate of the Company or
any of its Subsidiaries or has held any such position during the previous five
years or (ii) who is a director, an employee, insider, associate or Affiliate of
another party to the transaction in question.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Investments" means, with respect to any Person, directly or indirectly,
any advance, loan (including guarantees) or other extension of credit or capital
contribution to any other Person (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities issued by any other
Person and all other items that
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would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
security interest, hypothecation or other encumbrance upon or with respect to
any property of any kind (including any conditional sale or other title
retention agreement, any leases in the nature thereof, and any agreement to give
any security interest), real or personal, movable or immovable, now owned or
hereafter acquired.
"LIFO Accounting Method" means the last-in, first-out (LIFO) accounting
method used by the Company to value its crude oil, refined products, convenience
store merchandise and gasoline and other inventory.
"Maturity" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as herein or therein
provided, whether at Stated Maturity, the Offer Date or the Redemption Date and
whether by declaration of acceleration, Offer in respect of Excess Proceeds,
Change of Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Net Cash Proceeds" means (a) with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any of its
Subsidiaries) net of (i) brokerage commissions and other actual fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes payable as a result of such
Asset Sale, (iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of such Asset
Sale, (iv) amounts required to be paid to any Person (other than the Company or
any of its Subsidiaries) owning a beneficial interest in the assets subject to
such Asset Sale and (v) appropriate amounts to be provided by the Company or any
of its Subsidiaries, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by the
Company or any of its Subsidiaries, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Trustee and (b) with
respect to any issuance or sale of Capital Stock or options, warrants or rights
to purchase Capital Stock, or debt securities
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or Capital Stock that have been converted into or exchanged for Capital Stock,
as referred to in Section 1009 hereof, the proceeds of such issuance or sale in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of, or stock or other assets when
disposed for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Company or any of its
Subsidiaries), net of attorneys' fees, accountants' fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Offer" has the meaning specified in Section 1011 hereof.
"Officers' Certificate" means a certificate signed by the Chairman, the
President or any Vice President, and by the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, including an employee of the Company, and who shall be
reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
--------
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made;
(iii) Securities, except and only to the extent provided in Sections
1202 and 1203 hereof, with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Twelve; and
(iv) Securities which have been paid pursuant to Section 306 hereof or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture;
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provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by Trust Indenture Act Section
316(a), Securities owned by the Company or any other obligor upon the Securities
or any Affiliate of the Company or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in making such calculation or in relying upon such request,
demand, authorization, direction, notice, consent or waiver, only Securities
which the Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the Company
or such other obligor.
"Pasadena Refinery" means the Company's refinery located in Pasadena,
Texas.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (and premium, if any,
on) or interest on any Securities on behalf of the Company.
"Permitted Holders" means (i) any of the individuals listed on Schedule 1
hereto, any of their respective spouses or lineal descendants or any trust for
the benefit of any of the foregoing; (ii) American Trading and Production
Corporation, for so long as not less than 66 2/3% of the shares of Voting Stock
of such corporation are beneficially owned by any or all of the individuals or
trusts referred to in the preceding clause (i); (iii) any controlled Affiliate
of any of the foregoing; or (iv) in the event of incompetence or death of any of
the individuals described in clause (i) above, such individual's estate,
executor, administrator committee or other personal representative or
beneficiaries.
"Permitted Indebtedness" has the meaning specified in Section 1008 hereof.
"Permitted Investments" means (i) Investments in any of the Securities;
(ii) Temporary Cash Investments; (iii) Investments in existence on the date of
this Indenture; (iv) intercompany notes permitted under the definition of
"Permitted Indebtedness"; (v) Investments in any Wholly Owned Subsidiary or any
Person which, as a result of such Investment, becomes a Wholly Owned Subsidiary;
provided that such Wholly Owned Subsidiary is engaged in a business that is
- --------
reasonably related to the business of the Company and its Consolidated
Subsidiaries on the date of this Indenture; and (vi) other investments that do
not exceed
14
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$15,000,000 at any one time outstanding in joint ventures, corporations, limited
liability companies or partnerships engaged in a business that is reasonably
related to the business of the Company and its Consolidated Subsidiaries on the
date of this Indenture.
"Permitted Liens" has the meaning specified in Section 1012 hereof.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 hereof in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred stock whether now outstanding or issued after the date of
this Indenture, and including, without limitation, all classes and series of
preferred or preference stock.
"Public Equity Offering" means an underwritten sale of common stock of the
Company pursuant to a registration statement (other than Form S-8 or a
registration statement relating to securities issuable by any benefit plan of
the Company or any of its Subsidiaries) that is declared effective by the
Commission.
"Purchase Money Indebtedness" means (i) Indebtedness of a Person incurred
to finance the cost (including the cost of improvement) of acquisition or
construction in the ordinary course of business of real or tangible personal
property or (ii) Indebtedness of such Person incurred to refinance Indebtedness
described in clause (i) of this definition.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Securities or is redeemable at the option of the holder thereof
at any time prior to any such Stated Maturity, or is convertible
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<PAGE>
or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Redemption Date", when used with respect to any Security to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the _________ or ______ (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Required Filing Dates" has the meaning specified in Section 1018 hereof.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller 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.
"Restricted Payments" has the meaning specified in Section 1009 hereof.
"Sale and Leaseback Transaction" with respect to any Person, means any
arrangement with another Person for the leasing of any real or tangible personal
property, which property has been or is to be sold or transferred by such Person
to such other Person in contemplation of such leasing.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1993, as amended.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305 hereof.
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"S&P" means Standard and Poor's Ratings Group, a division of McGraw Hill
Inc., or any successor rating agency.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307 hereof.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Securities or a Guarantee, as
the case may be.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which at least a majority of the shares of Voting Stock is at the time owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof, or (ii) any
other Person of which at least a majority of voting interest is at the time,
directly or indirectly, owned by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof.
"Surviving Entity" has the meaning specified in Section 801 hereof.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
America, (ii) any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution that is a member of the Federal Reserve System and that has combined
capital and surplus and undivided profits of at least $250,000,000, whose debt
has a rating, at the time as of which any investment therein is made, of "P-2"
(or higher) according to Moody's or "A-2" (or higher) according to S&P, (iii)
commercial paper, maturing not more than one year after the date of acquisition,
issued by a corporation (other than an Affiliate or Subsidiary of the Company)
organized and existing under the laws of the United States of America with a
rating, at the time as of which any investment therein is made, of "P-2" (or
higher) according to Moody's or "A-2" (or higher) according to S&P, (iv) any
money market deposit accounts issued or offered by a domestic commercial bank
having combined capital and surplus of at least $250,000,000, (v) Eurodollar
time deposits rated "P-2" (or higher) according to Moody's or "A-2" (or higher)
according to
17
<PAGE>
S&P in an amount not exceeding $10,000,000; (vi) municipal bonds or notes with
maturities of six months or less rated "A" (or higher) according to Moody's or
S&P or guaranteed by one or more banks rated "Aaa" according to Moody's or "AAA"
according to S&P; and (vii) any shares in an open-end mutual fund organized by a
bank or financial institution having combined capital and surplus of at least
$100,000,000 investing solely in Investments permitted by the foregoing clauses
(i), (ii), (iii), (v) and (vi).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"U.S. Government Obligations" has the meaning specified in Section 1204
hereof.
"Voting Stock" means Capital Stock of a Person of the class or classes
pursuant to which the holders thereof have voting power under ordinary
circumstances for the election of directors, managers or trustees of such Person
(irrespective of whether or not at the time stock of any other class or classes
has or might have voting power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary of the Company all the Capital
Stock of which (other than directors' qualifying shares or shares required to be
owned by foreign nationals under applicable law) is owned by the Company or
another Wholly Owned Subsidiary.
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture (including any covenant, if compliance
therewith constitutes a condition precedent) relating to the proposed action
have been complied with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1019(a) hereof) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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<PAGE>
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, 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 complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel has actual knowledge that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
19
<PAGE>
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution, by an attestation of another authorized officer or by a certificate
of a notary public or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding Trust
Indenture Act Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
provided that no such request, demand, authorization, direction, notice,
- --------
consent, waiver or other Act by the Holders on such record date
20
<PAGE>
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after such record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Division, or at any other address previously furnished in writing to
the Holders and the Company by the Trustee, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture and directed to the attention of the
Secretary of the Company, or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice. Where
21
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this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or requirement of the Trust Indenture Act shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties
22
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hereto, any Paying Agent, any Securities Registrar and their successors
hereunder, and the Holders any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, or
Stated Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, or at the
Stated Maturity or Maturity; provided that no additional interest shall accrue
--------
for the period from and after such Interest Payment Date, Redemption Date,
Stated Maturity or Maturity, as the case may be, through such next succeeding
Business Day.
SECTION 114. Schedules and Exhibits.
----------------------
All schedules and exhibits attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
SECTION 115. Counterparts.
------------
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but all of such counterparts shall together
constitute one and the same instrument.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication shall
be in substantially the forms annexed hereto as Exhibit A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed
23
<PAGE>
thereon as may, consistently herewith, be determined by the officers executing
such Securities, as evidenced by their execution of the Securities. Any portion
of the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
The definitive Securities may be printed, lithographed or engraved on
steel-engraved borders or produced by any combination of these methods or may be
produced in any other manner, all as determined by the officers of the Company
executing such Securities, as evidenced by their execution of such Securities.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $125,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Sections
304, 305, 306, 906, 1011, 1014 or 1108 hereof.
The Securities shall be known and designated as the "____% Senior
Notes due 2005" of the Company. The Stated Maturity of the Securities shall be
____________, 2005, and they shall bear interest at the rate of ______% per
annum from _____________, 1995, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, payable on __________, 1995
and semiannually thereafter on __________ and ____________ in each year, until
the principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose; provided, however, that, at the option of the Company,
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interest may be paid by check mailed to addresses of the Persons entitled
thereto as such addresses shall appear on the Security Register.
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The Securities shall be subject to repurchase by the Company pursuant
to an Offer as provided in Section 1011 and pursuant to a Change of Control
Offer as provided in Section 1014 hereof.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman, its President, any Senior Vice President or any Vice President, and
attested by its Secretary, an Assistant Secretary or any other Vice President.
