<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
-----
Exchange Act of 1934
For the fiscal year ended April 30, 1997
OR
_____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period __________ to ___________
Commission File Number 1-11763
TRANSMONTAIGNE OIL COMPANY
DELAWARE 06-1052062
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2750 REPUBLIC PLAZA, 370 SEVENTEENTH STREET
DENVER, COLORADO 80202
(Address, including zip code, of principal executive offices)
(303) 626-8200
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
COMMON STOCK; $.01 PAR VALUE AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such report), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [x] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. The aggregate market value is computed by reference to the last
sale price of the Registrant's Common Stock on the American Stock Exchange on
July 23, 1997.
$173,934,000
The number of shares of the registrant's Common Stock outstanding on July 23,
1997 was
25,809,720
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement relating to the 1997 Annual Meeting
of Shareholders of the registrant are incorporated by reference into Part III.
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TABLE OF CONTENTS
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ITEM PAGE NO.
<S> <C>
Part I 1. Business 3
2. Properties 9
3. Legal Proceedings 9
4. Vote of Security Holders 9
Part II 5. Market for Common Stock 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
8. Financial Statements and Supplementary Data 23
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 51
Part III 10. Directors and Executive Officers 51
11. Executive Compensation 51
12. Security Ownership of Certain Beneficial
Owners and Management 51
13. Certain Relationships and Related Transactions 51
Part IV 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 53
</TABLE>
2
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PART I
ITEM 1. BUSINESS
GENERAL
TransMontaigne Oil Company ("TransMontaigne") provides a broad range
of integrated logistical services related to transportation, terminaling,
supply, distribution, gathering, processing and marketing to producers,
refiners, distributors, marketers and end-users of petroleum products, natural
gas and crude oil in the downstream sector of the petroleum industry.
TransMontaigne is a holding company which operates through its subsidiaries
primarily in the mid-continent and Rocky Mountain regions of the United States.
TransMontaigne does not explore for, or produce, crude oil or natural gas, and
it owns no crude oil or natural gas reserves.
TransMontaigne owns and operates refined petroleum product, crude oil
and natural gas facilities. TransMontaigne's refined petroleum product and crude
oil facilities consist primarily of 747 miles of pipeline and ten storage and
terminal facilities in seven states with a combined tank storage capacity of
approximately 4,820,000 barrels. Its natural gas gathering and processing
facilities consist of four distinct gathering and processing systems in two
states with combined throughput capacity of approximately 85 million cubic feet
per day of natural gas and over 2,700 miles of pipelines. The use of its
facilities and an extensive network of additional common carrier pipelines and
terminal facilities owned by others allows TransMontaigne to significantly
expand its geographic service area and the types of services it provides.
TransMontaigne operations are conducted through its logistical
petroleum services business segment which primarily includes pipelining,
terminaling, storing and marketing of refined petroleum products and through its
gas gathering and processing services business segment. Operating information
relating to these business segments is presented in note 17 to the financial
statements.
TransMontaigne believes that fundamental structural changes and the
trend toward outsourcing in the petroleum industry are creating opportunities
for its continued growth. Major oil companies and independents are undertaking
reorganization, rationalization and cost-saving measures in an effort to improve
operating and financial performance. In many instances this results in the
disposition of domestic non-strategic, non-core businesses and downstream assets
and facilities, and in the outsourcing of procurement, maintenance,
transportation, supply, distribution, gathering, processing, marketing and
administrative functions.
TransMontaigne believes that this disposition of downstream assets and
facilities provides opportunities for it to purchase pipeline, storage,
terminaling, gathering and processing assets, and to apply focused management
and more cost effective utilization of these facilities while providing value-
added service at competitive prices to its customers, often including the former
owners of the assets. TransMontaigne has acquired, designed and developed its
physical assets and its operating, risk management and information systems in
order to take advantage of these opportunities.
The principal predecessor of TransMontaigne was formed in 1977 under
the name of Continental Ozark Corporation. In April 1995, present management and
certain institutional stockholders of TransMontaigne acquired control of
Continental Ozark Corporation through a merger in which the name of the
corporation was changed to TransMontaigne Oil Company. In June 1996,
TransMontaigne and a publicly held corporation merged, with the stockholders of
TransMontaigne receiving approximately 93% of the stock of the merged
corporation.
3
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In December 1996 TransMontaigne acquired the Grasslands natural gas
gathering, processing, treating and fractionation system (the "Grasslands
Facilities") for approximately $71,000,000 in cash. The Grasslands system is one
of the largest natural gas facilities in the Williston Basin which is currently
among the most active areas of onshore domestic drilling activity. The
acquisition of the Grasslands Facilities is an example of the opportunities
available to TransMontaigne to enhance its earnings performance by capitalizing
on the industry's divestiture trend and applying its management expertise in the
downstream sector of the petroleum industry. The facilities complement
TransMontaigne's existing natural gas gathering and processing facilities in the
Williston Basin of the Rocky Mountain region, and enable TransMontaigne to
improve service to oil and gas producers as well as to end-users of natural gas
liquids ("NGLs") and natural gas.
The executive offices of TransMontaigne, a Delaware corporation, are
located at 2750 Republic Plaza, 370 Seventeenth Street, Denver, CO 80202, and
its telephone number is (303) 626-8200.
LOGISTICAL PETROLEUM SERVICES
Through its wholly owned subsidiary TransMontaigne Transportation
Services Inc., TransMontaigne provides refined petroleum product and crude oil
transportation, storage and terminaling services to over 500 customers,
including most major oil companies and independent refiners in the United
States. TransMontaigne employs its 747 miles of pipeline and ten storage and
terminal facilities in seven states with a combined tank storage capacity of
approximately 4,820,000 barrels in conjunction with the major mid-continent
pipeline and terminal systems owned by others to transport products to market
destinations and to conduct exchange transactions with major and independent
petroleum companies. The combined utilization of TransMontaigne-owned and non-
owned assets allows it to significantly expand its geographic service area and
the types of services it provides.
TransMontaigne owns and operates a 460-mile refined petroleum products
pipeline from Ft. Madison, Iowa through Chicago to Toledo, Ohio (the "NORCO
pipeline") and associated storage facilities located at Hartsdale, Indiana and
Toledo, Ohio. The NORCO pipeline system is interconnected to all major mid-
continent common carriers. TransMontaigne also owns a 60% interest in a 67-mile
refined petroleum products pipeline operating from Mt. Vernon, Missouri to
Rogers, Arkansas (the "Razorback pipeline") and an associated storage facility
at Mt. Vernon. The Razorback pipeline is the only refined petroleum products
pipeline providing transportation services to northwest Arkansas. TransMontaigne
also owns and operates a 220-mile crude oil gathering pipeline system, with
807,500 barrels of tank storage capacity, located in east Texas (the "CETEX
pipeline").
In general, a shipper owns the refined petroleum products or crude oil
and transfers custody of the products to the NORCO or Razorback pipelines or the
crude oil to the CETEX pipeline for shipment to a delivery location at which
point custody again transfers. Tariffs for the transportation service are
regulated and are charged by TransMontaigne to shippers based upon the
origination point on the pipelines to the point of product delivery. These
tariffs do not include fees for the storage of products at the NORCO and
Razorback pipeline storage facilities or crude oil at the CETEX pipeline storage
facilities, or for the terminaling and storage of products at TransMontaigne
terminals, the fees for which are separately charged if those facilities are
utilized.
4
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TransMontaigne's pipeline business depends in large part on the level
of demand for refined petroleum products in the markets served by the pipelines,
together with the ability and willingness of refiners and marketers having
access to the pipelines to supply that demand by shipments through these
pipelines. Competition is based primarily on pipeline operational dependability,
quality of customer service provided and proximity to end-users, although
product pricing at either the origin or terminal destination on a pipeline may
outweigh transportation cost considerations. TransMontaigne believes that high
capital costs, tariff regulation, environmental considerations, problems in
acquiring rights-of-way and TransMontaigne's available capacity make it unlikely
that additional competing pipeline systems comparable in size to the NORCO and
Razorback pipelines will be built in the near term.
The TransMontaigne-owned and operated terminals connect with product
transportation systems, storage facilities and product distribution locations.
These terminals are located in Rogers, Arkansas; Little Rock, Arkansas; East
Chicago, Indiana; Indianapolis, Indiana; South Bend, Indiana; and Bryan, Ohio.
The East Chicago, Indiana facility, purchased in January 1997, has
approximately 1,186,000 barrels of storage capacity, including specialized
storage for aviation and jet fuel, and strategic connections to additional
pipelines and facilities in the Chicago, Illinois and Whiting, Indiana areas.
The original South Bend terminal, inactive since its purchase in 1992, was
demolished and rebuilt during 1996. This modern facility which opened in
January 1997 has storage capacity of 210,000 barrels and is capable of
delivering volumes in excess of 15,000 barrels per day. These terminal and
storage facilities are expected to enhance terminaling revenue and improve
utilization and pipeline revenues on the NORCO pipeline system.
Terminal revenues are based on the volume of products handled,
generally at a standard industry fee. Terminal fees are not regulated. The
terminals receive petroleum products in bulk quantities from connecting pipeline
systems. Products are stored in bulk at the terminals and made available to
wholesale, shipment and exchange customers which transport the products by truck
to commercial and retail destinations and then to the end-user. TransMontaigne
markets refined petroleum products over truck loading racks at owned terminals,
as well as through exchanges with numerous companies at other non-owned
terminals located throughout the TransMontaigne distribution area.
TransMontaigne believes that based on location, pipeline connections and quality
of service, its terminals offer advantages over competing terminals.
Major and independent petroleum companies own terminal and storage
facilities which often have similar capabilities to those owned by independent
operators such as TransMontaigne, but generally do not provide terminaling and
storage services to third parties. In many instances, these companies are also
significant customers of TransMontaigne and frequently provide strong demand for
its terminals, particularly when TransMontaigne's terminals and storage
facilities have more cost effective locations near key transportation
connections. These companies also utilize TransMontaigne for terminaling and
storage services when their proprietary facilities are inadequate, either
because of size constraints, the nature of the products stored or specialized
handling requirements.
5
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Storage of refined petroleum products at TransMontaigne-owned
terminals pending delivery is an integral service function. Storage fees are
generally based on a per gallon rate, which varies with the duration of the
storage arrangement, the product stored and special handling requirements.
Ancillary services, including injection of shipper-furnished or TransMontaigne-
furnished additives, are also available for a fee at the TransMontaigne
terminals.
TransMontaigne provides products services through its wholly owned
subsidiary TransMontaigne Product Services Inc. Product services consist of the
bulk purchase and sale of substantial volumes of refined petroleum products and
the wholesale marketing of products at terminal truck loading rack locations,
both of which are high volume, low margin activities. These product supply and
distribution efforts are enhanced by TransMontaigne's ownership and operation of
product pipelines and terminals, a constant supply of NGLs from its gathering
and processing operations, and by its inventory positions in third-party common
carrier pipeline systems. TransMontaigne employs these assets to arbitrage
regional product price differentials and transportation costs; to buy bulk
volumes of products at the wholesale level and remarket them over truck loading
racks; and to take advantage of opportunities presented by changing market
conditions and seasonal variations.
TransMontaigne enters into product exchange transactions in order to
enhance operating margins in connection with its marketing activities. Exchanges
are arranged through agreements under which TransMontaigne agrees to buy and
sell products that differ in terms of geographic location, type of product or
delivery schedule. Through such exchanges, which are continuously monitored by
TransMontaigne's management information and risk management systems,
TransMontaigne seeks to increase its operating margins by maximizing
transportation, terminaling and product sales revenues from each barrel of
product sold while also minimizing related storage and shipping costs.
TransMontaigne may selectively hedge a portion of its inventory by
entering into a future physical delivery obligation to a third party or
purchasing a futures contract on the NYMEX in order to maintain a substantially
balanced position between product purchases and future product sales or delivery
obligations and to minimize exposure to the risk of price volatility of refined
petroleum products. TransMontaigne generally does not hedge the price risk on
the portion of its inventory consisting of pipeline fill, tank bottoms and a
minimum product supply required to satisfy exchange obligations, which inventory
is generally not available for sale. However, hedging positions may be
considered and strategically placed on this inventory when management believes
it is appropriate based upon an assessment of market conditions and the related
impact on operating income.
6
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GAS GATHERING AND PROCESSING SERVICES
TransMontaigne provides natural gas gathering and processing services
business through its wholly owned subsidiary Bear Paw Energy Inc. In December
1996 TransMontaigne acquired the Grasslands Facilities. The Grasslands
Facilities complement TransMontaigne's existing natural gas gathering and
processing facilities in the Williston Basin of the Rocky Mountain region, and
enable TransMontaigne to improve service to oil and gas producers as well as to
end-users of NGLs and natural gas. The Grasslands system is one of the largest
natural gas gathering and processing facilities in the Williston Basin which is
currently among the most active areas of domestic oil and gas drilling. With the
acquisition of the Grasslands Facilities, natural gas gathering and processing
becomes a significant and integral component of TransMontaigne's business.
The Grasslands natural gas processing plant, located in McKenzie
County, North Dakota, was built in 1980. Although the plant is designed for
approximately 65 million cubic feet per day inlet capacity, it has operated at
approximately 75 million cubic feet per day for extended periods. In addition,
it has approximately 180 long tons per day capacity for sulfur recovery. The
designed product recoveries are 88% propane, 99% butane and 100% gasoline.
Current throughput is approximately 45 million cubic feet per day from over
1,200 active leases, which is gathered through approximately 2,500 miles of low
and high pressure gathering lines. The majority of the wells connected to the
Grasslands Facilities primarily produce crude oil. They also produce small
volumes of natural gas that are generally high in NGL content. The natural gas
gathering lines cover the Williston Basin areas of western North Dakota and
eastern Montana. A 20 mile high pressure pipeline with a designed capacity in
excess of 25 million cubic feet per day has been recently completed into an area
of active drilling in the Lodgepole geologic formation near Dickinson, North
Dakota. Additional oil and gas wells can be connected to this entire system if
successful drilling continues.
The Grasslands Facilities are strategically located between
TransMontaigne's Marmarth facility in southwestern North Dakota, its Baker
facility in eastern Montana and its 50% owned Lignite facility in northern North
Dakota. With the Grasslands Facilities, TransMontaigne has natural gas gathering
facilities covering the eastern corridor of Montana and the western quarter of
North Dakota, from the Canadian border to the South Dakota border, which
significantly enhance TransMontaigne's ability to provide complete service to
North Dakota and Montana producers as well as to end-users of NGLs and natural
gas.
The Marmarth system is an approximately 4 million cubic feet per day
capacity natural gas gathering, processing, and treating facility which gathers
natural gas at low pressure in southwestern North Dakota through approximately
15 miles of gathering pipelines. NGLs are currently sold locally by truck after
being fractionated at the Baker facility. The Baker system located in eastern
Montana is an approximately 4 million cubic feet per day capacity natural gas
processing plant connected to a 15 mile gathering pipeline presently under
construction. Baker also fractionates the Marmarth system NGLs and provides
processing for a major oil company. The Lignite system is an approximately 12
million cubic feet per day capacity natural gas processing and treating facility
located in northern North Dakota connected to approximately 250 miles of
gathering pipelines.
7
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TransMontaigne continually seeks additional dedicated natural gas
supplies to maintain or increase throughput levels to offset natural production
declines in dedicated volumes. Such natural gas supplies are obtained by
purchasing existing systems from third parties or by connecting additional
wells. The opportunity to connect new wells to existing facilities is primarily
affected by levels of drilling activity near TransMontaigne's natural gas
gathering systems.
The gathering, processing and marketing sector of the natural gas
industry is currently in a consolidation phase. As this consolidation takes
place, it may become more difficult for many companies to earn acceptable
returns on smaller systems. Many oil and gas producers that have previously
operated their own natural gas gathering and processing facilities may realize
they lack the operational and management skills necessary to maximize the return
on these investments and choose to sell these assets. TransMontaigne intends to
take advantage of the opportunities presented by this consolidation.
In addition to the ownership of its four natural gas systems,
TransMontaigne manages 15 small natural gas gathering systems for a major
interstate pipeline company. TransMontaigne earns a fee for the management of
these systems and is compensated for any additional volumes which it connects to
them.
LION OIL COMPANY INVESTMENT
In 1985, a 65% owned subsidiary of TransMontaigne purchased 27.75% of
the stock of Lion Oil Company ("Lion"), which owns a modern 65,000 barrel per
day refinery in El Dorado, Arkansas; a 188-mile crude oil transportation
pipeline in east Texas; a 1,100-mile crude oil gathering system in south
Arkansas and north Louisiana; and two refined petroleum products terminals in
Tennessee. Lion is operated under a management contract with a company which
owns 48.6% of Lion. The remaining 23.65% of Lion is owned by various south
Arkansas oil and gas producers. TransMontaigne has two representatives on the
board of directors of Lion. Through April 30, 1997 TransMontaigne's interest in
Lion is reported for financial statement purposes using the equity method of
accounting.
ENVIRONMENTAL AND TARIFF REGULATIONS
The operations of TransMontaigne are subject to federal, state and
local laws and regulations relating to protection of the environment. Future
regulation may impose additional requirements. Although TransMontaigne believes
that its operations are in material compliance with applicable environmental
laws and regulations, and TransMontaigne has not accrued any material amounts
for environmental compliance as of April 30, 1997, risks of substantial costs
and liabilities are inherent in pipeline, terminal and processing operations,
and there can be no assurance that significant costs and liabilities will not be
incurred in the future.
The interstate petroleum product pipeline operations of TransMontaigne
are subject to regulation by the FERC under the Interstate Commerce Act (the
"ICA") which requires, among other things, that the rates set by the pipeline
transportation tariffs be just and reasonable and not unduly discriminatory.
New and changed tariffs must be filed with the FERC, which may investigate their
lawfulness on shipper protest or its own motion. The FERC may suspend the
effectiveness of such tariffs and require the pipeline to refund to shippers,
with interest, any difference between the level the FERC determines to be lawful
and the filed tariffs under investigation; the tariffs may also be challenged by
litigation.
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The intrastate petroleum pipeline operations of TransMontaigne are
subject to regulation by the Texas Railroad Commission. Like interstate
regulation, the Texas regulation requires that intrastate tariffs be filed with
the Railroad Commission and allows shippers to challenge such tariffs.
Employees
The Company had 236 employees at July 23, 1997. No employees are
subject to representation by unions for collective bargaining purposes.
ITEM 2. PROPERTIES
For information regarding TransMontaigne properties, see "General",
"Transportation Services" and "Natural Gas Gathering and Processing" sections
under Item 1. For information regarding Lion properties, see "Lion Oil Company
Investment" section under Item 1.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. VOTE OF SECURITY HOLDERS
Not Applicable
9
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PART II
ITEM 5. MARKET FOR COMMON STOCK
The Common Stock is traded on the American Stock Exchange under the
symbol "TMG." The following table sets forth, for the periods indicated, the
range of high and low per share sale prices for Common Stock as reported on the
American Stock Exchange, adjusted for a 2.432599 to 1 reverse stock split that
occurred in June 1996. The common stock of a much smaller predecessor of
TransMontaigne was traded on the American Stock Exchange (Emerging Company
Marketplace) from December 14, 1993 until June 3, 1996. On June 5, 1996,
following the merger of TransMontaigne and the predecessor, the Common Stock
began to trade on the American Stock Exchange (Primary List).
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LOW HIGH
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First Calendar Quarter 1995 $ 2.74 $ 3.95
Second Calendar Quarter 1995 $ 2.74 $ 4.26
Third Calendar Quarter 1995 $ 3.35 $ 4.26
Fourth Calendar Quarter 1995 $ 3.35 $ 4.56
First Calendar Quarter 1996 $ 3.35 $10.80
Second Calendar Quarter 1996 (through
June 3, 1996) $10.03 $17.94
June 5, 1996 through July 31, 1996 (1) $ 9.75 $15.13
August 1, 1996 through October 31, 1996 $ 9.69 $10.88
November 1, 1996 through January 31, 1997 $ 9.81 $14.75
February 1, 1997 through April 30, 1997 $13.50 $17.75
</TABLE>
_________
(1) In June 1996, TransMontaigne adopted a fiscal year end of April 30.
On July 23, 1997, the last reported sale price for the Common Stock on
the American Stock Exchange was $18.875. As of July 23, 1997, there were
approximately 460 stockholders of record of the Common Stock.
No dividends were declared or paid on the Common Stock during the
periods reported in the table above. TransMontaigne intends to retain future
cash flow for use in its business and has no current intention of paying
dividends in the foreseeable future. Any payment of future dividends and the
amounts thereof will depend upon TransMontaigne's earnings, financial condition,
capital requirements and other factors deemed relevant by TransMontaigne's Board
of Directors. TransMontaigne's Credit Facility and Master Shelf Agreement, as
well as instruments governing certain of its other indebtedness, contain certain
restrictions on the payment of dividends. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the fiscal years ended April
30, 1997, 1996 and 1995, the seven months ended April 30, 1994, and the fiscal
years ended September 30, 1993 and 1992, have been derived from applicable
audited consolidated financial statements. This selected financial data should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations, Item 7, and the consolidated financial
statements and notes thereto included in Item 8, "Financial Statements and
Supplementary Data."
<TABLE>
<CAPTION>
SEVEN
MONTHS
FISCAL YEARS ENDED ENDED FISCAL YEARS ENDED
APRIL 30, APRIL 30, SEPTEMBER 30,
----------------------------------------------- ------------ --------------------------
1997 1996 1995 1994 1993 1992
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STATEMENT OF
OPERATIONS DATA:
Revenue $1,166,664,621 533,106,747 324,591,409 296,086,981 507,936,810 515,547,695
Operating Income
(Loss) 9,900,568 6,548,953 406,042 (1,509,581) (1,710,242) (1,930,614)
Net Earnings
(Loss) 9,171,312 4,617,969 (3,217,635) (2,853,609) (4,490,468) (4,200,922)
Earnings (Loss)
Per Share 0.41 0.31 (1.32) (1.15) (1.85) (1.73)
STATEMENT OF CASH FLOWS
DATA:
Net Cash Provided By
(Used In):
Operating Activities $ (9,769,244) (3,919,753) (236,580) (2,187,251) 5,004,187 (8,153,054)
Investing Activities (89,920,465) (4,181,377) (233,562) (1,041,069) (4,614,892) (2,327,191)
Financing Activities 97,670,800 44,702,536 61,543 3,691,885 (1,315,700) (9,581,869)
OTHER FINANCIAL
DATA:
EBITDA (1) $ 15,354,682 8,844,357 1,561,251 (364,156) (669,698) (959,277)
Capital Expenditures(2) 92,294,394 4,124,264 747,774 461,888 4,730,726 2,247,052
<CAPTION>
APRIL 30, SEPTEMBER 30,
--------------------------------------------------------- --------------------------
1997 1996 1995 1994 1993 1992
------------- -------------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working Capital $ 78,423,038 55,651,839 37,989,205 11,554,715 11,470,225 20,685,446
Total Assets 261,724,320 120,962,976 104,220,346 75,470,266 86,334,703 76,336,971
Long-Term Debt,
excluding current
maturities 64,774,267 28,948,867 36,945,610 37,671,329 33,953,590 35,256,698
Stockholders'
Equity(3) 138,971,741 57,819,191 28,470,702 2,480,835 5,334,500 9,825,000
</TABLE>
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(1) EBITDA is earnings (loss) before income taxes plus interest
expense and other financing costs and depreciation and amortization.
TransMontaigne believes that, in addition to cash flow from operations and net
earnings (loss), EBITDA is a useful financial performance measurement for
assessing operating performance as it provides an additional basis to evaluate
the ability of TransMontaigne to incur and service debt and to fund capital
expenditures. In evaluating EBITDA, TransMontaigne believes that consideration
should be given, among other things, to the amount by which EBITDA exceeds
interest costs for the period, how EBITDA compares to principal repayments on
debt for the period and how EBITDA compares to capital expenditures for the
period. To evaluate EBITDA, the components of EBITDA such as revenue and
operating expenses and the variability of such components over time, should also
be considered. EBITDA should not be construed, however, as an alternative to
operating income (loss) (as determined in accordance with generally accepted
accounting principles (GAAP) as an indicator of TransMontaigne's operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. See TransMontaigne's
consolidated financial statements incorporated by reference and included herein.
TransMontaigne's method of calculating EBITDA may differ from methods used by
other companies, and as a result, EBITDA measures disclosed herein may not be
comparable to other similarly titled measures used by other companies.
(2) Includes approximately $71,000,000 relating to the Grasslands
acquisition.
(3) No dividends were declared or paid on the Common Stock during the
periods reported.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
TransMontaigne provides a broad range of integrated transportation,
terminaling, supply, distribution, gathering, processing and marketing services
to producers, refiners, distributors, marketers and end-users of petroleum
products, natural gas and crude oil in the downstream sector of the petroleum
industry. TransMontaigne is a holding company which conducts its operations
through subsidiaries primarily in the mid-continent and Rocky Mountain regions
of the United States. TransMontaigne does not explore for, or produce, crude oil
or natural gas, and owns no crude oil or natural gas reserves.
TransMontaigne owns and operates refined petroleum product, crude oil and
natural gas assets. TransMontaigne refined petroleum product and crude oil
assets consist primarily of 747 miles of pipeline and ten storage and terminal
facilities in seven states with a combined tank storage capacity of
approximately 4,820,000 barrels. Its natural gas gathering and processing
assets consist of four gathering and processing systems in two states with
combined throughput capacity of approximately 85 million cubic feet per day and
over 2,700 miles of pipelines. The use of these facilities and an extensive
network of additional common carrier pipelines and terminal facilities owned by
others allows TransMontaigne to significantly expand its geographic service area
and the types of services it provides.
The principal predecessor of TransMontaigne was formed in 1977 under the
name of Continental Ozark Corporation. In April 1995, present management and
certain institutional stockholders of TransMontaigne acquired control of
Continental Ozark Corporation through a merger in which the name of the
corporation was changed to TransMontaigne Oil Company. In June 1996,
TransMontaigne and a publicly held corporation merged, with the stockholders of
TransMontaigne receiving approximately 93% of the stock of the merged
corporation.
Since TransMontaigne present management assumed control in April 1995,
TransMontaigne has raised approximately $117,000,000 in equity capital
($30,000,000 private placement in May 1995; $25,000,000 private placement in
March 1996; and $62,000,000 public offering in February 1997); established a
$130,000,000 working capital and acquisition revolving bank credit facility (in
December 1996) which converted to the present $85,000,000 successor bank credit
facility due December 31, 2001 (in February 1997); and issued $50,000,000 of
7.85% Senior Notes due 2003 to an institutional lender under a $100,000,000
Master Shelf Agreement (in April 1997).
Management also has increased net operating margins to $21,344,000 and
$12,717,000 for the fiscal years ended April 30, 1997 and 1996 by improving the
performance of its facilities through selective capital improvements,
restructured operating and administrative functions and expanded marketing of
services and by implementing an operating plan together with financial
management
13
<PAGE>
systems which provide the foundation for its current operations and future
growth. In addition, new information systems, policies, procedures and
operating controls have been established; experienced managerial personnel have
been added to improve operational efficiencies in all service areas and to
expand the products supply and distribution and marketing functions; more
effective management of inventory price risk and quantities has been
implemented; and inventory carrying costs have been reduced.
In December 1996 TransMontaigne acquired the Grasslands natural gas
gathering, processing, treating and fractionation system (the "Grasslands
Facilities") for approximately $71,000,000 in cash and through April 30, 1997
has invested an additional $1,391,000 in improvements and enhancements. The
Grasslands system is one of the largest natural gas facilities in the Williston
Basin which is currently among the most active areas of onshore domestic
drilling activity. The acquisition of the Grasslands Facilities is an example
of the opportunities available to TransMontaigne to enhance its earnings
performance by capitalizing on an industry divestiture trend and applying its
management capabilities in the downstream sector of the petroleum industry. The
Grasslands Facilities complement TransMontaigne's other natural gas gathering
and processing facilities in the Williston Basin of the Rocky Mountain region,
and enable TransMontaigne to improve service to oil and gas producers as well as
to end-users of natural gas liquids and natural gas. The Grasslands Facilities
contributed a net operating margin of $5,988,000 to TransMontaigne during the
year ended April 30, 1997.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report contains "forward-looking statements" within the meaning of the
federal securities laws and may include the words or phrases "believes," "will
depend," "will become" and "plans to" or similar expressions as well as other
statements of expectations, beliefs, future strategies and comments concerning
matters which are not historical facts. These forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those expressed in or implied by the statements including, but
not limited to, the following:
. that TransMontaigne will generate net margins from high sales volumes
. that TransMontaigne net margins are affected by price volatility of
products purchased and sold
. that, to the extent TransMontaigne selectively hedges its inventory
positions, those hedges are not effective
. that TransMontaigne could be required to recognize a financial
statement loss through a lower of cost or market write-down of
inventories
. that TransMontaigne will incur unanticipated costs in complying with
current and possibly future environmental regulations
. that TransMontaigne will capitalize on the trend by companies in the
oil and gas industry to divest assets and outsource certain services
. that TransMontaigne will replace the supply of dedicated natural gas
reserves gathered and processed by its facilities.
14
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
YEARS ENDED APRIL 30,
------------------------------
1997 1996 1995
-------- -------- --------
(in thousands, except margin per gallon data)
<S> <C> <C> <C>
PIPELINE OPERATIONS
Volume (1) 19,580 18,902 13,721
Revenues $ 12,196 9,577 5,827
Net Operating Margins (2) $ 6,848 4,454 2,678
Margin per Gallon $ 0.0083 0.0056 0.0046
TERMINAL OPERATIONS
Volume (1) 774,000 587,000 547,000
Revenues $ 5,387 3,346 3,145
Net Operating Margins (2) $ 3,524 2,434 2,340
Margin per Gallon $ 0.0046 0.0041 0.0043
PRODUCTS SUPPLY AND
DISTRIBUTION OPERATIONS
Volume (1) 1,774,000 958,000 620,000
Revenues $ 1,125,941 520,184 315,619
Net Operating Margins (2) $ 3,984 5,829 761
Margin per Gallon $ 0.0022 0.0061 0.0012
GAS GATHERING AND
PROCESSING OPERATIONS (3)
Inlet Volume (4) 5,332 - -
NGL Production (4) 27,219 - -
Residue Production (4) 4,533 - -
Revenue $ 23,141 - -
Net Operating Margins (2) $ 6,988 - -
TOTAL OPERATIONS
Revenues $ 1,166,665 533,107 324,591
Net Operating Margins (2) $ 21,344 12,717 5,779
Net Income (Loss) $ 9,171 4,618 (3,218)
</TABLE>
15
<PAGE>
(1) Pipeline volumes are expressed in barrels (42 gallons per barrel), and
terminal and products supply and distribution sales volumes are expressed in
gallons.
(2) Net operating margin represents revenues less direct operating expenses for
pipeline and terminal operations; revenues less cost of refined petroleum
products purchased for products supply and distribution operations, and revenues
less cost of natural gas gathered, processed and sold and direct operating
expenses for natural gas gathering and processing operations.
(3) Natural gas gathering and processing volumes, production and revenues for
the year ended April 30, 1997 include those items only for the period from
December 20, 1996, the closing date of the Grasslands facilities acquisition,
through April 30, 1997.
(4) Natural gas inlet volumes are expressed in thousand cubic feet; natural gas
liquids (NGLs) production is expressed in gallons; and residue natural gas
production is expressed in million British Thermal Units.
Prior to the acquisition of the Grasslands Facilities, TransMontaigne's
revenues were derived from the logistical petroleum services business segment
consisting primarily of transporting refined petroleum products (and to a lesser
extent crude oil) in pipelines; storing and terminaling refined petroleum
products; and refined petroleum products supply, distribution and marketing.
Gas gathering and processing services became an important business segment with
the acquisition of the Grasslands Facilities and will have a significant impact
on TransMontaigne's future results of operations.
Pipeline revenues are based on the volume of refined petroleum products or
crude oil transported and the distance from the origin point to the delivery
point. TransMontaigne interstate pipeline systems transport refined petroleum
products and their tariffs are regulated by the Federal Energy Regulatory
Commission (the "FERC"). TransMontaigne intrastate pipeline transports crude oil
and its tariffs are not regulated by the FERC but are regulated by the Texas
Railroad Commission.
Terminal revenues are based on the volume of refined petroleum products
handled, generally at a standard per gallon rate. Terminal fees are not
regulated. Storage fees are generally based on a per gallon rate, which varies
with the duration of the storage arrangement, the refined petroleum product
stored and special handling requirements.
Direct operating expenses of pipelines and terminals include wages and
employee benefits, utilities, communications, maintenance and repairs, property
taxes, rent, insurance, vehicle expenses, environmental protection costs,
materials and supplies.
Products supply and distribution revenues are based on the volume of bulk
sales of refined petroleum products and the wholesale distribution of refined
petroleum products from terminals. Bulk purchase and sale transactions in
quantities of 25,000 barrels to 50,000 barrels are common and are generally made
at small margins. Wholesale distribution of refined petroleum products from
proprietary and nonproprietary terminal truck loading rack locations is
primarily represented by truck load sales of 8,000 gallons.
16
<PAGE>
Natural gas gathering and processing revenues are based on the inlet volume
of natural gas purchased from producers under both percentage of proceeds and
fee based arrangements. The natural gas is gathered and processed into NGL
products, principally propane, butane and natural gasoline. These products are
transported by truck or pipeline to storage facilities from which they are
further transported and marketed by TransMontaigne to wholesalers and end-users.
Residue natural gas is delivered to and marketed through connections with
interstate pipelines.
Direct operating expenses of natural gas gathering and processing include
wages and employee benefits, utilities, maintenance and repairs, property taxes,
insurance, vehicle expenses, environmental protection costs, material and
supplies.
YEAR ENDED APRIL 30, 1997 COMPARED TO YEAR ENDED APRIL 30, 1996
The net operating margin from pipeline operations of $6,848,000 increased
54%, or $2,394,000, in the current year. This increase resulted primarily from a
net increase in the volumes of higher tariff long haul pipeline shipments, based
on a 4% increase in total volumes shipped, together with increases in joint
tariff participation and tankage rental income all of which resulted in a 27%
increase in revenues of $2,619,000 in the current year. This increase in
revenues was partially offset by a 4% increase in operating costs of $225,000,
primarily due to incremental power costs from additional long haul shipment
volumes and increased field personnel costs, repairs and maintenance and
property tax assessments.
The net operating margin from terminal operations of $3,524,000 increased
45%, or $1,090,000, in the current year. This increase resulted from an overall
32% increase in volumes handled, primarily due to a 22% increase at the Little
Rock, Arkansas terminal and additional volumes at the East Chicago terminal
facility acquired in December 1996; offset in part by a 104% increase in
terminal operating costs attributable to the East Chicago terminal, a new
terminal lease, additional freight charges on products, field personnel expenses
and property tax assessments.
The net operating margin from product sales in the current year of
$3,983,000 decreased 32%, or $1,846,000. Net revenues increased $605,757,000
or 117%, on additional volume of 816,000,000 gallons of products sold. The
$.0022 net operating margin per gallon realized in the current year decreased
$.0039, or 64%, from the higher than normal $.0061 per gallon realized during
the prior year, primarily due to substantially reduced product margins realized
during the second half of the current year, notwithstanding the significant
increase in sales volume attributable to an expanded supply, distribution and
marketing program. The lower net operating margin was affected by generally
weak market conditions. The net operating margin was also negatively impacted
during certain periods in the latter part of the current year by bulk sales of
products shipped to locations on TransMontaigne pipelines which resulted in
minimal or negative margins. However, these product shipments increased
pipeline and terminal throughput volumes, and maximized related tariff and
handling revenues. By providing an integrated logistical service to customers
through the effective utilization of both its transportation and product supply,
distribution and marketing capabilities, the TransMontaigne aggregate net
operating margin from the logistical petroleum services business segment
increased $1,638,000, or 13%, over the prior year.
17
<PAGE>
The net operating margin from natural gas gathering and processing
operations of $6,988,000 in the current year is primarily attributable to the
business activities of the Grasslands facilities for the period from the
December 20, 1996 acquisition closing date through April 30, 1997 and also
includes net operating margin contributions from the Marmarth and Baker
facilities as well as fees for the management of fifteen small natural gas
gathering systems. These were not previously sources of net operating margins
since TransMontaigne natural gas gathering and processing operations commenced
in June 1996.
The unaudited pro forma results of operations reflected in Note 3 to the
Consolidated Financial Statements include the historical operating performance
of the Grasslands facilities under prior ownership and are presented for
comparative purposes. Included in the pro forma information are Grasslands
Facilities revenues of $52,848,000 for the year ended April 30, 1997
representing an increase of $7,381,000, or 16%, over revenues of $45,467,000 for
the year ended April 30, 1996. This revenue increase was primarily due to
improved product prices for NGLs and residue natural gas resulting from strong
wholesale demand during December 1996 and January 1997 together with a small
increase in product volumes sold. The pro forma net operating margin from
Grasslands Facilities operations was $14,907,000, a 45% increase of $4,640,000,
for the year ended April 30, 1997 over the pro forma net operating margin of
$10,267,000 for the year ended April 30, 1996. This increase resulted primarily
from improved product prices, decreased operating expenses and the conversion of
a natural gas gathering agreement from a fee based to a percentage of proceeds
arrangement.
General and administrative expenses increased $2,988,000, a 60% increase in
the current year, primarily due to additional personnel costs and increased
office lease expense together with increases in employee relocation, insurance,
information systems and communication expenses, a significant portion of which
expenses was attributable to TransMontaigne's expanded natural gas gathering and
processing business activities.
Other income includes equity in earnings of affiliates and interest income.
Equity in earnings of affiliates in the current year is represented by
TransMontaigne's share of Lion's earnings, net of related minority interests, of
approximately $70,000 compared to $605,000 for the prior year. The decrease was
primarily due to both planned and unanticipated turnaround costs (major
maintenance expenditures) which adversely impacted earnings.
Interest income in the current year increased to $1,777,000 from $521,000
primarily due to an increase in interest bearing cash balances held for future
investments.
Interest expense represents interest on the revolving and successor bank
lines of credit which were used primarily to finance the Grasslands Facilities
acquisition, other capital expenditures, inventory and accounts receivable and
also includes interest on TransMontaigne's senior subordinated debentures.
Other financing costs include fees paid for letters of credit issued to product
suppliers, loan commitment fees and debt acquisition costs paid in connection
with credit facilities. Interest expense and financing costs during the current
year increased $1,552,000, or 54%, over the prior year. Lower interest rates in
the current year were offset by the effect of a $25,000,000 increase in average
outstanding debt.
18
<PAGE>
Earnings before income taxes of TransMontaigne for the current year were
$7,483,000, a 56% increase of $2,672,000 over the $4,811,000 for the prior year.
This improvement was primarily a result of the aggregate increase in the
logistical petroleum services business segment net operating margin; the
positive impact of the net operating margin contribution from the gas gathering
and processing business segment attributable essentially to the inclusion of
over four months operations of the Grasslands Facilities; and additional
interest income. These increases were partially offset by increased general and
administrative, depreciation and interest expenses, primarily attributable to
the Grasslands Facilities acquisition.
As of April 30, 1997 management assessed the realizability of
TransMontaigne's deferred tax assets. Realization of the net deferred tax
assets is dependent upon the generation of future taxable income in periods when
temporary differences between financial statement carrying amounts and tax bases
of assets become deductible. Projected future taxable income and tax planning
strategies are considered in making the assessment. As a result of the
Grasslands acquisition in December 1996 and the public offering of common stock
in February 1997, management believes it is more likely than not that the
benefits of future deductible differences will be realized and, as a result, the
valuation allowance of $4,474,000 was reversed and recorded as an income tax
benefit in the year ended April 30, 1997. The current year income tax benefit of
$1,689,000 includes state tax expense of $586,000.
Net earnings of TransMontaigne for the current year were $9,171,000, a 99%
increase of $4,618,000 over the prior year.
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
The net operating margin from pipeline operations of $4,454,000 increased
66%, or $1,776,000, in the year ended April 30, 1996. This increase resulted
primarily from a 38% increase in volumes shipped and increased utilization.
These increases resulted in a 64% increase in revenues of $3,750,000 during the
period. The increase in revenues was partially offset by a 63% increase in
operating costs of $1,974,000, primarily due to incremental power costs due to
increased volumes, additional personnel costs and reductions in the
reimbursement of certain costs previously paid by third parties.
The net operating margin from terminal operations of $2,434,000 increased
4%, or $94,000, in the year ended April 30, 1996. This increase resulted from a
7% increase in volumes, primarily at the Little Rock, Arkansas terminal, offset
in part by an increase in terminal operating costs of 13%.
The net operating margin from product sales of $5,829,000 increased 666%,
or $5,068,000, in the year ended April 30, 1996. Net revenues increased
$204,565,000 on additional volume of 338,000,000 gallons sold. The improved net
margin was primarily due to increased bulk and rack product sales volumes, and
higher market prices for products sold in the peak seasonal period of gasoline
demand occurring in TransMontaigne's fiscal quarter ended April 30, 1996, during
which period gasoline prices reached a five year high of over $.70 per gallon.
The $.0061 net operating margin per gallon realized in the year ended April 30,
1996 increased $.0049 from the $.0012 per gallon realized during the prior year,
primarily due to higher than normal product margins realized during the 1996
year and significantly lower margins realized during the prior year.
19
<PAGE>
General and administrative expenses increased approximately 18% in the
year ended April 30, 1996 primarily due to increases in salaries and related
employee benefits costs associated with the hiring of additional personnel.
Other income includes equity in earnings of affiliates and interest income.
In the year ended April 30, 1996, equity in earnings of affiliates net of the
related minority interests increased to approximately $605,000 from
approximately $295,000 for the prior year, primarily due to improved crack
spreads at Lion.
Interest income of $521,000 in the year ended April 30, 1996, was
attributable to the investment in interest bearing securities held for future
investments during the period.
Interest expense in the year ended April 30, 1996 represents interest on
the revolving bank line of credit used to finance inventory and accounts
receivable and also includes interest on TransMontaigne's senior subordinated
debentures. Financing costs include fees paid for letters of credit issued to
product suppliers, loan commitment fees and debt acquisition costs paid in
connection with the revolving loan facility. Interest expense and financing
costs decreased $648,000, or 18%, primarily as a result of lower average debt
outstanding under the line of credit.
As a result of the increases in pipeline, terminal and products supply and
distribution net operating margins, reduction in interest expense and increase
in interest income, TransMontaigne net earnings for the year ended April 30,
1996 increased $7,836,000 to $4,618,000 from a loss of $3,218,000 in the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
The following summary reflects TransMontaigne's comparative net cash flows
for the years ended April 30, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Years Ended April 30,
---------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net cash used by operating activities $ 9,769,000 3,920,000 237,000
Net cash used by investing activities $ 89,920,000 4,181,000 234,000
Net cash provided by financing activities $ 97,671,000 44,703,000 62,000
</TABLE>
Net cash used by operating activities in the year ended April 30, 1997
increased $5,849,000 over the prior year. This increase was primarily a result
of increased petroleum product inventory levels required to meet expanded levels
of pipeline, terminaling and products supply and distribution operations,
partially offset by increased trade payable to suppliers of inventory; and also
increased trade receivables resulting from increased petroleum products sales
during the year and from residue natural gas and NGLs sales following the
Grasslands facilities acquisition in December 1996.
20
<PAGE>
Net cash used by investing activities in the year ended April 30, 1997
increased $85,739,000 over the prior year. This increase was primarily the
result of capital expenditures of $92,294,000 for additions and improvements to
its terminals and pipeline facilities, including approximately $71,000,000 for
the Grasslands Facilities acquisition. Capital expenditures in the year ended
April 30, 1996 were $4,124,000.
Net cash provided by financing activities in the year ended April 30, 1997
increased $52,968,000 over the prior year period. This increase was primarily a
result of $62,315,000 in net proceeds received from the public offering of
common stock and the $50,000,000 issuance of Senior Notes, reduced by decreased
borrowings under TransMontaigne's credit facilities.
EBITDA represents earnings before income taxes plus interest expense and
other financing costs and depreciation and amortization. Management uses EBITDA
as part of its overall assessment of TransMontaigne performance by analyzing and
comparing EBITDA between reporting periods. Management believes that, in
addition to cash flow from operations and net earnings as indicators of
operating performance, EBITDA is used increasingly by the financial community to
measure operating effectiveness and as a method to evaluate the market value of
companies like TransMontaigne. EBITDA is also used to evaluate TransMontaigne's
ability to incur and service debt and to fund capital expenditures, although it
is not considered in isolation or a substitute for the other measurements of
performance and liquidity.
Capital expenditures anticipated in the year ending April 30, 1998 are
estimated to be approximately $50,000,000 for pipeline, terminal and natural gas
gathering and processing facilities, including assets to support these
facilities. Future capital expenditures will depend on numerous factors,
including the availability, economics and cost of appropriate asset
acquisitions; the economics, cost and required regulatory approvals of expanding
and enhancing existing systems and facilities; the demand for the services
TransMontaigne provides; local, state and federal governmental regulations;
environmental compliance requirements; fuel conservation efforts; and the
availability, to the extent required, of financing on acceptable terms.
On February 13, 1997, TransMontaigne closed a public offering of 4,357,000
shares of its common stock of which 4,035,000 shares were issued and sold by
TransMontaigne and 322,000 shares were sold by certain selling stockholders.
The net proceeds to TransMontaigne, based on the public offering price of $14.25
per share, were $53,506,000 after deducting underwriting discounts and
commissions and offering costs, of which $45,000,000 was used to repay a portion
of the long-term debt incurred under its bank credit facility. The balance was
added to working capital. On March 11, 1997 the underwriters' overallotment
option to purchase an additional 557,543 shares and the Merrill Lynch Growth
Fund antidilution right to purchase an additional 98,390 shares were both
exercised and TransMontaigne received additional net proceeds of $8,809,000
which was added to working capital.
21
<PAGE>
The TransMontaigne bank credit facility at April 30, 1997 is an $85,000,000
revolving credit facility with a money center bank due December 31, 2001. The
amount available under the bank credit facility is to be reduced by $3,125,000
each calendar quarter beginning March 31, 2000. Borrowings under the bank
credit facility generally bear interest at an annual rate equal to the lender's
announced Base Rate, subject to a Eurodollar pricing option at TransMontaigne's
election. The interest rate at April 30, 1997 was 6.94%.
As of April 30, 1997, TransMontaigne had advances of $10,815,000
outstanding under the bank credit facility and $2,600,000 of the facility was
used to support a standby letter of credit to a bank to assist Lion in obtaining
financing.
In April 1997 TransMontaigne entered into a Master Shelf Agreement with an
institutional lender which provides that the lender will agree to quote, from
time to time, an interest rate at which the lender would be willing to purchase,
on an uncommitted basis, up to $100,000,000 of TransMontaigne's senior
promissory notes which will mature in no more than 12 years, with an average
life not in excess of 10 years.
On April 17, 1997, TransMontaigne issued to the lender, under the Master
Shelf Agreement, $50,000,000 of 7.85% Senior Notes due 2003.
The bank credit facility agreement and the Master Shelf Agreement contain a
negative pledge covenant by TransMontaigne and its subsidiaries and are secured
by the stock of the subsidiaries. These agreements also include financial tests
relating to fixed charges coverage, leverage ratio, consolidated tangible net
worth, distributions and inventory positions. As of April 30, 1997,
TransMontaigne was in compliance with all of such tests.
As of April 30, 1997, TransMontaigne had approximately $18,339,000 of net
operating loss carryforwards for federal income tax purposes which are available
to offset taxable income through 2010. Due to changes in ownership which
occurred through April 30, 1997, the use of these net operating loss
carryforwards to offset taxable income is limited to approximately $4,300,000
annually. As a result of the merger in June 1996, TransMontaigne acquired
additional net operating loss carryforwards of approximately $7,892,000 as of
June 4, 1996, which are included in the aggregate net operating loss
carryforwards, and are limited to approximately $1,300,000 annually. A portion
of the tax benefit of such carryforwards has been recognized as a net reduction
of goodwill recorded in the acquisition.
TransMontaigne had working capital of $78,423,000 at April 30, 1997.
Management believes TransMontaigne's current working capital position; future
cash provided by operating activities; proceeds from the private placement or
public offering of common stock; available borrowing capacity under the bank
credit facility agreement and the Master Shelf Agreement; other borrowing
permitted under those agreements; and its relationship with institutional
lenders and equity investors should enable it to meet its future capital
requirements.
22
<PAGE>
ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128") was issued in February 1997 by the Financial Accounting Standards
Board. It establishes standards for computing and presenting earnings per share
("EPS"), including simplifying the standards for computing earnings per share
and making them comparable to international EPS standards. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods, and will not have a material effect on
TransMontaigne's financial statements since TransMontaigne does not have a
complex capital structure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TransMontaigne consolidated financial statements are included herein
beginning on the following pages.
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
TRANSMONTAIGNE OIL COMPANY:
We have audited the accompanying consolidated balance sheets of TransMontaigne
Oil Company and subsidiaries as of April 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended April 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TransMontaigne Oil
Company and subsidiaries as of April 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 30, 1997 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
June 19, 1997
24
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
<TABLE>
<CAPTION>
ASSETS 1997 1996
- - ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36,384,325 38,403,234
Trade accounts receivable 46,871,207 20,905,812
Inventories 42,346,451 23,609,136
Deferred tax assets, net 3,676,000 -
Prepaid expenses and other 1,647,990 1,475,612
------------- ------------
130,925,973 84,393,794
------------- ------------
Property, plant and equipment:
Land 1,222,195 1,072,798
Plant and equipment 120,010,811 24,926,309
Accumulated depreciation (10,704,252) (6,461,244)
------------- ------------
110,528,754 19,537,863
------------- ------------
Investments and other assets:
Investments 15,656,097 15,830,006
Deferred debt issuance costs, net 1,638,909 386,600
Other assets 2,974,587 814,713
------------- ------------
20,269,593 17,031,319
------------- ------------
$ 261,724,320 120,962,976
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Trade accounts payable $ 36,893,399 10,698,199
Inventory due under exchange agreements 4,982,179 8,874,645
Excise taxes payable 6,437,829 6,483,756
Other accrued liabilities 4,189,528 2,685,355
------------- ------------
52,502,935 28,741,955
------------- ------------
Long-term debt 64,774,267 28,948,867
Minority interests 5,475,377 5,452,963
Stockholders' equity:
Preferred stock, par value $.01 per share, authorized
2,000,000 shares, none issued - -
Common stock, par value $.01 per share, authorized
40,000,000 shares, issued and outstanding 25,794,720
shares at April 30, 1997; and par value $.10 per share,
authorized 27,000,000 shares, issued and outstanding
19,331,171 shares at April 30, 1996 257,947 1,933,117
Capital in excess of par value 134,843,884 61,187,476
Retained earnings (accumulated deficit) 3,869,910 (5,301,402)
------------- ------------
138,971,741 57,819,191
------------- ------------
$ 261,724,320 120,962,976
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenue:
Product sales, pipeline tariffs
terminaling fees and natural gas
gathering and processing fees $ 1,166,664,621 533,106,747 324,591,409
Costs and expenses:
Product costs and direct
operating expenses 1,145,320,892 520,389,482 318,811,953
General and administrative 7,987,162 4,998,771 4,226,123
Depreciation and amortization 3,455,999 1,169,541 1,147,291
--------------- ------------ ------------
1,156,764,053 526,557,794 324,185,367
--------------- ------------ ------------
Operating income 9,900,568 6,548,953 406,042
Other income (expenses):
Interest income 1,777,441 520,900 -
Equity in earnings of affiliates 92,280 942,216 407,208
Minority interests (22,414) (337,253) (112,555)
Interest expense (4,042,616) (2,530,945) (3,119,019)
Other financing costs (373,533) (333,155) (393,031)
Cancellation of aircraft lease - - (286,735)
Other, net 150,808 - -
--------------- ------------ ------------
(2,418,034) (1,738,237) (3,504,132)
--------------- ------------ ------------
Earnings (loss) before
income taxes 7,482,534 4,810,716 (3,098,090)
Income tax benefit (expense) 1,688,778 (192,747) (119,545)
--------------- ------------ ------------
Net earnings (loss) $ 9,171,312 4,617,969 (3,217,635)
=============== ============ ============
Weighted average common
shares outstanding 22,500,984 15,129,637 2,860,390
=============== ============ ============
Earnings (loss) per common share $0.41 0.31 (1.32)
=============== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
_______________________________________________________________________________
<TABLE>
<CAPTION>
Retained
Redeemable Capital in earnings
preferred Common excess of (accumulated
stock stock par value deficit) Total
--------------- ---------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT APRIL 30, 1994 $ 7,426,692 269,483 941,095 (6,156,435) 2,480,835
Preferred stock dividends (78,515 shares) 545,195 - - (545,301) (106)
Common stock issued in connection with
conversion of preferred stock (7,971,887) 295,255 7,676,632 - -
Common stock issued in connection
with stock purchase agreements - 833,333 29,166,669 - 30,000,002
Common stock issued in connection
with a merger - 80,000 120,000 - 200,000
Costs related to conversion of preferred
stock and issuance of common stock - - (992,394) - (992,394)
Net loss - - - (3,217,635) (3,217,635)
--------------- ---------- -------------- ---------------- ------------
BALANCE AT APRIL 30, 1995 - 1,478,071 36,912,002 (9,919,371) 28,470,702
Common stock issued for cash - 455,046 24,558,462 - 25,013,508
Costs related to issuance of common stock - - (282,988) - (282,988)
Net earnings - - - 4,617,969 4,617,969
--------------- ---------- -------------- ---------------- ------------
BALANCE AT APRIL 30, 1996 - 1,933,117 61,187,476 (5,301,402) 57,819,191
Change in the par value of common stock
from $.10 to $.01 in connection
with merger - (1,739,805) 1,739,805 - -
Common stock issued in merger - 14,744 8,093,785 - 8,108,529
Common stock issued for minority interest
in subsidiary - 1,000 974,000 - 975,000
Common stock repurchased and retired - (148) (199,852) - (200,000)
Common stock issued for options exercised - 2,130 780,822 - 782,952
Common stock issued for cash in public
offering - 46,909 62,952,321 - 62,999,230
Costs related to issuance of common stock - - (684,473) - (684,473)
Net earnings - - - 9,171,312 9,171,312
--------------- ---------- -------------- ---------------- ------------
BALANCE AT APRIL 30, 1997 $ - 257,947 134,843,884 3,869,910 138,971,741
=============== ========== ============== ================ ============
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
----- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 9,171,312 4,617,969 (3,217,635)
Adjustments to reconcile net earnings (loss) to net
cash used by operating activities:
Depreciation and amortization 3,455,999 1,169,541 1,147,291
Equity in earnings of affiliates (92,280) (942,216) (407,208)
Minority interests 22,414 337,253 112,555
Deferred tax benefit (2,274,600) - -
Loss (gain) on disposition of assets (70,489) 167,459 (127,645)
Dividends received from affiliates - - 125,000
Loss on cancellation of aircraft lease - - 286,735
Write-off of noncurrent receivable - - 190,000
Changes in operating assets and liabilities,
net of noncash activities:
Trade accounts receivable (25,750,916) (3,297,248) 1,283,422
Inventories (18,737,315) (2,247,795) (1,591,906)
Prepaid expenses and other 199,516 (569,818) 169,196
Trade accounts payable 26,656,549 (10,979,599) (641,400)
Inventory due under exchange
agreements (3,892,466) 4,978,815 2,726,995
Excise taxes payable and other
accrued liabilities 1,543,032 2,845,886 (291,980)
----------- --------- ----------
Net cash used by
operating activities (9,769,244) (3,919,753) (236,580)
----------- ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (92,294,394) (4,124,264) (747,774)
Proceeds from sale of assets 18,318 320,210 260,585
Cash received in connection with acquisition 2,315,527 - -
Cost related to acquisition (399,284) - -
Cash balance in subsidiary sold (111,341) - -
Decrease (increase) in other assets, net 550,709 (377,323) 253,627
----------- ---------- ----------
Net cash used by
investing activities (89,920,465) (4,181,377) (233,562)
----------- ---------- ----------
Cash flows from financing activities:
Borrowings (repayments) of long-term debt, net 35,825,400 (9,100,568) 166,397
Deferred debt issuance costs (1,252,309) (239,772) -
Cash dividends paid on preferred stock - - (106)
Cash received in connection with merger - - 200,000
Common stock issued for cash 63,782,182 25,013,508 -
Stock subscription received in cash - 30,000,002 -
Costs paid relating to issuance of common stock
and conversion of preferred stock (684,473) (970,634) (304,748)
----------- ---------- ----------
Net cash provided by
financing activities 97,670,800 44,702,536 61,543
----------- ---------- ----------
Increase (decrease) in cash
and cash equivalents (2,018,909) 36,601,406 (408,599)
Cash and cash equivalents at beginning of year 38,403,234 1,801,828 2,210,427
----------- ---------- ----------
Cash and cash equivalents at end of year $ 36,384,325 38,403,234 1,801,828
============== ========== =========
(continued)
</TABLE>
28
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
________________________________________________________________________________
<TABLE>
<CAPTION>
1997 1996 1995
---- ----- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Acquisition of Sheffield Exploration Company
Fair value of assets acquired $ 8,739,247 - -
Fair value of liabilities assumed 231,484 - -
---------------- ---------------- ----------------
8,507,763 - -
Costs related to acquisition 399,284 - -
---------------- ---------------- ----------------
Fair value of stock issued $ 8,108,479 - -
================ ================ ================
Cash received in connection with acquisition
included in assets acquired $ 2,315,527 - -
================ ================ ================
Sale of Sheffield Operating Company
Fair value of assets sold $ 1,991,403 - -
Fair value of liabilities assumed by purchaser 245,451 - -
---------------- ---------------- ----------------
Fair value of consideration received $ 2,236,854 - -
================ ================ ================
Cash distributed in connection with sale
included in assets sold $ 111,341 - -
================ ================ ================
Costs accrued relating to issuance
of common stock and conversion
of preferred stock $ - - 687,646
================ ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
______________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF BUSINESS AND BASIS OF PRESENTATION
TransMontaigne Oil Company (the Company) is a holding company which
pursues, through its subsidiaries, business opportunities in the downstream
sector of the petroleum industry. The Company's principal operating
subsidiaries are engaged in pipelining, terminaling, storing and marketing
refined petroleum products principally in the Mid-Continent region of the
United States and in natural gas gathering and processing in the Rocky
Mountain region of the United States.
Management makes various estimates and assumptions in determining the
reported amounts of assets, liabilities, revenues and expenses for each
period presented, and in the disclosures of commitments and contingencies.
Changes in these estimates and assumptions will occur as a result of the
passage of time and the occurrence of future events, and actual results
will differ from those estimates.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include, collectively,
the Company and its wholly owned subsidiaries, TransMontaigne
Transportation Services Inc. which provides refined petroleum product and
crude oil pipeline transportation, storage and terminaling services to the
downstream sector of the petroleum industry through its subsidiaries,
TransMontaigne Pipeline Inc. and TransMontaigne Terminaling Inc.;
TransMontaigne Product Services Inc. which provides refined petroleum
products, crude oil and natural gas liquids supply, distribution and
marketing services to the downstream sector of the petroleum industry; Bear
Paw Energy Inc. which provides natural gas gathering and processing
services to oil and gas producers as well as to end-users of natural gas
liquids and residue natural gas; and the Company's 65% owned subsidiary,
TransMontaigne Holding Inc. which owns a minority interest in a refinery.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
30
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
______________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(C) CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with a maturity of three
months or less when acquired to be cash equivalents.
(D) INVENTORIES
Inventories of refined products are stated at the lower of last-in,
first-out (LIFO) cost or market. Refined products due from third parties
under exchange agreements are included in inventory and recorded at current
replacement cost. Refined products due to third parties under exchange
agreements are recorded at current replacement cost. Adjustments resulting
from changes in current replacement cost for refined products due to or
from third parties under exchange agreements are reflected in cost of
products sold. The exchange agreements are generally for a term of 30 days
and are generally settled by delivering product to or receiving product
from the party to the exchange.
(E) PROPERTY, PLANT AND EQUIPMENT
Depreciation of equipment is provided by the straight-line and double-
declining balance methods. Depreciation of all other assets is provided by
the straight-line method. Estimated useful lives are 25 years for plant,
which includes buildings, storage tanks, pipelines and 3 to 20 years for
equipment. All items of property, plant and equipment are carried at cost.
(F) INVESTMENT IN LION OIL COMPANY
The Company's investment in Lion Oil Company (Lion) is accounted for using
the equity method. Under this method, the investment, originally recorded
at cost, is adjusted to recognize the Company's share of the net earnings
or losses of Lion as incurred rather than as dividends or other
distributions are received.
31
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
___________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) RECOGNITION OF REVENUE
Revenue from the sale of refined petroleum products, natural gas liquids
and residue natural gas are recorded at the time title and risk of
ownership pass. Transfers of products to or from third parties under
exchange agreements do not culminate the earnings process and are recorded
as inventory and liability transactions with no effect on income.
(H) DEFERRED DEBT ISSUANCE COSTS
Deferred debt issuance costs related to senior subordinated debentures and
the long-term credit agreements are amortized on the interest method over
the term of the underlying debt instrument. Accumulated amortization was
$340,511 and $156,920 at April 30, 1997 and 1996, respectively.
(I) INCOME TAXES
The Company utilizes the asset and liability method of accounting for
income taxes, as prescribed by Statement of Financial Accounting Standards
No. 109 (SFAS 109). Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply in the
years in which these temporary differences are expected to be recovered or
settled. Changes in tax rates are recognized in income in the period that
includes the enactment date.
(J) MINORITY INTERESTS
Minority interests consist of ownership interests in TransMontaigne Holding
Inc. attributable to shareholders other than the Company.
32
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
_____________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(K) INVENTORY MANAGEMENT
The Company manages the risk associated with fluctuations in the price of
refined petroleum products inventory and purchase and sales commitments,
and may selectively enter into futures contracts which are designated as
hedges of the products purchased or sold. Hedging gains and losses are
recorded in inventory and are recognized when the inventory is sold. Since
February 1996, the Company has also engaged in the trading of futures
contracts. Gains and losses from these trading activities are recognized as
they occur.
The Company's Risk and Product Management Committee reviews the total
inventory position on a weekly basis in order to ensure compliance with the
Company's inventory management policies, including all hedging and trading
activities. The Company has adopted policies whereby its net inventory
position subject to price risk requires the prior approval of the Risk and
Product Management Committee.
At April 30, 1997, the Company had no net open futures contracts designated
as hedges, and there were no deferred hedging gains or losses.
In connection with its trading activities, the Company had outstanding
contracts to sell 1,300,000 barrels of product and contracts to purchase
1,300,000 barrels of product at April 30, 1997 and outstanding contracts to
sell 50,000 barrels of product and contracts to purchase 50,000 barrels of
product at April 30, 1996. The unrealized losses relating to such contracts
of approximately $148,000 in 1997 and $267,000 in 1996 have been charged to
operations. The net trading gains on futures contracts of approximately
$161,000 for the year ended April 30, 1997 and the net trading losses of
approximately $40,000 for the year ended April 30, 1996 have been included
in product sales and product costs and direct operating expenses in the
accompanying consolidated statements of operations.
Product futures contracts are traded on the New York Mercantile Exchange
(NYMEX). The change in market value of NYMEX-traded futures contracts
requires daily cash settlements in margin accounts with brokers. NYMEX
future contracts are guaranteed by the NYMEX and have nominal credit risk.
The Company is exposed to credit risk in the event the counterparties to
other third party agreements are not able to perform their contractual
obligations.
33
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(L) EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share has been calculated based on the weighted
average number of common shares outstanding during the period.
(M) RECLASSIFICATIONS
Certain amounts in the accompanying consolidated financial statements for
prior periods have been reclassified to conform to the classifications used
in 1997.
(2) MERGER
The Company is the surviving corporation of a merger between TransMontaigne
Oil Company and Sheffield Exploration Company, Inc. (Sheffield) effective
June 4, 1996. The merger constituted a reverse acquisition, in that
Sheffield survived the merger, but was then owned approximately 93% by the
former stockholders of TransMontaigne Oil Company. Consequently, the
transaction was accounted for as a purchase of Sheffield by the Company. As
a result of the merger, (i) Sheffield's name was changed to TransMontaigne
Oil Company; (ii) the number of shares of authorized common stock was
increased to 40,000,000; and (iii) stock options which Sheffield had
outstanding prior to the merger became options to purchase 79,338 shares of
the Company's common stock at $3.65 per share. These options were exercised
prior to their September 2, 1996 expiration date.
(3) ACQUISITION
On December 20, 1996, the Company's wholly owned subsidiary, Bear Paw
Energy Inc., acquired for approximately $71,000,000 cash the Grasslands
natural gas gathering, processing, treating and fractionating facilities
located in western North Dakota and northeastern Montana. The Grasslands
gas processing plant, located in McKenzie County, North Dakota, was built
in 1980.
The cost of the Grasslands facilities has been allocated to the assets
acquired based on their estimated fair market value as determined by the
Company.
34
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(3) ACQUISITION (CONTINUED)
The following summarized unaudited pro forma results of operations assumes
that the acquisition of the Grasslands facilities occurred as of May 1,
1995 and combines the historical results of the Company for the years ended
April 30, 1997 and 1996 with the historical results of operations of the
Grasslands facilities for the years ended April 30, 1997 and 1996.
The unaudited pro forma results of operations are not necessarily
indicative of the results of operations that would actually have occurred
if the Grasslands facilities had been acquired by the Company as of the
date indicated or which will be attained in the future.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues $1,198,125,000 578,574,000
============== ===========
Net Earnings $ 11,179,000 4,745,000
============== ===========
Earnings Per Common Share $ 0.50 0.31
============== ===========
</TABLE>
<TABLE>
<CAPTION>
(4) INVENTORIES
1997 1996
---- ----
<S> <C> <C>
Refined petroleum products $ 35,758,217 12,387,371
Refined petroleum products due from
third parties under exchange
agreements 6,148,220 11,208,859
Other 440,014 12,906
-------------- ----------
$42,346,451 23,609,136
============== ==========
</TABLE>
If the lower of average or replacement cost method of accounting had been
used instead of the LIFO method for valuing refined petroleum products,
inventories would have been $5,563,000 and $5,779,000 greater than reported
at April 30, 1997 and 1996, respectively.
During the year ended April 30, 1995 inventory quantities were reduced,
which resulted in a liquidation of LIFO inventory layers carried at costs
which prevailed in prior years. The effect of the liquidation was to
decrease product costs and decrease the net loss for the year ended April
30, 1995 by approximately $863,000.
35
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(4) INVENTORIES (CONTINUED)
The Company's refined petroleum products inventory consists primarily of
gasoline and distillates. A portion of this inventory represents line fill
and tank bottoms. This portion of the inventory is required for operating
balances in the conduct of the Company's daily distribution activities and
is maintained both in tanks and pipelines owned by the Company and
pipelines owned by third parties. The Company's natural gas liquids and
residual natural gas inventory is not significant.
(5) PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land 1,222,195 1,072,798
Natural gas gathering and processing 83,209,767 -
Terminals and equipment 14,726,237 6,230,696
Pipelines, rights of way and equipment 19,088,562 17,182,135
Other plant and equipment 2,986,245 1,513,478
------------ ----------
121,233,006 25,999,107
Less accumulated depreciation 10,704,252 6,461,244
------------ ----------
$110,528,754 19,537,863
============ ==========
</TABLE>
36
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(6) INVESTMENT IN LION
The Company, through its 65% ownership of TransMontaigne Holding Inc.,
effectively owns 18% of the common stock of Lion. At April 30, 1997 and
1996, respectively, the Company's investment in Lion was approximately
$15,586,000 and $15,494,000 and the minority interests were approximately
$5,475,000 and $5,453,000.
Summarized balance sheet information for Lion as of April 30, 1997 and 1996
is as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -----------
<S> <C> <C>
Assets:
Current assets $ 94,860,000 94,403,000
Property, plant and equipment,
net 65,687,000 68,436,000
Other assets 12,203,000 4,948,000
------------- -----------
$172,750,000 167,787,000
============= ===========
Liabilities and stockholders' equity:
Current liabilities $ 39,614,000 40,454,000
Long-term debt 66,275,000 62,140,000
Deferred income taxes 10,689,000 9,353,000
Stockholders' equity 56,172,000 55,840,000
------------- -----------
$172,750,000 167,787,000
============= ===========
</TABLE>
37
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
_______________________________________________________________________________
(6) INVESTMENT IN LION (CONTINUED)
Summarized statement of operations information for Lion for the years ended
April 30, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Net sales $643,884,000 566,812,000 525,037,000
Cost of sales 632,005,000 549,210,000 511,655,000
------------- ----------- -----------
Gross profit 11,879,000 17,602,000 13,382,000
Selling, general and
administrative expenses 5,132,000 5,996,000 5,763,000
Management fees 189,000 1,467,000 532,000
------------- ----------- -----------
Operating income 6,558,000 10,139,000 7,087,000
Interest expense and other
(income), net 5,790,000 4,260,000 4,939,000
------------- ----------- -----------
Earnings before
income tax 768,000 5,879,000 2,148,000
Income tax expense 436,000 2,288,000 892,000
------------- ----------- -----------
Net earnings $ 332,000 3,591,000 1,256,000
============= =========== ===========
</TABLE>
The Company has a $2,600,000 standby letter of credit outstanding to a bank
to assist Lion in obtaining financing. No outstanding obligations exist
under this letter of credit as of April 30, 1997.