The signature of any of these officers on the Securities may be manual or
facsimile signatures of the present or any future such authorized officer and
may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer or
employee, and such certificate upon any Security shall be
25
<PAGE>
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Securities authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Securities executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute and the Trustee
shall
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authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 hereof being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002 hereof, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
any authorized denomination or denominations of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company
27
<PAGE>
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 304, 306, 906,
1011, 1014 or 1108 hereof not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities
selected for redemption under Section 1104 hereof and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (i) any mutilated Security is surrendered to the Trustee, or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee (at the expense of the Holder) such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon Company
Order the Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or stolen Security, a
new Security of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
28
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date immediately prior to such
Interest Payment Date.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in
subparagraphs (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
subparagraph (1) provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to each
Holder in the manner provided for in Section 106 hereof, not less than 10
days prior to
29
<PAGE>
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following subparagraph (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this
subparagraph (2), such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any, on) and (subject to Sections 305 and 307 hereof) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and none of the Company, the Trustee or any agent of the Company or the
Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of by the Trustee in accordance
with its customary procedures and certification of their disposal delivered to
the Company unless
30
<PAGE>
by Company Order the Company shall direct that cancelled Securities be returned
to it. The Trustee shall provide the Company a list of all Securities that have
been cancelled from time to time as requested by the Company.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Securities, as
expressly provided for herein) as to all Outstanding Securities when
(1) either
(a) all the Securities theretofore authenticated and delivered
(except lost, stolen or destroyed Securities which have been replaced
or paid as provided in Section 306 hereof) have been cancelled or have
been delivered to the Trustee for cancellation; or
(b) all Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company or any Guarantor has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire Indebtedness on the Securities not theretofore delivered to the
Trustee for cancellation, including principal of, premium, if any, and accrued
interest at such Stated Maturity or redemption date;
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(2) the Company or any Guarantor has paid or caused to be paid all other
sums payable under this Indenture by the Company or any Guarantor; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel each stating that (a) all conditions precedent hereunder
relating to the satisfaction and discharge of this Indenture have been complied
with and (b) such satisfaction and discharge will not result in a breach or
violation of, or constitute a default under, this Indenture.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003
hereof, all money deposited with the Trustee pursuant to Section 401 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee; but such money need not be segregated from other funds except
to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) there shall be a default in the payment of any interest on any
Security when it becomes due and payable, and such default shall continue
for a period of 30 days;
(2) there shall be a default in the payment of the principal of (or
premium, if any, on) any Security at its Maturity (upon acceleration,
optional or mandatory redemption, required repurchase or otherwise);
(3) (a) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company or any Guarantor under this
Indenture (other than a default in the performance, or breach, of a
covenant or agreement which
32
<PAGE>
is specifically dealt with in clauses (1) or (2) or in subclauses (b), (c)
and (d) of this clause (3)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail,
(x) to the Company by the Trustee or (y) to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities, specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under
this Indenture; (b) there shall be a default in the performance or breach
of the provisions described in Article Eight; (c) the Company shall have
failed to make or consummate an Offer in accordance with the provisions of
Section 1011 hereof; or (d) the Company shall have failed to make or
consummate a Change of Control Offer in accordance with the provisions of
Section 1014 hereof;
(4) (a) there shall have occurred one or more defaults by the Company
or any of its Subsidiaries in the payment of the principal on Indebtedness
aggregating $5,000,000 or more, when the same becomes due and payable at
the final maturity thereof, and such default or defaults shall have
continued after any applicable grace period and shall not have been cured
or waived or (b) Indebtedness of the Company or any of its Subsidiaries
aggregating $5,000,000 or more shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or repurchased, prior
to the Stated Maturity thereof;
(5) any holder of at least $5,000,000 in aggregate principal amount of
Indebtedness of the Company or any of its Subsidiaries after a default
under such Indebtedness shall commence proceedings, or take any action
(including by way of set-off, other than set-off or netting arising under a
single agreement with respect to regularly scheduled payments or deliveries
to be made in respect of any Hedging Obligation), to retain in satisfaction
of such Indebtedness or to collect or seize, dispose of or apply in
satisfaction of Indebtedness, assets of the Company or any of its
Subsidiaries having a Fair Market Value in excess of $1,000,000
individually or in the aggregate (including funds on deposit or held
pursuant to lock-box and other similar arrangements) and in any such case
there shall have been a period of 60 consecutive days during which a stay
of, or injunction with respect to such proceedings or action, by reason of
an order, decree, appeal or otherwise, shall not be in effect;
(6) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and effect
and enforceable in accordance with its terms, except to the extent
permitted by this Indenture and any such Guarantee;
33
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(7) one or more judgments, orders or decrees for the payment of money
in excess of $5,000,000, either individually or in the aggregate (net of
amounts covered by insurance, bond, surety or similar instrument), shall be
entered against the Company, any Subsidiary of the Company or any of their
respective properties and shall not be discharged and either (A) there
shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of an appeal or otherwise,
shall not be in effect or (B) any creditor shall have commenced an
enforcement proceeding upon such judgment, order or decree and there shall
have been a period of 60 consecutive days during which a stay of such
enforcement proceeding, by reason of an appeal or otherwise, shall not be
in effect;
(8) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company
or any of its Subsidiaries in an involuntary case or proceeding under any
applicable Bankruptcy Law or (b) a decree or order adjudging the Company or
any of its Subsidiaries bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or
any of its Subsidiaries under any applicable Federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or any of its
Subsidiaries or of any substantial part of their respective properties, or
ordering the winding up or liquidation of their affairs, and any such
decree or order for relief shall continue to be in effect, or any such
other decree or order shall be unstayed and in effect, for a period of 60
consecutive days; or
(9) (a) the Company or any of its Subsidiaries shall commence a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Company or any of its Subsidiaries shall consent to the entry of a decree
or order for relief in respect of the Company or such Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or to
the commencement of any bankruptcy or insolvency case or proceeding against
it, (c) the Company or any of its Subsidiaries files a petition or answer
or consent seeking reorganization or relief under any applicable Federal or
state law, (d) the Company or any of its Subsidiaries (x) consents to the
filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or such Subsidiary or of any substantial part of
their respective properties, (y) makes an assignment for the benefit of
creditors or (z) admits in writing its inability to pay its debts generally
as they
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<PAGE>
become due or (e) the Company or any of its Subsidiaries takes any
corporate action in furtherance of any such actions in this clause (9).
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than as specified in Section 501(8) or
501(9) hereof) shall occur and be continuing, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Securities then Outstanding
may, and the Trustee at the request of such Holders shall, declare all unpaid
principal of, premium, if any, and accrued interest on all the Securities to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the Holders of the Securities). Thereupon such principal
shall become immediately due and payable, and the Trustee may, at its
discretion, proceed to protect and enforce the rights of the Holders of
Securities by appropriate judicial proceeding. If an Event of Default specified
in Section 501(8) or 501(9) hereof occurs and is continuing, then all the
Securities shall ipso facto become and be immediately due and payable, in an
---- -----
amount equal to the principal amount of the Securities, together with accrued
and unpaid interest, if any, to the date the Securities become due and payable,
without any declaration or other act on the part of the Trustee or any Holder.
The Trustee or, if notice of acceleration is given by the Holders, the Holders
shall give notice to the agent under the Credit Facility of any such
acceleration; provided that failure to give such notice shall not affect the
--------
validity thereof.
At any time after a declaration of acceleration has been made, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in aggregate principal amount of
Securities Outstanding, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(a) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel,
(b) all overdue interest on all Securities, and
(c) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
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<PAGE>
(2) all Events of Default, other than the non-payment of principal of
the Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513 hereof;
and
(3) the rescission will not conflict with any judgment or decree of a
court of competent jurisdiction.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company covenants that if:
(a) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof, or, with respect to any
Security required to have been purchased pursuant to an Offer or a Change
of Control Offer made by the Company, at the purchase date thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement
36
<PAGE>
of any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
37
<PAGE>
SECTION 505. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders in respect of which such judgment has been
recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606
hereof;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on,) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (and premium, if any) and
interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 507. Limitation on Suits.
-------------------
No Holder shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
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<PAGE>
(3) such Holder or Holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance
with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority or
more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Twelve)
and in such Security of the principal of (and premium, if any, on) and (subject
to Section 307 hereof) interest on, such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen
39
<PAGE>
Securities in the last paragraph of Section 306 hereof, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(1) in respect of the payment of the principal of (or premium, if any,
on) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected by such modification or amendment.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed
40
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to have been cured, for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not, and will not permit any of its Subsidiaries to, at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not, and will not permit any of its Subsidiaries to, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will, and
will cause its Subsidiaries to, suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 515. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or the Securities or in any suit against the Trustee for any action
taken or omitted by it as Trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the costs of
the suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by
Holders of more than 10% in principal amount of the Securities or to any suit
instituted by any Holder for the enforcement of the payment of the principal of
(or premium, if any) or interest on any Security on or after the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
or after the respective Redemption Dates).
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
------------------
Within 30 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in Trust
Indenture Act Section 313(c), notice of such Default hereunder known to the
Trustee, unless such Default shall have been cured or waived; provided, however,
-------- -------
that, except
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in the case of a Default in the payment of the principal of (or premium, if any,
on) or interest on any Security, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the interest of
the Holders.
SECTION 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Trust Indenture Act Sections 315(a)
through 315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
42
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paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture; and
(i) if an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture, and
shall use the same degree of care and skill in their exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
---------------------------------------------------
Securities.
- ----------
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that any statements made by
it in a Statement of Eligibility and Qualification on Form T-1 supplied to the
Company are (or when delivered, will be) true and accurate, subject to the
qualifications set forth therein. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
43
<PAGE>
SECTION 604. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to Trust Indenture
Act Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other agent.
SECTION 605. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 606. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
The obligations of the Company under this Section 606 to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior
44
<PAGE>
to the Securities upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the payment of principal of (and
premium, if any, on) or interest on particular Securities.
SECTION 607. Conflicting Interests.
---------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 608. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Section 310(a)(1) and shall
have a combined capital and surplus of at least $50,000,000. If the Trustee
does not have an office in The City of New York, the Trustee may appoint an
agent in The City of New York reasonably acceptable to the Company to conduct
any activities which the Trustee may be required under this Indenture to conduct
in The City of New York. If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of Federal, state, territorial
or District of Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 609. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 610 hereof.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 610 hereof shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of
45
<PAGE>
the Outstanding Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 608 hereof
and shall fail to resign after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to Trust Indenture Act Section 315(e), any Holder who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee to the Holders of
Securities in the manner
46
<PAGE>
provided for in Section 106 hereof. Each notice shall include the name of the
successor trustee and the address of its Corporate Trust Office.