38
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(7) LONG-TERM DEBT
Long-term debt at April 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Line of credit with a bank $10,815,000 25,000,000
Senior notes 50,000,000 -
12 3/4% senior subordinated debentures,
net of discount (face amount
$4,000,000) 3,959,267 3,948,867
------------ ----------
$64,774,267 28,948,867
============ ==========
</TABLE>
The Company's bank credit facility at April 30, 1997 is an $85,000,000
working capital revolving credit facility with a money center bank due
December 31, 2001. The amount available under the bank credit facility is
to be reduced by $3,125,000 each calendar quarter beginning March 31, 2000.
Borrowings under the bank credit facility generally bear interest at an
annual rate equal to the lender's announced Base Rate, subject to a
Eurodollar pricing option at the Company's election. The interest rate at
April 30, 1997 was 6.94% and at April 30, 1996 was 6.875%.
As of April 30, 1997, the Company had advances of $10,815,000 outstanding
under the bank credit facility and $2,600,000 of the facility was used to
support in a standby letter of credit to a bank (see Note 6).
In April 1997 the Company entered into a Master Shelf Agreement with an
institutional lender which provides that the lender will agree to quote,
from time to time, an interest rate at which the lender would be willing to
purchase, on an uncommitted basis, up to $100 million of the Company's
senior promissory notes which will mature in no more than 12 years, with an
average life not in excess of 10 years.
On April 17, 1997, the Company sold to the lender, under the Master Shelf
Agreement, $50,000,000 of 7.85% Senior Notes due 2003.
39
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(7) LONG-TERM DEBT (CONTINUED)
The bank credit facility agreement and the Master Self Agreement each
contain similar negative pledge covenants by the Company and its
subsidiaries and both are secured by the stock of the subsidiaries. These
agreements also include financial tests relating to fixed charges coverage,
leverage ratio, consolidated tangible net worth, distributions and open
inventory positions. As of April 30, 1997, the Company was in compliance
with all such tests.
In March 1991, the Company issued 12 3/4% senior subordinated debentures
which are guaranteed by certain subsidiaries and are due December 15, 2000,
with interest payable semi-annually on June 15 and December 15. The
debentures are subject to a required redemption of $2,000,000 on
December 15, 1999 and December 15, 2000. The debentures may be prepaid
prior to maturity at a premium, under certain circumstances. In
conjunction with the issuance of these debentures, the Company issued
warrants to purchase 248,686 shares of the Company's common stock. The
warrant exercise price was reduced effective April 26, 1995 from $6.10 per
share to $3.60 per share, through December 15, 2000.
Maturities of long-term debt for fiscal years subsequent to 1997 are as
follows:
<TABLE>
<S> <C>
1998 $ -
1999 -
2000 5,125,000
2001 9,649,267
2002 -
2003 50,000,000
------------
$ 64,774,267
============
</TABLE>
Cash payments for interest were approximately $4,404,000, $2,994,000 and
$2,478,000 for the years ended April 30, 1997, 1996 and 1995, respectively.
40
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each of on and off-balance sheet financial instruments, along with the
methods and assumptions used to estimate such fair values at April 30, 1997
and 1996:
CASH AND CASH EQUIVALENTS, TRADE RECEIVABLES AND TRADE ACCOUNTS PAYABLE
The carrying amount approximates fair value because of the short term
maturity of these instruments.
LONG-TERM DEBT
The carrying value of the line of credit approximates its fair value since
the line bears interest at a variable rate.
The carrying value of the 12 3/4% senior subordinated debentures
approximates the estimated fair value of the debentures since the effective
interest rate of the debentures approximates the current market rate for
similar debt instruments.
FUTURES CONTRACTS
The carrying value and fair value of the futures contracts entered into for
trading purposes was a liability of approximately $148,000 at April 30,
1997 and $267,000 at April 30, 1996 based on the quoted market price of the
related futures contracts.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
41
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(9) SALE OF SUBSIDIARY
On October 31, 1996 the Company sold a wholly owned subsidiary for
approximately $2,237,000 and received as consideration a note receivable
for approximately $2,067,000 payable over five years, a receivable for
$100,000 and shares of common stock representing an approximate 18%
interest in the acquiring company's common stock. On November 4, 1996 the
Company received a $700,000 cash payment on the note and the $100,000
receivable was collected. On January 3, 1997, 14,815 shares of the
Company's stock were received as a $200,000 payment on the note receivable.
These shares were valued at the January 2, 1997 closing price of $13.50 and
were retired.
(10) SHAREHOLDERS' EQUITY
Effective as of April 17, 1996 the Company completed a private placement of
4,545,456 shares of common stock at $5.50 per share for proceeds of
$25,000,008.
On February 13, 1997, the Company closed a public offering of 4,357,000
shares of its common stock of which 4,035,000 shares were issued and sold
by the Company and 322,000 shares were sold by certain selling
stockholders. The net proceeds to the Company, based on the public offering
price of $14.25 per share, were approximately $53,506,000, after deducting
underwriting discounts and commissions and offering costs, of which
$45,000,000 was used to repay a portion of the debt incurred under its bank
credit facility. On March 11, 1997 the underwriters' overallotment option
to purchase an additional 557,543 shares and the Merrill Lynch Growth Fund
antidilution right to purchase an additional 98,390 shares were both
exercised and the Company received additional net proceeds of $8,809,000.
(11) STOCK OPTIONS
The Company has adopted two stock option plans, (the "1991 Plan" and the
"1995 Plan") under which stock options may be granted to key employees of
the Company. No additional options are available to be granted under either
the 1991 Plan or the 1995 Plan. Options granted under the 1991 Plan expire
no later than ten years from the date of grant and under the 1995 Plan
expire no later than seven years from the date of grant.
42
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(11) STOCK OPTIONS (CONTINUED)
Changes in stock options outstanding for the years ended April 30, 1997,
1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1991 Plan 1995 Plan
------------------------- -----------------------
Option price Option price
Shares per share Shares per share
----------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Outstanding at April 30, 1994 95,754 $3.50 - 6.10 124,500 $ 2.70
Granted - - 358,000 2.70
Exercised - - - -
----------- ------------- ------- -------------
Outstanding at April 30, 1995 95,754 3.50 - 6.10 482,500 2.70
Granted - - 421,746 3.60 - 5.50
Exercised - - (5,000) 2.70
----------- ------------- ------- -------------
Outstanding at April 30, 1996 95,754 3.50 - 6.10 899,246 2.70 - 5.50
Granted - - - -
Exercised (17,500) 6.10 (118,246) 2.70 - 5.50
----------- ------------- ------- -------------
Outstanding at April 30, 1997 78,254 $3.50 - 6.10 781,000 $2.70 - 5.50
=========== ============= ======= =============
Exercisable at April 30, 1997 78,254 $3.50 - 6.10 781,000 $2.70 - 5.50
=========== ============= ======= =============
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related Interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for
its stock option plans. If compensation cost for the Company's two stock-
based compensation plans had been determined on the fair value at the
grant dates for awards under those plans consistent with Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, the Company's net earnings and earnings per common share
would have been reduced in 1996 to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net earnings:
As reported $9,171,312 $4,617,969
Pro forma $8,724,685 $4,268,159
Earnings per common share
As reported $ .41 $ .31
Pro forma $ .39 $ .28
</TABLE>
43
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(11) STOCK OPTIONS (CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for options granted during the year ended April 30, 1996:
no dividend yield; expected volatility of 0%; risk-free rate of 6.27%; and
expected life of 6.37 years. The weighted average fair value at grant date
for options granted during the year ended April 30, 1996 was $5.23.
(12) EMPLOYEE BENEFIT PLAN
The Company has established a 401(k) retirement savings plan for all
employees. The plan allows participants to contribute up to 15% of their
compensation, with the Company making a discretionary percentage matching
contribution as determined by management based upon the Company's financial
performance. Employees vest 25% per year in the Company's contribution.
The total amount of the Company's discretionary percentage matching
contribution during the year ended April 30, 1997 was $31,410. The Company
did not make a contribution to a predecessor employee profit sharing plan
for the year ended April 30, 1996; a contribution to the predecessor
employee profit-sharing plan was $46,700 for the year ended April 30, 1995.
44
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(13) INCOME TAXES
Income tax (benefit) expense for years ending April 30 consists of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ---------
<S> <C> <C> <C>
Current state income taxes $ 585,822 192,747 119,545
Deferred federal income taxes (1,975,300) - -
Deferred state income taxes (299,300) - -
------------ ---------- ---------
Income tax (benefit) expense $(1,688,778) 192,747 119,545
============ ========== =========
</TABLE>
Income tax expense differs from the amount computed by applying the U.S.
federal corporate income tax rate of 34% to pretax earnings (loss) as a
result of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense $2,544,000 1,636,000 (1,053,000)
Increase (reduction) in income
taxes resulting from:
Increase (decrease) in the
valuation allowance for
deferred tax assets
allocated to income tax
expense (4,474,000) (1,785,000) 1,174,000
Recognition of tax benefit of net
operating loss carryforwards
of acquired entity (1,021,600) - -
Adjustment of prior year's
cumulative temporary differences
offset by a change in the
valuation allowance 497,000 - -
State income taxes, net of
federal income tax benefit 387,000 127,000 79,000
Other, net 378,822 214,747 (80,455)
------------ ---------- ---------
Income tax (benefit) expense $(1,688,778) 192,747 119,545
============ ========== =========
</TABLE>
45
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(13) INCOME TAXES (CONTINUED)
The tax effects of temporary differences which give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April
30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -----------
Deferred tax assets:
<S> <C> <C>
Inventories, principally due to difference in
costing method used for tax purposes $ 2,196,000 2,196,000
Unrealized commodity futures contract losses
(gains) (122,000) 102,000
Net operating loss carryforwards 6,969,000 5,670,000
Alternative minimum tax credit carryforwards 24,000 24,000
------------ -----------
Gross deferred tax assets 9,067,000 7,992,000
Less valuation allowance - (4,474,000)
Deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation methods (4,895,000) (2,994,000)
Investments in affiliated company,
principally due to undistributed earnings (496,000) (524,000)
------------ -----------
Net deferred tax assets $ 3,676,000 -
============ ===========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.
As of April 30, 1996, management believed that the benefits of future
deductible differences might not be realized due to losses incurred in
recent years and uncertainty about future earnings. Accordingly, a
valuation allowance was provided for net deferred tax assets at that date.
46
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
____________________________________________________________________________
(13) INCOME TAXES (CONTINUED)
As a result of the Grasslands acquisition in December 1996 and the public
offering of common stock in February 1997, and based upon projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes the "more likely than not" criteria has
been satisfied as of April 30, 1997, and that the benefits of future
deductible differences will be realized. Accordingly, the remaining
valuation allowance was reversed to income for the year ended April 30,
1997.
At April 30, 1997, the Company has aggregate net operating loss
carryforwards for federal income tax purposes of approximately $18,339,000
which are available to offset future federal taxable income, if any,
through 2010. In addition, the Company has alternative minimum tax credit
carryforwards of approximately $24,000 available to reduce future federal
regular income taxes, if any, which can be carried forward indefinitely.
Due to changes in ownership which occurred through April 30, 1996, the use
of these net operating loss carryforwards to offset taxable income is
limited to approximately $4,300,000 annually. As a result of the merger in
June 1996, the Company acquired additional net operating loss carryforwards
of approximately $7,892,000 as of June 4, 1996, which are included in the
aggregate net operating loss carryforwards, and are limited to
approximately $1,300,000 annually. A portion of the tax benefit of the
utilization of such carryforwards has been recognized as a reduction of
goodwill recorded in the acquisition.
Under SFAS 109, the Company provides for deferred income taxes on the
undistributed net earnings of Lion. Under the transition rules in SFAS
109, the Company is not required to recognize a deferred tax liability of
approximately $6,100,000 for the undistributed net earnings of Lion which
arose prior to the adoption of SFAS 109 because the Company currently does
not expect those undistributed earnings to become taxable to the Company in
the foreseeable future. A deferred tax liability will be recognized on
these undistributed earnings when the Company expects that it will recover
those undistributed earnings in a taxable manner, such as through the
receipt of dividends or the sale of the investment.
The Company paid state income taxes of approximately $214,000, $106,000 and
$138,000 for the years ended April 30, 1997, 1996 and 1995, respectively,
and federal income taxes of approximately $126,000 for the year ended April
30, 1997.
47
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(14) RELATED PARTY TRANSACTIONS
The Company had sales of $10,900,000 and $3,380,000 and purchases of
$49,700,000 and $33,879,000 for the years ended April 30, 1997 and 1996,
respectively, to Lion.
Related party balances at April 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accounts receivable 2,694,913 90,498
Accounts payable 228,462 84,034
</TABLE>
(15) NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 121, Accounting for
Impairment of Long-Lived Assets to be Disposed of (SFAS 121) was issued in
March, 1995, by the Financial Accounting Standards Board. It requires that
long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of this statement by the Company as of May 1,
1996 had no effect on the Company's consolidated financial statements.
(16) CONCENTRATION OF CREDIT RISK
Substantially all of the Company's trade accounts receivable at April 30,
1997 and 1996 result from sales of refined petroleum products to companies
in the oil and gas industry. This concentration could impact the Company's
overall credit risk since these companies could be affected by industry-
wide changes in economics or other conditions. Since the Company provides
short-term credit to its customers which are generally either major and
large independent oil companies or wholesale distributors of these
products, it may require collateral, such as letters of credit, liens on
products and guarantees as determined on a customer by customer basis. The
Company maintains allowances for potential uncollectible accounts
receivable, which historically have been minimal.
48
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(17) BUSINESS SEGMENTS
Prior to the year ended April 30, 1997 the Company's principal operating
business segment was logistical petroleum services related to pipelining,
terminaling, storing and marketing refined petroleum products. During the
year ended April 30, 1997 the Company acquired natural gas gathering and
processing assets and commenced service operations in that business
segment.
Information about the Company's business segments for the year ended April
30, 1997 is summarized below:
<TABLE>
<S> <C>
Revenues
Logistical petroleum services $ 1,143,524,074
Gas gathering and processing services 23,140,547
---------------
$ 1,166,664,621
===============
Operating income
Logistical petroleum services $ 6,747,996
Gas gathering and processing services 4,189,122
Corporate (1,036,550)
---------------
$ 9,900,568
===============
Identifiable assets at year end (net of
depreciation)
Logistical petroleum services $ 112,178,478
Gas gathering and processing services 86,730,296
Corporate 62,815,546
---------------
$ 261,724,320
===============
Depreciation and amortization
Logistical petroleum services $ 1,338,768
Gas gathering and processing services 1,735,034
Corporate 382,197
---------------
$ 3,455,999
===============
Capital expenditures
Logistical petroleum services $ 11,118,556
Gas gathering and processing services 80,059,318
Corporate 1,116,520
---------------
$ 92,294,394
===============
</TABLE>
The Corporate business segment represents all of the Company's activities
and assets not specifically identified with the primary business segments,
including cash and cash equivalents, investments and other assets.
49
<PAGE>
TRANSMONTAIGNE OIL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1997 AND 1996
________________________________________________________________________________
(18) FINANCIAL RESULTS BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
July 31 October 31 January 31 April 30
1996 1996 1997 1997
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 194,052,000 276,771,000 340,654,000 355,188,000
Total costs
and expenses 191,816,000 274,298,000 338,210,000 352,440,000
------------- ----------- ----------- -----------
Operating income $ 2,236,000 2,473,000 2,444,000 2,748,000
============= =========== =========== ===========
Net earnings $ 1,807,000 2,673,000 1,426,000 3,265,000
============= =========== =========== ===========
Earnings
per common share $ .09 .12 .07 .13
============= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------
July 31 October 31 January 31 April 30
1995 1995 1996 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 107,691,000 134,324,000 105,960,000 185,132,000
Total costs
and expenses 105,128,000 133,461,000 106,118,000 181,851,000
------------- ----------- ----------- -----------
Operating income (loss) $ 2,563,000 863,000 (158,000) 3,281,000
============= =========== =========== ===========
Net earnings (loss) $ 2,031,000 438,000 (867,000) 3,016,000
============= =========== =========== ===========
Earnings (loss)
per common share $ .14 .03 (.06) .20
============= =========== =========== ===========
</TABLE>
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by Item 10 concerning executive officers of
the registrant is included under the caption "Executive Officers of
the Registrant" on page 52 of this report.
ITEM 11. EXECUTIVE COMPENSATION
*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
*
* Incorporated by reference from the Proxy Statement dated August 8,
1997 for the Annual Meeting of Stockholders to be held on August 28,
1997.
51
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
CURRENT POSITIONS AND PRINCIPAL
NAME AGE OCCUPATIONS DURING LAST FIVE YEARS
---- --- ----------------------------------
Cortlandt S. Dietler 75 Director since April 1995; Chief Executive
Officer of Associated Natural Gas Corporation
prior to its 1994 merger with Panhandle
Eastern Corporation (now Duke Energy
Corporation) from 1985 to 1994
Richard E. Gathright 43 President and Chief Operating Officer since
September 1996; Director since April 1995;
Executive Vice President from April 1995 to
September 1996; President of a subsidiary of
TransMontaigne from December 1993 to April
1995; President and Director of North
American Operations for Aberdeen Petroleum
PLC from 1988 to 1993
Harold R. Logan, Jr. 52 Executive Vice President/Finance, Treasurer
and a Director since April 1995; Senior Vice
President/Finance of Associated Natural Gas
Corporation from 1985 to 1994
W. A. Sikora 60 Executive Vice President since September
1996; Senior Vice President and Chief
Financial Officer of a subsidiary of
TransMontaigne from May 1995 to September
1996; business consultant from 1982 to April
1995
Frederick W. Boutin 42 Senior Vice President since April 1995; Vice
President of Associated Natural Gas
Corporation from 1985 to 1994
Rodney S. Pless 36 Vice President, Controller and Chief
Accounting Officer since December 1996; Vice
President, Controller and other accounting
positions of a subsidiary of TransMontaigne
from 1987 to December 1996
Robert W. Bradberry 43 President of TransMontaigne Product Services
Inc. since January 1, 1997; other senior
management positions of a subsidiary of
TransMontaigne from 1979 to January 1997
Robert J. Clark 52 President of Bear Paw Energy Inc. since June
1996; President of a predecessor of Bear Paw
Energy Inc. from March 1995 to June 1996;
Senior Vice President of Snyder Oil
Corporation from 1988 to March 1995
Larry F. Clynch 52 President of TransMontaigne Transportation
Services Inc. since January 1, 1997; Senior
Vice President of a subsidiary of
TransMontaigne from January 1996 to January
1997; prior to January 1996 employed 28 years
by Conoco Pipe Line Company, the last 3 years
as President
52
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) The following documents are filed as a part of this report.
(1) Consolidated Financial Statements:
TransMontaigne Oil Company
Independent Auditors' Report
Consolidated Balance Sheets as of April 30, 1997 and 1996
Consolidated Statements of Operations for the years ended
April 30, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended April 30, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the years ended
April 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules: Not Applicable
(3) Exhibits:
A list of the exhibits required by Item 601 of Regulation S-K to
be filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
3.1 Restated Articles of Incorporation and Certificate of Merger.
Incorporated by reference to TransMontaigne Oil Company Form
10-K (Securities and Exchange Commission File No. 1-11763)
for the year ended April 30, 1996
3.2 Amended and Restated By-Laws. Incorporated by reference to
TransMontaigne Oil Company Form S-2 (Securities and Exchange
Commission File No. 333-18795)
10.1 The TransMontaigne Oil Company Amended and Restated 1995
Stock Option Plan. Incorporated by reference to
TransMontaigne Oil Company Form 10-K (Securities and
Exchange Commission File No. 1-11763) for the year ended
April 30, 1996
</TABLE>
53
<PAGE>
<TABLE>
<S> <C>
10.2 Partnership agreement between TransMontaigne's wholly-owned
subsidiary, Sheffield Gas Processors, Inc., and Interenergy.
Incorporated by reference to Sheffield Exploration Company,
Inc. Form 8-K (Securities and Exchange Commission File No.
0-13201) dated September 26, 1991
10.3 Stock Purchase Agreement effective April 17, 1996 between
TransMontaigne Oil Company and the investors named therein.
Incorporated by reference to TransMontaigne Oil Company Form
10-K (Securities and Exchange Commission File No. 1-11763)
for the year ended April 30, 1996
10.4 Anti-dilution Rights Agreement dated as of April 17, 1996
between TransMontaigne Oil Company and Waterwagon & Co.,
nominee for Merrill Lynch Growth Fund. Incorporated by
reference to TransMontaigne Oil Company Form 10-K (Securities
and Exchange Commission File No. 1-11763) for the year ended
April 30, 1996
10.5 Agreement to Elect Directors dated as of April 17, 1996
between TransMontaigne Oil Company and the First Reserve
Investors named therein. Incorporated by reference to
TransMontaigne Oil Company Form 10-K (Securities and Exchange
Commission File No. 1-11763) for the year ended April 30,
1996
10.6 Registration Rights Agreement dated as of April 17, 1996
between TransMontaigne Oil Company and the entities named
therein. Incorporated by reference to TransMontaigne Oil
Company Form 10-K (Securities and Exchange Commission File
No. 1-11763) for the year ended April 30, 1996
10.7 Agreement for Sale of McKenzie Gas Processing Plant and
Grasslands Gas Gathering System dated as of October 31, 1996
between Bear Paw Energy, Inc. and Koch Hydrocarbon Company.
Incorporated by reference to TransMontaigne Oil Company Form
S-2 (Securities and Exchange Commission File No. 333-18795)
10.8 Credit Agreement between TransMontaigne Oil Company and The
First National Bank of Boston, Agent, dated December 18,
1996. Incorporated by reference to TransMontaigne Oil Company
Form S-2 (Securities and Exchange Commission File No. 333-
18795)
10.9 Amendment No. 2 to Credit Agreement between TransMontaigne
Oil Company and The First National Bank of Boston, Agent,
dated April 17, 1997. FILED HEREWITH
</TABLE>
54
<PAGE>
10.10 Master Shelf Agreement among TransMontaigne Oil Company, The
Prudential Insurance Company and U.S. Private Placement Fund,
dated April 17, 1997. FILED HEREWITH
21 Schedule of TransMontaigne's Subsidiaries. Incorporated by
reference to TransMontaigne Oil Company Form S-2 (Securities
and Exchange Commission File No. 333-18795)
23.1 Consent of KPMG Peat Marwick LLP. FILED HEREWITH
27 Financial Data Schedule. FILED HEREWITH
(b) Reports on Form 8-K.
None
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRANSMONTAIGNE OIL COMPANY
By /s/CORTLANDT S. DIETLER
-----------------------
Cortlandt S. Dietler
Chairman and Chief Executive Officer
Date: July 28, 1997
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities indicated on July 24, 1997.
Name and Signature Title
------------------ -----
(i) Principal executive officer:
/s/CORTLANDT S. DIETLER Chairman, Chief Executive Officer and
- - ------------------------------
Cortlandt S. Dietler Director
(ii) Principal operating officer:
/s/RICHARD E. GATHRIGHT President, Chief Operating Officer and
- - ------------------------------
Richard E. Gathright Director
(iii) Principal financial officer:
/s/HAROLD R. LOGAN, JR. Executive Vice President/Finance,
- - ------------------------------
Harold R. Logan, Jr. Treasurer and Director
(iv) Principal accounting officer:
/s/RODNEY S. PLESS Vice President, Controller and Chief
- - ------------------------------
Rodney S. Pless Accounting Officer
(v) Non Employee Directors:
/s/JOHN A. HILL Director
- - ------------------------------
John A. Hill
/s/BRYAN H. LAWRENCE Director
- - ------------------------------
Bryan H. Lawrence
/s/WILLIAM E. MACAULAY Director
- - ------------------------------
William E. Macaulay
/s/EDWIN H. MORGENS Director
- - ------------------------------
Edwin H. Morgens
56
<PAGE>
EXHIBIT 10.9
Execution Copy
TRANSMONTAIGNE OIL COMPANY
CREDIT AGREEMENT
Amendment No. 2
This Agreement, dated as of April 17, 1997, is among TransMontaigne Oil
Company, a Delaware corporation (the "Company"), the Subsidiaries of the Company
-------
party hereto, the Lenders party hereto and The First National Bank of Boston, as
agent (the "Agent") for itself and the other Lenders. The parties agree as
-----
follows:
1. Reference to Credit Agreement; Background.
-----------------------------------------
1.1. Reference to Credit Agreement; Definitions. Reference is made to
------------------------------------------
the Credit Agreement dated as of December 18, 1996, as amended by Amendment No.
1 thereto dated as of January 30, 1997 (as so amended, the "Credit Agreement"),
----------------
among the Company, the Guarantors, the Lenders from time to time party thereto
and the Agent. The Credit Agreement, as amended by the amendments set forth in
Section 2 hereof (the "Amendment"), is referred to as the "Amended Credit
--------- --------------
Agreement." Terms defined in the Amended Credit Agreement and not otherwise
- - ---------
defined herein are used herein with the meanings so defined.
1.2. Background. The Company has advised the Lenders that it intends to
----------
borrow $50,000,000 of senior secured debt pursuant to a master shelf agreement
with The Prudential Insurance Company of America and certain of its affiliates,
which debt shall be on a parity with the Credit Obligations, and to establish a
new intermediate Subsidiary to be named "TransMontaigne Transportation Services
--------------------------------------
Inc.". The Company also has requested that the Agent agree to hold the Credit
- - ----
Security for the benefit of both the Lenders and the holders of the senior
secured notes and has requested that the Lenders consent to a number of
amendments of the Credit Agreement, as set forth in Section 2 hereof.
2. Amendments to Credit Agreement. Subject to all of the terms and conditions
-----------------------------
hereof and in reliance upon the representations and warranties set forth or
incorporated by reference in Section 4 hereof, the Credit Agreement is amended
as follows, effective as of April 17, 1997 (the "Amendment Closing Date").
----------------------
2.1. Section 1.12 of the Credit Agreement is amended by adding at the
end thereof a new paragraph reading in its entirety as follows:
Notwithstanding the foregoing, for the period commencing on and
including the Amendment Closing Date and ending on the date on which the
Applicable Margin is adjusted pursuant to the immediately preceding
paragraph
<PAGE>
for the Leverage Ratio as in effect on April 30, 1997, the Applicable
Margin shall be calculated by reference to the Leverage Ratio determined
based upon the pro forma balance sheet delivered to the Agent pursuant
to Section 5.6 hereof.
2.2. Section 1.36 is amended to read in its entirety as follows:
1.36. "Computation Covenants" means Sections 6.5, 6.6.7, 6.6.16,
---------------------
6.6.17, 6.9.5, 6.9.7, 6.10.2, 6.11.1, 6.12.2 and 6.19.
2.3. Section 1.44 is amended by amending paragraph (a) thereof to read
in its entirety as follows:
(a) this Agreement, the Notes, each Letter of Credit, each draft
presented or accepted under a Letter of Credit, the Bank of Boston Fee
Letter, the Intercreditor Agreement, the Pledge Agreement and each
Interest Rate Protection Agreement provided by a Lender (or an Affiliate
of a Lender) to the Company or any of its Subsidiaries, each as from
time to time in effect;
2.4. Section 1 is amended by adding thereto a new Section 1.81A reading
in its entirety as follows:
1.81A. "Intercreditor Agreement" means the Intercreditor
-----------------------
Agreement dated as of April 17, 1997, as from time to time in effect,
among the Company, the Guarantors, the Lenders, the Agent and
Prudential.
2.5. Section 1 is further amended by adding a new Section 1.95A reading
in its entirety as follows:
1.95A. "Master Shelf Agreement" is defined in Section 6.6.12.
----------------------
2.6. Section 1 is further amended by adding a new Section 1.115A reading
in its entirety as follows:
1.115A. "Pledge Agreement" means the Pledge Agreement dated as of
----------------
April 17, 1997, as from time to time in effect, among the Company, the
Guarantors and the Agent, as collateral agent.
2.7. Section 1 is further amended by adding hereto a new Section 1.119A
reading in its entirety as follows:
1.119A. "Prudential" is defined in Section 6.6.12.
----------
2.8. Section 6.2.4 is amended to read in its entirety as follows:
6.2.4. Compliance with Material Agreements. Each of the Company
-----------------------------------
and
-2-
<PAGE>
its Subsidiaries shall comply in all material respects with the
Material Agreements (to the extent not in violation of the other
provisions of this Agreement or any other Credit Document). Without the
prior written consent of the Required Lenders, no Material Agreement
shall be amended, modified, waived or terminated in any manner that
would have in any material respect an adverse effect on the interests of
the Lenders; provided, without limitation of the foregoing, that any
modification of the Master Shelf Agreement that would cause the
covenants of the Company or the defaults thereunder to be more
restrictive than the covenants or defaults, respectively, contained in
this Agreement or that would constitute or cause a Default shall require
the prior written consent of the Required Lenders.
2.9. Section 6.4.2 is amended by amending the first paragraph thereof to
read in its entirety as follows:
6.4.2. Quarterly Reports. The Company shall furnish to the
-----------------
Lenders as soon as available and, in any event, within 50 days after the
end of each of the first three fiscal quarters of the Company, the
internally prepared Consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, the Consolidated
statements of income, changes in shareholders' equity and cash flows of
the Company and its Subsidiaries for such fiscal quarter and for the
portion of the fiscal year then ended (all in reasonable detail) and
together with Consolidating schedules as of such date and for such
period (if such Consolidating schedules are requested by the Agent or
the Required Lenders) and, in the case of Consolidated statements,
comparative figures for the same period in the preceding fiscal year,
all accompanied by:
2.10. Section 6.4.3 is deleted in its entirety.
2.11. Section 6.4.4 is amended by amending paragraph (f) to read in its
entirety as follows:
(f) Any 90-day or 30-day letter from the federal Internal Revenue
Service asserting material tax deficiencies against the Company or any
of its Subsidiaries; and any similar notice from a state or other taxing
authority asserting material tax deficiencies against the Company or any
of its Subsidiaries that are not fully resolved without the assessment
of a material tax deficiency (and any tax paid) within 90 days following
the date of such notice.
2.12. Section 6.4.5 is amended by changing the figure in clause (a) from
$1,000,000 to $2,000,000 and by changing the figure in clause (b) from $500,000
to $1,000,000.
2.13. Section 6.5.3 is amended to read in its entirety as follows:
-3-
<PAGE>
6.5.3. Consolidated Tangible Net Worth. Consolidated Tangible Net
-------------------------------
Worth shall not at any time be less than $100,000,000; provided,
--------
however, that on April 30, 1997 and on the last day of each fiscal
-------
quarter of the Company thereafter, the then effective dollar amount in
this Section 6.5.3 shall be increased by the sum of (a) 50% of
Consolidated Net Income (if positive) for the fiscal quarter then ended
plus (b) 50% of the net proceeds realized by the Company and its
Subsidiaries, calculated on a Consolidated basis in accordance with
GAAP, from the issuance of any equity securities during the fiscal
quarter then ended.
2.14. Section 6.5.4 is deleted in its entirety.
2.15. Section 6.6.7 is amended by changing the figure in clause (a)
thereof from $1,000,000 to $2,000,000 and by changing the figure in clause (b)
thereof from $5,000,000 to $10,000,000.
2.16. Section 6.6.12 is amended to read in its entirety as follows:
6.6.12. The 7.85% Senior Secured Notes, Series A, Due April 10,
2003 of the Company issued pursuant to the Master Shelf Agreement dated
as of April 17, 1997 (as from time to time amended subject to the
provisions of Section 6.2.4 hereof, the "Master Shelf Agreement")
----------------------
between the Company and The Prudential Insurance Company of America and
affiliates thereof from time to time party thereto (collectively,
"Prudential") in aggregate principal amount not exceeding $50,000,000,
and other "Obligations", as defined in the Master Shelf Agreement, of
the Company and the Guarantors under the Master Shelf Agreement
(excluding any "Series" of "Notes" other than the "Series A Notes", each
as defined in the Master Shelf Agreement).
2.17. A new Section 6.6.15 is added reading in its entirety as follows:
6.6.15. Funded Debt of the Company issued under and subject to
the terms of the Master Shelf Agreement, provided, that the aggregate
principal amount of such additional Funded Debt so issued shall not
exceed $50,000,000 and that the average life of such additional Funded
Debt shall be equal to or greater than six years from the date of
issuance; and provided, further, that after giving effect to the
issuance of such Funded Debt and the application of the proceeds thereof
on the issuance date no Default shall exist and the Company shall have
delivered to the Agent a certificate of a Financial Officer of the
Company in reasonable detail demonstrating compliance with Section 6.5
after giving effect to such issuance and application.
2.18. A new Section 6.6.16 is added reading in its entirety as follows:
-4-
<PAGE>
6.6.16. Unsecured Funded Debt of the Company; provided that after
giving effect to the issuance of such Unsecured Funded Debt and the
application of any of the proceeds thereof on the issuance date no
Default shall exist, the Leverage Ratio shall not exceed 60% if the
issuance date is on or before April 29, 1999, 55% if the issuance date
is after April 29, 1999 and on or before April 29, 2000 or 50% if the
issuance date is on or after April 30, 2000 and the Company shall have
delivered to the Agent a certificate of a Financial Officer of the
Company in reasonable detail demonstrating compliance with these
conditions after giving effect to such issuance and application; and
provided, further, either (a) that the terms and conditions of such
unsecured Funded Debt, including without limitation, financial
covenants, defaults, amortization and rate of interest shall have been
consented to by the Required Lenders or (b) that the sum of (i) the
aggregate outstanding principal amount of Indebtedness permitted by
Section 6.6.15 plus (ii) the aggregate outstanding principal amount of
Indebtedness permitted under this clause (b) and not consented to as
provided in the preceding clause (a) at no time shall exceed
$50,000,000.
2.19. Existing Section 6.6.15 is renumbered 6.6.17 and restated in its
entirety to read as follows:
6.6.17. Indebtedness of the Company (other than Financing Debt)
in addition to the foregoing; provided, however, that the aggregate
-------- -------
amount of all such Indebtedness at any one time outstanding shall not
exceed $2,000,000.
2.20. Section 6.7.5 is amended to read in its entirety as follows:
6.7.5. The unsecured Guarantee by Transmontaigne Product Services
Inc. (formerly known as Continental Ozark, Inc.), an Arkansas
corporation, of the Subordinated Debentures pursuant to the Senior
Subordinated Debenture Guarantee dated March 28, 1991 (the "Subordinated
------------
Debentures Guarantee") executed by such corporation.