SECTION 610. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 611. Merger, Conversion Consolidation or Succession to
-------------------------------------------------
Business.
- --------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
- --------
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may, upon receipt of a Company Order,
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Securities or in this
Indenture provided that the certificate of the Trustee shall
47
<PAGE>
have; provided, however, that the right to adopt the certificate of
-------- -------
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, amalgamation, conversion or consolidation.
SECTION 612. Preferential Collection of Claims Against Company.
--------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders.
- -------
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
provided, however, that if and so long as the Trustee shall be the Security
- -------- -------
Registrar, no such list need be furnished.
Section 702. Preservation of Information; Communications to Holders;
-------------------------------------------------------
Disclosure of Names and Addresses of Holders.
- --------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 hereof and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 hereof upon receipt of a new list so furnished.
48
<PAGE>
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with Trust Indenture Act Section 312, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Trust Indenture Act Section 312(b).
SECTION 703. Reports by Trustee.
------------------
(a) Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Securities, the Trustee shall transmit
to all Holders, in the manner and to the extent provided in Trust Indenture Act
Section 313(c), a brief report dated as of such May 15 if required by Trust
Indenture Act Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when any Securities are listed on any stock
exchange.
SECTION 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the Required Filing Dates.
49
<PAGE>
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS
SECTION 801. Company and its Subsidiaries May Consolidate,
---------------------------------------------
etc., Only on Certain Terms.
- ---------------------------
(a) The Company shall not, in a single transaction or through a series
of related transactions, consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to any Person or
group of affiliated Persons, or permit any of its Subsidiaries to enter into any
such transaction or transactions if such transaction or transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
disposal of all or substantially all of the properties and assets of the Company
and its Subsidiaries on a Consolidated basis to any other Person or group of
affiliated Persons, unless at the time and after giving effect thereto:
(1) either
(i) the Company shall be the continuing corporation; or
(ii) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition of
all or substantially all of the properties and assets of the Company and
its Subsidiaries on a Consolidated basis (the "Surviving Entity") shall be
a corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and
such Person expressly assumes, by an indenture supplemental hereto in a
form reasonably satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture, and this Indenture shall
remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(3) except in the case of the consolidation or merger of any
Subsidiary of the Company with or into the Company, immediately after giving
effect to such transaction on a pro forma basis, the Consolidated Net Worth of
--- -----
the Company (or the Surviving Entity if the Company is not the continuing
obligor hereunder) is equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction;
50
<PAGE>
(4) except in the case of the consolidation or merger of any
Subsidiary of the Company with or into the Company, immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
--- -----
Company (or the Surviving Entity if the Company is not the continuing obligor
hereunder) could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 1008 hereof;
(5) each Guarantor, if any, unless it is the other party to the
transactions described above, shall have by an indenture supplemental hereto
confirmed that its Guarantee shall apply to such Person's obligations hereunder
and the Securities;
(6) if any of the property or assets of the Company or any of its
Subsidiaries would thereupon become subject to any Lien, the provisions of
Section 1012 hereof are complied with; and
(7) the Company or the Surviving Entity shall have delivered, or
caused to be delivered, to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each to the effect that such consolidation, merger, transfer, sale, assignment,
conveyance, lease or other transaction and the supplemental indenture in respect
thereto comply with this Indenture and that all conditions precedent herein
provided for relating to such transaction have been complied with.
(b) Each Guarantor, if any, shall not, and the Company will not permit
a Guarantor to, in a single transaction or through a series of related
transactions merge or consolidate with or into any other Person (other than the
Company or any other Guarantor), or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on a
Consolidated basis to any Person (other than the Company or any other Guarantor)
unless at the time and after giving effect thereto:
(1) either
(i) such Guarantor shall be the continuing corporation; or
(ii) the Person (if other than such Guarantor) formed by such
consolidation or into which such Guarantor is merged or the Person
which acquires by sale, assignment, conveyance, transfer, lease or
disposition the properties and assets of such Guarantor shall be a
corporation duly organized and validly existing under the laws of the
United States of America, any state thereof, the District of Columbia
or the jurisdiction in which such Guarantor was organized and such
Person shall expressly assume by an indenture
51
<PAGE>
supplemental hereto, executed and delivered to the Trustee, in a form
reasonably satisfactory to the Trustee, all the obligations of such
Guarantor under its Guarantee and this Indenture;
(2) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and
(3) such Guarantor shall have delivered or caused to be delivered to
the Trustee, in form and substance reasonably satisfactory to the Trustee,
an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or
disposition and such supplemental indenture comply with this Indenture and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
The provisions of this Section 801(b) hereof shall not apply to any
transaction (including any Asset Sale made in accordance with Section 1011
hereof) with respect to any Guarantor if the Guarantee of such Guarantor is
released in connection with such transaction in accordance with paragraph (c) of
Section 1013 hereof.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company (or any Guarantor) with or
merger of the Company (or any Guarantor) with or into any other Person or any
sale, assignment, conveyance, transfer, or other disposition of the properties
and assets of the Company (or any Guarantor) substantially as an entirety to any
Person in accordance with Section 801(a) or Section 801(b) hereof in which the
Company or any Guarantor is not the continuing corporation, the successor Person
formed by such consolidation or into which the Company (or a Guarantor) is
merged or to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or the
Guarantor, as the case may be, under this Indenture with the same effect as if
such successor Person had been named as the Company or the Guarantor, as the
case may be herein, and in the event of any such conveyance or transfer, the
Company (which term shall for this purpose mean the Person named as the
"Company" in the first paragraph of this Indenture or any successor Person which
shall theretofore become such in the manner described in Section 801(a) hereof),
or the Guarantor, as the case may be, except in the case of a lease, shall be
discharged of all obligations and covenants under this Indenture and the
Securities.
52
<PAGE>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the obligations
under this Indenture and the Securities of the Company or any Guarantor and
the assumption by any such successor of the covenants of the Company and
any Guarantor contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(3) to provide for a Guarantee of the Securities or add a Guarantor
pursuant to the requirements of Section 1013 hereof;
(4) to secure the Securities pursuant to the requirements of Section
1012 hereof or otherwise; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee pursuant to the requirements of Section
610 hereof; or
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided that such action shall not adversely affect
--------
the interests of the Holders; or
(7) to comply with any requirement of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee
53
<PAGE>
may enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that no such supplemental
-------- -------
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which the principal of any
Security or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof;
(2) amend, change or modify the obligation of the Company to make and
consummate an Offer with respect to any Asset Sale or Asset Sales in
accordance with Section 1011 hereof or the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control in accordance with Section 1014 hereof, including amending,
changing or modifying any definitions with respect thereto;
(3) reduce the percentage in principal amount of Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver;
(4) modify any of the provisions of this Section or Section 513
hereof, except to increase the percentage of Outstanding Securities
required for such actions or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each Security affected thereby;
(5) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Guarantor of any of its rights
and obligations under this Indenture; or
(6) amend or modify any of the provisions of this Indenture relating
to any Guarantee of the Securities in any manner adverse to the Holders of
the Securities or any Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902 hereof, the
Company shall give notice thereof to the Holders of each Outstanding Security
affected, in the manner provided for in Section 106 hereof, setting forth in
general terms the substance of such supplemental indenture.
55
<PAGE>
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
---------------------------------------------------
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any, on) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York where Securities may be surrendered for
registration of transfer or exchange, and shall also maintain an office or
agency where Securities may be presented or surrendered for payment and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served (in or outside the Borough of Manhattan, The City of New
York). The Corporate Trust Office of the Trustee shall be such office or agency
of the Company, unless the Company shall designate and maintain some other
office or agency for one or more of such purposes. The Company will give prompt
written notice to the Trustee of any change in the location of any 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, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time rescind the above designation
and designate one or more other offices or agencies (in or outside the Borough
of Manhattan, The City of New York) where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind any
such subsequent designation; provided, however, that no such designation or
-------- -------
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any, on) or
interest on any of the Securities,
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<PAGE>
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before each due date of the principal of (and
premium, if any, on), or interest on, any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any, on) or interest on Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any, on) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and
57
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payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
-------------------
Subject to Article Eight, and as long as any Securities remain
Outstanding, the Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence, rights
(charter and statutory) and franchises of the Company and each of its
Subsidiaries; provided, however, that the Company shall not be required to
-------- -------
preserve any such right or franchise if the Board of Directors shall determine
in good faith that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries as a whole and that
the loss thereof is not disadvantageous in any material respect to the Holders.
This Section 1004 shall not prohibit the Company from taking any action
otherwise permitted by, and made in accordance with, the provisions of this
Indenture.
SECTION 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
-------- -------
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings properly instituted and
diligently conducted and in respect of which appropriate reserves (as determined
by the Board of Directors in good faith) are being maintained in accordance with
GAAP.
58
<PAGE>
SECTION 1006. Maintenance of Properties.
-------------------------
The Company shall cause all properties used or useful in the conduct
of its business or the business of any Subsidiary of the Company to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 1006 shall prevent the Company
- -------- -------
from discontinuing the operation or maintenance of any of such properties if
such discontinuance is, as determined by the Board of Directors in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1007. Maintenance of Insurance.
------------------------
The Company shall, and shall cause its Subsidiaries to, keep at all
times all of their properties which are of an insurable nature insured against
loss or damage with insurers believed by the Company to be responsible to the
extent that property of similar character is usually so insured by corporations
similarly situated and owning like properties in accordance with good business
practice. The Company shall, and shall cause its Subsidiaries to, use the
proceeds from any such insurance policy to repair, replace or otherwise restore
the property to which such proceeds relate; provided, however, that the Company
-------- -------
shall not be required to repair, replace or otherwise restore such property if
the Board of Directors shall determine in good faith that such repair,
replacement or restoration is not desirable in the conduct of the business of
the Company and its Subsidiaries as a whole and that the loss of such property
is not disadvantageous in any material respect to the Holders.
SECTION 1008. Limitation on Indebtedness.
--------------------------
(a) The Company shall not create, issue, assume, guarantee, or
otherwise in any manner become directly or indirectly liable for or with respect
to or otherwise incur (collectively, "incur") any Indebtedness and the Company
shall not permit any of its Subsidiaries to incur any Indebtedness, except that
(1) the Company may incur Indebtedness and
(2) any Subsidiary of the Company may incur Acquired Indebtedness,
Purchase Money Indebtedness, and Indebtedness in respect of Sale and
Leaseback Transactions,
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<PAGE>
if, in each case, (x) the Consolidated Fixed Charge Coverage Ratio for the
Company for the four full fiscal quarters immediately preceding the incurrence
of such Indebtedness taken as one period (and after giving pro forma effect to:
--- -----
(i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance
other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such four-
quarter period;
(ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day
of such four-quarter period as if such Indebtedness was incurred,
repaid or retired at the beginning of such four-quarter period (except
that, in making such computation, the amount of Indebtedness under any
revolving credit facility will be computed based upon the average
daily balance of such Indebtedness during such four-quarter period);
(iii) in the case of Acquired Indebtedness and Purchase Money
Indebtedness, the related acquisition as if such acquisition occurred
at the beginning of such four-quarter period; and
(iv) any acquisition or disposition by the Company and its
Subsidiaries of any company or any business or any assets out of the
ordinary course of business, whether by merger, stock purchase or sale
or asset purchase or sale or any related repayment of Indebtedness,
since the first day of such four-quarter period, as if such
acquisition or disposition occurred at the beginning of such four-
quarter period)
is at least equal to 2.5 to 1.0 and (y) if such Indebtedness is Subordinated
Indebtedness, such Indebtedness has an Average Life to Stated Maturity greater
than the remaining Average Life to Stated Maturity of the Securities and a
Stated Maturity for its final scheduled principal payment later than the Stated
Maturity for the final scheduled principal payment of the Securities.
(b) The foregoing limitations shall not apply to the incurrence of
any of the following (collectively "Permitted Indebtedness"):
(i) Total Indebtedness under the Credit Facility in an aggregate
principal amount at any one time outstanding not to exceed $125,000,000;
provided that if such Indebtedness is for borrowed money, then such
--------
Indebtedness together with all other Indebtedness for borrowed money under
the Credit
60
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Facility shall not exceed at any time $50,000,000 in aggregate principal
amount;
(ii) Indebtedness of the Company pursuant to the Securities and
Indebtedness of any Guarantor pursuant to a Guarantee of the Securities;
(iii) Indebtedness of the Company or any of its Subsidiaries
outstanding on the date of this Indenture and listed on Schedule 2 hereto;
(iv) Indebtedness (1) of the Company owing to a Subsidiary of the
Company or (2) of a Wholly Owned Subsidiary owing to the Company or another
Wholly Owned Subsidiary provided that any such Indebtedness is made
--------
pursuant to an intercompany note in the form attached as Exhibit B hereto
and, in the case of Indebtedness of the Company owing to a Subsidiary of
the Company, is subordinated in right of payment from and after such time
as the Securities become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Securities; provided, further, that (x) any
-------- -------
disposition, pledge or transfer of any such Indebtedness to a Person (other
than the Company or a Wholly Owned Subsidiary) will be deemed to be an
incurrence of such Indebtedness by the obligor not permitted by this clause
(iv) and (y) any transaction pursuant to which any Wholly Owned Subsidiary,
which has Indebtedness owing to the Company or any other Wholly Owned
Subsidiary, ceases to be a Wholly Owned Subsidiary will be deemed to be the
incurrence of Indebtedness by the Company or such other Wholly Owned
Subsidiary that is not permitted by this clause (iv);
(v) Indebtedness of the Company pursuant to Hedging Obligations, so
long as the notional amount of those Hedging Obligations which relate to
other Indebtedness described in clause (i), (ii) or (iii) of the definition
of "Indebtedness" at the time incurred does not exceed the aggregate
principal amount of such Indebtedness then outstanding or in good faith
anticipated to be outstanding within 90 days of such incurrence;
(vi) guarantees of any Subsidiary of the Company made in accordance
with Section 1013 hereof;
(vii) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing," for purposes
of this Section 1008) of any Indebtedness described in clauses (ii) and
(iii) of this paragraph (b) including any successive refinancings,
provided, that (A) the aggregate principal amount of Indebtedness
--------
represented thereby is not increased by such
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refinancing plus the lesser of (I) the stated amount of any premium,
interest or other payment required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium, interest or other payment actually paid at such
time to refinance such Indebtedness, plus, in either case, the amount of
reasonable fees and expenses of the Company incurred in connection with
such refinancing, (B) such refinancing does not reduce the Average Life to
Stated Maturity or the Stated Maturity of such Indebtedness, (C)
Subordinated Indebtedness is refinanced only with Indebtedness which is
equally subordinated and (D) Indebtedness of the Company is not refinanced
with Indebtedness of any Subsidiary of the Company; and
(viii) Indebtedness of the Company (including without limitation under
the Credit Facility) in addition to that described in clauses (i) through
(vii) above, and any renewals, extensions, substitutions, refundings,
refinancings or replacements of such Indebtedness, so long as the aggregate
principal amount of such Indebtedness does not exceed the greater of (A)
$10,000,000 and (B) the dollar amount represented by the product of 500,000
and the settlement price on the New York Mercantile Exchange of the spot
month for a barrel of West Texas Intermediate crude oil (or, if such price
cannot be obtained, the arithmetic mean of the applicable prices shown in
the then most recently published Platt's Oilgram Price Report or, if such
----------------------------
publication is not published at any time, or if it does not include such
prices, then in any comparable industry publication including such prices),
which amount will be calculated by the Company as of the last day of each
calendar quarter using the price per barrel as determined under (B) above
as of such date and shall be in effect for the next succeeding calendar
quarter.
The Company shall, not later than the second Business Day of each
calendar quarter, provide the Trustee with an Officers' Certificate setting
forth the calculation of the amount of Permitted Indebtedness as of the last day
of the preceding calendar quarter as set forth in the above definition.
SECTION 1009. Limitation on Restricted Payments.
---------------------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable solely in shares of its Qualified Capital Stock or
in options, warrants or other rights to acquire such Qualified Capital
Stock);
62
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(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of the Capital Stock of the Company or
any Affiliate thereof (other than any Wholly Owned Subsidiary of the
Company) or any options, warrants or other rights to acquire such Capital
Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund or maturity, any Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock
of any Subsidiary of the Company to any Person (other than the Company or
any of its Wholly Owned Subsidiaries) or purchase, redeem or otherwise
acquire or retire for value any Capital Stock of any Subsidiary of the
Company held by any Person (other than the Company or any of its Wholly
Owned Subsidiaries);
(v) incur, create, assume or suffer to exist any guarantee of
Indebtedness of any Affiliate (other than a Wholly Owned Subsidiary); or
(vi) make any Investment (other than any Permitted Investment) in any
Person
(any of the foregoing payments described in clauses (i) through (vi) being,
collectively, "Restricted Payments"), unless after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, as determined in good faith by the Board of Directors, whose determination
will be conclusive and evidenced by a Board Resolution), (1) no Default or Event
of Default has occurred and is continuing; (2) immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
--- -----
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in accordance with Section 1008 hereof; and (3) the aggregate
amount of all such Restricted Payments declared or made after the date of this
Indenture does not exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of
the Company accrued on a cumulative basis during the period beginning
on the date of this Indenture and ending on the last day of the
Company's last fiscal quarter ending prior to the date of the proposed
Restricted Payment (or if such aggregate cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company as capital contributions to the Company;
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(C) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any of its Subsidiaries) of its shares of Qualified Capital Stock or
any options, warrants or rights to purchase such shares of Qualified
Capital Stock (except, in each case, to the extent such proceeds are
used to redeem any of the Securities with the proceeds of an issuance
of common stock of the Company in a Public Equity Offering as provided
in Section 1101 hereof and in the form of Security (attached hereto as
Exhibit A));
(D) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company (other than from any of its
Subsidiaries) upon the exercise of any options, warrants or other
rights to purchase shares of Qualified Capital Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date of
this Indenture by the Company from the issuance or sale (other than to
any of its Subsidiaries) of debt securities or shares of Redeemable
Capital Stock of the Company that have been converted into or
exchanged for Qualified Capital Stock of the Company to the extent
such debt securities or shares of Redeemable Capital Stock were
originally issued or sold for cash plus the aggregate Net Cash
Proceeds received by the Company at the time of such conversion or
exchange; and
(F) $10,000,000.
(b) Notwithstanding the foregoing, and in the case of clauses (ii)
through (iv) below, so long as there is no Default or Event of Default
continuing, the foregoing provisions shall not prohibit the following actions:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (a) of this Section 1009 (such
payment shall be deemed to have been paid on such date of declaration for
purposes of the calculation required by paragraph (a) of this Section
1009);
(ii) the repurchase, redemption, or other acquisition or retirement of
any shares of any class of Capital Stock of the Company in exchange for, or
out of the Net Cash Proceeds of, a substantially concurrent issue and sale
for cash (other than to a Subsidiary of the Company) of other shares of
Qualified Capital Stock of the Company; provided that the Net Cash Proceeds
--------
from the issuance of such shares of
64
<PAGE>
Qualified Capital Stock are excluded from clause (3)(C) of paragraph (a) of
this Section 1009;
(iii) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the Net Cash Proceeds of, a
substantially concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Capital Stock of the Company;
provided that the Net Cash Proceeds from the issuance of such shares of
--------
Qualified Capital Stock are excluded from clause (3)(C) of paragraph (a) of
this Section 1009; and
(iv) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (collectively, a
"refinancing," for purposes of this Section 1009) through the issuance of
new Subordinated Indebtedness of the Company, provided, that any such new
--------
Subordinated Indebtedness (A) is in an aggregate principal amount that does
not exceed the principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration thereof, then such
lesser amount as of the date of determination) plus the lesser of (I) the
stated amount of any premium, interest or other payment required to be paid
in connection with such a refinancing pursuant to the terms of the
Subordinated Indebtedness being refinanced or (II) the amount of premium or
other payment actually paid at such time to refinance such Subordinated
Indebtedness, plus, in either case, the amount of reasonable fees and
expenses of the Company incurred in connection with such refinancing; (B)
has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Securities; (C) has a Stated Maturity for
its final scheduled principal payment later than the Stated Maturity for
the final scheduled principal payment of the Securities; and (D) is
expressly subordinated in right of payment to the Securities at least to
the same extent as the Subordinated Indebtedness to be refinanced.