--------------------
2.21. A new Section 6.7.6 is added reading in its entirety as follows:
6.7.6. Guarantees of the Funded Debt permitted by Sections 6.6.12
and 6.6.15.
2.22. A new Section 6.8.10 is added reading in its entirety as follows:
6.8.10. Liens on the Credit Security securing the Funded Debt
permitted by Sections 6.6.12 and 6.6.15, but only so long as such Liens
-5-
<PAGE>
are on parity with or subordinate to the Lien of Section 10 hereof.
2.23. Section 6.9.5 is amended to read in its entirety as follows:
6.9.5. Investments made after the date hereof in Subsidiaries
listed in Exhibit 7.1 hereto as supplemented from time to time other
than Wholly Owned Subsidiaries, provided that the aggregate outstanding
amount of loans, advances and other Investments in such Subsidiaries,
measured in each case as of the date of the making of such Investment,
shall not at any time exceed 10% of Consolidated Net Tangible Assets.
2.24. Section 6.9.7 is amended to read in its entirety as follows:
6.9.7. Other Investments made after the date hereof that are not
permitted by any of the foregoing subsections of this Section 6.9,
provided that the aggregate outstanding amount of loans, advances and
other Investments of the Company and its Subsidiaries permitted under
this Section 6.9.7, measured in each case as of the date of the making
of such Investment, shall not at any time exceed 10% of Consolidated
Tangible Net Worth; provided, however, that no Investment may be made in
-------- -------
a Subsidiary unless such Subsidiary is listed in Exhibit 7.1 hereto as
supplemented from time to time.
2.25. Section 6.9 is amended by amending the last paragraph thereof to
read in its entirety as follows:
In addition, the Company covenants that the Company and its
Subsidiaries shall not acquire any operating business unless, after
giving effect to such acquisition and the financing thereof, the Company
and its Subsidiaries will not suffer any Default under any Computation
Covenant or any other provision of this Agreement; and provided, that,
if the consideration (including without limitation any assumption of
Indebtedness, any deferred consideration and any consideration paid for
any related non-competition agreement) given shall exceed $3,000,000 for
any single acquisition or $15,000,000 in the aggregate for acquisitions
consummated in any period of twelve consecutive months (excluding the
acquisition under the Acquisition Agreement), then prior to consummating
any such acquisition the Company shall provide to the Lenders a
certificate of a Financial Officer demonstrating that, after giving
effect to such acquisition and the financing thereof, the Company and
its Subsidiaries will not suffer any Default under any Computation
Covenant or any other provision of this Agreement.
2.26. Section 6.12.2 is amended by changing the figure $4,000,000 to
$8,000,000.
2.27. Section 6.19 is amended to read in its entirety as follows:
-6-
<PAGE>
6.19. Open Positions. The Company and its Subsidiaries may
--------------
maintain Open Positions relating to product inventory requirements that
do not exceed the amount permitted by the Risk and Product Management
Policy Statement then in effect, so long as that policy is materially
consistent with the requirements of the first sentence of Section 6.2.5.
2.28. Section 7.1.2 is amended by adding at the end of such provision a
semicolon and the following proviso:
provided, however, that there may be omitted from Exhibit 7.1 one
or more Subsidiaries which have no business operations and no
assets or liabilities.
2.29. Section 7.2.2 is amended to read in its entirety as follows:
7.2.2. Material Agreements. The Company has previously furnished
-------------------
to the Lenders a correct and complete copy of the Securities Purchase
Agreement dated March 28, 1991 (the "Subordinated Debentures Agreement")
---------------------------------
between the Company's predecessor, Continental Ozark Corporation, and
Dillon, Read & Co., Inc., as nominee, and correct and complete copies,
including all exhibits, schedules and amendments thereto, of the
agreements, each as in effect on the date hereof, listed in Exhibit
7.2.2 (together with the Subordinated Debentures, the Subordinated
Debentures Agreement, the Subordinated Debentures Guarantee, the
Acquisition Agreement and the Master Shelf Agreement, the "Material
--------
Agreements").
----------
2.30. Section 8.1.2 is amended to read in its entirety as follows:
8.1.2. Specified Covenants. The Company or any of its
-------------------
Subsidiaries shall fail to perform or observe any of the provisions of
Section 6.2.5, 6.4.6, 6.5, 6.6, 6.7, 6.8, 6.11, 6.12 or 6.19.
2.31. Section 8.1.5(a) is amended by changing the figure $1,000,000 to
$3,000,000.
2.32. Section 10.1.1 is amended to read in its entirety as follows:
10.1.1. Pledged Stock. (a) All shares of capital stock or other
-------------
evidence of beneficial interest in any corporation, business trust or
limited liability company, including without limitation of all shares of
stock of each of TransMontaigne Transportation Services Inc.,
TransMontaigne Product Services Inc., Bear Paw Energy Inc. and
TransMontaigne Holding Inc. owned by the Company, and all shares of
stock of TransMontaigne Pipeline Inc. and TransMontaigne Terminaling
Inc. owned by TransMontaigne Transportation Services Inc., (b) all
limited partnership interests in any limited partnership, (c) all
general partnership
-7-
<PAGE>
interests in any general partnership, (d) all joint venture interests in
any joint venture and (e) all options, warrants and similar rights to
acquire such capital stock or such interests. All such capital stock,
interests, options, warrants and other rights are collectively referred
to as the "Pledged Stock".
-------------
2.33. Section 10.1.2 is amended to read in its entirety as follows:
10.1.2. Pledged Rights. All rights to receive profits or surplus
--------------
of, or other Distributions (including income, return of capital and
liquidating distributions) from, any corporation, business trust,
limited liability company, partnership or joint venture, including any
distributions by any such Person to partners or joint venturers. All
such rights are collectively referred to as the "Pledged Rights".
--------------
2.34. Section 10.3.1 is amended to read in its entirety as follows:
10.3.1. Pledged Stock. All shares of capital stock, limited
-------------
partnership interests, membership interests, beneficial interests and
similar securities included in the Pledged Stock are and shall be at all
times duly authorized, validly issued, fully paid and (in the case of
capital stock and limited partnership interests) nonassessable. Each
Obligor will deliver to the Agent certificates representing any Pledged
Stock represented by a certificate, accompanied by a stock transfer
power executed in blank and, if the Agent so requests, with the
signature guaranteed, all in form and manner satisfactory to the Agent.
Pledged Stock that is not evidenced by a certificate will be registered
in the Agent's name as pledgee on the issuer's records, all in form and
substance satisfactory to the Agent. At any time after the occurrence of
an Event of Default, the Agent may transfer into its name or the name of
its nominee, as pledgee, any Pledged Securities. In the event the
Pledged Stock includes any Margin Stock, the Obligors will furnish to
the Lenders Federal Reserve Form U-1 and take such other action as the
Agent may request to ensure compliance with applicable laws.
2.35. Section 10.3.4 is amended to read in its entirety as follows:
10.3.4. No Liens or Restrictions on Transfer or Change of
------------------------------------------------
Control. All Credit Security shall be free and clear of any Liens and
-------
restrictions on the transfer thereof, including contractual provisions
which prohibit the assignment of rights under contracts, except for
Liens permitted by Section 6.8. Without limiting the generality of the
foregoing, each Obligor will exclude from contracts to which it becomes
a party after the date hereof (other than partnership and joint venture
agreements) provisions that would prevent such Obligor from creating a
security interest in such contract or any property acquired thereunder
as contemplated hereby. None of the Pledged Stock is subject to any
adverse claims, option to purchase or similar rights of any Person.
Except with the written consent of the Agent, no Obligor is, and none of
them will be, party to or
-8-
<PAGE>
bound by any agreement, instrument, deed or lease that restricts the
change of control or ownership, or the creation of a security interest
in the ownership, of the Company or any of its Subsidiaries (other than
a Subsidiary which is a partnership).
2.36. Section 12.5 is amended to read in its entirety as follows:
12.5. Sharing of Payments, etc. Each Lender agrees that (a) if by
------------------------
exercising any right of set-off or counterclaim or otherwise, it shall
receive payment of (i) a proportion of the aggregate amount due with
respect to its Percentage Interest in the Loan and Letter of Credit
Exposure which is greater than (ii) the proportion received by any other
Lender in respect of the aggregate amount due with respect to such other
Lender's Percentage Interest in the Loan and Letter of Credit Exposure
and (b) if such inequality shall continue for more than 10 days, the
Lender receiving such proportionately greater payment shall purchase
participations in the Percentage Interests in the Loan and Letter of
Credit Exposure held by the other Lenders, and such other adjustments
shall be made from time to time (including rescission of such purchases
of participations in the event the unequal payment originally received
is recovered from such Lender through bankruptcy proceedings or
otherwise), as may be required so that all such payments of principal
and interest with respect to the Loan and Letter of Credit Exposure held
by the Lenders shall be shared by the Lenders pro rata in accordance
with their respective Percentage Interests; provided, however, that this
-------- -------
Section 12.5 shall not impair the right of any Lender to exercise any
right of set-off or counterclaim it may have and to apply the amount
subject to such exercise to the payment of Indebtedness of any Obligor
other than such Obligor's Indebtedness with respect to the Loan and
Letter of Credit Exposure; provided, further, that such application may
-------- -------
be affected by Section 4.05 of the Intercreditor Agreement. Each Lender
that grants a participation in the Credit Obligations to a Credit
Participant shall require as a condition to the granting of such
participation that such Credit Participant agree to share payments
received in respect of the Credit Obligations as provided in this
Section 12.5. The provisions of this Section 12.5 are for the sole and
exclusive benefit of the Lenders and no failure of any Lender to comply
with the terms hereof shall be available to any Obligor as a defense to
the payment of the Credit Obligations.
2.37. Exhibit 6.4.1 is amended to read in its entirety as provided in
Exhibit 6.4.1 hereto.
2.38. Exhibit 6.4.3 is deleted in its entirety.
2.39. Exhibit 6.4.3(a) is deleted in its entirety.
2.40. Exhibit 7.1 is amended to read in its entirety as provided in
Exhibit 7.1
-9-
<PAGE>
hereto.
2.41. Exhibit 7.3 is amended to read in its entirety as provided in
Exhibit 7.3 hereto.
3. Intercreditor and Pledge Agreements. Each of the Company, the Guarantors and
-----------------------------------
the Lenders hereby requests that the Agent enter into the proposed Pledge
Agreement among the Company, the Guarantors and the Agent, as collateral agent,
and the proposed Intercreditor Agreement among the Company, the Guarantors, the
Lenders, The Prudential Insurance Company of America, U.S. Private Placement
Fund and the Agent, as collateral agent, each substantially in the form
previously furnished to the Lenders with such changes therein as the Agent shall
approve.
4. Representations and Warranties. In order to induce the Lenders to enter into
------------------------------
this Agreement, each of the Company and the Guarantors jointly and severally
represents and warrants to each of the Lenders that:
4.1. No Legal Obstacle to Agreements. Neither the execution and delivery
-------------------------------
of this Agreement or any other Credit Document, nor the making of any borrowing
under the Amended Credit Agreement, nor the guaranteeing of the Credit
Obligations, nor the securing of the Credit Obligations with the Credit
Security, nor the consummation of any transaction referred to in or contemplated
by this Agreement, the Amended Credit Agreement or any other Credit Document,
nor the fulfillment of the terms hereof or thereof or of any other agreement,
instrument, deed or lease contemplated by this Agreement, the Amended Credit
Agreement or any other Credit Document, has constituted or resulted in or will
constitute or result in:
(a) any breach or termination of the provisions of any agreement,
instrument, deed or lease to which the Company or any of its
Subsidiaries is a party or by which it is bound, or of the Charter or
By-laws of the Company or any of its Subsidiaries;
(b) the violation of any law, statute, judgment, decree or
governmental order, rule or regulation applicable to the Company or any
of its Subsidiaries;
(c) the creation under any agreement, instrument, deed or lease
of any Lien (other than Liens on the Credit Security which secure the
Credit Obligations and Liens permitted by Section 6.8 of the Amended
Credit Agreement) upon any of the assets of the Company or any of its
Subsidiaries; or
(d) any redemption, retirement or other repurchase obligation of
the Company or any of its Subsidiaries under any Charter, By-law,
agreement, instrument, deed or lease.
No approval, authorization or other action by, or declaration to or filing with,
any
-10-
<PAGE>
governmental or administrative authority or any other Person is required to
be obtained or made by the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement, the performance of this Agreement,
the Amended Credit Agreement or any other Credit Document, the transactions
contemplated hereby or thereby, the making of any borrowing under the Amended
Credit Agreement, the guaranteeing of the Credit Obligations or the securing of
the Credit Obligations with the Credit Security.
4.2. Defaults. Immediately after giving effect to the Amendment, no
-------
Default shall exist.
4.3. Incorporation of Representations and Warranties of Company.
----------------------------------------------------------
Immediately after giving effect to the Amendment, the representations and
warranties set forth in Section 8 of the Amended Credit Agreement will be true
and correct as if originally made on and as of the Amendment Closing Date
(except to the extent of any representation or warranty which refers to a
specific earlier date).
5. Conditions. The effectiveness of each of the amendments set forth in Section
----------
2 hereof shall be subject to the satisfaction of the following conditions:
5.1. Officer's Certificate. The representations and warranties contained
---------------------
in Section 4 hereof shall be true and correct on and as of the Amendment Closing
Date with the same force and effect as though originally made on and as of the
Amendment Closing Date; immediately after giving effect to such amendments, no
Default shall exist; no Material Adverse Change shall have occurred since
January 31, 1997; and the Company shall have furnished to the Lenders on or
before the Amendment Closing Date a certificate to these effects signed by a
Financial Officer of the Company.
5.2. Proper Proceedings. All proper proceedings shall have been taken by
------------------
the Company and the Guarantors (including without limitation TransMontaigne
Transportation Services Inc.) to authorize this Agreement, the Amended Credit
Agreement and the transactions contemplated hereby and thereby. On or before the
Amendment Closing Date, the Agent shall have received copies of all documents,
including legal opinions of counsel and records of corporate proceedings which
the Agent may have requested in connection therewith, such documents, where
appropriate, to be certified by proper corporate or governmental authorities.
5.3. Execution and Delivery. Each of the Company, the Guarantors and the
----------------------
Lenders shall have executed and delivered this Agreement.
5.4. Prudential Agreements. Each of the Master Shelf Agreement, the
---------------------
Intercreditor Agreement and the Pledge Agreement shall have been executed and
delivered substantially in the form previously furnished to the Lenders with
such changes therein as the Agent shall have approved; and the Funded Debt
permitted by Section 6.6.12 shall have been issued by the Company and purchased
by Prudential.
-11-
<PAGE>
5.5. Joinder Agreement. TransMontaigne Transportation Service Inc., an
-----------------
Arkansas corporation, shall have become a party to the Amended Credit Agreement
as a Guarantor by executing and delivering to the Agent an agreement to such
effect that is satisfactory in form and substance to the Agent, together with
such corporate certificates and legal opinions with respect to such joinder as
the Agent shall reasonably require.
5.6. Pro Forma Balance Sheet. The Company shall have furnished to the
-----------------------
Agent the internally prepared pro forma Consolidated balance sheet of the
Company and its Subsidiaries as of January 31, 1997, together with a calculation
in reasonable detail of the Leverage Ratio of the Company and its Subsidiaries
as of January 31, 1997.
6. Further Assurances. The Company will, promptly upon the request of the Agent
------------------
from time to time, execute, acknowledge and deliver, and file and record, all
such instruments and notices, and take all such action, as the Agent deems
necessary or advisable to carry out the intent and purposes of this Agreement.
7. General. The Amended Credit Agreement and all of the other Credit Documents
-------
are each confirmed as being in full force and effect. This Agreement, the
Amended Credit Agreement and the other Credit Documents referred to herein or
therein constitute the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral, with respect to such
subject matter. The invalidity or unenforceability of any provision hereof shall
not affect the validity and enforceability of any other term or provision
hereof. The headings in this Agreement are for convenience of reference only and
shall not alter, limit or otherwise affect the meaning hereof. Each of this
Agreement and the Amended Credit Agreement is a Credit Document and may be
executed in any number of counterparts, which together shall constitute one
instrument, and shall bind and inure to the benefit of the parties and their
respective successors and assigns, including as such successors and assigns all
holders of any Note. This Agreement shall be governed by and construed in
accordance with the laws (other than the conflict of law rules) of The
Commonwealth of Massachusetts.
-12-
<PAGE>
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
TRANSMONTAIGNE OIL COMPANY
By_________________________________
Title:
TRANSMONTAIGNE TRANSPORTATION
SERVICES INC.
TRANSMONTAIGNE PRODUCT
SERVICES INC.
TRANSMONTAIGNE PIPELINE INC.
TRANSMONTAIGNE TERMINALING INC.
By_________________________________
As ____________ of each of the
foregoing corporations
BEAR PAW ENERGY INC.
By_________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender and as Agent for the
Lenders
By_________________________________
Title:
THE BANK OF MONTREAL
By__________________________________
Authorized Officer
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<PAGE>
CIBC INC.
By__________________________________
Authorized Officer
COLORADO NATIONAL BANK
By__________________________________
Authorized Officer
NATIONSBANK OF TEXAS, N.A.
By__________________________________
Authorized Officer
BANQUE PARIBAS
By__________________________________
Authorized Officer
By__________________________________
Authorized Officer
ING (U.S.) CAPITAL CORPORATION
By__________________________________
Authorized Officer
-14-
<PAGE>
EXHIBIT 7.1
COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of Business
Name Incorporation Capitalization Locations
---- --------------- -------------- ---------
<S> <C> <C> <C>
1. TransMontaigne Delaware Publicly held Colorado
Oil Company Arkansas
2. TransMontaigne Arkansas 50,001 common Arkansas
Product Services shares, par Colorado
Inc. value $.10 Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
North Dakota
Ohio
Oklahoma
South Dakota
Texas
Wisconsin
3. TransMontaigne Arkansas 10,000 common Arkansas
Transportation shares, par Indiana
Services Inc. value $.10
4. TransMontaigne Arkansas 10,000 common Illinois
Pipeline Inc. shares, par Indiana
value $.10 Iowa
Missouri
Ohio
Texas
</TABLE>
-15-
<PAGE>
<TABLE>
<S> <C> <C> <C>
5. Arkansas 10,000 common Arkansas
TransMontaigne shares, par Indiana
Terminaling Inc. value $.10 Missouri
Ohio
6. TransMontaigne Arkansas 1,000 common Arkansas
Holding Inc. shares, par
value $.10
7. Bear Paw Energy Colorado 500,000 common Arkansas
Inc. shares, par Colorado
value $0.10 Kansas
Montana
North Dakota
Oklahoma
Texas
Wyoming
</TABLE>
Additional Information:
All of the issued and outstanding capital stock of TransMontaigne
Product Services Inc., TransMontaigne Transportation Services Inc. and Bear Paw
Energy Inc. is owned by the Company. The Company owns 65% of the capital stock
of TransMontaigne Holding Inc.
All of the issued and outstanding capital stock of TransMontaigne
Pipeline Inc. and TransMontaigne Terminaling Inc. is owned by TransMontaigne
Transportation Services Inc.
The address of the principal executive office and chief place of
business of the Company and Bear Paw Energy Inc. is 2750 Republic Plaza, 370
Seventeenth Street, Denver, Colorado 80202.
The address of the principal executive office and chief place of
business of each of the other Subsidiaries is 280 N. College, First South
Centre, Suite 500, Fayetteville, Arkansas 72702.
None of the Company or its Subsidiaries operates under any name other
than its own name listed above, except that TransMontaigne Terminaling Inc.
operates a terminal at Rogers, Arkansas under the name "Razorback Terminaling
Company."
-16-
<PAGE>
EXHIBIT 7.3
FINANCING DEBT AND INVESTMENTS
As of April 17, 1997, the Financing Debt of the Company and its
Subsidiaries, and all Liens and Guarantees relating thereto, include the
following:
(1) The Credit Obligations and the Credit Security and Guarantees
provided therefor under the Credit Agreement.
(2) The Subordinated Debentures in the aggregate outstanding
principal amount of $4,000,000 and the Subordinated Debentures
Guarantee.
(3) The 7.85% Senior Secured Notes, Series A, due April 10, 2003
issued pursuant to the Master Shelf Agreement, the Subsidiary Guarantees
thereunder and the Liens granted by the Pledge Agreement.
As of April 17, 1997, the Investments referred to in Section 6.9.5
include the following:
(1) Ownership by TransMontaigne Holding Inc. of approximately 28%
of the common stock of Lion Oil Company, an Arkansas corporation.
(2) The 60% ownership interest of TransMontaigne Pipeline Inc. in
Razorback Pipeline Company, a Delaware general partnership.
(3) The 50% ownership interest of Bear Paw Energy Inc. in
InterEnergy Sheffeld Processing Company.
-17-
<PAGE>
EXHIBIT 10.10
[Execution Copy]
- - --------------------------------------------------------------------------------
TRANSMONTAIGNE OIL COMPANY
$100,000,000
SENIOR NOTES
MASTER SHELF AGREEMENT
(INCLUDING GUARANTEES OF SUBSIDIARIES)
DATED AS OF APRIL 17, 1997
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
1. AUTHORIZATION OF ISSUE OF NOTES 1
2. PURCHASE AND SALE OF NOTES.2
2A. FACILITY.2
2B. ISSUANCE PERIOD.2
2C. PERIODIC SPREAD INFORMATION.2
2D. REQUEST FOR PURCHASE.3
2E. RATE QUOTES.4
2F. ACCEPTANCE.4
2G. MARKET DISRUPTION.5
2H. CLOSING.5
2I. FEES.6
3. CONDITIONS OF CLOSING.8
3A. CERTAIN DOCUMENTS.8
3B. ADDITIONAL DOCUMENTS TO BE DELIVERED AT THE INITIAL CLOSING.9
3C. PERFECTION OF SECURITY.9
3D. PAYMENT OF FEES.9
3E. REPRESENTATIONS AND WARRANTIES; NO DEFAULT.10
3F. PURCHASE PERMITTED BY APPLICABLE LAWS.10
3G. LEGAL MATTERS.10
3H. PROCEEDINGS.10
3I. FACILITY FEE.10
4. PREPAYMENTS.10
4A. REQUIRED PREPAYMENTS.10
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT.10
4C. NOTICE OF OPTIONAL PREPAYMENT.11
4D. APPLICATION OF PREPAYMENTS.11
4E. RETIREMENT OF NOTES.11
5. AFFIRMATIVE COVENANTS.12
5A. FINANCIAL STATEMENTS AND REPORTS.12
5B. INFORMATION REQUIRED BY RULE 144A.16
5C. INSPECTION OF PROPERTY.16
5D. COVENANT TO SECURE NOTES EQUALLY.16
5E. TAXES AND OTHER CHARGES; ACCOUNTS PAYABLE.17
5F. TYPES OF BUSINESS.17
5G. MAINTENANCE OF PROPERTIES.17
5H. STATUTORY COMPLIANCE.18
5I. COMPLIANCE WITH MATERIAL AGREEMENTS.18
5J. TRADING POLICY.18
5K. SUBORDINATED DEBENTURES.18
<PAGE>
5L. INVENTORY ACCOUNTING.19
5M. INSURANCE.19
5N. ERISA, ETC.19
5O. OPEN POSITIONS.19
5P. ENVIRONMENTAL LAWS.20
6. NEGATIVE COVENANTS.20
6A. CERTAIN FINANCIAL TESTS.20
6B. DISTRIBUTIONS.21
6C. LIENS, INDEBTEDNESS AND OTHER RESTRICTIONS.21
6D. ISSUANCE OF STOCK BY SUBSIDIARIES; SUBSIDIARY DISTRIBUTIONS.27
6E. DERIVATIVE CONTRACTS.27
6F. NEGATIVE PLEDGE CLAUSES.27
6G. TRANSACTIONS WITH AFFILIATES.28
6H. INACTIVE SUBSIDIARIES.28
7. EVENTS OF DEFAULT.28
7A. ACCELERATION.32
7B. RESCISSION OF ACCELERATION.32
7C. NOTICE OF ACCELERATION OR RESCISSION.32
7D. OTHER REMEDIES.32
7E. ANNULMENT OF DEFAULTS.32
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.33
8A. ORGANIZATION.33
8B. FINANCIAL STATEMENTS.34
8C. ACTIONS PENDING.34
8D. OUTSTANDING DEBT.35
8E. TITLE TO PROPERTIES.35
8F. TAXES.35
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS.35
8H. OFFERING OF NOTES.36
8I. USE OF PROCEEDS.36
8J. ERISA.36
8K. GOVERNMENTAL CONSENT.37
8L. DISCLOSURE.37
8M. HOSTILE TENDER OFFERS.37
8N. LICENSES, ETC.38
8O. CERTAIN BUSINESS REPRESENTATIONS.38
8P. ENVIRONMENTAL REGULATIONS.39
8Q. FOREIGN TRADE REGULATIONS; GOVERNMENT REGULATION.40
8R. FACILITY CONVERSION DATE.41
8S. BANK AGREEMENT.41
8T. MATERIAL AGREEMENTS.41
<PAGE>
9. REPRESENTATIONS OF THE PURCHASERS.41
9A. NATURE OF PURCHASE.41
9B. SOURCE OF FUNDS.41
10. DEFINITIONS.41
10A. YIELD-MAINTENANCE TERMS.42
10B. OTHER TERMS.43
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS.58
11. GUARANTEES.59
11A. GUARANTEES OF OBLIGATIONS.59
11B. CONTINUING OBLIGATION.59
11C. WAIVERS WITH RESPECT TO OBLIGATIONS.60
11D. LENDERS' POWER TO WAIVE, ETC.61
11E. INFORMATION REGARDING THE COMPANY, ETC.62
11F. CERTAIN GUARANTOR REPRESENTATIONS.62
11G. SUBROGATION.63
11H. SUBORDINATION.63
11I. FUTURE SUBSIDIARIES; FURTHER ASSURANCES.63
12. MISCELLANEOUS.64
12A. NOTE PAYMENTS.64
12B. EXPENSES.64
12C. CONSENT TO AMENDMENTS.64
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.65
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS.66
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.66
12G. SUCCESSORS AND ASSIGNS.66
12H. NOTICES.67
12I. PAYMENTS DUE ON NON-BUSINESS DAYS.67
12J. SEVERABILITY.67
12K. DESCRIPTIVE HEADINGS.67
12L. SATISFACTION REQUIREMENT.67
12M. MAXIMUM INTEREST PAYABLE.68
12N. GOVERNING LAW.68
12O. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.68
12P. COUNTERPARTS.70
12Q. BINDING AGREEMENT.70
INFORMATION SCHEDULE
SCHEDULE 3A(vii) -- UCC Searches
SCHEDULE 5A(i) -- Form of Covenant Compliance Certificate
SCHEDULE 5J -- Risk and Product Management Policy
SCHEDULE 8A -- Company and Subsidiary Information
SCHEDULE 8D -- Financing Debt, Liens, Guarantees and Investments
SCHEDULE 8G -- List of Agreements Restricting Debt
<PAGE>
SCHEDULE 8J -- Defined Benefit Plans
SCHEDULE 8P -- Environmental Information
SCHEDULE 8T -- Material Agreements
EXHIBIT A-1 -- FORM OF SERIES A NOTE
EXHIBIT A-2 -- FORM OF NOTE
EXHIBIT B -- FORM OF REQUEST FOR PURCHASE
EXHIBIT C -- FORM OF CONFIRMATION OF ACCEPTANCE
EXHIBIT D -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT E -- FORM OF PLEDGE AGREEMENT
EXHIBIT F -- FORM OF INTERCREDITOR AGREEMENT
<PAGE>
TRANSMONTAIGNE OIL COMPANY
370 17TH STREET, SUITE 2750
DENVER, COLORADO 80202
As of April 17, 1997
To: The Prudential Insurance Company
of America (herein called "PRUDENTIAL")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential, the
"PURCHASERS")
c/o Prudential Capital Group
Gateway Center Four
100 Mulberry Street
Newark, NJ 07102-4069
Ladies and Gentlemen:
The undersigned, TransMontaigne Oil Company (the "COMPANY"), hereby
agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue of its senior promissory notes (the "NOTES") in the aggregate principal
amount of $100,000,000, to be dated the date of issue thereof; to mature, in the
case of each Note so issued, no more than 12 years after the date of original
issuance thereof; to have an average life, in the case of each note so issued,
of no more than 10 years after the date of original issuance thereof; to bear
interest on the unpaid balance thereof from the date thereof at the rate per
annum, and to have such other particular terms, as shall be set forth, in the
case of each Note so issued, in the Confirmation of Acceptance with respect to
such Note delivered pursuant to paragraph 2F; and to be substantially in the
form of Exhibit A-2 attached hereto. The term "NOTES" as used herein shall
-----------
include each Note delivered pursuant to any provision of this Agreement and each
Note delivered in substitution or exchange for any such Note pursuant to any
such provision. Notes which have (i) the same final maturity, (ii) the same
installment payment dates, (iii) the same installment payment amounts (as a
percentage of the original principal amount of each Note), (iv) the same
interest rate, (v) the same interest payment periods, and (vi) the same original
date of issuance are herein called a "SERIES" of Notes. Capitalized terms used
herein have the meanings specified in paragraph 10.
2. PURCHASE AND SALE OF NOTES.
1
<PAGE>
2A. FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
and Prudential Affiliates from time to time, the purchase of Notes pursuant to
this Agreement. The willingness of Prudential to consider such purchase of
Notes is herein called the "FACILITY". At any time, the aggregate principal
amount of Notes stated in paragraph 1, minus the aggregate principal amount of
-----
Notes purchased and sold pursuant to this Agreement prior to such time, minus
the aggregate principal amount of Accepted Notes (as hereinafter defined) which
have not yet been purchased and sold hereunder prior to such time is herein
called the "AVAILABLE FACILITY AMOUNT" at such time. NOTWITHSTANDING THE
WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF NOTES, THIS AGREEMENT IS
ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY
PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE
NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC
PURCHASES OF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A
COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.
2B. ISSUANCE PERIOD. Notes may be issued and sold pursuant to this
Agreement until the earlier of (i) (a) if no Notes have been previously issued
hereunder in addition to the Series A Notes, the first anniversary of the date
of this Agreement or (b) upon receipt of the Renewal Fee provided for in
paragraph 2I(4) or the issuance of Notes in addition to the Series A Notes prior
to the first anniversary date of this Agreement, the second anniversary of the
date of this Agreement (or if any such anniversary is not a Business Day, the
Business Day next preceding such anniversary) and (ii) the thirtieth day after
Prudential shall have given to the Company, or the Company shall have given to
Prudential, a notice stating that it elects to terminate the issuance and sale
of Notes pursuant to this Agreement (or if such thirtieth day is not a Business
Day, the Business Day next preceding such thirtieth day). The period during
which Notes may be issued and sold pursuant to this Agreement is herein called
the "ISSUANCE PERIOD".
2C. PERIODIC SPREAD INFORMATION. Provided no Default or Event of
Default exists, not later than 9:30 A.M. (New York City local time) on a
Business Day during the Issuance Period if there is an Available Facility Amount
on such Business Day, the Company may request by telecopier or telephone, and
Prudential will, to the extent reasonably practicable, provide to the Company on
such Business Day (or, if such request is received after 9:30 A.M. (New York
City local time) on such Business Day, on the following Business Day),
information (by telecopier or telephone) with respect to various spreads at
which Prudential or Prudential Affiliates might be interested in purchasing
Notes of different average lives; provided, however, that the Company may not
-------- -------
make such requests more frequently than once in every five Business Days or such
other period as shall be mutually agreed to by the Company and Prudential. The
amount and content of information so provided shall be in the sole discretion of
Prudential but it is the intent of Prudential to provide information which will
be of use to the Company in determining whether to initiate procedures for use
of the Facility. Information so provided shall not constitute an offer to
purchase Notes, and neither Prudential nor any Prudential Affiliate shall
2
<PAGE>
be obligated to purchase Notes at the spreads specified. Information so provided
shall be representative of potential interest only for the period commencing on
the day such information is provided and ending on the earlier of the fifth
Business Day after such day and the first day after such day on which further
spread information is provided. Prudential may suspend or terminate providing
information pursuant to this paragraph 2C if, in its sole discretion, it
determines that there has been an adverse change in the credit quality of the
Company after the date of this Agreement.
2D. REQUEST FOR PURCHASE.
(i) The Company may from time to time during the Issuance Period make
requests for purchases of Notes (each such request being a "REQUEST FOR
PURCHASE"). Each Request for Purchase shall be made to Prudential by
telecopier and confirmed by nationwide overnight delivery service, and
shall (a) specify the aggregate principal amount of Notes covered thereby,
which shall not be less than $10,000,000 and not be greater than the
Available Facility Amount at the time such Request for Purchase is made,
(b) specify the principal amounts, final maturities, installment payment
dates and amounts and interest payment periods (quarterly or semi-annual in
arrears) of the Notes covered thereby, (c) specify the use of proceeds of
such Notes, (d) specify the proposed day for the closing of the purchase
and sale of such Notes, which shall be a Business Day during the Issuance
Period not less than 10 days and not more than 20 days after the making of
such Request for Purchase, (e) specify the number of the account and the
name and address of the depository institution to which the purchase prices
of such Notes are to be transferred on the Closing Day for such purchase
and sale, (f) certify that the representations and warranties contained in
paragraph 8 are true on and as of the date of such Request for Purchase
except to the extent of changes caused by the transactions herein
contemplated and that there exists on the date of such Request for Purchase
no Event of Default or Default, and (g) be substantially in the form of
Exhibit B attached hereto. Each Request for Purchase shall be in writing
---------
and shall be deemed made when received by Prudential.
(ii) PRUDENTIAL AGREES, TO THE EXTENT THE INFORMATION PROVIDED
PURSUANT TO CLAUSE (I)(C) OF PARAGRAPH 2D CONTAINS CONFIDENTIAL
INFORMATION, PRUDENTIAL WILL USE ITS BEST EFFORTS TO HOLD IN CONFIDENCE AND
NOT TO DISCLOSE THE CONFIDENTIAL INFORMATION, EXCEPT (A) AS MAY BE REQUIRED
BY LAW, AND (B) TO PRUDENTIAL'S AND ITS SUBSIDIARIES' OFFICERS, DIRECTORS
AND EMPLOYEES, AND TO PRUDENTIAL'S AGENTS AND PROFESSIONAL CONSULTANTS IN
CONNECTION WITH THE PURCHASE OF THE NOTES TO WHICH SUCH REQUEST FOR
PURCHASE RELATES; PROVIDED THAT PRUDENTIAL WILL BE FREE, AFTER NOTICE TO
--------
THE COMPANY, TO CORRECT ANY FALSE OR MISLEADING INFORMATION WHICH MAY
BECOME PUBLIC CONCERNING PRUDENTIAL'S RELATIONSHIP TO THE COMPANY OR TO THE
PURCHASE OF SUCH NOTES.