SECTION 1010. Limitation on Transactions with Affiliates.
------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any Affiliate
of the Company (other than the Company or a Wholly Owned Subsidiary) unless:
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(i) such transaction or series of related transactions is in writing
on terms that are no less favorable to the Company or such Subsidiary, as
the case may be, than would be available in a comparable transaction in
arm's-length dealings with an unrelated third party;
(ii) with respect to any transaction or series of related transactions
in which the aggregate rental value, remuneration or other consideration
(including the value of a loan), together with the aggregate rental value,
remuneration or other consideration (including the value of a loan) of all
such other transactions consummated in the calendar year during which such
transaction or series of related transactions is proposed to be
consummated, exceeds $1,000,000, the Company delivers an Officers'
Certificate to the Trustee certifying that such transaction or series of
related transactions complies with clause (i) above;
(iii) with respect to any transaction or series of related
transactions in which the aggregate rental value, remuneration or other
consideration (including the value of a loan), together with the aggregate
rental value, remuneration or other consideration (including the value of a
loan) of all such other transactions consummated in the calendar year
during which such transaction or series of related transactions is proposed
to be consummated, exceeds $2,500,000, the Company delivers to the Trustee,
in addition to the Officers' Certificate referred to in clause (ii) above,
a Board Resolution evidencing that such transaction or series of related
transactions has been approved in good faith by a majority of the
Independent Directors of the Company that are disinterested; and
(iv) with respect to any transaction or series of related transactions
in which the aggregate rental value, remuneration or other consideration
(including the value of a loan), together with the aggregate rental value,
remuneration or other consideration (including the value of a loan) of all
such other transactions consummated in the calendar year during which such
transaction or series of related transactions is proposed to be
consummated, exceeds $5,000,000, the Company delivers to the Trustee, in
addition to the Officers' Certificate and the Board Resolution referred to
in clauses (ii) and (iii) above, respectively, an opinion of an investment
banking firm of national standing, unaffiliated with the Company or such
Subsidiary and the Affiliate which is party to such transaction stating
that the transaction or series of related transactions is fair to the
Company or such Subsidiary;
provided, however, that this Section 1010 shall not apply to transactions
- -------- -------
pursuant to agreements in existence on the date of this Indenture.
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SECTION 1011. Limitation on Sale of Assets.
----------------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, consummate an Asset Sale unless (i) at
least 85% of the proceeds from such Asset Sale are received in cash or Cash
Equivalents and (ii) the Company or such Subsidiary receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
shares, properties or assets sold.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are
not required to be applied to repay permanently any unsubordinated Indebtedness
then outstanding as required by the terms thereof, and the Company determines
not to apply such Net Cash Proceeds to the permanent prepayment of such
unsubordinated Indebtedness or if no such unsubordinated Indebtedness is then
outstanding, then the Company may within 12 months of the Asset Sale, invest the
Net Cash Proceeds thereof in other properties and assets which (as determined in
good faith by the Board of Directors) replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be used
in the businesses of the Company or its Subsidiaries existing on the date of
this Indenture or in businesses reasonably related thereto. The amount of such
Net Cash Proceeds neither used to permanently repay or prepay unsubordinated
Indebtedness nor used or invested as set forth in this paragraph constitute
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $5,000,000 or
more, the Company shall make an irrevocable offer to purchase (an "Offer") from
all holders of the Securities in accordance with the procedures set forth herein
in the maximum principal amount (expressed as an integral multiple of $1,000) of
Securities that may be purchased with the Excess Proceeds. The purchase price
to be paid pursuant to any such Offer will be payable in cash in an amount equal
to 100% of the principal amount of the Securities, plus accrued and unpaid
interest, if any, through the repurchase date. To the extent that the aggregate
purchase price for Securities tendered pursuant to an Offer is less than the
Excess Proceeds (the amount of such shortfall, if any, constituting a
"Deficiency"), the Company may use such Deficiency for general corporate
purposes. Upon completion of the purchase of all the Securities tendered
pursuant to an Offer, the amount of Excess Proceeds, if any, will be reset to
zero.
(d) Whenever the aggregate amount of Excess Proceeds received by the
Company exceeds $5,000,000, such Excess Proceeds shall, prior to any purchase of
Securities described in paragraph (c) above, be set aside by the Company in a
separate account pending (i) deposit with a depositary or a paying agent of the
amount required to purchase the Securities tendered in an Offer and (ii)
delivery by the Company of the purchase price to the
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holders of the Securities tendered in an Offer. Such Excess Proceeds may be
invested in Cash Equivalents at the Company's written direction, provided that
--------
the maturity date of any such investment made after the amount of Excess
Proceeds exceeds $5,000,000, will not be later than the repurchase date. The
Company will be entitled to any interest or dividends accrued, earned or paid on
such Cash Equivalents, provided that the Company will not withdraw such interest
--------
from the separate account if an Event of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to
paragraph (c) above, the Securities shall be purchased by the Company, at the
option of the holder thereof, in whole or in part in integral multiples of
$1,000, on a date that is not earlier than 45 days and not later than 60 days
from the date the notice is given to holders, or such later date as may be
necessary for the Company to comply with the requirements under the Exchange
Act, subject to proration in the event the Excess Proceeds are less than the
aggregate purchase price of all Securities tendered.
(f) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with an Offer. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
this Section 1011, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 1011 by virtue thereof.
(g) The Company shall not, and shall not permit any of its
Subsidiaries to, create or permit to exist or become effective any consensual
restriction (other than restrictions not more restrictive than those in effect
under Indebtedness outstanding on the date of this Indenture and listed on
Schedule 2 hereto, including Indebtedness under the Credit Facility) that would
materially impair the ability of the Company to comply with the provisions of
this Section 1011.
SECTION 1012. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, affirm or suffer to exist any Lien of
any kind upon any of its property or assets (including any intercompany notes),
owned at the date of this Indenture or acquired after the date of this
Indenture, or any income or profits therefrom, unless the Securities (or in the
case of Liens on property or assets of a Guarantor, the related Guarantee) are
directly secured equally and ratably with (or prior to in the case of Liens with
respect to Subordinated Indebtedness or Indebtedness of a Guarantor subordinated
in right of payment to its Guarantee) the obligation or liability secured
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by such Lien, excluding, however, from the operation of the foregoing any of the
following (collectively, "Permitted Liens"):
(a) any Lien existing as of the date of this Indenture;
(b) any Lien arising by reason of (i) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired; (ii) taxes
not yet delinquent or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and
against which appropriate reserves have been established in accordance with
GAAP; (iii) security for payment of workers' compensation or other
insurance; (iv) good faith deposits in connection with tenders, leases or
contracts (other than contracts for the payment of money); (v) zoning
restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord
or owner of the leased property, with or without consent of the lessee),
none of which materially impairs the use of any parcel of property material
to the operation of the businesses of the Company or any of its
Subsidiaries or the value of such property for the purpose of such
businesses; (vi) deposits to secure public or statutory obligations, or in
lieu of surety or appeal bonds; (vii) certain surveys, exceptions, title
defects, encumbrances, easements, reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph or telephone lines and
other similar purposes or zoning or other restrictions as to the use of
real property not materially adversely interfering with the ordinary
conduct of the businesses of the Company or any of its Subsidiaries; or
(viii) operation of law in favor of mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for
sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof and against which appropriate reserves have been established;
(c) any Lien (including extensions and renewals thereof) upon real or
tangible personal property acquired or constructed in the ordinary course
of business after the date of this Indenture; provided that (i) such Lien
--------
is created (A) solely for the purpose of securing Purchase Money
Indebtedness incurred in respect of the item of property or assets subject
thereto and such Lien is created
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prior to, at the time of or within 90 days after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (B) to refinance any Purchase Money
Indebtedness previously incurred and so secured, (ii) the principal amount
of Purchase Money Indebtedness secured by such Lien does not exceed 100% of
the lesser of the aggregate cost or the Fair Market Value of such item of
property or assets, (iii) any such Lien does not extend to or cover any
property or assets other than such item of property or assets and any
improvements on such item and (iv) any such Lien does not extend to or
cover any property or assets of the Company or any of its Subsidiaries
existing as of the date of this Indenture;
(d) any Lien now or hereafter existing on property or assets of the
Company or any of its Subsidiaries securing the Securities;
(e) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any of its Subsidiaries, in each case which
Indebtedness is permitted under Section 1008 hereof; provided that any such
--------
Lien only extends to the assets that were subject to such Lien securing
such Acquired Indebtedness prior to the related transaction by the Company
or its Subsidiaries;
(f) any Lien securing Hedging Obligations that the Company enters into
in the ordinary course of business for the purpose of protecting against
fluctuations in the price of crude oil, other feedstocks or refined
products;
(g) any Lien on pipeline or pipeline facilities which arise out of
operation of law;
(h) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing paragraphs (a) through (g) so
long as no additional assets become subject to such Liens as a result of
such extension, renewal, refinancing or replacement; and
(i) any Lien on property of the Company or any of its Subsidiaries
that is subject to a Sale and Leaseback Transaction, provided that after
--------
giving effect to such transaction the aggregate principal amount of
Attributable Indebtedness in respect of all Sale and Leaseback Transactions
entered into by the Company and its Subsidiaries then outstanding, other
than any Sale and Leaseback Transactions existing as of the date of this
Indenture, does not at the time such Lien is incurred exceed 10% of the
Consolidated Net Worth of the Company.
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SECTION 1013. Limitation on Issuances of Guarantees of and Pledges
----------------------------------------------------
for Indebtedness.
- ----------------
(a) The Company shall not permit any of its Subsidiaries, directly or
indirectly, to secure the payment of any Indebtedness of the Company or pledge
any intercompany notes representing obligations of any Subsidiary of the Company
to secure the payment of any Indebtedness unless in each case (i) such
Subsidiary simultaneously executes and delivers a supplemental indenture to this
Indenture providing for a guarantee of payment of the Securities by such
Subsidiary, which guarantee is on the same terms as the guarantee of such
Indebtedness (if a guarantee of Indebtedness is granted by any such Subsidiary)
except that the guarantee of the Securities need not be secured and (ii) such
Subsidiary waives and shall not in any manner whatsoever claim or take the
benefit or advantage of any rights of reimbursement, indemnity or subrogation or
any other rights against the Company or any other Subsidiary of the Company as a
result of any payment by such Subsidiary under its guarantee.