"CONFIDENTIAL INFORMATION" shall mean information about the use of
proceeds specified in such Request for Purchase, but does not include
information (i) which was publicly known, or otherwise known to Prudential, at
the time of disclosure,
3
<PAGE>
(ii) which subsequently becomes publicly known through no act or omission by
Prudential, or (iii) which otherwise becomes known to Prudential, other than
through disclosure by the Company.
Notwithstanding the foregoing, the Company acknowledges that
Prudential and each Purchaser of Accepted Notes specified in such Request for
Purchase may disclose Confidential Information to (i) any Purchaser or holder of
any Note, (ii) any Person to which it offers to sell any Note or any part
thereof, (iii) any Person to which it sells or offers to sell a participation in
all or any part of any Note, (iv) any Person from which it offers to purchase
any security of the Company, (v) any federal or state regulatory authority
having jurisdiction over it, (vi) the National Association of Insurance
Commissioners or any similar organization, or (vii) any other Person to which
such delivery or disclosure may be necessary or appropriate (a) in compliance
with any law, rule, regulation or order applicable to it, (b) in response to any
subpoena or other legal process or informal investigative demand or (c) in
connection with any litigation to which it is a party.
2E. RATE QUOTES. Not later than five Business Days after the Company
shall have given Prudential a Request for Purchase pursuant to paragraph 2D,
Prudential may provide (by telephone promptly thereafter confirmed by
telecopier, in each case no earlier than 9:30 A.M. and no later than 1:30 P.M.
New York City local time) interest rate quotes for the several principal
amounts, maturities, installment payment schedules, and interest payment periods
of Notes specified in such Request for Purchase. Each quote shall represent the
interest rate per annum payable on the outstanding principal balance of such
Notes until such balance shall have become due and payable, at which Prudential
or a Prudential Affiliate would be willing to purchase such Notes at 100% of the
principal amount thereof.
2F. ACCEPTANCE. Within 30 minutes after Prudential shall have
provided any interest rate quotes pursuant to paragraph 2E or, in the event that
due to conditions in the market place it shall not be feasible to hold such
interest rate quotes open 30 minutes, such shorter period as Prudential may
specify to the Company (such period being the "ACCEPTANCE WINDOW"), the Company
may, subject to paragraph 2G, elect to accept such interest rate quotes as to
not less than $10,000,000 aggregate principal amount of the Notes specified in
the related Request for Purchase. Such election shall be made by an Authorized
Officer of the Company notifying Prudential by telephone or telecopier within
the Acceptance Window (but not earlier than 9:30 A.M. or later than 1:30 P.M.,
New York City local time) that the Company elects to accept such interest rate
quotes, specifying the Notes (each such Note being an "ACCEPTED NOTE") as to
which such acceptance (an "ACCEPTANCE") relates. The day the Company notifies an
Acceptance with respect to any Accepted Notes is herein called the "ACCEPTANCE
DAY" for such Accepted Notes. Any interest rate quotes as to which Prudential
does not receive an Acceptance within the Acceptance Window shall expire, and no
purchase or sale of Notes hereunder shall be made based on such expired interest
rate quotes. Subject to paragraph 2G and the other terms and conditions hereof,
the Company agrees to sell to Prudential or a Prudential Affiliate, and
Prudential agrees to
4
<PAGE>
purchase, or to cause the purchase by a Prudential Affiliate of, the
Accepted Notes at 100% of the principal amount of such Notes. As soon as
practicable following the Acceptance Day, the Company, Prudential and each
Prudential Affiliate which is to purchase any such Accepted Notes will execute a
confirmation of such Acceptance substantially in the form of Exhibit C attached
---------
hereto (a "CONFIRMATION OF ACCEPTANCE").
2G. MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2F, if Prudential shall have provided interest rate quotes pursuant to paragraph
2E and thereafter prior to the time an Acceptance with respect to such quotes
shall have been notified to Prudential in accordance with paragraph 2F there
shall occur a general suspension, material limitation, or significant disruption
of trading in securities generally on the New York Stock Exchange or in the
market for U.S. Treasury securities and other financial instruments, then such
interest rate quotes shall expire, and no purchase or sale of Notes hereunder
shall be made based on such expired interest rate quotes. If the Company
thereafter notifies Prudential of the Acceptance of any such interest rate
quotes, such Acceptance shall be ineffective for all purposes of this Agreement,
and Prudential shall promptly notify the Company that the provisions of this
paragraph 2G are applicable with respect to such Acceptance.
2H. CLOSING.
2H(1) INITIAL CLOSING -- The Company hereby agrees to sell to
Prudential and, subject to the terms and conditions herein set forth, the
Purchasers listed on the Information Schedule attached hereto agree to purchase
---------------------
from the Company under the Facility $50,000,000 of 7.85% Senior Notes, Series A,
due April 17, 2003 (the "SERIES A NOTES") at 100% of such aggregate principal
amount. The Series A Notes shall be substantially in the form of Exhibit A-1
-----------
attached hereto. The Company will deliver to Prudential, at the offices of
Prudential Capital Group at 2200 Ross Avenue, Suite 4200E, Dallas, Texas 75201,
one or more Notes registered in such Purchaser's name, evidencing the
aggregate principal amount of Series A Notes to be purchased by such Purchaser's
and in the denomination or denominations specified in the Information Schedule
--------------------
attached hereto against payment of the purchase price thereof by transfer of
immediately available funds to the credit of the Company's account 522-59654 at
The First National Bank of Boston, 100 Federal Street, Boston MA 02110 (ABA No.
011-000-390 Reference: TransMontaigne Oil Company) on the date of closing, which
shall be April 17, 1997, or any other date on or before April 17, 1997 upon
which the Company and Prudential may mutually agree (the "INITIAL CLOSING").
2H(2) SUBSEQUENT CLOSINGS. Not later than 11:30 A.M. (New York
City local time) on the Closing Day for any Accepted Notes, the Company will
deliver to each Purchaser listed in the Confirmation of Acceptance relating
thereto at the offices of Prudential Capital Group at 2200 Ross Avenue, Suite
4200E, Dallas, Texas 75201 the Accepted Notes to be purchased by such Purchaser
in the form of one or more Notes in authorized denominations as such Purchaser
may request for each Series of
5
<PAGE>
Accepted Notes to be purchased on the Closing Day, dated the Closing Day and
registered in such Purchaser's name (or in the name of its nominee), against
payment of the purchase price thereof by transfer of immediately available funds
for credit to the Company's account specified in the Request for Purchase of
such Notes.
2H(3) RESCHEDULED CLOSINGS. If the Company fails to tender to any
Purchaser the Accepted Notes to be purchased by such Purchaser on the scheduled
Closing Day for such Accepted Notes as provided above in this paragraph 2H, or
any of the conditions specified in paragraph 3 shall not have been fulfilled by
the time required on such scheduled Closing Day, the Company shall, prior to
1:00 P.M., New York City local time, on such scheduled Closing Day notify such
Purchaser in writing whether (x) such closing is to be rescheduled (such
rescheduled date to be a Business Day during the Issuance Period not less than
one Business Day and not more than 30 Business Days after such scheduled Closing
Day (the "RESCHEDULED CLOSING DAY") and certify to such Purchaser that the
Company reasonably believes that it will be able to comply with the conditions
set forth in paragraph 3 on such Rescheduled Closing Day and that the Company
will pay the Delayed Delivery Fee in accordance with paragraph 2I(2) or (y) such
closing is to be canceled as provided in paragraph 2I(3). In the event that the
Company shall fail to give such notice referred to in the preceding sentence,
such Purchaser may at its election, at any time after 1:00 P.M., New York City
local time, on such scheduled Closing Day, notify the Company in writing that
such closing is to be canceled as provided in paragraph 2I(3).
2I. FEES.
2I(1) FACILITY FEE -- The Company will pay to Prudential in
immediately available funds a fee (the "FACILITY FEE") on each Closing Day that
occurs after the first anniversary of the date of this Agreement, in an amount
equal to 0.20% of the aggregate principal amount of Notes sold on such Closing
Day.
2I(2) DELAYED DELIVERY FEE -- If the closing of the purchase and sale
of any Accepted Note is delayed for any reason beyond the original Closing Day
for such Accepted Note (other than if all the conditions in paragraph 3 are
satisfied and Prudential fails to purchase such Accepted Notes), the Company
will pay to Prudential on the Cancellation Date or actual closing date of such
purchase and sale (if such Cancellation Date or closing date occurs on a date
later than the date specified in the Confirmation of Acceptance for such
Accepted Note), a fee (the "DELAYED DELIVERY FEE") calculated as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, i.e., the yield per
annum on an alternative investment selected by Prudential on the date Prudential
receives notice of the delay in the closing for such Accepted Notes having a
maturity date or dates the same as, or closest to, the Rescheduled Closing Day
or Rescheduled Closing Days (a
6
<PAGE>
new alternative investment being selected by Prudential each time such closing
is delayed); "DTS" means Days to Settlement, i.e., the number of actual days
elapsed from and including the originally scheduled Closing Day with respect to
such Accepted Note to but excluding the date of such payment; and "PA" means
Principal Amount, i.e., the principal amount of the Accepted Note for which such
calculation is being made. In no case shall the Delayed Delivery Fee be less
than zero. Nothing contained herein shall obligate any Purchaser to purchase any
Accepted Note on any day other than the Closing Day for such Accepted Note, as
the same may be rescheduled from time to time in compliance with paragraph 2H.
2I(3) CANCELLATION FEE -- If the Company at any time notifies
Prudential in writing that the Company is canceling the closing of the purchase
and sale of any Accepted Note, or if Prudential notifies the Company in writing
under the circumstances set forth in the last sentence of paragraph 2H that the
closing of the purchase and sale of such Accepted Note is to be canceled, or if
the closing of the purchase and sale of such Accepted Note is not consummated on
or prior to the last day of the Issuance Period (the date of any such
notification, or the last day of the Issuance Period, as the case may be, being
the "CANCELLATION DATE"), the Company will pay Prudential in immediately
available funds an amount (the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid
price (as determined by Prudential) of the Hedge Treasury Notes(s) on the
Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the
meaning specified in paragraph 2I(2). The foregoing bid and ask prices shall be
as reported by Telerate Systems, Inc. (or, if such data for any reason ceases to
be available through Telerate Systems, Inc., any publicly available source of
similar market data). Each price shall be based on a U.S. Treasury security
having a par value of $100.00 and shall be rounded to the second decimal place.
In no case shall the Cancellation Fee be less than zero.
2I(4) RENEWAL FEE -- If no additional Notes are issued during the
period from the issuance of the Series A Notes until the first anniversary of
the date of this Agreement, the Facility shall be terminated and the Issuance
Period shall end on such anniversary date unless on or before such first
anniversary the Company shall pay to Prudential a renewal fee (the "RENEWAL
FEE") in the aggregate amount of $50,000. In the event the Company pays the
Renewal Fee, the Facility shall remain in place and the Issuance Period shall
extend until the second anniversary of the date of this Agreement (unless
terminated earlier pursuant to paragraph 2B).
2I(5) STRUCTURING FEE -- At the time of the execution and delivery of
this Agreement by the Company and Prudential, the Company will pay to Prudential
in immediately available funds a one time fee (the "STRUCTURING FEE") in an
amount equal to $187,500. If following payment of the Structuring Fee and prior
to the first
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anniversary of the date of this Agreement a Refund Event shall occur, Prudential
shall refund to the Company the Refundable Portion of the Structuring Fee.
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to
purchase and pay for any Accepted Notes is subject to the satisfaction, on or
before the Closing Day for such Accepted Notes, of the following conditions:
3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:
(i) The Accepted Note(s) to be purchased by such Purchaser.
(ii) Certified copies of the resolutions of the Board of Directors
of the Company and each other Obligor approving this Agreement and the
other Loan Documents to which it is a party, and of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to this Agreement and the Accepted Notes; or for any
Closing Day other than the first Closing Day, a certificate of the
Secretary or an Assistant Secretary of the Company or such other Obligor
stating that such resolutions remain in effect.
(iii) A certificate of the Secretary or an Assistant Secretary of the
Company and each other Obligor certifying the names and true signatures of
the officers of the Company authorized to sign this Agreement, the Accepted
Notes, the other Loan Documents to which it is a party and any other
documents to be delivered hereunder to which it is a party; or for any
Closing Day other than the first Closing Day, a certificate of the
Secretary or an Assistant Secretary of the Company or such other Obligor
stating that the information in such certificate continues to be true and
correct.
(iv) Certified copies of the Certificate of Incorporation and
By-laws of the Company and each other Obligor; or a certificate of the
Secretary or an Assistant Secretary of the Company or such other Obligor
stating that the Certificate of Incorporation and By-laws of the Company or
such other Obligor have not changed since last delivered pursuant to this
Agreement.
(v) Favorable opinions of the following counsel satisfactory to
such Purchaser and substantially in the form of Exhibit D attached hereto
---------
and as to such other matters as such Purchaser may reasonably request: (a)
Holme Roberts & Owen LLP, special counsel for the Company - Exhibit D-1;
-----------
Clanahan Tanner Downing and Knowlton, general counsel for Bear Paw Energy
Inc. - Exhibit D-2; and Jim H. Boyd, general counsel of the Guarantors -
-----------
Exhibit D-3. The Company hereby directs each such counsel to deliver such
-----------
opinion, agrees that the issuance and sale of any Accepted Notes will
constitute a reconfirmation of such direction, and understands and agrees
that each Purchaser receiving such an opinion will and is hereby authorized
to rely on such opinion.
(vi) A good standing certificate for the Company and the other
Obligors
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from the Secretary of State of Delaware and Colorado dated of a recent date
and such other evidence of the status of the Company as you may reasonably
request.
(vii) With respect to the Initial Closing only, certified copies of
Requests for Information or Copies (Form UCC-11) or equivalent reports
listing all effective financing statements which name the Company or any
Subsidiary (under its present name and previous names) as debtor and which
are filed in the offices of the Secretaries of State listed in Schedule
--------
3A(vii) together with copies of such financing statements.
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(viii) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by such Purchaser.
3B. ADDITIONAL DOCUMENTS TO BE DELIVERED AT THE INITIAL CLOSING.
Such Purchaser shall have received the following, each dated the date of the
Initial Closing:
(i) The Pledge Agreement, duly executed and delivered by the parties
thereto.
(ii) The Intercreditor Agreement, duly executed and delivered by the
parties thereto.
(iii) The Bank Agreement shall have been duly amended to permit the
issuance of the Notes under the Facility, and a copy thereof shall have
been delivered to the Purchasers.
3C. PERFECTION OF SECURITY. Each Obligor shall have duly authorized,
executed, acknowledged, delivered, filed, registered and recorded such security
agreements, notices, financing statements and other instruments as Prudential
may have requested in order to perfect the Liens purported or required pursuant
to the Loan Documents to be created in the Loan Security.
3D. PAYMENT OF FEES. The Company shall have paid to Prudential (i)
for the account of the Purchasers, the Structuring Fee, and (ii) without
limiting the provisions of paragraph 12B, the fees and disbursements of the
Purchaser's special counsel and other costs and expenses of the Purchasers for
which statements have been rendered on or prior to the date of the Initial
Closing.
3E. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 8 shall be true on and as of such Closing
Day, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on such Closing Day no Event of Default or
Default; and
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<PAGE>
the Company shall have delivered to such Purchaser an Officer's Certificate,
dated such Closing Day, to both such effects.
3F. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Accepted Notes to be purchased by such Purchaser on the terms
and conditions herein provided (including the use of the proceeds of such Notes
by the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and such
Purchaser shall have received such certificates or other evidence as it may
request to establish compliance with this condition.
3G. LEGAL MATTERS. Counsel for such Purchaser, including any special
counsel for the Purchasers retained in connection with the purchase and sale of
such Accepted Notes, shall be satisfied as to all legal matters relating to such
purchase and sale, and such Purchaser shall have received from such counsel
favorable opinions as to such legal matters as it may request.
3H. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to such Purchaser,
and it shall have received all such counterpart originals or certified or other
copies of such documents as it may reasonably request.
3I. FACILITY FEE. With respect to any Closing Day occurring after
the first anniversary and the Note hereof, the Company shall have paid the
Facility Fee due on such date.
4. PREPAYMENTS. The Notes shall be subject to prepayment with
respect to any required prepayments set forth in such Notes as provided in
paragraph 4A and with respect to the optional prepayments permitted by paragraph
4B.
4A. REQUIRED PREPAYMENTS. The Notes of each Series shall be subject
to required prepayments, if any, set forth in the Notes of such Series.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes
shall be subject to prepayment on any Business Day occurring six months after
the day of issue, in whole at any time or from time to time in part (in a
minimum amount of $1,000,000 and integral multiples of $100,000), at the option
of the Company, at 100% of the principal amount so prepaid plus interest thereon
to the prepayment date and the Yield-Maintenance Amount, if any, with respect to
each such Note. Any partial prepayment of Notes pursuant to this paragraph 4B
shall be applied in satisfaction of required payments of principal of the Notes
in inverse order of their scheduled due dates.
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4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder
of each Note to be prepaid pursuant to paragraph 4B irrevocable written notice
of such prepayment not less than 10 Business Days prior to the prepayment date,
specifying such prepayment date, specifying the aggregate principal amount of
the Notes to be prepaid on such date, identifying each Note held by such holder,
and the principal amount of each such Note, to be prepaid on such date and
stating that such prepayment is to be made pursuant to paragraph 4B; provided
--------
that notice to Prudential under this paragraph 4C shall constitute notice to
each Prudential Affiliate that is a holder. Notice of prepayment having been
given as aforesaid, the principal amount of the Notes specified in such notice,
together with interest thereon to the prepayment date and together with the
Yield-Maintenance Amount, if any, herein provided, shall become due and payable
on such prepayment date. The Company shall, on or before the day on which it
gives written notice of any prepayment pursuant to paragraph 4A, give telephonic
notice of the principal amount of the Notes to be prepaid and the prepayment
date to each Significant Holder which shall have designated a recipient for such
notices in the Information Schedule attached hereto or by notice in writing to
the Company.
4D. APPLICATION OF PREPAYMENTS.
(i) REQUIRED PREPAYMENTS. Upon any partial prepayment of the Notes of
any Series pursuant to paragraph 4A, the amount so prepaid shall be
allocated to all outstanding Notes of such Series (including, for the
purpose of this paragraph 4D only, all Notes (other than the Series A
Notes, which are due at maturity) prepaid or otherwise retired or purchased
or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A or 4B) in
proportion to the respective outstanding principal amounts thereof.
(ii) OPTIONAL PREPAYMENTS. Upon any partial prepayment of the Notes
pursuant to 4B, the amount to be prepaid shall be applied pro rata to all
outstanding Notes of all Series (including, for the purpose of this
paragraph 4D only, all Notes (other than the Series A Notes, which are due
at maturity) prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates other than
by prepayment pursuant to paragraph 4A or 4B) according to the respective
unpaid principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 4A or 4B or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes
held by any holder unless the Company or such Subsidiary or Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of Notes held
by each other holder of Notes at the time outstanding upon the same terms and
conditions. Any Notes so prepaid or otherwise
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<PAGE>
retired or purchased or otherwise acquired by the Company or any of its
Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose
under this Agreement, except as provided in paragraph 4D.
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5. AFFIRMATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
5A. FINANCIAL STATEMENTS AND REPORTS. The Company shall, and shall
cause each of its Subsidiaries to, maintain a system of accounting in
accordance with generally accepted accounting practices. The fiscal year of the
Company and its Subsidiaries shall end on April 30 in each year and the fiscal
quarters of the Company and its Subsidiaries shall end on July 31, October 31,
January 31 and April 30 in each year.
(i) ANNUAL REPORTS. The Company shall furnish to each holder in
duplicate (unless a greater or lesser number is requested by such holder)
and as soon as available, and in any event within 95 days after the end of
each fiscal year, the Consolidated balance sheet of the Company and its
Subsidiaries as at the end of such fiscal year, the Consolidated statements
of income, changes in shareholders' equity and cash flows of the Company
and its Subsidiaries for such fiscal year (all in reasonable detail) and
together with Consolidating schedules as of such date and for such period
and, in the case of Consolidated financial statements, comparative figures
for the immediately preceding fiscal year, all accompanied by:
(a) Unqualified reports of KPMG Peat Marwick LLP (or, if they cease to
be auditors of the Company and its Subsidiaries, other independent
certified public accountants of recognized national standing reasonably
satisfactory to the Majority Holders), containing no material uncertainty,
to the effect that they have audited the foregoing Consolidated financial
statements in accordance with generally accepted auditing standards and
that such Consolidated financial statements present fairly, in all material
respects, the financial position of the Company and its Subsidiaries
covered thereby at the dates thereof and the results of their operations
for the periods covered thereby in conformity with GAAP.
(b) The statement of such accountants that they have caused this
Agreement to be reviewed and that in the course of their audit of the
Company and its Subsidiaries no facts have come to their attention that
cause them to believe that any Default or Event of Default exists and in
particular that they have no knowledge of any Default or Event of Default
under paragraphs 6A through 6H, inclusive, or 5N, 5O or 5P, if such is not
the case, specifying such Default or Event of Default and the nature
thereof. This statement is furnished by such accountants with the
understanding that the examination of such accountants
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<PAGE>
cannot be relied upon to give such accountants knowledge of any such
Default except as it relates to accounting or auditing matters within the
scope of their audit.
(c) A certificate of the Company signed by a Financial Officer to the
effect that such officer has caused this Agreement to be reviewed and has
no knowledge of any Default or Event of Default, or if such officer has
such knowledge, specifying such Default or Event of Default and the nature
thereof, and what action the Company has taken, is taking or proposes to
take with respect thereto.
(d) Computations by the Company in the form set forth in Schedule
--------
5A(i) hereto demonstrating, as of the end of such fiscal year, compliance
-----
with the Computation Covenants, certified by a Financial Officer.
(e) Calculations, as at the end of such fiscal year, of (I) the
Accumulated Benefit Obligations for each Plan covered by Title IV of ERISA
(other than Multiemployer Plans) and (II) the fair market value of the
assets of such Plan allocable to such benefits.
(f) Supplements to Schedules 8A, 8D and 8J showing any changes in
------------ -- --
the information set forth in such Schedules not previously furnished to the
holders in writing, as well as any changes in the Charter, Bylaws or
incumbency of officers of the Company or its Subsidiaries from those
previously certified to the holders.
(ii) QUARTERLY REPORTS. The Company shall furnish to each holder in
duplicate (unless a greater or lesser number is requested by such holder)
as soon as available and, in any event, within 50 days after the end of
each of the first three fiscal quarters of the Company, the internally
prepared Consolidated balance sheet of the Company and its Subsidiaries as
of the end of such fiscal quarter, the Consolidated statements of income,
changes in shareholders' equity and cash flows of the Company and its
Subsidiaries for such fiscal quarter and for the portion of the fiscal year
then ended (all in reasonable detail) and together with Consolidating
schedules as of such date and for such period and, in the case of
Consolidated statements, comparative figures for the same period (if such
Consolidating schedules are requested by Prudential or the Majority
Holders) in the preceding fiscal year, all accompanied by:
(a) A certificate of the Company signed by a Financial Officer to
the effect that such financial statements have been prepared in accordance
with GAAP and present fairly, in all material respects, the financial
position of the Company and its Subsidiaries covered thereby at the dates
thereof and the results of their operations for the periods covered
thereby, subject only to normal year-end audit adjustments and the addition
of footnotes.
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<PAGE>
(b) A certificate of the Company signed by a Financial Officer to the
effect that such officer has caused this Agreement to be reviewed and has
no knowledge of any Default, or if such officer has such knowledge,
specifying such Default and the nature thereof and what action the Company
has taken, is taking or proposes to take with respect thereto.
(c) Computations by the Company in the form set forth in Schedule
--------
5A(i) hereto demonstrating, as of the end of such quarter, compliance with
-----
the Computation Covenants, certified by a Financial Officer.
(d) Supplements to Schedules 8A, 8D and 8J showing any changes in the
------------ -- --
information set forth in such Schedules not previously furnished to the
holders in writing, as well as any changes in the Charter, Bylaws or
incumbency of officers of the Company and its Subsidiaries from those
previously certified to the holders.
(iii) OTHER REPORTS. The Company shall promptly furnish to each
holder:
(a) As soon as prepared and in any event within 90 days after the
beginning of each fiscal year, an annual budget and operating projections
for such fiscal year of the Company and its Subsidiaries, prepared in a
manner consistent with the manner in which the financial projections
described in paragraph 8L were prepared and shall include a capital
expenditure plan for such fiscal year.
(b) Any material updates of such budget and projections.
(c) Any management letters furnished to the Company or any of its
Subsidiaries by the Company's auditors.
(d) All budgets, projections, statements of operations and other
reports furnished generally to the shareholders of the Company.
(e) Such registration statements, proxy statements and reports,
including Forms S-1, S-2, S-3, 10-K, 10-Q and 8-K, as may be filed by the
Company or any of its Subsidiaries with the Securities and Exchange
Commission.
(f) Any 90-day letter or 30-day letter from the federal Internal
Revenue Service asserting material tax deficiencies against the Company or
any of its Subsidiaries; and any similar notice from a state or other
taxing authority asserting material tax deficiencies against the Company or
any of its Subsidiaries that are not fully resolved without the assessment
of a material tax deficiency (and any tax paid) within 90 days following
the date of such notice.
(g) Notice of the issuance of any Funded Debt permitted by paragraph
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<PAGE>
6C(2)(xi) or 6C(2)(xii), together with a calculation of the proceeds
thereof (net of costs of issuance) and copies of all evidence of
Indebtedness and other documentation governing such Funded Debt.
(h) Any revised versions of the Risk and Product Management Policy
Statement referred to in paragraph 5J.
(iv) NOTICE OF LITIGATION. The Company shall promptly furnish to each
holder notice of any litigation or any administrative or arbitration
proceeding (a) to which the Company or any of its Subsidiaries may
hereafter become a party if the damages claimed in such proceeding exceed
$2,000,000 or (b) which creates a material risk of resulting, after giving
effect to any applicable insurance, in the payment by the Company and its
Subsidiaries of more than $1,000,000 or (c) which results, or creates a
material risk of resulting, in a Material Adverse Change.
(v) NOTICE OF DEFAULTS. Promptly upon acquiring knowledge thereof,
the Company shall notify the holders of the existence of any Default or
Event of Default, specifying the nature thereof and what action the Company
or any Subsidiary has taken, is taking or proposes to take with respect
thereto.
(vi) ERISA REPORTS. The Company shall furnish to the holders as soon
as available the following items with respect to any Plan:
(a) any request for a waiver of the funding standards or an extension
of the amortization period,
(b) any reportable event (as defined in section 4043 of ERISA), unless
the notice requirement with respect thereto has been waived by regulation,
(c) any notice received by any ERISA Group Person that the PBGC has
instituted or intends to institute proceedings to terminate any Plan, or
that any Multiemployer Plan is insolvent or in reorganization,
(d) notice of the possibility of the termination of any Plan by its
administrator pursuant to section 4041 of ERISA, and
(e) notice of the intention of any ERISA Group Person to withdraw, in
whole or in part, from any Multiemployer Plan.
(vii) OTHER INFORMATION. From time to time at reasonable intervals
upon request of Prudential or the Majority Holders, each of the Company and
its Subsidiaries shall furnish to the holders such other information
regarding the business, assets, financial condition, income or prospects of
the Company and its Subsidiaries as such officer may reasonably request,
including copies of all tax returns, licenses, agreements, leases and
instruments to which any of the
15
<PAGE>
Company or its Subsidiaries is party.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the
request of any holder, provide such holder, and any qualified institutional
buyer designated by such holder, such financial and other information as such
holder may reasonably determine to be necessary in order to permit compliance
with the information requirements of Rule 144A under the Securities Act in
connection with the resale of Notes, except at such times as the Company is
subject to the reporting requirements of section 13 or 15(d) of the Exchange
Act. For the purpose of this paragraph 5B, the term "QUALIFIED INSTITUTIONAL
BUYER" shall have the meaning specified in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY.
(i) The Company will permit any Person designated by the Majority
Holders in writing, at the expense of the holders making such request, to
visit and inspect any of the properties of the Company and its
Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom
and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Company, all at such
reasonable times and as often as the Majority Holders may reasonably
request.
(ii) The Company will permit any Person designated by any Significant
Holder in writing, at such Significant Holder's expense, to visit and
inspect any of the properties of the Company and its Subsidiaries, to
examine the corporate books and financial records of the Company and its
Subsidiaries and make copies thereof or extracts therefrom and to discuss
the affairs, finances and accounts of any of such corporations with the
principal officers of the Company, all at such reasonable times and as
often as such Significant Holder may reasonably request; provided, however,
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that so long as no Default or Event of Default exists, such Significant
Holder may only make one such request during a calendar year.
(iii) The Majority Holders, upon reasonable advance notice, may at the
expense of the Company undertake to have the Company and its Subsidiaries
reviewed by the commercial financial examiners and fixed asset appraisers
appointed by the Majority Holders; provided that so long as no Event of
--------
Default shall have occurred and be continuing, the Majority Holders shall
not request such reviews more than twice in any fiscal year of the Company.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any
Subsidiary shall create or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 6C(1) (unless prior written consent to the creation or
assumption thereof
16
<PAGE>
shall have been obtained pursuant to paragraph 11C), make or cause to be made
effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Indebtedness thereby secured so long as any such
other Indebtedness shall be so secured.
5E. TAXES AND OTHER CHARGES; ACCOUNTS PAYABLE.
(i) TAXES AND OTHER CHARGES. The Company shall, and shall cause each
of its Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same becomes in arrears, all material taxes,
assessments and other governmental charges imposed upon such Person and its
properties, sales or activities, or upon the income or profits therefrom,
as well as all claims for labor, materials or supplies which if unpaid
might by law become a Lien upon any of its property; provided, however,
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that any such tax, assessment, charge or claim need not be paid if the
validity or amount thereof shall at the time be contested in good faith by
appropriate proceedings and if such Person shall have set aside on its
books adequate reserves with respect thereto to the extent required by
GAAP; and provided, further, that the Company shall, and shall cause each
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of its Subsidiaries to, pay or bond, or cause to be paid or bonded, all
such taxes, assessments, charges or other governmental claims immediately
upon the commencement of proceedings to foreclose any Lien which may have
attached as security therefor (except to the extent such proceedings have
been dismissed or stayed).
(ii) ACCOUNTS PAYABLE. The Company shall, and shall cause each of
its Subsidiaries to, promptly pay when due, or in conformity with customary
trade terms, all other material Indebtedness incident to the operations of
such Person not referred to in paragraph 5E(I); provided, however, that any
-------- -------
such Indebtedness need not be paid if the validity or amount thereof shall
at the time be contested in good faith and if such Person shall have set
aside on its books adequate reserves with respect thereto to the extent
required by GAAP.
5F. TYPES OF BUSINESS. The Company shall, and shall cause each of
its Subsidiaries to, engage principally in one or more of the businesses of (a)
providing transportation, terminaling and storage services for petroleum
products and the distribution, purchase and/or sale of petroleum products, (b)
natural gas gathering, processing, transmission and marketing and (c) other
activities related thereto. The Company and its Subsidiaries may engage in
businesses other than those described in the preceding sentence, provided that
--------
the gross revenues of such other businesses in any fiscal year of the Company
shall not exceed 10% of the Consolidated gross revenues of the Company and its
Subsidiaries.
5G. MAINTENANCE OF PROPERTIES. The Company shall, and shall cause
each of its Subsidiaries to:
(i) keep its properties in such repair, working order and condition,
and shall from time to time make such repairs, replacements, additions and
17
<PAGE>
improvements thereto as are necessary for the efficient operation of its
businesses and shall comply at all times in all material respects with all
material franchises, licenses and leases to which it is party so as to
prevent any loss or forfeiture thereof or thereunder, except where failure
to comply with such provisions has not resulted, and does not create a
material risk of resulting, in the aggregate in any Material Adverse
Change; and
(ii) (other than Republic Natural Gas Company) do all things
necessary to preserve, renew and keep in full force and effect and in good
standing its legal existence and authority necessary to continue its
business; provided, however, that this paragraph 5G(ii) shall not prevent
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the merger, consolidation or liquidation of Subsidiaries permitted by
paragraph 6C(5).
5H. STATUTORY COMPLIANCE. The Company shall, and shall cause each of
its Subsidiaries to, comply in all material respects with all valid and
applicable statutes, laws, ordinances, zoning and building codes and other rules
and regulations of the United States of America, of the states and territories
thereof and their counties, municipalities and other subdivisions and of any
foreign country or other jurisdictions applicable to such Person, except where
failure so to comply with such provisions has not resulted, and does not create
a material risk of resulting, in the aggregate in any Material Adverse Change.
5I. COMPLIANCE WITH MATERIAL AGREEMENTS. The Company shall, and
shall cause each of its Subsidiaries to, comply in all material respects with
the Material Agreements (to the extent not in violation of the other provisions
of this Agreement or any other Loan Document). Without the prior written
consent of the Majority Holders, no Material Agreement shall be amended,
modified, waived or terminated in any manner that would have in any material
respect an adverse effect on the interests of the holders; provided, without
--------
limitation of the foregoing, that any modification of the Bank Agreement that
would cause the covenants of the Company or the defaults thereunder to be more
restrictive than the covenants or defaults, respectively, contained in this
Agreement or that would constitute or cause a Default or Event of Default shall
require the prior written consent of the Majority Holders.
5J. TRADING POLICY. The Company shall, and shall cause each of its
Subsidiaries (to the extent they are engaged in such business) to, maintain and
follow a policy of managing petroleum inventory risk with the objective of
minimizing potentially adverse impacts on earnings arising from volatility
in refined petroleum product prices. The holders acknowledge that the policy
described in the Risk and Product Management Policy Statement dated December
1996 of Continental Ozark, Inc., a copy of which is attached to this Agreement
as Schedule 5J, represents such a policy.
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5K. SUBORDINATED DEBENTURES. The Company shall do all things
necessary to assure that the Notes and all of the Obligations be and remain
"Superior Indebtedness" within the meaning of Section 10 of the Subordinated
Debentures Agreement.
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5L. INVENTORY ACCOUNTING. The Company shall, and shall cause each of
its Subsidiaries to, account for their inventory on the basis of the "LIFO"
method of accounting; provided, that they may change to the "FIFO" method of
--------
inventory accounting, if such method is then permitted by GAAP and if the
provisions of paragraph 6A are amended in such manner as the Majority Holders
shall consider necessary in the reasonable judgment to maintain the same
standards of creditworthiness.
5M. INSURANCE.