(b) The Company shall not permit any of its Subsidiaries, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless (i) such Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a guarantee of the Securities on the same terms as the guarantee
of such Indebtedness except that (A) such guarantee need not be secured unless
required pursuant to Section 1012 hereof and (B) if such Indebtedness is by its
terms expressly subordinated to the Securities, any such assumption, guarantee
or other liability of such Subsidiary with respect to such Indebtedness is
subordinated to such Subsidiary's assumption, guarantee or other liability with
respect to the Securities to the same extent as such Indebtedness is
subordinated to the Securities and (ii) such Subsidiary waives and shall not in
any manner whatsoever claim or take the benefit or advantage of any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary of the Company as a result of any payment by such
Subsidiary under its guarantee.
(c) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each such
Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing, any
Guarantee by a Subsidiary of the Company of the Securities will provide by its
terms that it will be automatically and unconditionally released and discharged
upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's Capital Stock in, or all or substantially all
the assets of, such Subsidiary, which is in compliance with the terms of this
Indenture or (ii) the release by all of the holders of
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the Indebtedness of the Company described in paragraphs (a) and (b) above of
their security interest or their guarantee by such Subsidiary (including any
deemed release upon payment in full of all obligations under such Indebtedness,
except a release by or as a result of enforcement upon such security interest or
payment under such guarantee), at a time when (A) no other Indebtedness of the
Company has been secured or guaranteed by such Subsidiary, as the case may be,
or (B) the holders of all such other Indebtedness which is secured or guaranteed
by such Subsidiary also release their security interest in, or guarantee by,
such Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness, except a release by or as a result of
enforcement upon such security interest or payment under such guarantee).
SECTION 1014. Purchase of Securities Upon a Change of Control.
-----------------------------------------------
(a) If a Change of Control shall occur at any time, then each Holder
shall have the right to require that the Company purchase such Holder's
Securities in whole or in part in integral multiples of $1,000, at a purchase
price (the "Change of Control Purchase Price") in cash in an amount equal to
101% of the principal amount of such Securities, together with accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Purchase Date"), pursuant to the irrevocable offer described below (the "Change
of Control Offer") and the other procedures set forth in paragraphs (b), (c) and
(d) of this Section 1014.
(b) Within 15 days following any Change of Control, the Company shall
notify the Trustee thereof and give written notice of such Change of Control to
each Holder in the manner set forth in Section 106 hereof, stating
(i) that a Change of Control has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Securities at the
Change of Control Purchase Price;
(ii) the Change of Control Purchase Price and the Change of Control
Purchase Date, which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed, or such later date
as is necessary to comply with requirements under the Exchange Act;
(iii) that any Security not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Securities accepted for payment pursuant to the
Change of Control Offer
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will cease to accrue interest after the Change of Control Purchase Date;
and
(v) certain procedures that a holder of Securities must follow to
accept a Change of Control Offer or to withdraw such acceptance.
(c) Holders electing to have Securities purchased will be required to
surrender such Securities with an appropriate execution form duly executed to
the Company at the address specified in the notice at least 10 Business Days
prior to the Change of Control Purchase Date. Holders will be entitled to
withdraw their election if the Company receives, not later than three Business
Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Securities delivered for purchase by the Holder as to which his
election is to be withdrawn and a statement that such Holder is withdrawing his
election to have such Securities purchased. Holders whose Securities are
purchased only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.
(d) The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Section 1014, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 1014 by virtue thereof.
(e) The Company shall not, and shall not permit any of its
Subsidiaries to, create or permit to exist or become effective any restriction
(other than restrictions not more restrictive than those in effect under
Indebtedness outstanding on the date of this Indenture and listed on Schedule 2
hereto, including Indebtedness under the Credit Facility) that would materially
impair the ability of the Company to make a Change of Control Offer to purchase
the Securities or, if such Change of Control Offer is made, to pay for the
Securities tendered for purchase.
SECTION 1015. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, enter into any Sale and Leaseback Transaction unless (i) immediately before
and immediately after giving effect to such transaction and the Attributable
Indebtedness in respect thereof, on a pro forma basis, the Company or such
--- -----
Subsidiary could incur $1.00 of additional Indebtedness (other than
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Permitted Indebtedness) in accordance with Section 1008 hereof, (ii) immediately
before and immediately after giving effect to such transaction, on a pro forma
--- -----
basis, the Company or such Subsidiary could incur Indebtedness secured by a Lien
on property in a principal amount equal to or exceeding the Attributable
Indebtedness in respect of such Sale and Leaseback Transaction pursuant to
paragraph (i) of Section 1012 hereof had such Sale and Leaseback Transaction
been structured as a secured loan rather than a Sale and Leaseback Transaction
without equally and ratably securing the Securities, 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 1011
hereof.
SECTION 1016. Limitation on Subsidiary Capital Stock.
--------------------------------------
The Company shall not permit (a) any Subsidiary of the Company to
issue any Capital Stock, except for:
(i) Capital Stock issued to and held by the Company or a Wholly Owned
Subsidiary, and
(ii) Capital Stock issued by a Person prior to the time (A) such
Person becomes a Subsidiary of the Company, (B) such Person merges with or
into a Subsidiary of the Company or (C) a Subsidiary of the Company merges
with or into such Person, provided that such Capital Stock was not issued
--------
or incurred by such Person in anticipation of the type of transaction
contemplated by subclauses (A), (B) or (C) of this subparagraph (ii),
or (b) any Person (other than the Company or a Wholly Owned Subsidiary) to own
or hold any interest in any Preferred Stock of any Subsidiary of the Company (in
each of clauses (a) and (b) above, other than directors' qualifying shares or
shares required to be owned by foreign nationals under applicable law).
SECTION 1017. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries.
- ----------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (i) pay dividends or make any other distribution on
its Capital Stock to the Company or any other Subsidiary of the Company, (ii)
pay any Indebtedness owed to the Company or any other Subsidiary of the Company,
(iii) make any Investment in the Company or any other Subsidiary of the Company
or (iv) transfer any of its properties or assets to the Company or any other
Subsidiary of the Company, except (A) any encumbrance or restriction pursuant to
an agreement in effect or entered into on the date of this Indenture; (B) any
encumbrance or restriction,
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with respect to a Subsidiary that is not a Subsidiary of the Company on the date
of this Indenture, in existence at the time such Person becomes a Subsidiary of
the Company and not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company; and (C) any encumbrance or
restriction existing under any agreement that extends, renews, refinances or
replaces the agreements containing the encumbrances or restrictions in the
foregoing clauses (A) and (B), or in this clause (C), provided that the terms
--------
and conditions of any such encumbrances or restrictions are not materially less
favorable to the holders of the Securities than those under or pursuant to the
agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced.
SECTION 1018. Provision of Financial Statements.
---------------------------------
(a) Whether or not the Company is subject to Section 13(a) or 15(d) of
the Exchange Act, the Company shall, to the extent permitted under the Exchange
Act, file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to such Section 13(a) or 15(d) if the Company were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject.
(b) The Company shall also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all holders of Securities, as their
names and addresses appear in the security register, without cost to such
holders and (ii) file with the Trustee copies of the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if
the Company were subject to such Sections and (y) if filing such documents by
the Company with the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective holder of
Securities at the Company's cost.
SECTION 1019. Statement by Officers As to Default; Compliance
-----------------------------------------------
Certificates.
- ------------
(a) The Company will deliver to the Trustee, on or before a date not
more than 60 days after the end of each fiscal quarter and not more than 120
days after the end of each fiscal year, a brief certificate from the Company's
principal executive officer, principal financial officer or principal accounting
officer as to such officer's knowledge of the Company's compliance with all
conditions and covenants under this Indenture. Such certificate shall state
that such officer has reviewed this Indenture and believes that either (a) the
Company
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and the Guarantors, if any, are in compliance with the terms hereof or (b) the
Company and the Guarantors, if any, are not in compliance with the terms hereof,
and if a Default has occurred and is continuing, specifying the nature and
period of the existence thereof. For purposes of this Section 1019(a), such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any of its Subsidiaries gives any notice or takes
any other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $1,000,000), the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officers' Certificate specifying such event, notice or
other action within five Business Days of its occurrence.
(c) The Company shall deliver to the Trustee within 90 days after the
end of each fiscal year a written statement by the Company's independent public
accountants stating (A) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate to accounting
matters, and (B) whether, in connection with their audit examination, any
Default has come to their attention and, if such a Default has come to their
attention, specifying the nature and period of the existence thereof.
SECTION 1020. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 801 hereof and in Sections
1008 through 1010, 1012, 1013, and 1015 through 1018 hereof, inclusive, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the Outstanding Securities, by Act of such Holders, waive
such compliance in such instance with such term, provision or condition, but no
such waiver shall extend to or affect such term, provision or condition except
to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
-------------------
(a) The Securities shall be subject to redemption at any time on or
after _______, 2000 at the option of the Company, in whole or in part, subject
to the conditions and at the Redemption Prices specified in the form of Security
(attached hereto as Exhibit A), together with accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Dates to receive interest due on any Interest Payment
Date that is on or prior to the Redemption Date).
(b) Notwithstanding the foregoing, at any time prior to ___________,
1998, the Company may redeem Securities having an aggregate principal amount of
up to $__________ at a redemption price of ______% of the principal amount of
Securities redeemed, plus accrued and unpaid interest, if any, to the Redemption
Date, with the Net Cash Proceeds of one or more Public Equity Offerings of the
Company, provided, that Securities having an aggregate principal amount of at
--------
least $_____________ remain Outstanding immediately after any such redemption.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 hereof shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104 hereof.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from
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the Outstanding Securities not previously called for redemption, pro rata, by
--- ----
lot or by any other method as the Trustee shall deem fair and reasonable and
which may provide for the selection for redemption of portions (equal to $1,000
or any integral multiple thereof) of the principal amount of Securities of a
denomination larger than $1,000.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner provided for in
Section 106 hereof not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price (together with
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107 hereof) will become due and payable upon each such Security,
or the portion thereof, to be redeemed, and that interest thereon will
cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
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SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003 hereof) an amount
of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities or portions thereof which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for redemption in accordance with said notice, such Security shall be paid by
the Company at the Redemption Price, together with accrued interest, if any, to
the Redemption Date; provided, however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
SECTION 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002 hereof (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
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ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
- ----------
The Company may, at its option by Board Resolution at any time, elect
to have either Section 1202 or Section 1203 hereof be applied to all Outstanding
Securities upon compliance with the conditions set forth below in this Article
Twelve.