(i) PROPERTY INSURANCE. The Company shall, and shall cause each of
its Subsidiaries to, keep its assets which are of an insurable character
insured by financially sound and reputable insurers against theft and fraud
and against loss or damage by fire, explosion and hazards insured against
by extended coverage to the extent, in amounts and with deductibles at
least as favorable as those generally maintained by businesses of similar
size engaged in similar activities.
(ii) LIABILITY INSURANCE. The Company shall, and shall cause each of
its Subsidiaries to, maintain with financially sound and reputable insurers
insurance against liability for hazards, risks and liability to persons and
property to the extent, in amounts and with deductibles at least as
favorable as those generally maintained by businesses of similar size
engaged in similar activities; provided, however, that it may effect
-------- -------
workers' compensation insurance or similar coverage with respect to
operations in any particular state or other jurisdiction through an
insurance fund operated by such state or jurisdiction or by meeting the
self-insurance requirements of such state or jurisdiction.
5N. ERISA, ETC. The Company shall comply, and shall cause each of
its Subsidiaries and all ERISA Group Persons to comply, in all material
respects, with the provisions of ERISA and the Code applicable to each Plan.
The Company shall meet, and shall cause each of its Subsidiaries and all ERISA
Group Persons to meet, all minimum funding requirements applicable to them with
respect to any Plan pursuant to section 302 of ERISA or section 412 of the Code,
without giving effect to any waivers of such requirements or extensions of the
related amortization periods which may be granted. At no time shall the
Accumulated Benefit Obligations under any Plan that is not a Multiemployer Plan
exceed the fair market value of the assets of such Plan allocable to such
benefits by more than $1,000,000. The Company shall not withdraw, and shall
cause its Subsidiaries and all other ERISA Group Persons not to withdraw, in
whole or in part, from any Multiemployer Plan so as to give rise to withdrawal
liability exceeding $1,000,000 in the aggregate. At no time shall the actuarial
present value of unfunded liabilities for post-employment health care benefits,
whether or not provided under a Plan, calculated in a manner consistent with
Statement No. 106 of the Financial Accounting Standards Board, exceed
$1,000,000.
5O. OPEN POSITIONS. The Company and its Subsidiaries may maintain
19
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Open Positions relating to product inventory requirements that do not exceed the
amount permitted by the Risk and Product Management Policy Statement then in
effect, so long as that policy is materially consistent with the requirements of
the first sentence of paragraph 5J.
5P. ENVIRONMENTAL LAWS.
(i) COMPLIANCE WITH LAW AND PERMITS. The Company shall, and shall
cause each of its Subsidiaries to, use and operate all of its facilities
and properties in material compliance with all Environmental Laws, keep all
necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain in
material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Environmental Laws, except where
any failure to so act could not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) NOTICE OF CLAIMS, ETC. The Company shall immediately notify the
holders, and provide copies upon receipt, of all written claims,
complaints, notices or inquiries from governmental authorities relating to
the condition of the facilities and properties of the Company or its
Subsidiaries or compliance with Environmental Laws which could have a
Material Adverse Effect, and shall use best efforts to promptly cure and
have dismissed with prejudice to the satisfaction of the Majority Holders
any actions and proceedings relating to compliance with Environmental Laws.
6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
6A. CERTAIN FINANCIAL TESTS.
6A(1) FIXED CHARGES COVERAGE. The Company will not permit, on the
last day of each fiscal quarter of the Company, the Consolidated Income from
Operations of the Company and its Subsidiaries for the period of four
consecutive fiscal quarters then ended to be less than 225% of the Consolidated
interest expense of the Company and its Subsidiaries for such period determined
in accordance with GAAP.
6A(2) LEVERAGE RATIO. The Company will not permit the Leverage Ratio
of the Company and its Subsidiaries at any time during each period specified
below to equal or exceed the percentage set forth below next to such period:
Period Percentage
------ ----------
To and including April 29, 1999 65%
From and including April 30, 1999 60%
20
<PAGE>
to and including April 29, 2000
April 30, 2000 and thereafter 55%.
6A(3) CONSOLIDATED TANGIBLE NET WORTH. The Company will not permit
Consolidated Tangible Net Worth at any time to be less than $100,000,000;
provided, however, that on April 30, 1997 and on the last day of each fiscal
- - -------- -------
quarter of the Company thereafter, the then effective dollar amount in this
paragraph 6A(3) shall be increased by the sum of (a) 50% of Consolidated Net
Income (if positive) for the fiscal quarter then ended plus (b) 50% of the net
proceeds realized by the Company and its Subsidiaries, calculated on a
Consolidated basis in accordance with GAAP, from the issuance of any equity
securities during the fiscal quarter then ended.
6B. DISTRIBUTIONS. The Company will not, and will not permit any of
its Subsidiaries to, make any Distribution except for the following:
------
(i) Subsidiaries of the Company may make Distributions to the Company
or any Wholly Owned Subsidiary of the Company.
(ii) So long as immediately before and after giving effect thereto no
Default or Event of Default exists, the
Company may make Distributions to its stockholders; provided that the
--------
cumulative amount distributed after October 31, 1996 shall not exceed the
sum of (a) $5,000,000 plus (b) 50% of the cumulative Consolidated Net
----
Income of the Company and its Subsidiaries commencing November 1, 1996.
(iii) So long as immediately before and after giving effect thereto no
Default or Event of Default exists, the Company may make scheduled payments
of interest and principal on the Subordinated Debentures and other Funded
Debt of the Company permitted under paragraph 6C(2)(xi).
6C. LIENS, INDEBTEDNESS AND OTHER RESTRICTIONS. The Company will
not, and will not permit any of its Subsidiaries to:
6C(1) LIENS. Create, incur or enter into, or suffer to be created or
incurred or to exist, any Lien, except the following:
------
(i) Liens on the Loan Security that secure the Notes, and, so long as
the Intercreditor Agreement is in effect, Liens on the Loan Security that
secure the Bank Obligations.
(ii) Liens to secure taxes, assessments and other governmental
charges, to the extent that payment thereof shall not at the time be
required by paragraph 5E.
(iii) Deposits or pledges made (a) in connection with, or to secure
21
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payment of, workers' compensation, unemployment insurance, old age pensions
or other social security, (b) in connection with casualty insurance
maintained in accordance with paragraph 5M, (c) to secure the performance
of bids, tenders, contracts (other than contracts relating to Financing
Debt) or leases, (d) to secure statutory obligations or surety or appeal
bonds, (e) to secure indemnity, performance or other similar bonds in the
ordinary course of business or (f) in connection with contested amounts to
the extent that payment thereof shall not at that time be required by
paragraph 5E.
(iv) Liens in respect of judgments or awards, to the extent that such
judgments or awards are permitted by paragraph 6C(2)(vi).
(v) Liens of carriers, warehouses, mechanics and similar Liens, in
each case (a) in existence less than 90 days from the date of creation
thereof or (b) being contested in good faith by the Company or any
Subsidiary in appropriate proceedings (so long as the Company or such
Subsidiary shall have set aside on its books adequate reserves with respect
thereto to the extent required by GAAP).
(vi) Encumbrances in the nature of (a) zoning restrictions, (b)
easements, (c) restrictions of record on the use of real property, (d)
landlords' and lessors' Liens on rented premises and (e) restrictions on
transfers or assignment of leases, which in each case do not materially
detract from the value of the encumbered property or materially impair the
use thereof in the business of the Company or any Subsidiary.
(vii) Restrictions under federal and state securities laws on the
transfer of securities.
(viii) Restrictions under Foreign Trade Regulations on the transfer or
licensing of certain assets of the Company and its Subsidiaries.
(ix) Liens constituting (a) purchase money security interests
(including mortgages, conditional sales, Capitalized Leases and any other
title retention or deferred purchase devices) in real property, interests
in leases or tangible personal property (other than inventory) existing or
created on the date on which such property is acquired, and (b) the
renewal, extension or refunding of any security interest referred to in the
foregoing clause (a) in an amount not to exceed the amount thereof
remaining unpaid immediately prior to such renewal, extension or refunding;
provided, however, that (i) each such security interest shall attach solely
-------- -------
to the particular item of property so acquired, and the principal amount of
Indebtedness (including Indebtedness in respect of Capitalized Lease
Obligations) secured thereby shall not exceed the cost (including all such
Indebtedness secured thereby, whether or not assumed) of such item of
property; and (ii) the aggregate principal amount of all Indebtedness
secured by Liens permitted by this paragraph 6C(1)(ix) shall not exceed the
amount
22
<PAGE>
permitted by paragraph 6C(2)(vii).
6C(2) INDEBTEDNESS. Create, incur, assume or otherwise become or
remain liable with respect to any Indebtedness except the following if incurred
------
and existing in compliance with paragraph 6A(1) and 6A(2):
(i) Indebtedness in respect of the Notes.
(ii) Guarantees permitted by paragraph 6C(3).
(iii) Current liabilities, other than Financing Debt, incurred in the
ordinary course of business.
(iv) To the extent that payment thereof shall not at the time be
required by paragraph 5E, Indebtedness in respect of taxes, assessments,
governmental charges and claims for labor, materials and supplies.
(v) Indebtedness secured by Liens of carriers, warehouses, mechanics
and landlords permitted by paragraphs 6C(1)(v) and 6C(1)(vi).
(vi) Indebtedness in respect of judgments or awards (a) which have
been in force for less than the applicable appeal period or (b) in respect
of which the Company or any Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review and, in the case of each of
clauses (a) and (b), the Company or such Subsidiary shall have taken
appropriate reserves therefor in accordance with GAAP and execution of such
judgment or award shall not be levied.
(vii) To the extent permitted by paragraph 6C(1)(ix), Indebtedness in
respect of Capitalized Lease Obligations or secured by purchase money
security interests; provided, however, that (a) the aggregate principal
-------- -------
amount of all Indebtedness permitted by this paragraph 6C(2)(vii) which
consists of Indebtedness in respect of Capital Lease Obligations and other
Indebtedness incurred for the acquisition of equipment shall not exceed
$2,000,000 at any one time outstanding and (b) that the aggregate principal
amount of all Indebtedness permitted by this paragraph 6C(2)(vii) which
consists of Indebtedness issued to sellers of any business or part thereof
or operating assets in consideration for the acquisition thereof by the
Company or a Subsidiary shall not exceed $10,000,000 at any one time
outstanding.
(viii) Indebtedness in respect of deferred taxes arising in the
ordinary course of business.
(ix) Indebtedness in respect of inter-company loans and advances among
the Company and its Subsidiaries which are not prohibited by paragraph
6C(4).
23
<PAGE>
(x) Indebtedness of the Company in respect of its 12.75% Guaranteed
Senior Subordinated Debentures due December 15, 2000 (the "SUBORDINATED
DEBENTURES").
(xi) Unsecured Funded Debt of the Company which is incurred or issued
for the purpose of financing acquisitions permitted by paragraphs 6C(4)(v)
or 6C(4)(vii) and/or by the last paragraph of paragraph 6C(4) and which is
subordinated to the Obligations on terms satisfactory to the Majority
Holders.
(xii) So long as the Intercreditor Agreement is in effect, Funded Debt
of the Company under the Bank Agreement not exceeding $125,000,000, and
other "Credit Obligations" (as defined in the Bank Agreement) of the
Company and the Guarantors under the Bank Agreement.
(xiii) Unfunded pension liabilities with respect to Plans so long as
the Company is in compliance with paragraph 5N.
(xiv) Indebtedness outstanding on December 18, 1996 and described in
Schedule 8D.
-----------
(xv) Unsecured Funded Debt of the Company; provided that after giving
--------
effect to the issuance of such unsecured Funded Debt and the
application of any of the proceeds thereof on the issuance date no
Default or Event of Default shall exist, the Leverage Ratio shall not
exceed 60% on or before April 29, 1999, 55% on or after April 30, 1999
and on or before April 29, 2000, or 50% on or after April 30, 2000 and
the Company shall have delivered to the holders a certificate of a
Financial Officer of the Company in reasonable detail demonstrating
compliance with these conditions after giving effect to such issuance
and application; provided, further, either (a) that the terms and
-------- -------
conditions of such unsecured Funded Debt, including without
limitation, financial covenants, defaults, amortization and rate of
interest shall have been consented to by to the Majority Holders or
(b) that the sum of (I) the aggregate outstanding principal amount of
Notes (other than the Series A Notes) plus (II) the aggregate
----
principal amount of Indebtedness permitted under this clause (b) and
not consented to as provided in the preceding clause (a) at no time
shall exceed $50,000,000.
(xvi) Indebtedness of the Company (other than Financing Debt) in
addition to the foregoing; provided, however, that the aggregate amount of
-------- -------
all such Indebtedness at any one time outstanding shall not exceed
$2,000,000.
6C(3) GUARANTEES; LETTERS OF CREDIT. Become or remain liable with
respect to any Guarantee, including reimbursement obligations under letters of
credit or other financial guarantees by third parties, except the following:
------
(i) Guarantees of the Guarantors of the Obligations.
(ii) Guarantees by the Company or its Subsidiaries of Indebtedness
incurred by any of its Subsidiaries and permitted by paragraph 6C(2).
24
<PAGE>
(iii) Unsecured Guarantees by Wholly Owned Subsidiaries of the
Obligations or Indebtedness of the Company permitted by paragraphs 6C(2)(x)
and 6C(2)(xi), so long as such Wholly Owned Subsidiaries are Guarantors and
such Guarantees are subordinated to such Guarantors' Guarantees of the
Obligations to the same extent and in the same manner as the Indebtedness
of the Company permitted by paragraphs 6C(2)(x) and 6C(2)(xi).
(iv) Guarantees of the Company and reimbursement obligations of the
Company with respect to letters of credit issued in support of Lion Oil
Company, an Arkansas corporation, but only so long as the Investment
represented thereby is permitted under paragraph 6C(4)(vi) or 6C(4)(vii)
and, if permitted by paragraph 6C(4)(vii), is counted toward the limit
provided therein.
(v) The unsecured Guarantee by TransMontaigne Product Services, Inc.
(formerly known as Continental Ozark, Inc.), an Arkansas corporation, of
the Subordinated Debentures pursuant to the Senior Subordinated Debenture
Guarantee dated March 28, 1991 (the "SUBORDINATED DEBENTURES GUARANTEE")
executed by such corporation.
(vi) Letters of Credit and Guarantees under the Bank Agreement so long
as the Intercreditor Agreement is in effect.
6C(4) INVESTMENTS AND ACQUISITIONS. Have outstanding, acquire, commit
itself to acquire or hold any Investment (including any Investment consisting of
the acquisition of any business) except for the following:
------
(i) Investments of the Company and its Subsidiaries in Wholly Owned
Subsidiaries as long as such Wholly Owned Subsidiaries are or become
Guarantors; provided, that Investments consisting of all or part of a
--------
business or operating assets shall be permitted under this paragraph
6C(4)(i) to the extent that such business or assets shall be acquired as
assets of the Company or of a Wholly Owned Subsidiary which is or becomes a
Guarantor.
(ii) Intercompany loans and advances from any Wholly Owned Subsidiary
to the Company or other Wholly Owned Subsidiaries but in each case only to
the extent reasonably necessary for Consolidated tax planning and working
capital management.
(iii) Investments in Cash Equivalents.
(iv) Guarantees permitted by paragraph 6C(3).
(v) Investments made after the date hereof in Subsidiaries listed in
Schedule 8A hereto as supplemented from time to time other than Wholly
-----------
Owned Subsidiaries, provided that the aggregate outstanding amount of
--------
loans, advances
25
<PAGE>
and other Investments in such Subsidiaries, measured in each case as of the
date of the making of such Investment, shall not at any time exceed 10% of
Consolidated Net Tangible Assets.
(vi) Investments outstanding on December 18, 1996 and identified in
Schedule 8D, in each case as said Schedule 8D is in effect on December 18,
----------- -----------
1996.
(vii) Other Investments made after December 18, 1996 that are not
permitted by any of the foregoing subsections of this paragraph 6C(4),
provided that the aggregate outstanding amount of loans, advances and other
--------
Investments of the Company and its Subsidiaries permitted under this
paragraph 6C(4)(vii), measured in each case as of the date of the making of
such Investment, shall not at any time exceed 10% of Consolidated Tangible
Net Worth; provided, however, that no Investment may be made in a
-------- -------
Subsidiary unless the Subsidiary is listed in Schedule 8A hereto as
-----------
supplemented from time to time.
In addition, the Company covenants that the Company and its
Subsidiaries shall not acquire any operating business unless, after giving
effect to such acquisition and the financing thereof, the Company and its
Subsidiaries will not suffer any Default or Event of Default under any
Computation Covenant or any other provision of this Agreement; and provided,
--------
that, if the consideration (including without limitation any assumption of
Indebtedness, any deferred consideration and any consideration paid for any
related non-competition agreement) given shall exceed $3,000,000 for any single
acquisition or $15,000,000 in the aggregate for acquisitions consummated in any
period of 12 consecutive months, then prior to consummating any such acquisition
the Company shall provide to the holders a certificate of a Financial Officer
demonstrating that, after giving effect to such acquisition and the financing
thereof, the Company and its Subsidiaries will not suffer any Default or Event
of Default under any Computation Covenant or any other provision of this
Agreement.
6C(5) MERGER, CONSOLIDATION AND DISPOSITIONS OF ASSETS. Merge or
enter into a consolidation or sell, lease, sell and lease back, sublease or
otherwise dispose of any of its assets, except the following:
------
(i) The Company and any of its Subsidiaries may sell or otherwise
dispose of (a) inventory in the ordinary course of business, (b) tangible
assets to be replaced in the ordinary course of business within six months
by other tangible assets of equal or greater value and (c) tangible assets
that are no longer used or useful in the business of the Company or such
Subsidiary, the fair market value (or book value if greater) of which shall
not exceed 4% of Consolidated Net Tangible Assets of the Company and its
Subsidiaries as of the last day of the next preceding fiscal year.
(ii) Any Wholly Owned Subsidiary of the Company may merge or be
liquidated into the Company or any other Wholly Owned Subsidiary of the
Company so long as after giving effect to any such merger to which the
Company
26
<PAGE>
is a party the Company shall be the surviving or resulting Person.
(iii) The Company and its Subsidiaries may enter into leases (other
than Capitalized Leases) as lessor of real and tangible personal property
and rights associated therewith in the ordinary course of business.
(iv) Any inactive Subsidiary other than a Guarantor may be
liquidated.
6C(6) LEASE OBLIGATIONS. Be or become obligated as lessee under any
lease except:
------
(i) Capitalized Leases permitted by paragraph 6C(2)(vii) and
6C(1)(ix).
(ii) Leases other than Capitalized Leases; provided, however, that the
-------- -------
aggregate fixed rental obligations for any fiscal year (excluding payments
required to be made by the lessee in respect of taxes and insurance whether
or not denominated as rent) shall not exceed $8,000,000 per annum.
6D. ISSUANCE OF STOCK BY SUBSIDIARIES; SUBSIDIARY DISTRIBUTIONS.
(i) ISSUANCE OF STOCK BY SUBSIDIARIES. The Company will not permit
any Subsidiary to issue or sell any shares of its capital stock or other
evidence of beneficial ownership to any Person other than the Company or
any Wholly Owned Subsidiary of the Company, which shares shall have been
pledged to the Collateral Agent as part of the Loan Security.
(ii) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Except for this
Agreement and the Loan Documents and the Bank Agreement, the Company will
not, and will not permit any Subsidiary to, enter into or be bound by any
agreement (including covenants requiring the maintenance of specified
amounts of net worth or working capital) restricting the right of any
Subsidiary to make Distributions or extensions of credit to the Company
(directly or indirectly through another Subsidiary).
6E. DERIVATIVE CONTRACTS. The Company will not, and will not permit
any of its Subsidiaries to, enter into any Interest Rate Protection Agreement,
foreign currency exchange contract or other financial or commodity derivative
contracts except to provide hedge protection for an underlying economic
transaction in the ordinary course of business.
6F. NEGATIVE PLEDGE CLAUSES. The Company will not, and will not
permit any of its Subsidiaries to, enter into any agreement, instrument, deed or
lease which prohibits or limits the ability of the Company or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
their respective properties, assets or revenues, whether now owned or hereafter
acquired, except the following:
------
27
<PAGE>
(i) This Agreement and the other Loan Documents.
(ii) Covenants in documents creating Liens permitted by paragraph
6C(1) prohibiting further Liens on the assets encumbered thereby.
(iii) The Bank Agreement.
6G. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not
permit any of its Subsidiaries to, effect any transaction with any of their
respective Affiliates (except for the Company and its Subsidiaries) on a basis
less favorable to the Company and its Subsidiaries than would be the case if
such transaction had been effected with a non-Affiliate.
6H. INACTIVE SUBSIDIARIES. The Company will not, and will not permit
any of its Subsidiaries to, make any Investment in or transfer any assets to
each of K123 Corporation, a Colorado corporation, and Republic Natural Gas
Company, a Kansas corporation, each of which is a Wholly Owned Subsidiary of the
Company.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any principal of, or Yield
Maintenance Amount payable with respect to, any Note when the same shall
become due, either by the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than three Business Days after the date due; or
(iii) the Company or any Subsidiary defaults (whether as primary
obligor or as guarantor or other surety) in any payment of principal of or
interest on any other Financing Debt beyond any period of grace provided
with respect thereto, or the Company or any Subsidiary fails to perform or
observe any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing) and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such holder
or holders) to cause, such obligation to become due (or to be repurchased
by the Company or any Subsidiary) prior to any stated maturity, provided
--------
that the aggregate amount of all obligations as to which such a payment
default shall occur and be continuing or such a failure or other event
causing or permitting acceleration (or resale to the Company or any
Subsidiary) shall occur and be continuing exceeds $3,000,000; or any Lien
or any property of the Company or any of its Subsidiary securing any such
Financing Debt shall be enforced by foreclosure or
28
<PAGE>
similar action; or
(iv) any representation or warranty made by the Company herein or by
any Obligor in any Loan Document or by the Company, any other Obligor or
any of their officers in any writing furnished in connection with or
pursuant to this Agreement or the other Loan Documents shall be false in
any material respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant or
agreement contained in paragraph 5A(v), 5J, 5O, 6A, 6C(1), 6C(2), 6C(3),
6C(5) or 6C(6); or
(vi) the Company or any other Obligor fails to perform or observe any
other agreement, covenant, term or condition contained herein or in any
other Loan Document and such failure shall not be remedied within 30 days
after the earlier of (a) Financial Officer obtains actual knowledge thereof
or (b) notice thereof by any holder to the Company; or
(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or
(viii) any decree or order for relief in respect of the Company or any
Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (the "BANKRUPTCY LAW"),
of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
90 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or
29
<PAGE>
decree remains unstayed and in effect for more than 60 days: or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently ended, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
(xiii) one or more final judgments or orders in an aggregate amount
in excess of $1,000,000 is rendered against the Company or any Subsidiary
and either (i) enforcement proceedings have been commenced by any creditor
upon any such judgment or order of (ii) within 60 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending appeal,
or within 60 days after the expiration of any such stay, such judgment is
not discharged; or
(xiv) any "reportable event" (as defined in section 4043 of ERISA)
shall have occurred that reasonably could be expected to result in
termination of a Plan or the appointment by the appropriate United States
District Court of a trustee to administer any Plan or the imposition of a
Lien in favor of a Plan; or any ERISA Group Person shall fail to pay when
due amounts aggregating in excess of $1,000,000 which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice
of intent to terminate a Plan shall be filed under Title IV of ERISA by any
ERISA Group Person or administrator; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to
be appointed to administer any Plan or a proceeding shall be instituted by
a fiduciary of any Plan against any ERISA Group Person to enforce section
515 or 4219(c)(5) of ERISA and such proceeding shall not have been
dismissed within 60 days thereafter; or a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that
any Plan must be terminated.
(xv) any Loan Document shall cease for any reason (other than the
scheduled termination thereof in accordance with its terms) to be
enforceable in accordance with its terms or in full force and effect and
such enforceability shall not be restored, or other provision therefor
made, to the satisfaction of the Majority Holders within 30 days following
such cessation; or any party to any Loan Document shall so assert in a
judicial or similar proceeding; or the security interests created by or any
Loan Document shall cease to be enforceable and of the same effect and
priority purported to be created hereby; or
(xvi) except as permitted by paragraph 6C(5):
30
<PAGE>
(a) The Company shall cease to own, directly or indirectly, all the
capital stock of any Subsidiary which is a Wholly Owned Subsidiary on the
date hereof or subsequently becomes a Wholly Owned Subsidiary;
(b) any Person, together with "affiliates" and "associates" of such
Person within the meaning of Rule 12b-2 of the Exchange Act, which is not
now a beneficial owner of equity securities of the Company shall acquire
after the date hereof beneficial ownership within the meaning of Rule 13d-3
of the Exchange Act of 50% or more of either the voting stock or total
equity capital of the Company;
(c) a majority of the board of directors shall consist of
individuals who were not on the date hereof members of such board, except
to the extent that the new members were nominated by a majority of the
directors serving on the date hereof; and
(d) The Company or any of its Subsidiaries or any other Obligor
shall initiate any action to dissolve, liquidate or otherwise terminate its
existence; or
(xvii) there shall occur any "Event of Default" as defined in Section
13.1 of the Subordinated Debentures Agreement, or any of the Obligations
shall fail to be "Superior Indebtedness" within the meaning of Section 10
of the Subordinated Debentures Agreement;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, any holder of any Note may at its option, by notice in
writing to the Company, declare all of the Notes held by such holder to be, and
all of the Notes held by such holder shall thereupon be and become, immediately
due and payable together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, (b) if such event is an Event of Default specified in clause (viii),
(ix) or (x) of this paragraph 7A with respect to the Company, all of the Notes
at the time outstanding shall automatically become immediately due and payable
at par together with interest accrued thereon and the Yield-Maintenance Amount,
if any, with respect to all such Notes, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company, and (C) if
such event is any Event of Default other than as specified in preceding clause
(b), the Required Holder(s) of the Notes of any Series may at its or their
option by notice in writing to the Company, declare all of the Notes of such
Series to be, and all of the Notes of such Series shall thereupon be and become,
immediately due and payable together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, with respect to each Note of such
Series, without presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes of any Series shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) of the Notes of such Series
may, by notice in
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writing to the Company, rescind and annul such declaration and its consequences
if (i) the Company shall have paid all overdue interest on the Notes of such
Series, the principal of and Yield-Maintenance Amount, if any, payable with
respect to any Notes of such Series which have become due otherwise than by
reason of such declaration, and interest on such overdue interest and overdue
principal and Yield Maintenance Amount at the rate specified in the Notes of
such Series, (ii) the Company shall not have paid any amounts which have become
due solely by reason of such declaration, (iii) all Events of Default and
Defaults, other than non-payment of amounts which have become due solely by
reason of such declaration, shall have been cured or waived pursuant to
paragraph 12C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes of such Series or this
Agreement. No such rescission or annulment shall extend to or affect any
subsequent Event of Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
7E. ANNULMENT OF DEFAULTS. Once an Event of Default has occurred,
such Event of Default shall be deemed to exist and be continuing for all
purposes of the Loan Documents until the Majority Holders (unless otherwise
specified in paragraph 12C) shall have waived such Event of Default in writing,
stated in writing that the same has been cured to such holders' reasonable
satisfaction or entered into an amendment to this Agreement which by its express
terms cures such Event of Default, at which time such Event of Default shall no
longer be deemed to exist or to have continued. No such action by the holders
shall extend to or affect any subsequent Event of Default or impair any rights
of the holders upon the occurrence thereof. The making of any extension of
credit (including the purchase of Notes) during the existence of any Default or
Event of Default shall not constitute a waiver thereof.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
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8A. ORGANIZATION.
(i) THE COMPANY. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware,
and the Company has the corporate power to own its respective property and
to carry on its respective business as now being conducted. The execution,
delivery and performance by the Company of this Agreement and the other
Loan Documents to which it is a party (including, without limitation to
grant the Collateral Agent, for the benefit of the holders, the security
interests in the Loan Security owned by it to secure the Obligations) are
within the Company's corporate powers and have been duly authorized by all
necessary corporate action. Certified copies of the Charter and By-laws of
the Company have been previously delivered to the holders and are correct
and complete. Schedule 8A, as from time to time hereafter supplemented in
-----------
accordance with paragraphs 5A(i) and 5A(ii), sets forth, as of the later of
the date hereof or as of the end of the most recent fiscal quarter for
which financial statements are required to be furnished in accordance with
such paragraphs, (i) the jurisdiction of incorporation of the Company, (ii)
the address of the Company's principal executive office and chief place of
business, (iii) each name, including any trade name, under which the
Company conducts its business and (iv) the jurisdictions in which the
Company keeps tangible personal property.
(ii) SUBSIDIARIES. Each Subsidiary is a corporation duly organized
and validly existing in good standing under the laws of the jurisdiction in
which it is incorporated, and each Subsidiary has the corporate power to
own its respective property and to carry on its respective business as now
being conducted. The execution, delivery and performance by each
Subsidiary of this Agreement and the other Loan Documents to which it is a
party (including, without limitation to grant the Collateral Agent, for the
benefit of the holders, the security interests in the Loan Security owned
by it to secure the Obligations) are within such Subsidiary's corporate
powers and have been duly authorized by all necessary corporate action.
Certified copies of the Charter and By-laws of each Guarantor have been
previously delivered to the Purchasers and are correct and complete.
Schedule 8A, as from time to time hereafter supplemented in accordance with
-----------
paragraphs 5A(i) and 5A(ii), sets forth, as of the later of the date hereof
or as of the end of the most recent fiscal quarter for which financial
statements are required to be furnished in accordance with such paragraphs,
(i) the jurisdiction of incorporation of each Subsidiary, (ii) the address
of each Subsidiary's principal executive office and chief place of
business, (iii) each name, including any trade name, under which such
Subsidiary conducts its business and (iv) the jurisdictions in which such
Subsidiary keeps tangible personal property; provided, however, that there
-------- -------
may be omitted from Schedule 8A one or more Subsidiaries which have no
-----------
business operations and no assets or liabilities.
(iii) CAPITALIZATION. No options, warrants, conversion rights,
preemptive rights or other statutory or contractual rights to purchase
shares of capital stock or
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<PAGE>
other securities of any Subsidiary now exist, nor has any Subsidiary
authorized any such right, nor is any Subsidiary obligated in any other
manner to issue shares of its capital stock or other securities.
8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser
of any Accepted Notes with the following financial statements, provided by a
principal Financial Officer of the Company: (i) a Consolidated balance sheet of
the Company and its Subsidiaries as at April 30 in each of the three fiscal
years of the Company most recently completed prior to the date as of which this
representation is made or repeated to such Purchaser (other than fiscal years
completed within 95 days prior to such date for which audited financial
statements have not been released) and Consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for each
such year, all reported on by KPMG Peat Marwick LLP; and (ii) a Consolidated
balance sheet of the Company and its Subsidiaries as at the end of the quarterly
period (if any) most recently completed prior to such date and after the end of
such fiscal year (other than quarterly periods completed within 50 days prior to
such date for which financial statements have not been released) and the
comparable quarterly period in the preceding fiscal year and Consolidated
statements of income, stockholders' equity and cash flows for the periods from
the beginning of the fiscal years in which such quarterly periods are included
to the end of such quarterly periods, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and correct
in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has been no material adverse change in the business, property
or assets, condition (financial or otherwise) operations or prospects of the
Company and its Subsidiaries taken as a whole since the end of the most recent
fiscal year for which such audited financial statements have been furnished, and
neither the Company nor any Subsidiary of the Company has entered into any
material transaction outside the ordinary course of business except for the
transactions contemplated by this Agreement and the Material Agreements.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which might result in any material adverse change in the
business, property or assets, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole. There is no action, suit,
investigation or proceeding pending or, to the knowledge of the
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<PAGE>
Company, threatened against the Company or any of its Subsidiaries which
purports to affect the validity or enforceability of this Agreement or any other
Loan Document.
8D. OUTSTANDING DEBT. Schedule 8D, as from time to time hereafter
-----------
supplemented in accordance with paragraph 5A(i) and 5A(ii) sets forth (a) the
amounts (as of the dates indicated in Schedule 8D, as so supplemented) of all
-----------
Financing Debt of the Company and its Subsidiaries and all agreements which
relate to such Financing Debt, (b) all Liens and Guarantees with respect to such
Financing Debt, (c) all agreements which directly or indirectly require the
Company or any Subsidiary to make any Investment and (d) all Investments
permitted under paragraph 6C(4)(vi). The Company has furnished the Purchasers
with correct and complete copies of any agreements described in clauses (a),
(b), (c) and (d) above requested by the Purchasers. There exists no default
under the provisions of any instrument evidencing such Indebtedness or of any
agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has defensible title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the most
recent audited balance sheet referred to in paragraph 8B (other than properties
and assets disposed of in the ordinary course of business), subject to no Lien
of any kind except Liens permitted by paragraph 6C(1) and except for assets
disposed of as permitted by paragraph 6C(5). All leases necessary in any
material respect for the conduct of the respective businesses of the Company and
its Subsidiaries are valid and subsisting and are in full force and effect.
8F. TAXES. The Company has and each of its Subsidiaries has filed
all federal, state and other income tax returns which, to the best knowledge of
the officers of the Company and its Subsidiaries, are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments received
by it to the extent that such taxes have become due, except such taxes as are
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with generally accepted accounting
principles.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement or subject
to any charter or other corporate restriction which materially and adversely
affects its business, property or assets, condition (financial or otherwise) or
operations. Neither the execution nor delivery of this Agreement, the Notes or
the other Loan Documents, nor the offering, issuance and sale of the Notes, nor
fulfillment of nor compliance with the terms and provisions hereof and of the
Notes or the other Loan Documents will conflict with, or result in a breach of
the terms, conditions or provisions of, or constitute a default under, or result
in any violation of, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to, the
Charter or By-laws of the Company or any of its Subsidiaries, any award of any
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<PAGE>
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject (other than the Liens created
by the Pledge Agreement). Neither the Company nor any of its Subsidiaries is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing Indebtedness of the Company or such Subsidiary, any agreement
relating thereto or any other contract or agreement (including its Charter)
which limits the amount of, or otherwise imposes restrictions on the incurring
of, Indebtedness of the Company of the type to be evidenced by the Notes except
as set forth in the agreements listed in Schedule 8G attached hereto.
-----------
8H. OFFERING OF NOTES. Neither the Company nor any agent acting on
its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes or
any similar security of the Company from, or otherwise approached or negotiated
with respect thereto with, any Person other than institutional investors, and
neither the Company nor any agent acting on its behalf has taken or will take
any action which would subject the issuance or sale of the Notes to the
provisions of Section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. None of the proceeds of the sale of any Notes
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any "margin stock" as defined
in Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System ("MARGIN STOCK") or for the purpose of maintaining, reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
stock that is then currently a margin stock or for any other purpose which might
constitute the purchase of such Notes a "purpose credit" within the meaning of
such Regulation G, unless the Company shall have delivered to the Purchaser
which is purchasing such Notes, on the Closing Day for such Notes, an opinion of
counsel satisfactory to such Purchaser stating that the purchase of such Notes
does not constitute a violation of such Regulation G. Neither the Company nor
any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation G, T, or X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Exchange Act, in each case as in effect now or as the same may hereafter be
in effect.
8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company , any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, property or assets, condition (financial or otherwise) or operations
of the
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<PAGE>
Company and its Subsidiaries taken as a whole. Neither the Company , any
Subsidiary nor any ERISA Affiliate has incurred or presently expects to incur
any withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan which is or would be materially adverse to the business,
property or assets, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole. The execution and delivery of
this Agreement and the issuance and sale of the Notes will be exempt from or
will not involve any transaction which is subject to the prohibitions of section
406 of ERISA and will not involve any transaction in connection with which a
penalty could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the Company in the
next preceding sentence is made in reliance upon and subject to the accuracy of
the representation of each Purchaser in paragraph 9B as to the source of funds
to be used by it to purchase any Notes. Each Multiemployer Plan and each plan
that constitutes a "defined benefit plan" (as defined in ERISA) are set forth in
Schedule 8J.
- - -----------
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of
any Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
any action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Closing
Day for any Notes with the Securities and Exchange Commission and/or state Blue
Sky authorities) in connection with the execution and delivery of this
Agreement, the offering, issuance, sale or delivery of the Notes or fulfillment
of or compliance with the terms and provisions hereof or of the Notes.
8L. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to the
Company or any of its Subsidiaries which materially adversely affects or in the
future may (so far as the Company can now foresee) materially adversely affect
the business, property or assets, condition (financial or otherwise) or
operations of the Company or any of its Subsidiaries and which has not been set
forth in this Agreement or in the section of the Company's prospectus dated
February 11, 1997 titled "Risk Factors". In the Company's judgment, the
financial and operational projections and current capital expenditures plan of
the Company and its Subsidiaries dated November 15, 1996 constitute a reasonable
basis as of the date of the Initial Closing for the assessment of the future
performance of the Company and its Subsidiaries during the periods indicated
therein, it being understood that any projected financial information represents
an estimate, based on various assumptions, of future results of operations,
which assumption may prove to have been incorrect and which results may not in
fact occur.
8M. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any
Notes will be used to finance a Hostile Tender Offer.
8N. LICENSES, ETC. To the best knowledge of the Company and the
Guarantors, the Company and its Subsidiaries have all material patents, patent
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<PAGE>
applications, patent licenses, patent rights, trademarks, trademark rights,
trade names, trade name rights, copyrights, licenses, franchises, permits,
authorizations and other rights as are necessary for the conduct of the business
of the Company and its Subsidiaries as now conducted by them. All of the
foregoing are in full force and effect in all material respects, and each of the
Company and its Subsidiaries is in substantial compliance with the foregoing
without any known conflict with the valid rights of others which has resulted,
or creates a material risk of resulting, in any Material Adverse Effect. No
event has occurred which permits, or after notice or lapse of time or both would
permit, the revocation or termination of any such license, franchise or other
right or which affects the rights of any of the Company and its Subsidiaries
thereunder so as to result, or to create a material risk of resulting, in any
Material Adverse Effect. No litigation or other proceeding or dispute exists
with respect to the validity or, where applicable, the extension or renewal, of
any of the foregoing which has resulted, or creates a material risk of
resulting, in any Material Adverse Effect.
8O. CERTAIN BUSINESS REPRESENTATIONS.
(i) LABOR RELATIONS. No dispute or controversy between the Company or
any of its Subsidiaries and any of their respective employees has resulted,
or is reasonably likely to result, in any Material Adverse Effect, and
neither the Company nor any of its Subsidiaries anticipates that its
relationships with its unions or employees will result, or are reasonably
likely to result, in any Material Adverse Effect. The Company and each of
its Subsidiaries is in compliance in all material respects with all federal
and state laws with respect to (a) non-discrimination in employment with
which the failure to comply, in the aggregate, has resulted, or creates a
material risk of resulting, in a Material Adverse Effect and (b) the
payment of wages.
(ii) ANTITRUST. Each of the Company and its Subsidiaries is in
compliance in all material respects with all federal and state antitrust
laws relating to its business and the geographic concentration of its
business.
(iii) CONSUMER PROTECTION. Neither the Company nor any of its
Subsidiaries is in violation of any rule, regulation, order, or
interpretation of any rule, regulation or order of the Federal Trade
Commission (including truth-in-lending), with which the failure to comply,
in the aggregate, has resulted, or creates a material risk of resulting, in
a Material Adverse Effect.
(iv) BURDENSOME OBLIGATIONS. Neither the Company nor any of its
Subsidiaries is party to or bound by any agreement, instrument, deed or
lease or is subject to any Charter, By-law or other restriction, commitment
or requirement which, in the opinion of the management of such Person, is
so unusual or burdensome as in the foreseeable future to result, or create
a material risk of resulting, in a Material Adverse Effect.
(v) FUTURE EXPENDITURES. Neither the Company nor any of its
Subsidiaries
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anticipate that the future expenditures, if any, by the Company and its
Subsidiaries needed to meet the provisions of any federal, state or foreign
governmental statutes, orders, rules or regulations will be so burdensome
as to result, or create a material risk of resulting, in any Material
Adverse Effect.
8P. ENVIRONMENTAL REGULATIONS.
(i) ENVIRONMENTAL COMPLIANCE. To the best knowledge of the Company
and the Guarantors, each of the Company and its Subsidiaries is in
compliance in all material respects with the Clean Air Act, the Federal
Water Pollution Control Act, the Marine Protection Research and Sanctuaries
Act, RCRA, CERCLA and any other Environmental Law in effect in any
jurisdiction in which any properties of the Company or any of its
Subsidiaries are located or where any of them conducts its business, and
with all applicable published rules and regulations (and applicable
standards and requirements) of the federal Environmental Protection Agency
and of any similar agencies in states or foreign countries in which the
Company or its Subsidiaries conducts its business, in each case other than
those which in the aggregate have not resulted, and do not create a
material risk of resulting, in a Material Adverse Effect.
(ii) ENVIRONMENTAL LITIGATION. Except in instances in which such
event has not resulted, and does not create a material risk of resulting,
in a Material Adverse Effect, no suit, claim, action or proceeding of which
the Company or any of its Subsidiaries has been given notice or otherwise
has knowledge is now pending before any court, governmental agency or board
or other forum, or to the Company's or any of its Subsidiaries knowledge,
threatened by any Person (nor to the Company's or any of its Subsidiaries'
knowledge, does any factual basis exist therefor) for, and neither the
Company nor any of its Subsidiaries have received written correspondence
from any federal, state or local governmental authority with respect to:
(a) noncompliance by the Company or any of its Subsidiaries with any
Environmental Law;
(b) personal injury, wrongful death or other tortious conduct
relating to materials, commodities or products used, generated, sold,
transferred or manufactured by the Company or any of its Subsidiaries
(including products made of, containing or incorporating asbestos, lead or
other hazardous materials, commodities or toxic substances); or
(c) the release into the environment by the Company or any of its
Subsidiaries of any Hazardous Material generated by the Company or any of
its Subsidiaries whether or not occurring at or on a site owned, leased or
operated by the Company or any of its Subsidiaries.
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(iii) HAZARDOUS MATERIAL. Schedule 8P contains a list as of the date
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hereof of all waste disposal or dump sites at which Hazardous Material
generated by either the Company or any of its Subsidiaries has been
disposed of directly by the Company or any of its Subsidiaries and all
independent contractors to whom the Company and its Subsidiaries have
delivered Hazardous Material, or to the Company's or any of its
Subsidiary's knowledge, where Hazardous Material finally came to be
located, and indicates all such sites which are or have been included
(including as a potential or suspect site) in any published federal, state
or local "superfund" or other list of hazardous or toxic waste sites,
except sites as to which the involvement of the Company or any Subsidiary
has not resulted, and does not present a material risk of resulting, in a
Material Adverse Effect. Any waste disposal or dump sites at which
Hazardous Material generated by either the Company or any of its
Subsidiaries has been disposed of directly by the Company or any of its
Subsidiaries and all independent contractors to whom the Company or any of
its Subsidiaries have delivered Hazardous Material, or to the Company's or
any of its Subsidiaries' knowledge, where Hazardous Material finally came
to be located, has not resulted, and does not present a material risk of
resulting, in a Material Adverse Effect.
(iv) ENVIRONMENTAL CONDITION OF PROPERTIES. None of the properties
owned or leased by the Company or any of its Subsidiaries has been used as
a treatment, storage or disposal site, other than as disclosed in Schedule
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8P, except sites as to which the involvement of the Company or any
--
Subsidiary has not resulted, and does not present a material risk of
resulting, in a Material Adverse Effect. No Hazardous Material is present
in any real property currently or formerly owned or operated by the Company
or any of its Subsidiaries except that which has not resulted, and does
not present a material risk of resulting, in a Material Adverse Effect.
8Q. FOREIGN TRADE REGULATIONS; GOVERNMENT REGULATION.
(i) FOREIGN TRADE REGULATIONS. Neither the execution and delivery of
this Agreement or any other Loan Document, nor issuance by the Company of
any Notes, nor the guaranteeing of the Obligations by any Guarantor, nor
the securing of the Obligations with the Loan Security, has constituted or
resulted in or will constitute or result in the violation of any Foreign
Trade Regulation.
(ii) GOVERNMENT REGULATION. Neither the Company nor any of its
Subsidiaries, nor any Person controlling the Company or any of its
Subsidiaries or under common control with the Company or any of its
Subsidiaries, is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Investment Company Act, the
Interstate Commerce Act or any statute or regulation which regulates the
incurring by the Company or any of its Subsidiaries of Financing Debt as
contemplated by this Agreement and the other Loan Documents.
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8R. FACILITY CONVERSION DATE. The Facility Conversion Date occurred
on February 14, 1997.
8S. BANK AGREEMENT. The Company has previously furnished the
Purchasers with a correct and complete copy of the Bank Agreement (including all
schedules and exhibits) in effect as of the date of the Initial Closings.
8T. MATERIAL AGREEMENTS. The Company has previously furnished to the
Purchasers a correct and complete copy of the Securities Purchase Agreement
dated March 28, 1991 (the "SUBORDINATED DEBENTURES AGREEMENT") between the
Company's predecessor, Continental Ozark Corporation and Dillon, Read & Co.,
Inc., as nominee, and correct and complete copies, including all exhibits,
schedules and amendments thereto, of the agreements, each as in effect on the
date hereof, listed in Schedule 8T (together with the Subordinated Debentures,
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the Subordinated Debentures Agreements, the Subordinated Debentures Guarantee
and the Bank Agreement, the "MATERIAL AGREEMENTS").
9. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's property shall at all times be and remain within
its control.
9B. SOURCE OF FUNDS. The source of the funds being used by such
Purchaser to pay the purchase price of the Notes being purchased by such
Purchaser hereunder constitutes assets (i) allocated to the "insurance company
general account" of such Purchaser (as such term is defined under Section V of
the United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Section I and IV
of PtCE 95-60, (ii) allocated to a separate account maintained by such Purchaser
in which no employee benefit plan, other than employee benefit plans identified
on a list which has been furnished by such Purchaser to the Company,
participates to the extent of 10% or more or (iii) of an investment fund, the
assets of which do not include assets of any employee benefit plan within the
meaning of ERISA. For the purpose of this paragraph 9B, the terms "SEPARATE
ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall have the respective meanings
specified in section 3 of ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the terms
defined in paragraphs 1 and 2 shall have the respective meanings specified
therein, and the following terms shall have the meanings specified with respect
thereto below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
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10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and
payable pursuant to paragraph 7A, as the context requires.
"DESIGNATED SPREAD" shall mean 0.75% in the case of each Series A Note
and 0% in the case of each Note of any other Series unless the Confirmation of
Acceptance with respect to the Notes of such Series specifies a different
Designated Spread in which case it shall mean, with respect to each Note of such
Series, the Designated Spread so specified.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on such Note is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal
of any Note, the Designated Spread plus the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City local time) on the Business Day
next preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum
-
of the products obtained by multiplying (a) each Remaining Scheduled Payment of
such Called Principal (but not of interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth
42
<PAGE>
year) which will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.
10B. OTHER TERMS.
"ACCEPTANCE" shall have the meaning specified in paragraph 2F.
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2F.
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2F.
"ACCEPTED NOTE" shall have the meaning specified in paragraph 2F.
"ACCUMULATED BENEFIT OBLIGATIONS" shall mean the actuarial present
value of the accumulated benefit obligations under any Plan, calculated in
accordance with Statement No. 87 of the Financial Accounting Standards Board.
"AFFILIATE" shall mean, with respect to the Company (or any other
specified Person), any other Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Company, and
shall include (a) any executive officer or director or general partner of the
Company and (b) any Person of which the Company or any Affiliate (as defined in
clause (a) above) of the Company shall, directly or indirectly, beneficially own
either (i) at least 25% of the outstanding equity securities having the general
power to vote or (ii) at least 25% of all equity interests; provided, however,
-------- -------
that Lion Oil Company, an Arkansas corporation, shall not be deemed to be an
Affiliate of the Company or of any Subsidiary of the Company under clause (b) of
this definition, unless the Company or such Subsidiary shall, directly or
indirectly, beneficially own either (x) at least 30% of the outstanding equity
securities having the general power to vote of Lion Oil Company or (y) at least
30% of all equity interests in
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Lion Oil Company.
"AUTHORIZED OFFICER" shall mean (i) in the case of the Company, its
chief executive officer, its chief financial officer, any vice president of the
Company designated as an "Authorized Officer" of the Company in the Information
-----------
Schedule attached hereto or any vice president of the Company designated as an
- - --------
"Authorized Officer" of the Company for the purpose of this Agreement in an
Officer's Certificate executed by the Company's chief executive officer or chief
financial officer and delivered to Prudential, and (ii) in the case of
Prudential, any officer of Prudential designated as its "Authorized Officer" in
the Information Schedule or any officer of Prudential designated as its
----------- --------
"Authorized Officer" for the purpose of this Agreement in a certificate executed
by one of its Authorized Officers. Any action taken under this Agreement on
behalf of the Company by any individual who on or after the date of this
Agreement shall have been an Authorized Officer of the Company and whom
Prudential in good faith believes to be an Authorized Officer of the Company at
the time of such action shall be binding on the Company even though such
individual shall have ceased to be an Authorized Officer of the Company, and any
action taken under this Agreement on behalf of Prudential by any individual who
on or after the date of this Agreement shall have been an Authorized Officer of
Prudential and whom the Company in good faith believes to be an Authorized
Officer of Prudential at the time of such action shall be binding on Prudential
even though such individual shall have ceased to be an Authorized Officer of
Prudential.
"AVAILABLE FACILITY AMOUNT" shall have the meaning specified in
paragraph 2A.
"BANK AGENT" shall mean The First National Bank of Boston and any
successor agent under the Bank Agreement.
"BANK AGREEMENT" shall mean the Credit Agreement dated as of December
18, 1996 among the Company and the Bank Agent, as amended from time to time.
"BANK OBLIGATIONS" shall mean the obligations of the Company and the
other Obligors under the Bank Agreement.
"BANKRUPTCY DEFAULT" shall mean an Event of Default described in
paragraph 7A(vii), 7A(viii) or 7A(ix).
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a
Sunday, (ii) a day on which commercial banks in New York City are required or
authorized to be closed and (iii) for purposes of paragraph 2C hereof only, a
day on
44
<PAGE>
which Prudential is not open for business.
"BY-LAWS" shall mean all written by-laws, rules, regulations and all
other documents relating to the governance of any Person other than an
individual, or interpretive of the Charter of such Person, all as from time to
time in effect.
"CANCELLATION DATE" shall have the meaning specified in paragraph
2I(3).
"CANCELLATION FEE" shall have the meaning specified in paragraph
2I(3).
"CAPITALIZED LEASE" shall mean any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
"CAPITALIZED LEASE OBLIGATIONS" shall mean the amount of the liability
reflecting the aggregate discounted amount of future payments under all
Capitalized Leases calculated in accordance with GAAP, including Statement Nos.
13 and 98 of the Financial Accounting Standards Board.
"CASH EQUIVALENTS" shall mean:
(a) negotiable certificates of deposit, time deposits (including sweep
accounts), demand deposits and bankers' acceptances having a maturity of
nine months or less and issued by any United States financial institution
having capital and surplus and undivided profits aggregating at least
$100,000,000 and rated at least Prime-1 by Moody's Investors Service, Inc.
or A-1 by Standard & Poor's Ratings Service or issued by any Lender;
(b) corporate obligations having a maturity of nine months or less and
rated at least Prime-1 by Moody's Investors Service, Inc. or A-1 by
Standard & Poor's Ratings Service or issued by any Lender;
(c) any direct obligation of the United States of America or any
agency or instrumentality thereof, or of any state or municipality thereof,
(i) which has a remaining maturity at the time of purchase of not more than
one year or which is subject to a repurchase agreement with any Lender (or
any other financial institution referred to in clause (a) above)
exercisable within one year from the time of purchase and (ii) which, in
the case of obligations of any state or municipality, is rated at least Aa
by Moody's Investors Service, Inc. or AA by Standard & Poor's Ratings
Service; and
(d) any mutual fund or other pooled investment vehicle rated at least
Aa by Moody's Investors Service, Inc. or AA by Standard & Poor's Ratings
Service which invests principally in obligations described above.
"CERCLA" shall mean the federal Comprehensive Environmental
45
<PAGE>
Response, Compensation and Liability Act of 1980.
"CHARTER" shall mean the articles of organization, certificate of
incorporation, statute, constitution, joint venture agreement, partnership
agreement, trust indenture, limited liability company agreement or other charter
document of any Person other than an individual, each as from time to time in
effect.
"CLOSING DAY" for any Accepted Note shall mean the Business Day
specified for the closing of the purchase and sale of such Note in the Request
for Purchase of such Note, provided that (i) if the Acceptance Day for such
--------
Accepted Note is less than five Business Days after the Company shall have made
such Request for Purchase and the Company and the Purchaser which is obligated
to purchase such Note agree on an earlier Business Day for such closing, the
"CLOSING DAY" for such Accepted Note shall be such earlier Business Day, and
(ii) if the closing of the purchase and sale of such Accepted Note is
rescheduled pursuant to paragraph 2H, the Closing Day for such Accepted Note,
for all purposes of this Agreement except paragraph 2I(3), shall mean the
Rescheduled Closing Day with respect to such Closing.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGENT" shall mean the Collateral Agent under the
Intercreditor Agreement which shall initially be The First National Bank of
Boston.
"COMPUTATION COVENANTS" shall mean paragraphs 5O, 6A, 6C(2)(vii),
6C(2)(xv), 6C(2)(xvi), 6C(4)(v), 6C(4)(vii), 6B(ii), 6C(5)(i) and 6C(6)(ii).
"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in
paragraph 2F.
"CONFIDENTIAL INFORMATION" shall have the meaning specified in
paragraph 2D.
"CONSOLIDATED" and "CONSOLIDATING", when used with reference to any
term, shall mean that term as applied to the accounts of the Company (or other
specified Person) and all of its Subsidiaries (or other specified group of
Persons), or such of its Subsidiaries as may be specified, consolidated (or
combined) or consolidating (or combining), as the case may be, in accordance
with GAAP and with appropriate deductions for minority interests in
Subsidiaries.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, at any date, all
amounts that are or should be carried as current liabilities on the balance
sheet of the Company and its Subsidiaries determined in accordance with GAAP on
a Consolidated basis, including the current portion of all Funded Debt.
"CONSOLIDATED INCOME FROM OPERATIONS" shall mean, for any period,
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<PAGE>
gross revenues of the Company and its Subsidiaries, determined in accordance
with GAAP on a Consolidated basis, minus the sum of (a) the cost of operations
-----
of the Company and its Subsidiaries for such period, determined in accordance
with GAAP on a Consolidated basis, and (b) the selling, general and
administrative expenses of the Company and its Subsidiaries for such period,
determined in accordance with GAAP on a Consolidated basis.
"CONSOLIDATED NET INCOME" shall mean, for any period, the net income
(or loss) of the Company and its Subsidiaries, determined in accordance with
GAAP on a Consolidated basis; provided, however, that Consolidated Net Income
-------- -------
shall not include:
---
(a) the income (or loss) of any Person accrued prior to the date such
Person becomes a Subsidiary or is merged into or consolidated with the
Company or any of its Subsidiaries;
(b) the income (or loss) of any Person (other than a Subsidiary) in
which the Company or any of its Subsidiaries has an ownership interest;
provided, however, that (i) Consolidated Net Income shall include amounts
-------- -------
in respect of the income of such Person when actually received in cash by
the Company or such Subsidiary in the form of dividends or similar
Distributions and (ii) Consolidated Net Income shall be reduced by the
aggregate amount of all Investments, regardless of the form thereof, made
by the Company or any of its Subsidiaries in such Person for the purpose of
funding any deficit or loss of such Person;
(c) all amounts included in computing such net income (or loss) in
respect of the write-up of any asset or the retirement of any Indebtedness
or equity at less than face value after April 30, 1996;
(d) extraordinary and nonrecurring gains;
(e) the income of any Subsidiary to the extent the payment of such
income in the form of a Distribution or repayment of Indebtedness to the
Company or a Wholly Owned Subsidiary is not permitted, whether on account
of any Charter or By-law restriction, any agreement, instrument, deed or
lease or any law, statute, judgment, decree or governmental order, rule or
regulation applicable to such Subsidiary; and
(f) any after-tax gains or losses attributable to returned surplus
assets of any Plan.
"CONSOLIDATED NET TANGIBLE ASSETS" shall mean at any date the total
of:
(a) the total assets of the Company and its Subsidiaries
determined in accordance with GAAP on a Consolidated basis;
minus (b) Consolidated Current Liabilities;
-----
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<PAGE>
minus (c) all other liabilities of the Company and its
-----
Subsidiaries determined in accordance with GAAP on a Consolidated basis
other than liabilities for Funded Debt;
minus (d) the amount of intangible assets carried on the balance sheet
-----
of the Company and its Subsidiaries determined in accordance with GAAP on a
Consolidated basis, including goodwill, patents, patent applications,
copyrights, trademarks, tradenames, research and development expense,
organizational expense, annualized debt discount and expense, deferred
financing charges and debt acquisition costs;
minus (e) the amount at which any minority interest in a
-----
Subsidiary appears as a liability on the Consolidated balance sheet of the
Company and its Subsidiaries.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any date, the
total of:
(a) stockholders' equity of the Company and its Subsidiaries
determined in accordance with GAAP on a Consolidated basis, excluding the
effect of any foreign currency translation adjustments;
minus (b) the amount by which such stockholders' equity has been
-----
increased after April 30, 1996 by the items described in clauses (a)
through (f) of the definition of Consolidated Net Income;
minus (c) to the extent not already deducted from the amount in clause
-----
(a) above, (i) treasury stock, (ii) receivables due from an employee stock
ownership plan and (iii) Guarantees of Indebtedness incurred by an employee
stock ownership plan;
minus (d) the amount of intangible assets carried on the balance
-----
sheet of the Company and its Subsidiaries determined in accordance with
GAAP on a Consolidated basis, including goodwill, patents, patent
applications, copyrights, trademarks, tradenames, research and development
expense, organizational expense, unamortized debt discount and expense,
deferred financing charges and debt acquisition costs.
"DELAYED DELIVERY FEE" shall have the meaning specified in paragraph
2I(2).
"DISTRIBUTION" shall mean, with respect to the Company (or other
specified Person):
(a) the declaration or payment of any dividend or distribution,
including dividends payable in shares of capital stock of or other equity
interests in the
48
<PAGE>
Company (or such specified Person), on or in respect of
any shares of any class of capital stock of or other equity interests in
the Company (or such specified Person);
(b) the purchase, redemption or other retirement of any shares of any
class of capital stock of or other equity interest in the Company (or such
specified Person) or of options, warrants or other rights for the purchase
of such shares, directly, indirectly through a Subsidiary or otherwise;
(c) any other distribution on or in respect of any shares of any class
of capital stock of or equity or other beneficial interest in the Company
(or such specified Person);
(d) any payment of principal or interest with respect to, or any
purchase, redemption or defeasance of, any Indebtedness of the Company (or
such specified Person) which by its terms or the terms of any agreement is
subordinated to the payment of the Obligations; and
(e) any loan or advance by the Company (or such specified Person) to,
or any other Investment by the Company (or such specified Person) in, the
holder of any shares of any class of capital stock of or equity interest in
the Company (or such specified Person), or any Affiliate of such holder;
provided, however, that the term "Distribution" shall not include (i)
-------- -------
dividends payable in perpetual common stock of or other similar equity interests
in the Company (or such specified Person), (ii) payments in the ordinary course
of business in respect of (A) reasonable compensation paid to employees,
officers and directors or (B) advances to employees for travel expenses, drawing
accounts and similar expenditures, (iii) any loan or advance by the Company to
any Guarantor or (iv) any other loan or advance by the Company which constitutes
an Investment permitted under paragraph 6C(4)(v), 6C(4)(vi) or 6C(4)(vii).
"ENVIRONMENTAL LAWS" shall mean all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment, including OSHA.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"ERISA GROUP PERSON" shall mean the Company, any Subsidiary of the
Company and any Person which is a member of the controlled group or under common
control with the Company or any Subsidiary within the meaning of section 414 of
the
49
<PAGE>
Code or section 4001(a)(14) of ERISA.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITY" shall have the meaning specified in paragraph 2A.
"FACILITY FEE" shall have the meaning specified in paragraph 2I(1).
"FACILITY CONVERSION DATE" shall have the meaning specified in the
Bank Agreement as in effect on December 18, 1996.
"FINANCIAL OFFICER" of the Company (or other specified Person) shall
mean its chief executive officer, chief financial officer, chief operating
officer, chairman, president, treasurer or any of its vice presidents whose
primary responsibility is for its financial affairs, all of whose incumbency and
signatures have been certified to the Majority Holders by the secretary or other
appropriate attesting officer of the Company (or such specified Person).
"FINANCING DEBT" shall mean each of the items described in clauses (a)
through (f) of the definition of the term "Indebtedness".
"FOREIGN TRADE REGULATIONS" means (a) any act that prohibits or
restricts, or empowers the President or any executive agency of the United
States of America to prohibit or restrict, exports to or financial transactions
with any foreign country or foreign national, (b) the regulations with respect
to certain prohibited foreign trade transactions set forth at 22 C.F.R Parts
120-130 and 31 C.F.R. Part 500 and (c) any order, regulation, ruling,
interpretation, direction, instruction or notice relating to any of the
foregoing.
"FUNDED DEBT" shall mean all Indebtedness of the Company or other
specified Person which is payable more than one year from the date of creation
thereof and shall include (a) current maturities of such Indebtedness and (b)
all Indebtedness consisting of reimbursement obligations with respect to
letters of credit other than letters of credit issued to finance inventory
purchases or to secure other debt appearing on the balance sheet of the obligor.
"GUARANTEE" shall mean, with respect to the Company (or other
specified Person):
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<PAGE>
(a) any guarantee by the Company (or such specified Person), of the
payment or performance of, or any contingent obligation by the Company (or
such specified Person), in respect of, any Indebtedness or other obligation
of any primary obligor;
(b) any other arrangement whereby credit is extended to a primary
obligor on the basis of any promise or undertaking of the Company (or such
specified Person), including any binding "comfort letter" or "keep well
agreement" written by the Company (or such specified Person), to a creditor
or prospective creditor of such primary obligor, to (i) pay the
Indebtedness of such primary obligor, (ii) purchase an obligation owed by
such primary obligor, (iii) pay for the purchase or lease of assets or
services regardless of the actual delivery thereof or (iv) maintain the
capital, working capital, solvency or general financial condition of such
primary obligor;
(c) any liability of the Company (or such specified Person), as a
general partner of a partnership in respect of Indebtedness or other
obligations of such partnership;
(d) any liability of the Company (or such specified Person) as a
joint venturer of a joint venture in respect of Indebtedness or other
obligations of such joint venture; and
(e) reimbursement obligations of the Company (or such specified
Person) with respect to letters of credit, bankers acceptances, surety
bonds, other financial guarantees and Interest Rate Protection Agreements,
whether or not any of the foregoing are reflected on the balance sheet
of the Company (or such specified Person) or in a footnote thereto; provided,
--------
however, that the term "Guarantee" shall not include endorsements for collection
- - -------
or deposit in the ordinary course of business. The amount of any Guarantee and
the amount of Indebtedness resulting from such Guarantee shall be the maximum
amount that the guarantor may become obligated to pay in respect of the
obligations (whether or not such obligations are outstanding at the time of
computation).
"GUARANTOR" shall mean each Subsidiary listed on the signature page
hereto or which subsequently becomes party to this Agreement as a Guarantor.
"HAZARDOUS MATERIAL" shall mean any pollutant, toxic or hazardous
material or waste, including any "hazardous substance" or "pollutant" or
"contaminant" as defined in section 101(14) of CERCLA or any other Environmental
Law or regulated as toxic or hazardous under RCRA or any other Environmental
Law.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted
Note, the United States Treasury Note or Notes whose duration (as determined by
51
<PAGE>
Prudential) most closely matches the duration of such Accepted Note.
"HOLDERS" shall mean the holders of the Notes from time to time.
"HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds
of any Note, any offer to purchase, or any purchase of, shares of capital stock
of any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities
exchange or in any over-the-counter market, other than purchases of such shares,
equity interests, securities or rights representing less than 5% of the equity
interests or beneficial ownership of such corporation or other entity for
portfolio investment purposes, and such offer or purchase has not been duly
approved by the board of directors of such corporation or the equivalent
governing body of such other entity prior to the date on which the Company makes
the Request for Purchase of such Note.
"INDEBTEDNESS" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP are required to be classified upon the balance
sheet of the Company (or other specified Person) as liabilities, but in any
event including (without duplication):
(a) borrowed money;
(b) indebtedness evidenced by notes, debentures or similar
instruments;
(c) Capitalized Lease Obligations;
(d) the deferred purchase price of assets or securities, including
related noncompetition, consulting and stock repurchase obligations (other
than ordinary trade accounts payable within six months after the incurrence
thereof in the ordinary course of business);
(e) mandatory redemption or dividend obligations on capital stock
(or other equity);
(f) reimbursement obligations with respect to letters of credit,
bankers acceptances, surety bonds, other financial guarantees and Interest
Rate Protection Agreements;
(g) unfunded pension liabilities;
(h) obligations that are immediately and directly due and payable
out of the proceeds of or production from property;
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<PAGE>
(i) liabilities secured by any Lien existing on property owned or
acquired by the Company (or such specified Person), whether or not the
liability secured thereby shall have been assumed; and
(j) all Guarantees in respect of Indebtedness of others.
"INITIAL CLOSING" shall have the meaning specified in paragraph
2H(1).
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement in
substantially the form of Exhibit F hereto, as amended from time to time.
---------
"INTEREST RATE PROTECTION AGREEMENT" shall mean any interest rate
swap, interest rate cap, interest rate hedge or other contractual arrangement
that converts variable interest rates into fixed interest rates, fixed interest
rates into variable interest rates or other similar arrangements.
"INVESTMENT" shall mean, with respect to the Company (or other
specified Person):
(a) any share of capital stock, partnership or other equity
interest, evidence of Indebtedness or other security issued by any other
Person to the Company (or such other specified Person);
(b) any loan, advance or extension of credit to, or contribution to
the capital of, any other Person;
(c) any Guarantee of the Indebtedness of any other Person;
(d) any acquisition of all or any part of the business of any other
Person or the assets comprising such business or part thereof; and
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e)
shall be included in the term "Investment" whether they are made or acquired by
purchase, exchange, issuance of stock or other securities, merger,
reorganization or any other method; provided, however, that the term
-------- -------
"Investment" shall not include (i) current trade and customer accounts
receivable for property leased, goods furnished or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms, (ii) advances and prepayments to suppliers for property leased, goods
furnished and services rendered in the ordinary course of business, (iii)
advances to employees for travel expenses, drawing accounts and similar
expenditures, (iv) stock or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due to the Company (or
such specified Person) or as security for any such Indebtedness or claim or (v)
demand deposits in banks or similar financial
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institutions.
In determining the amount of outstanding Investments:
(A) the amount of any Investment shall be the cost thereof minus any
-----
returns of capital in cash on such Investment (determined in accordance
with GAAP without regard to amounts realized as income on such Investment);
(B) the amount of any Investment in respect of a purchase described
in clause (d) above shall be increased by the amount of any Indebtedness
assumed in connection with such purchase or secured by any asset acquired
in such purchase (whether or not any Indebtedness is assumed) or for which
any Person that becomes a Subsidiary is liable on the date on which the
securities of such Person are acquired; and
(C) no Investment shall be increased as the result of an increase in
the undistributed retained earnings of the Person in which the Investment
was made or decreased as a result of an equity interest in the losses of
such Person.
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B.
"LEVERAGE RATIO" shall mean on any date the quotient, expressed as a
percentage, equal to the Consolidated Funded Debt of the Company and its
Subsidiaries divided by the Consolidated Net Tangible Assets of the Company and
its Subsidiaries.
"LIEN" shall mean, with respect to the Company (or any other specified
Person):
(a) Any lien, encumbrance, mortgage, pledge, charge or security
interest of any kind upon any property or assets of the Company (or such
specified Person), whether now owned or hereafter acquired, or upon the
income or profits therefrom;
(b) The acquisition of, or the agreement to acquire, any property or
asset upon conditional sale or subject to any other title retention
agreement, device or arrangement (including a Capitalized Lease);
(c) The sale, assignment, pledge or transfer for security of any
accounts, general intangibles or chattel paper of the Company (or such
specified Person), with or without recourse;
(d) The transfer of any tangible property or assets for the purpose
of subjecting such items to the payment of previously outstanding
Indebtedness in priority to payment of the general creditors of the Company
(or such specified Person); and
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(e) The existence for a period of more than 120 consecutive days of
any Indebtedness against the Company (or such specified Person) which if
unpaid would by law or upon a Bankruptcy Default be given any priority over
general creditors.
"LOAN DOCUMENTS" shall mean:
(a) this Agreement, the Notes, the Intercreditor Agreement, the Pledge
Agreement, and each Interest Rate Protection Agreement provided by a holder
(or an Affiliate of a holder) to the Company or any of its Subsidiaries,
each as from time to time in effect;
(b) all financial statements, reports, notices, mortgages,
assignments, UCC financing statements or certificates delivered to the
Collateral Agent or any of the holders by the Company, any of its
Subsidiaries or any other Obligor in connection herewith or therewith; and
(c) any other present or future agreement or instrument from time to
time entered into among the Company, any of its Subsidiaries or any other
Obligor, on one hand, and the Collateral Agent, any or all the holders, on
the other hand, relating to, amending or modifying this Agreement or any
other Loan Document referred to above or which is stated to be a Loan
Document, each as from time to time in effect.