SECTION 1202. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 1201 hereof of the option
applicable to this Section 1202, the Company, any Guarantor and any other
obligor upon the Securities shall be deemed to have been discharged from their
respective obligations with respect to all the Outstanding Securities on the
date the conditions set forth in Section 1204 hereof are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by
Outstanding Securities except for (i) the rights of Holders of Outstanding
Securities to receive payments out of amounts deposited in trust with the
Trustee (as set forth in Section 1204 hereof) in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due,
(ii) the Company's obligations with respect to the Securities concerning issuing
temporary Securities, registration of Securities, mutilated, destroyed, lost or
stolen Securities, and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and (iv) this Article Twelve.
SECTION 1203. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 1201 hereof of the option
applicable to this Section 1203, the Company, any Guarantor and any other
obligor upon the Securities shall be released from their respective obligations
under any covenant in Section 801 hereof and in Sections 1005 through 1017
hereof with respect to the Outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Securities, the Company and any Guarantor may omit to comply with and shall have
no liability
80
<PAGE>
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 501(3) or
Section 501(6) hereof, but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
1202 or Section 1203 hereof to the Outstanding Securities:
(i) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 608 hereof who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
cash in United States dollars in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, money in an amount, or (C)
a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of (and premium, if any, on) and interest on
the Outstanding Securities on the Stated Maturity (or Redemption Date, if
applicable) of such principal (and premium, if any) or installment of
principal (or on any date after ________, 2000 (such date being referred
to as the "Defeasance Redemption Date") if when exercising under Section
1201 hereof either its option applicable to Section 1202 hereof or its
option applicable to Section 1203 hereof, the Company shall have delivered
to the Trustee an irrevocable notice to redeem all of the Outstanding
Securities on the Defeasance Redemption Date); provided that the Trustee
--------
shall have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to said payments with respect to the
Securities. For this purpose, "U.S. Government Obligations" means
securities that are (x) direct obligations of the United States of America
for the timely payment of which its full faith and credit is pledged or (y)
obligations of a Person
81
<PAGE>
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
--------
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the
specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(ii) In the case of an election under Section 1202 hereof, the Company
shall have delivered to the Trustee an opinion of independent counsel in
the United States of America stating that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the date of this Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel in the United States of America shall
confirm that, the Holders of the Outstanding Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such defeasance had not occurred.
(iii) In the case of an election under Section 1203 hereof, the
Company shall have delivered to the Trustee an opinion of independent
counsel in the United States of America to the effect that the Holders of
the Outstanding Securities will not recognize income, gain or loss for
Federal income tax purposes as a result of such 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 with respect to the Securities
shall have occurred and be continuing on the date of such deposit or, with
respect to Section 501(8) or Section 501(9) hereof, at any time during the
period ending on the 91st day after the date of deposit.
82
<PAGE>
(v) Such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest with respect to any securities of the
Company or any Guarantor.
(vi) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture.
(vii) The Company shall have delivered to the Trustee an opinion of
independent counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(viii) 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 of the Securities or any Guarantee over
the other creditors of the Company or any Guarantor with the intent of
defeating, hindering, delaying or defrauding creditors of the Company, any
Guarantor or others;
(ix) No event or condition shall exist that would prevent the Company
from making payments of principal of, premium, if any, and interest on the
Securities on the date of such deposit or at any time ending on the 91st
day after the date of such deposit; and
(x) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 1202
hereof or the covenant defeasance under Section 1203 hereof (as the case
may be) have been complied with.
83
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CROWN CENTRAL PETROLEUM
CORPORATION,
as Issuer
By
----------------------------
Title:
Attest:
--------------------
Title:
THE FIRST NATIONAL BANK
OF BOSTON,
as Trustee
By
----------------------------
Title:
Attest:
--------------------
Title:
84
<PAGE>
SCHEDULE 1
Permitted Holders
1. Susan B. Berlow
2. Lisa D. Bertelsen
3. Mary Jane Blaustein
4. Jeanne B. Bokor
5. Marjorie T. Coleman
6. Barbara B. Hirschhorn
7. Jeffery A. Hoffberger
8. Judith R. Hoffberger
9. Russel J. Hoffberger
10. Ruth R. Marder
11. Edward L. Rosenberg
12. Frank B. Rosenberg
13. Henry A. Rosenberg, Jr.
14. Elizabeth B. Roswell
15. Louis B. Thalheimer
16. Elizabeth T. Wachs
<PAGE>
SCHEDULE 2
Outstanding Indebtedness
As of January 4, 1995 /(1)/
===========================
<TABLE>
<S> <C>
$125 Million Credit Facility
Borrowings $ 0
Letters of Credit $19,005,045
$ 60 Million Note Purchase Agreement
dated January 3, 1991 $51,428,000
Purchase Money Liens (BOT Financial) $ 5,490,826
Capitalized Lease Obligations $ 916,940
Hedging Obligations (Marked to Market)
Interest Rate Swaps
Chase Manhattan #A06263 $ 284,825
A06703 $ 479,329
A06843 $ 295,494
Nations Bank 115070 $ 286,862
116480 $ 618,923
125850 $ 502,718
Bank of Nova Scotia S05992 $ 348,913
Commodity Futures Contracts/(1)/
Merrill Lynch (5,328 contracts) $ 209,481
Refco (2,619 contracts) $ (338,046)
EDF Mann ( 771 contracts) $ 15,422
Deferred Purchase Price
Tongue Brooks and Company
Purchase of the following:
Health Plan Administrators Inc. $ 132,750
H. Francis La Brun Company, Inc. $ 216,828
Wolman Hecht Inc. $ 83,909
</TABLE>
/(1)/ The dollar values shown for the Commodity Futures Contracts are marked to
market based on market conditions as of December 30, 1994. These Hedging
Obligations have expirations ranging from January to June 1995.
<PAGE>
Exhibit A
---------
[FORM OF FACE OF SECURITY]
CROWN CENTRAL PETROLEUM CORPORATION
______% Senior Note due 2005
CUSIP
No.__________ $______________
CROWN CENTRAL PETROLEUM CORPORATION, a Maryland corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to __________, or its
registered assigns, the principal sum of _____________________________ United
States dollars, on _________________, 2005.
Interest Rate: % per annum.
Interest Payment Dates: __________ and _______, of each year
commencing __________, 1995.
Regular Record Dates: _________ and _________ of each year.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Date:___________________ CROWN CENTRAL PETROLEUM
CORPORATION
By:___________________________
Title:
[SEAL]
Attest:__________________
Title:
A-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the ______% Senior Notes due 2005 described in the within-
mentioned Indenture.
THE FIRST NATIONAL BANK OF
BOSTON, as Trustee
By:
---------------------------
Authorized Signatory
A-2
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
CROWN CENTRAL PETROLEUM CORPORATION
______% Senior Note due 2005
1. Principal and Interest.
----------------------
The Company will pay the principal of this Security on
________________, 2005.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate of
______% per annum.
Interest will be payable semiannually (to the holders of record of the
Securities (or any Predecessor Securities) at the close of business on the
_________ or ___________ immediately preceding the Interest Payment Date) on
each Interest Payment Date, commencing __________, 1995.
Interest on this Security will accrue from the most recent date to
which interest has been paid on this Security or, if no interest has been paid,
from ______________, 1995; provided that, if there is no existing default in the
--------
payment of interest and if this Security is authenticated between a Regular
Record Date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum equal to the rate of interest applicable to the Securities.
2. Method of Payment.
-----------------
The Company will pay interest (except defaulted interest) on the
principal amount of the Securities on each _____________ and _______________ to
the persons who are holders (as reflected in the Security Register at the close
of business on the ______________ and _______________ immediately preceding the
Interest Payment Date), in each case, even if the Security is cancelled on
registration of transfer or registration of exchange after such record date;
provided that, with respect to the payment of principal, the Company will make
- --------
payment to the Holder
A-3
<PAGE>
that surrenders this Security to any Paying Agent on or after ______________,
2005.
The Company will pay principal, premium, if any, and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal, premium, if
any, and interest by its check payable in such money. The Company may mail an
interest check to a Holder's registered address (as reflected in the Security
Register). If a payment date is a date other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding day that is a
Business Day and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar upon written notice thereto.
The Company, any of its Subsidiaries or any Affiliate of any of them may act as
Paying Agent, Registrar or co-registrar.
4. Indenture; Limitations.
----------------------
The Company issued the Securities under an Indenture dated as of
___________, 1995 (the "Indenture"), between the Company and The First National
Bank of Boston, as trustee (the "Trustee"). Capitalized terms herein are used
as defined in the Indenture unless otherwise indicated. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Securities are subject to
all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this
Security and the terms of the Indenture, the terms of the Indenture shall
control.
The Securities are general unsecured obligations of the Company. The
Indenture limits the aggregate principal amount of the Securities to
$125,000,000.
5. Redemption.
----------
Optional Redemption. The Securities shall be subject to redemption at
-------------------
any time on or after ___________, 2000, at the option of the Company, in whole
or in part, on not less than 30 nor more than 60 days' prior notice in amounts
of $1,000 or an integral multiple thereof at the following Redemption Prices
(expressed as percentages of the principal amount), if redeemed
A-4
<PAGE>
during the 12-month period beginning ___________ of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . ____%
2001 . . . . . . . . . . . . . . . . . . . ____%
2002 . . . . . . . . . . . . . . . . . . . ____%
</TABLE>
and thereafter at 100% of the principal amount, in each case together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
Optional Redemption upon a Public Offering. Notwithstanding the
------------------------------------------
foregoing, at any time prior to ___________, 1998, the Company may redeem up to
$_____________, principal amount of the Securities at a Redemption Price of
________% of the principal amount of Securities redeemed, together with accrued
and unpaid interest, if any, to the Redemption Date, with the Net Cash Proceeds
of one or more Public Equity Offerings of the Company; provided that after such
--------
redemption Securities having an aggregate principal amount of at least
$____________, remain Outstanding.
Notice of a redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's last address as it appears in the Security Register.
Securities in original denominations larger than $1,000 may be redeemed in part
in integral multiples of $1,000. On and after the Redemption Date, interest
ceases to accrue on Securities or portions of Securities called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon a Change in Control and Asset Sales.
---------------------------------------------------
(a) Upon the occurrence of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Securities at a
redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase and (b) upon Asset Sales, the
Company may be obligated to make offers to purchase Securities with a portion of
the Net Cash Proceeds of such Asset Sales at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase.
A-5
<PAGE>
7. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Securities selected for redemption (except the
unredeemed portion of any Security being redeemed in part). Also, it need not
register the transfer or exchange of any Securities for a period of 15 days
before a selection of Securities to be redeemed is made.
8. Persons Deemed Owners.
---------------------
A Holder may be treated as the owner of a Security for all purposes.
9. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company irrevocably deposits, or causes to be deposited, with
the Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of (and premium on, if any) and accrued interest on the
Securities (a) to redemption or maturity, the Company will be discharged from
the Indenture and the Securities, except in certain circumstances for certain
sections thereof, and (b) to the Stated Maturity, the Company will be discharged
from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities then outstanding, and
certain existing defaults or compliance with certain restrictive covenants and
provisions
A-6
<PAGE>
may be waived with the consent of the Holders of not less than a majority in
aggregate principal amount of the Securities then outstanding. Without notice
to or the consent of any Holder, the parties to the Indenture may amend or
supplement the Indenture or the Securities to, among other things, cure any
ambiguity, defect or inconsistency and make any change that does not materially
adversely affect the rights of any Holder.
12. Restrictive Covenants.
---------------------
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) transactions with Affiliates; (iv) sale of
Assets; (v) Liens; (vi) issuances of Guarantees and pledges by Subsidiaries;
(vii) purchase of Securities upon a Change of Control; (viii) Sale and Leaseback
Transactions; (ix) Subsidiary Capital Stock; (x) dividends and other payment
restrictions affecting Subsidiaries; and (xi) consolidation, merger and certain
transfers of assets. Within 120 days after the end of each fiscal year and
within 60 days after the end of each fiscal quarter, the Company must report to
the Trustee on compliance with such limitations.
13. Successor Persons.
-----------------
When a successor person or other entity assumes all the obligations of
its predecessor under the Securities and the Indenture, the predecessor person
will be released from those obligations.
14. Remedies for Events of Default.
------------------------------
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Securities then Outstanding may declare all the Securities to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Subsidiaries occurs and is continuing, the
Securities automatically become immediately due and payable. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at
least a majority in principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power.
A-7
<PAGE>
15. Trustee Dealing with Company.
----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. Authentication.
--------------
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
17. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Crown Central
Petroleum Corporation, One North Charles Street, Baltimore, Maryland 21201,
Attention: Secretary.
A-8
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- ------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- ------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
Date:
----------------- ---------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the within mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee:
----------------------------
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 1011 or Section 1014 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1011 or Section 1014 of the Indenture, state the
amount (in original principal amount) below:
$______________________________.
Date:__________________
Your Signature:_____________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:____________________
A-10
<PAGE>
Exhibit B
---------
[FORM OF INTERCOMPANY NOTE]
CROWN CENTRAL PETROLEUM CORPORATION
__% Subordinated Note Due ____
$___________
CROWN CENTRAL PETROLEUM CORPORATION, a Maryland corporation (the
"Company"), for value received, promises to pay to _______
_________________________, or its registered assigns, the principal sum of
________________________________ ($____________) on ___________________.
Interest Rate: ____% per annum.
Interest Payment Dates: ____________ and ____________, commencing
________________.
Reference is hereby made to the further provisions of this Note set
forth herein, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually by its duly authorized officers.
Date: CROWN CENTRAL PETROLEUM CORPORATION
By___________________________
Title:
By___________________________
Title:
B-1
<PAGE>
CROWN CENTRAL PETROLEUM CORPORATION
__% Subordinated Note Due ____
1. Principal and Interest.
----------------------
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth on the first page of this Note,
at the rate of __% per annum.
Interest will be payable [semiannually] on each Interest Payment Date,
commencing ________________.
Interest on this Note will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
2. Subordination
-------------
This Note will be subordinated indebtedness of the Company. Payment
of the Subordinated Obligations (as defined below) will be subordinated in right
of payment to the prior payment in full, in cash or cash equivalents, of all
Senior Indebtedness, including, without limitation, the Company's obligations
under the ______% Senior Notes due 2005.
"Subordinated Obligations" means any principal of, premium, if any, or
interest on this Note payable pursuant to the terms of this Note or upon
acceleration, including any amounts received upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of this Note or amounts
corresponding to such principal, premium, if any, or interest on this Note.
Upon any payment or distribution of assets or securities of the
Company, of any kind or character, whether in cash, property or securities, in
connection with any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness (including any interest accruing
subsequent to an event of bankruptcy, whether or not such interest is an allowed
claim enforceable against the debtor under the United States Bankruptcy Code)
shall first be paid in full, in cash or cash equivalents,
B-2
<PAGE>
before the holders shall be entitled to receive any payment by the Company on
account of Subordinated Obligations, or any payment to acquire this Note for
cash, property or securities, or any distribution with respect to this Note of
any cash, property or securities. Before any payment may be made by, or on
behalf of, the Company on any Subordinated Obligations in connection with any
such dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the holders would be entitled,
but for the subordination provisions of this Note, shall be made by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person making such payment or distribution or by the holders if received
by them, directly to the holders of the Senior Indebtedness (pro rata to such
--- ----
holders on the basis of the respective amounts of Senior Indebtedness held by
such holders) or their representatives or to any trustee or trustees under any
indenture pursuant to which any such Senior Indebtedness may have been issued,
as their respective interests appear, to the extent necessary to pay all such
Senior Indebtedness in full, in cash or cash equivalents after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of such Senior Indebtedness.
No direct or indirect payment by or on behalf of the Company of
Subordinated Obligations, whether pursuant to the terms of this Note or upon
acceleration or otherwise, shall be made if, at the time of such payment, there
exists an event of default, or a default (it being understood that as used in
this sentence a "default" with respect to any Senior Indebtedness shall mean the
happening of any event or the existence of any condition which, after the giving
of notice or the passage of time or both, would constitute an event of default
under such Senior Indebtedness) with respect to any portion of the obligations
on any Senior Indebtedness, and such default shall not have been cured or waived
or the benefits of this sentence waived by or on behalf of the holders of such
Senior Indebtedness.
"Senior Indebtedness" means the following obligations of the Company:
(i) any obligation with respect to the ______% Senior Notes due 2005 of the
Company (the "Senior Notes"); and (ii) all other indebtedness of the Company,
including principal, premium and interest on such indebtedness, unless such
indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such indebtedness is outstanding, is expressly subordinated in
right of payment to any other indebtedness of the Company; provided that the
term "Senior Indebtedness" shall not include (a) any Indebtedness of the Company
which, when incurred and without respect to any election under Section 1111(b)
of Title 11 of the United States Code, is without recourse to the Company, (b)
any indebtedness of the
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Company to a subsidiary of the Company or to a joint venture in which the
Company has an interest, (c) any indebtedness of the Company (other than such
indebtedness already described in clause (i) above) of the type described in
clause (ii) above and not permitted by the "Limitation on Indebtedness" covenant
of the indenture with respect to the Senior Notes, (d) any repurchase,
redemption or other obligation in respect of redeemable stock, (e) any
Indebtedness to any employee of the Company or any of its subsidiaries, (f) any
liability for Federal, state, local or other taxes owed or owing by the Company
or (g) any trade payables. Senior Indebtedness will also include interest
accruing subsequent to events of bankruptcy of the Company and its subsidiaries
at the rate provided for in the document governing such Senior Indebtedness,
whether or not such interest is an allowed claim enforceable against the debtor
in a bankruptcy case under federal bankruptcy law.
To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar person, the Senior Indebtedness or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred. To the extent the obligation to repay any Senior
Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not been affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration invalidity or
setting aside had not occurred.
"Trade Payables" means, with respect to any person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or guaranteed by such person or any of its subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
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Exhibit 5
McGuire, Woods, Battle & Boothe, L.L.P.
The Blaustein Building
One North Charles Street
Baltimore, Maryland 21201-3793
January 16, 1995
Crown Central Petroleum Corporation
1 North Charles Street
Baltimore, MD 21201
Gentlemen:
In connection with the Registration Statement on Form S-3 ("Registration
Statement") being filed by Crown Central Petroleum Corporation, a Maryland
corporation (the "Company"), with the Securities and Exchange Commission for the
purpose of registering under the Securities Act of 1933, as amended (the
"Securities Act"), $125,000,000 of the Company's debt securities (the
"Securities"), we have examined such corporate records, certificates and other
documents, and reviewed such questions of law, as we have considered necessary
or appropriate for the purpose of this opinion.
On the basis of such examination and review, we advise you that, in our
opinion, when the Registration Statement has become effective under the
Securities Act, and the Securities have been duly issued and sold in the manner
contemplated by the Registration Statement, and assuming due authentication
thereof by the Trustee or the Authenticating Agent, in accordance with the
provisions of the Indenture to be entered into between the Company and The
First National Bank of Boston, as Trustee (the "Trustee"), the Securities will
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to reference to us under the heading "Legal Matters"
in the Registration Statement (including the Prospectus relating to the
Securities contained within the Registration Statement). We do not admit by
giving this consent that we are in the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
/s/ McGuire, Woods, Battle & Boothe,
L.L.P.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and the related Prospectus of Crown Central
Petroleum Corporation for the registration of debt securities in the amount of
$125,000,000, to the inclusion therein of our report dated February 24, 1994,
with respect to the consolidated financial statements of Crown Central
Petroleum Corporation for the year ended December 31, 1993 and to the
incorporation by reference therein of our report dated February 24, 1994, with
respect to the consolidated financial statements and schedules of Crown Central
Petroleum Corporation included in its Annual Report (Form 10-K) for the year
ended December 31, 1993, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Baltimore, Maryland
January 16, 1995