"LOAN SECURITY" shall mean all assets now or from time to time
hereafter subjected to a security interest, mortgage or charge (or intended or
required so to be subjected pursuant to this agreement or any other Loan
Document) to secure the payment or performance of any of the Obligations,
including the assets described in the Pledge Agreement.
"MAJORITY HOLDERS" shall mean, at any time, the holders of more than
50% of the outstanding principal amount of the Notes outstanding at such time.
"MATERIAL ADVERSE CHANGE" shall mean, since any specified date or from
the circumstances existing immediately prior to the happening of any specified
event, a material adverse change in the business, assets, financial condition or
income of the Company and its Subsidiaries on a Consolidated basis, whether as a
result of (a) general economic conditions affecting the petroleum industry, (b)
difficulties in obtaining supplies and raw materials, (c) fire, flood or other
natural calamities, (d) environmental pollution, (e) regulatory changes,
judicial decisions, war or other governmental action or (f) any other event or
development, whether or not related to those enumerated above.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, assets, financial condition or income of the Company and its
Subsidiaries on a Consolidated basis.
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"MATERIAL AGREEMENTS" shall have the meaning specified in paragraph
8T.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NOTES" shall have the meaning specified in paragraph 1.
"OBLIGATIONS" shall mean all present and future liabilities,
obligations and Indebtedness of the Company, any of its Subsidiaries or any
other Obligor owing to the any holder under or in connection with this Agreement
or any other Loan Document, including without limitation obligations in respect
of principal, interest and Interest Rate Protection Agreements provided by a
holder (or an Affiliate of a holder), Yield-Maintenance Amount, commitment fees,
Facility Fees, Structuring Fees, amounts provided for in paragraphs 2I(2), 2I(3)
and 12B and other fees, charges, indemnities and expenses from time to time
owing hereunder or under any other Loan Document (whether accruing before or
after a Bankruptcy Default).
"OBLIGOR" shall mean the Company, each Guarantor and each Person
guaranteeing, providing collateral for or subordinating obligations to the
Obligations.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by an Authorized Officer of the Company.
"OPEN POSITION" shall mean any difference (whether positive or
negative) between (a) the number of barrels of petroleum product the Company and
its Subsidiaries hold in inventory or have contracted to buy and (b) the number
of barrels of petroleum product the Company and its Subsidiaries have contracted
to sell.
"OSHA" shall mean the federal Occupational Health and Safety Act.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
"PERCENTAGE INTEREST" shall mean, at any time, the ratio that the
respective amounts of the Obligations owing to the holders in respect of the
Notes to the total outstanding Obligations owing to all holders in respect of
the Notes.
"PERSON" shall mean and include an individual, a partnership, a
limited liability, joint stock or other company, a joint venture, a corporation,
a trust, an unincorporated organization, and a government or any department or
agency thereof.
"PLAN" shall mean any employee pension benefit plan (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
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"PLEDGE AGREEMENT" shall mean the Pledge Agreement substantially in
the form of Exhibit E hereto, as amended from time to time.
---------
"PLEDGED INDEBTEDNESS" has the meaning specified in the Pledge
Agreement.
"PLEDGED RIGHTS" has the meaning specified in the Pledge Agreement.
"PLEDGED SECURITIES" means the Pledged Stock, the Pledged Rights and
the Pledged Indebtedness, collectively.
"PLEDGED STOCK" has the meaning specified in the Pledge Agreement.
"PRUDENTIAL" shall mean The Prudential Insurance Company of America.
"PRUDENTIAL AFFILIATE" shall mean any corporation or other entity all
of the Voting Stock (or equivalent voting securities or interests) of which is
owned by Prudential either directly or through Prudential Affiliates and any
investment fund over which Prudential (or a subsidiary of Prudential) has
investment authority.
"PURCHASERS" shall mean, with respect to any Accepted Notes the
Persons, either Prudential or a Prudential Affiliate, who is purchasing such
Accepted Notes.
"RCRA" shall mean the federal Resource Conservation and Recovery Act,
42 U.S.C. (S) 690, et seq.
"REFUND EVENT" shall mean a termination of the Facility resulting from
Prudential's provision of a notice of termination as contemplated by clause (ii)
of paragraph 2B unless a Default or Event of Default existed at the time of the
provision of such notice.
"REFUNDABLE PORTION" shall mean with respect to the Structuring Fee,
that portion thereof determined by multiplying $62,500 by a fraction, the
denominator of which shall be 365 and the numerator of which shall be the
difference between 365 and the number of days elapsed between the date of this
Agreement and the date of the Refund Event.
"RENEWAL FEE" shall have the meaning specified in paragraph 2I(4).
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph
2D.
"REQUIRED HOLDER(S)" shall mean, with respect to the Notes of any
Series, at any time, the holder or holders of at least 66 2/3% of the aggregate
principal
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amount of the Notes of such Series outstanding at such time.
"RESCHEDULED CLOSING DAY" shall have the meaning specified in
paragraph 2H.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES" shall have the meaning specified in paragraph 1.
"SERIES A NOTES" shall have the meaning specified in paragraph 2H(1).
"SIGNIFICANT HOLDER" shall mean (i) Prudential, so long as Prudential
or any Prudential Affiliate shall hold (or be committed under this Agreement to
purchase) any Note, or (ii) any other holder of at least 5% of the aggregate
principal amount of the Notes from time to time outstanding.
"STRUCTURING FEE" shall have the meaning specified in paragraph 2I(5).
"SUBORDINATED DEBENTURES" shall have the meaning specified in
paragraph 6C(2)(x).
"SUBORDINATED DEBENTURES AGREEMENT" has the meaning specified in
paragraph 8T.
"SUBORDINATED DEBENTURES GUARANTEE" has the meaning specified in
paragraph 6C(3)(v).
"SUBSIDIARY" shall mean any Person of which the Company (or other
specified Person) shall at the time, directly or indirectly through one or more
of its Subsidiaries, (a) own more than 50% of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally or (b) hold more
than 50% of the partnership, joint venture or similar interests.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary of which all of
the outstanding capital stock (or other shares of beneficial interest) entitled
to vote generally (other than directors' qualifying shares) is owned by the
Company (or other specified Person) directly, or indirectly through one or more
Wholly Owned
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Subsidiaries.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All
references in this Agreement to "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or
"GAAP" shall be deemed to refer to generally accepted accounting principles in
effect in the United States at the time of application thereof. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to clause (ii)
of paragraph 5A or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of paragraph 8B.
11. GUARANTEES.
11A. GUARANTEES OF OBLIGATIONS. Each Guarantor irrevocably and
unconditionally, jointly and severally, guarantees that the Obligations will be
performed and will be paid in full in cash when due and payable, whether at the
stated or accelerated maturity thereof or otherwise, this guarantee being a
guarantee of payment and not of collectability and being absolute and in no way
conditional or contingent. In the event any part of the Obligations shall not
have been so paid in full when due and payable, each Guarantor will, immediately
upon notice by any holder or, without notice, immediately upon the occurrence of
a Bankruptcy Default, pay or cause to be paid to the holders in accordance with
the holders' respective Percentage Interests the amount of such Obligations
which are then due and payable and unpaid. The obligations of each Guarantor
hereunder shall not be affected by the invalidity, unenforceability or
irrecoverability of any of the Obligations as against any other Obligor, any
other guarantor thereof or any other Person. For purposes hereof, the
Obligations shall be due and payable when and as the same shall be due and
payable under the terms of this Agreement, the Notes or any other Loan Document
notwithstanding the fact that the collection or enforcement thereof may be
stayed or enjoined under any Bankruptcy Law or other applicable law.
11B. CONTINUING OBLIGATION. Each Guarantor acknowledges that
Prudential and the other Purchasers have entered into this Agreement (and, to
the extent that the Purchasers or the holders may enter into any future Loan
Document, will have entered into such agreement) in reliance on the Guarantee in
this paragraph 11 being a continuing irrevocable agreement, and such Guarantor
agrees that its guarantee may not be revoked in whole or in part. The
obligations of the Guarantors hereunder shall terminate when the Facility shall
have terminated and all of the Obligations have been indefeasibly paid in full
in cash and discharged; provided, however, that
-------- -------
(a) if a claim is made upon the holders at any time for repayment or
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recovery of any amounts or any property received by the holders from any
source on account of any of the Obligations and the holders repay or return
any amounts or property so received (including interest thereon to the
extent required to be paid by the holders) or
(b) if the holders become liable for any part of such claim by
reason of (i) any judgment or order of any court or administrative
authority having competent jurisdiction, or (ii) any settlement or
compromise of any such claim of which the Company has notice and an
opportunity to comment, then the Guarantors shall remain liable under this
Agreement for the amounts so repaid or property so returned or the amounts
for which the holders become liable (such amounts being deemed part of the
Obligations) to the same extent as if such amounts or property had never
been received by the holders, notwithstanding any termination hereof or the
cancellation of any instrument or agreement evidencing any of the
Obligations. Not later than five days after receipt of notice from the
Majority Holders, the Guarantors shall jointly and severally pay to the
holders an amount equal to the amount of such repayment or return for which
such holders have so become liable. Payments hereunder by a Guarantor may
be required by the holders on any number of occasions.
11C. WAIVERS WITH RESPECT TO OBLIGATIONS. Except to the extent
expressly required by this Agreement or any other Loan Document, each Guarantor
waives all of the following (including all defenses, counterclaims and other
rights of any nature based upon any of the following):
(i) presentment, demand for payment and protest of nonpayment of any
of the Obligations, and notice of protest, dishonor or nonperformance;
(ii) notice of acceptance of this guarantee and notice that credit
has been extended in reliance on the Guarantor's guarantee of the
Obligations;
(iii) notice of any Default or of any inability to enforce
performance of the obligations of the Company or any other Person with
respect to any Loan Document, or notice of any acceleration of maturity of
any Obligations;
(iv) demand for performance or observance of, and any enforcement of
any provision of, the Obligations, this Agreement or any other Loan
Document or any pursuit or exhaustion of rights or remedies with respect to
any Loan Security or against the Company or any other Person in respect of
the Obligations or any requirement of diligence or promptness on the part
of the holders in connection with any of the foregoing;
(v) any act or omission on the part of the holders which may impair
or prejudice the rights of the Guarantor, including rights to obtain
subrogation, exoneration, contribution, indemnification or any other
reimbursement from the
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Company or any other Person, or otherwise operate as a deemed release or
discharge;
(vi) failure or delay to perfect or continue the perfection of any
security interest in any Loan Security or any other action which harms or
impairs the value of, or any failure to preserve or protect the value of,
any Loan Security;
(vii) any statute of limitations or any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than the obligation of the principal;
(viii) any "single action" or "anti-deficiency" law which would
otherwise prevent the Lenders from bringing any action, including any claim
for a deficiency, against the Guarantor before or after the holders'
commencement or completion of any foreclosure action, whether judicially,
by exercise of power of sale or otherwise, or any other law which would
otherwise require any election of remedies by any holder;
(ix) all demands and notices of every kind with respect to the
foregoing; and
(x) to the extent not referred to above, all defenses (other than
payment) which the Company may now or hereafter have to the payment of the
Obligations, together with all suretyship defenses, which could otherwise
be asserted by such Guarantor.
Each Guarantor represents that it has obtained the advice of counsel
as to the extent to which suretyship and other defenses may be available to it
with respect to its obligations hereunder in the absence of the waivers
contained in this paragraph 11C.
No delay or omission on the part of any holder in exercising any right
under this Agreement or any other Loan Document or under any guarantee of the
Obligations or with respect to the Loan Security shall operate as a waiver or
relinquishment of such right. No action which any holder or the Company may
take or refrain from taking with respect to the Obligations, including any
amendments thereto or modifications thereof or waivers with respect thereto,
shall affect the provisions of this Agreement or the obligations of any
Guarantor hereunder. None of the holders' rights shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of any
Obligor, or by any noncompliance by the Company with the terms, provisions and
covenants of this Agreement, regardless of any knowledge thereof which any
holder may have or otherwise be charged with.
11D. LENDERS' POWER TO WAIVE, ETC. Each Guarantor grants to the
holders full power in their discretion, without notice to or consent of such
Guarantor, such notice and consent being expressly waived, and without in any
way affecting the
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liability of the Guarantor under its guarantee hereunder:
(a) To waive compliance with, and any Default or Event of Default
under, and to consent to any amendment to or modification or termination of
any terms or provisions of, or to give any waiver in respect of, this
Agreement, any other Loan Document, the Loan Security, the Obligations or
any guarantee thereof (each as from time to time in effect);
(b) To grant any extensions of the Obligations (for any duration),
and any other indulgence with respect thereto, and to effect any total or
partial release (by operation of law or otherwise), discharge, compromise
or settlement with respect to the obligations of the Obligors or any other
Person in respect of the Obligations, whether or not rights against the
Guarantor under this Agreement are reserved in connection therewith;
(c) To take security in any form for the Obligations, and to consent
to the addition to or the substitution, exchange, release or other
disposition of, or to deal in any other manner with, any part of any
property contained in the Loan Security whether or not the property, if
any, received upon the exercise of such power shall be of a character or
value the same as or different from the character or value of any property
disposed of, and to obtain, modify or release any present or future
guarantees of the Obligations and to proceed against any of the Loan
Security or such guarantees in any order;
(d) To collect or liquidate or realize upon any of the Obligations
or the Loan Security in any manner or to refrain from collecting or
liquidating or realizing upon any of the Obligations or the Loan Security;
and
(e) To extend credit under this Agreement, any other Loan Document
or otherwise in such amount as the holders or Prudential may determine,
including increasing the amount of credit and the interest rate and fees
with respect thereto, even though the condition of the Obligors (financial
or otherwise on an individual or Consolidated basis) may have deteriorated
since the date hereof.
11E. INFORMATION REGARDING THE COMPANY, ETC. Each Guarantor has
made such investigation as it deems desirable of the risks undertaken by it in
entering into this Agreement and is fully satisfied that it understands all such
risks. Each Guarantor waives any obligation which may now or hereafter exist on
the part of Prudential or the holders to inform it of the risks being undertaken
by entering into this Agreement or of any changes in such risks and, from and
after the date hereof, each Guarantor undertakes to keep itself informed of such
risks and any changes therein. Each Guarantor expressly waives any duty which
may now or hereafter exist on the part of Prudential or the holders to disclose
to the Guarantor any matter related to the business, operations, character,
collateral, credit, condition (financial or otherwise), income or prospects of
the Company or its Affiliates or their properties or management,
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whether now or hereafter known by the Prudential or the holders. Each Guarantor
represents, warrants and agrees that it assumes sole responsibility for
obtaining from the Company all information concerning this Agreement and all
other Loan Documents and all other information as to the Company and its
Affiliates or their properties or management as such Guarantor deems necessary
or desirable.
11F. CERTAIN GUARANTOR REPRESENTATIONS. Each Guarantor
represents that:
(a) it is in its best interest and in pursuit of the purposes for
which it was organized as an integral part of the business conducted and
proposed to be conducted by the Company and its Subsidiaries, and
reasonably necessary and convenient in connection with the conduct of the
business conducted and proposed to be conducted by them, to induce the
Prudential and the other Purchasers to enter into this Agreement and to
extend credit to the Company by making the Guarantees contemplated by this
paragraph 11,
(b) the credit available hereunder will directly or indirectly inure
to its benefit,
(c) by virtue of the foregoing it is receiving at least reasonably
equivalent value from the holders for its Guarantee,
(d) it will not be rendered insolvent as a result of entering into
this Agreement,
(e) after giving effect to the transactions contemplated by this
Agreement, it will have assets having a fair saleable value in excess of
the amount required to pay its probable liability on its existing debts as
they become absolute and matured,
(f) it has, and will have, access to adequate capital for the
conduct of its business,
(g) it has the ability to pay its debts from time to time incurred
in connection therewith as such debts mature, and
(h) it has been advised by Prudential that the other Purchasers are
unwilling to enter into this Agreement unless the Guarantees contemplated
by this paragraph 11 are given by it.
11G. SUBROGATION. Each Guarantor agrees that, until the
Obligations are paid in full, it will not exercise any right of reimbursement,
subrogation, contribution, offset or other claims against the other Obligors
arising by contract or operation of law in connection with any payment made or
required to be made by such Guarantor under this Agreement. After the payment in
full of the Obligations, each Guarantor shall be entitled to exercise against
the Company and the other Obligors all such rights of
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reimbursement, subrogation, contribution and offset, and all such other claims,
to the fullest extent permitted by law.
11H. SUBORDINATION. Each Guarantor covenants and agrees that,
after the occurrence of an Event of Default, all Indebtedness, claims and
liabilities then or thereafter owing by the Company or any other Obligor to such
Guarantor whether arising hereunder or otherwise are subordinated to the prior
payment in full of the Obligations and are so subordinated as a claim against
such Obligor or any of its assets, whether such claim be in the ordinary course
of business or in the event of voluntary or involuntary liquidation,
dissolution, insolvency or bankruptcy, so that no payment with respect to any
such Indebtedness, claim or liability will be made or received while any Event
of Default exists.
11I. FUTURE SUBSIDIARIES; FURTHER ASSURANCES. The Company will
from time to time cause (a) any present Wholly Owned Subsidiary that is not a
Guarantor within 30 days after notice from the Majority Holders or (b) any
future Wholly Owned Subsidiary within 30 days after any such Person becomes a
Wholly Owned Subsidiary, to join this Agreement as a Guarantor pursuant to a
joinder agreement in form and substance satisfactory to the Majority Holders.
Each Guarantor will, promptly upon the request of the Majority Holders from time
to time, execute, acknowledge and deliver, and file and record, all such
instruments, and take all such action, as the Majority Holders deem necessary or
advisable to carry out the intent and purposes of this paragraph 11.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of, interest
on, and any Yield-Maintenance Amount payable with respect to, such Note, which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City local time,
on the date due) to the account or accounts of such Purchaser, if any, as are
specified in the Information Schedule, attached hereto, or, in the case of any
----------- --------
Purchaser not named in the Information Schedule or any Purchaser wishing to
----------- --------
change the account specified for it in the Information Schedule, such account or
----------- --------
accounts in the United States as such Purchaser may from time to time designate
in writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. Each Purchaser agrees that, before disposing of
any Note, it will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made thereon and of the date to which interest
thereon has been paid. The Company agrees to afford the benefits of this
paragraph 12A to any Transferee which shall have made the same agreement as the
Purchasers have made in this paragraph 12A.
12B. EXPENSES. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to pay, and save
Prudential, each Purchaser and any Transferee harmless against liability for the
payment of, all
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out-of-pocket expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees and expenses of
any special counsel engaged by the Purchasers or any Transferee in connection
with this Agreement, the transactions contemplated hereby and any subsequent
proposed modification of, or proposed consent under, this Agreement and the
other Loan Documents, whether or not such proposed modification shall be
effected or proposed consent granted, (ii) the costs and expenses, including
attorneys' fees, incurred by any Purchaser or any Transferee in enforcing (or
determining whether or how to enforce) any rights under this Agreement or the
Notes or the other Loan Documents or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the transactions contemplated hereby or by reason of any
Purchaser's or any Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case and (iii) the
costs and expenses, including attorneys' fees, incurred by the Collateral Agent
in enforcing (or determining whether or how to enforce) any rights under the
Pledge Agreement or the Intercreditor Agreement. The obligations of the Company
under this paragraph 12B shall survive the transfer of any Note or portion
thereof or interest therein by any Purchaser or any Transferee and the payment
of any Note.
12C. CONSENT TO AMENDMENTS. This Agreement may be amended, and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Majority Holders
except that, (i) with the written consent of the holders of all
- - ------ ----
Notes of a particular Series, and if an Event of Default shall have occurred and
be continuing, of the holders of all Notes of all Series, at the time
outstanding (and not without such written consents), the Notes of such Series
may be amended or the provisions thereof waived to change the maturity thereof,
to change or affect the principal thereof, or to change or affect the rate or
time of payment of interest on or any Yield-Maintenance Amount payable with
respect to the Notes of such Series, (ii) without the written consent of the
-------
holder or holders of all Notes at the time outstanding, no amendment to or
waiver of the provisions of this Agreement shall change or affect the provisions
of paragraph 7A or this paragraph 12C insofar as such provisions relate to
proportions of the principal amount of the Notes of any Series, or the rights of
any individual holder of Notes, required with respect to any declaration of
Notes to be due and payable or with respect to any consent, amendment, waiver or
declaration, (iii) with the written consent of Prudential (and not without the
----
written consent of Prudential) the provisions of paragraph 2 may be amended or
waived (except insofar as any such amendment or waiver would affect any rights
or obligations with respect to the purchase and sale of Notes which shall have
become Accepted Notes prior to such amendment or waiver), and (iv) with the
----
written consent of all of the Purchasers which shall have become obligated to
purchase Accepted Notes of any Series (and not without the written consent of
all such Purchasers), any of the provisions of paragraphs 2 and 3 may be amended
or waived insofar as such amendment or waiver would affect only rights or
obligations with respect to the purchase and sale of the Accepted Notes of such
Series or the terms and provisions of such Accepted Notes. Each holder of any
Note at the time or thereafter outstanding
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shall be bound by any consent authorized by this paragraph 12C, whether or not
such Note shall have been marked to indicate such consent, but any Notes issued
thereafter may bear a notation referring to any such consent. No course of
dealing between the Company and the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of any holder of such Note. As used herein and in the Notes, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. The Notes are issuable as registered notes without coupons in
denominations of at least $100,000, except as may be necessary to reflect any
principal amount not evenly divisible by $100,000. The Company shall keep at
its principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company, the
Company shall, at its expense, execute and deliver one or more new Notes of like
tenor and of a like aggregate principal amount, registered in the name of such
transferee or transferees. At the option of the holder of any Note, such Note
may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Each installment of principal payable on each installment date upon each new
Note issued upon any such transfer or exchange shall be in the same proportion
to the unpaid principal amount of such new Note as the installment of principal
payable on such date on the Note surrendered for registration of transfer or
exchange bore to the unpaid principal amount of such Note. No reference need be
made in any such new Note to any installment or installments of principal
previously due and paid upon the Note surrendered for registration of transfer
or exchange. Every Note surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder of such Note or such holder's attorney duly
authorized in writing. Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of and interest on, and any Yield-
Maintenance Amount
66
<PAGE>
payable with respect to, such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in all or any part of such Note
to any Person on such terms and conditions as may be determined by such holder
in its sole and absolute discretion.
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT. All representations and warranties contained herein or made in
writing by or on behalf of the Company in connection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements
in this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
12H. NOTICES. All written communications provided for hereunder
(other than communications provided for under paragraph 2) shall be sent by
first class mail or nationwide overnight delivery service (with charges prepaid)
and (i) if to any Person listed in the Information Schedule attached hereto,
----------- --------
addressed to it at the address specified for such communications in such
Information Schedule, or at such other address as it shall have specified in
- - ----------- --------
writing to the Person sending such communication, and (ii) if to any Purchaser
or holder of any Note which is not a Person listed in such Information Schedule,
----------- --------
addressed to it at such address as it shall have specified in writing to the
Person sending such communication or, if any such holder shall not have so
specified an address, then addressed to such holder in care of the last holder
of such Note which shall have so specified an address to the Person sending such
communication, provided, however, that any such communication to the Company may
-------- -------
also, at the option of the Person sending such communication, be delivered by
any other means either to the Company at its address specified in the
Information Schedule or to any Authorized Officer of the Company. Any
- - ----------- --------
communication pursuant to paragraph 2 shall be made by the method specified for
such communication in paragraph 2, and shall be effective to create any rights
or obligations under this Agreement only if, in the case of a telephone
communication, an Authorized Officer of the party conveying the information and
of the party receiving the information are parties to the telephone call, and in
the case of a telecopier communication, the communication is signed by an
Authorized Officer of the party conveying the information, addressed to the
attention of an Authorized Officer of the party receiving the information, and
in fact received at the telecopier terminal the number of which is listed for
the party receiving the communication in the Information Schedule or at such
----------- --------
67
<PAGE>
other telecopier terminal as the party receiving the information shall have
specified in writing to the party sending such information.
12I. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or interest on, or Yield-Maintenance Amount payable with respect to, any Note
that is due on a date other than a Business day shall be made on the next
succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business Day.
12J. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12K. DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
12L. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser, to any holder of Notes
or to the Majority Holder(s), the determination of such satisfaction shall be
made by such Purchaser, such holder or the Majority Holder(s), as the case may
be, in the sole and exclusive judgment (exercised in good faith) of the Person
or Persons making such determination.
12M. MAXIMUM INTEREST PAYABLE. The Company, each other Obligor,
the Purchasers and any other holders of the Notes specifically intend and agree
to limit contractually the amount of interest payable under this Agreement, the
Notes, the other Loan Documents and all other instruments and agreements related
hereto and thereto to the maximum amount of interest lawfully permitted to be
charged under applicable law. Therefore, none of the terms of this Agreement,
the Notes, the other Loan Documents or any instrument pertaining to or relating
to this Agreement, the Notes or any other Loan Document shall ever be construed
to create a contract to pay interest at a rate in excess of the maximum rate
permitted to be charged under applicable law, and neither the Company, each
other Obligor, any other guarantor nor any other party liable or to become
liable hereunder, under the Notes, any guaranty or under any other instruments
and agreements related hereto and thereto shall ever be liable for interest in
excess of the amount determined at such maximum rate, and the provisions of this
paragraph 12M shall control over all other provisions of this Agreement, any
Notes, the other Loan Documents, any guaranty or any other instrument pertaining
to or relating to the transactions herein contemplated. If any amount of
interest taken or received by any Purchaser or any holder of a Note shall be in
excess of said maximum amount of interest which, under applicable law, could
lawfully have been collected by any Purchaser or such holder incident to such
transactions, then such excess shall be deemed to have been the result of a
mathematical error by all parties hereto and shall
68
<PAGE>
be refunded promptly by the Person receiving such amount to the party paying
such amount, or, at the option of the recipient, credited ratably against the
unpaid principal amount of the Note or Notes held by such holder. All amounts
paid or agreed to be paid in connection with such transactions which would under
applicable law be deemed "interest" shall, to the extent permitted by such
applicable law, be amortized, prorated, allocated and spread throughout the
stated term of this Agreement and the Notes. "APPLICABLE LAW" as used in this
paragraph means that law in effect from time to time applicable to the
transactions contemplated by this Agreement and the other Loan Documents which
permits the charging and collection of the highest permissible lawful,
nonusurious rate of interest on the transactions herein contemplated including
laws of the United States of America, and "MAXIMUM RATE" as used in this
paragraph means, with respect to each of the Notes, the maximum lawful,
nonusurious rates of interest (if any) which under applicable law may be charged
to the Company from time to time with respect to such Notes.
12N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK.
12O. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(i) THE COMPANY, EACH OTHER OBLIGOR AND EACH HOLDER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION OF ANY CLAIM WHICH IS BASED HEREON, OR ARISES OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER
LOAN DOCUMENT, OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN),
OR ACTIONS OF THE COMPANY, ANY OTHER OBLIGOR OR THE HOLDERS. THE COMPANY
AND EACH OTHER OBLIGOR ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PURCHASERS TO ENTER INTO THIS AGREEMENT.
(ii) EACH OBLIGOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF
THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY, OF THE UNITED
STATES OF AMERICA AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT,
ACTION OR OTHER PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR THE SUBJECT MATTER HEREOF, AND HEREBY WAIVES,
AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN
ANY SUCH SUIT, ACTION OR PROCEEDINGS, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED COURTS FOR ANY REASON
WHATSOEVER, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN
69
<PAGE>
AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING
IS IMPROPER. THE GUARANTOR HEREBY AGREES THAT PROCESS MAY BE SERVED ON THE
SECRETARY OF STATE OF THE STATE OF NEW YORK. ANY AND ALL SERVICE OF PROCESS
AND ANY OTHER NOTICE IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
EFFECTIVE AGAINST SUCH PARTIES IF GIVEN BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, OR BY ANY OTHER MEANS OR MAIL WHICH REQUIRES A
SIGNED RECEIPT, POSTAGE PREPAID, MAILED TO SUCH PARTIES HAS HEREIN PROVIDED
IN PARAGRAPH 12H. DURING THE TERM OF THIS AGREEMENT, IN THE EVENT THE
SECRETARY OF STATE OF THE STATE OF NEW YORK SHALL NOT BE ABLE TO ACCEPT
SERVICE OF PROCESS AS AFORESAID AND IF THE OBLIGORS SHALL NOT MAINTAIN AN
OFFICE IN NEW YORK CITY, THE OBLIGORS SHALL, PROMPTLY APPOINT AND MAINTAIN
AN AGENT QUALIFIED TO ACT AS AN AGENT FOR SERVICE OF PROCESS WITH RESPECT
TO ALL COURTS IN AND OF NEW YORK CITY, AND ACCEPTABLE TO THE HOLDERS, AS
THE OBLIGOR'S AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON THE OBLIGOR'S
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH
ACTION, SUIT OR PROCEEDING.
THE OBLIGOR HEREBY AGREES THAT THE SUBMISSION TO JURISDICTION REFERRED
TO IN THIS PARAGRAPH 12O SHALL NOT LIMIT IN ANY MANNER THE RIGHTS OF ANY OF
THE HOLDERS TO TAKE PROCEEDINGS AGAINST SUCH OBLIGOR IN SOME OTHER COURT OF
COMPETENT JURISDICTION WHETHER WITHIN OR OUTSIDE THE UNITED STATES.
12P. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
12Q. BINDING AGREEMENT. When this Agreement is executed and
delivered by the Company and Prudential, it shall become a binding agreement
between the Company and Prudential. This Agreement shall also inure to the
benefit of each Purchaser which shall have executed and delivered a Confirmation
of Acceptance, and each such Purchaser shall be bound by this Agreement to the
extent provided in such Confirmation of Acceptance.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
TRANSMONTAIGNE OIL COMPANY
70
<PAGE>
By: /s/ RICHARD E. GATHRIGHT
----------------------------
Title: President and Chief
Operating Officer
GUARANTORS
TRANSMONTAIGNE PRODUCT
SERVICES INC.
TRANSMONTAIGNE PIPELINE INC.
TRANSMONTAIGNE TERMINALING INC.
TRANSMONTAIGNE TRANSPORTATION
SERVICES INC.
By: /s/ RICHARD E. GATHRIGHT
----------------------------
As C.E.O. of each of the foregoing
corporations
BEAR PAW ENERGY INC.
By: /s/ ROBERT J. CLARK
----------------------------
Title: President
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ RANDALL M. KOB
-------------------------------
Vice President
U.S. PRIVATE PLACEMENT FUND
By: Prudential Private Placement
Investors, L.P., Investment Advisor
By: Prudential Private Placement
71
<PAGE>
Investors, Inc., its General Partner
By: /s/ RANDALL M. KOB
-------------------------------
Vice President
72
<PAGE>
INFORMATION SCHEDULE
PRUDENTIAL/PURCHASER(S)
Aggregate Principal
Amount of Series A
Notes to be Purchased Denominations
--------------------- -------------
$45,000,000 $40,000,000
$ 5,000,000
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(1) All payments on account of Notes held by such purchaser shall be made by
wire transfer of immediately available funds for credit to:
Account No. 890-0303-391 (in the case of payments on account of the Note
originally issued in the principal amount of $40,000,000)
Account No. 890-0304-944 (in the case of payments on account of the Note
originally issued in the principal amount of $5,000,000)
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
SERIES A NOTES
Each such wire transfer shall set forth the name of the Company, a reference to
"7.85% Senior Notes, Series A, due April 17, 2003, Security No. !INV5596!" (in
the case of payments on account of the Note originally issued in the principal
amount of $40,000,000) and "Security No.!INV5597!" (in the case of payments on
account of the Note originally issued in the principal amount of $5,000,000),
and the due date and application (as among principal, interest and Yield-
Maintenance Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Investment Operations Group
(Attention: Manager)
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
73
<PAGE>
(4) Recipient of telephonic or facsimile prepayment notices:
Manager, Investment Structure and Pricing
(201) 802-7398
(201) 624-6432 (facsimile)
(5) Tax Identification No.: 22-1211670
(6) Authorized Officers:
R.A. Walker, Randall M. Kob, Robert G. Gwin,
Steven D. Arnold, and Jay D. Squiers
74
<PAGE>
INFORMATION SCHEDULE
PRUDENTIAL/PURCHASER(s)
Aggregate Principal
Amount of Series A
Notes to be Purchased Denominations
--------------------- -------------
$5,000,000 $5,000,000
U.S. PRIVATE PLACEMENT FUND
(1) All payments on account of Notes held by such purchaser shall be made by
wire transfer of immediately available funds for credit to:
Account No. UIFF1000002
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
ABA No.: 0l1-001-234
DDA No.: 108111
Account Name: U.S. Private Placement Fund
Each such wire transfer shall set forth the name of the Company, a reference to
"7.85% Senior Secured Notes, Series A, due April 17, 2003", and the due date
and application (as among principal, interest and Yield-Maintenance Amount) of
the payment being made.
(2) Address for all notices relating to payments:
Mellon Trust
One Cabot Road
Mail Stop #028-003C
Medford, MA 02155-5159
Attention: Derek von Vliet
Telephone: (617) 382-4850
Facsimile: (617) 382-4003
(3) Address for copies of notices under (2) above and all other communications
and notices:
Prudential Private Placement Investors, Inc.
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102-4069
Attention: Vice President
Telephone:(201) 802-8608
Facsimile: (201) 802-7045
(4) Recipient of telephonic prepayment notices:
See (2) above.
75
<PAGE>
The Company
TransMontaigne Oil Company
(1) Address for Notices:
TransMontaigne Oil Company
370 17th Street, Suite 2750
Denver, Colorado 80202
Attention: President
(2) Receipt of telephonic or facsimile notices:
(303) 626-8200 (telephone)
(303) 626-8228 (facsimile)
(3) Authorized Officers:
Cortlandt S. Dietler, Chief Executive Officer
Richard E. Gathright, President and Chief Operating Officer
Harold R. Logan, Jr., Executive Vice President-Finance and Treasurer
W.A. Sikora, Executive Vice President
75A
<PAGE>
SCHEDULE 3A(vii)
----------------
SUMMARY OF UCC SEARCHES
-----------------------
TRANSMONTAIGNE/PRUDENTIAL PRIVATE PLACEMENT
A. Listing of all companies searched including total number of listings:
<TABLE>
<CAPTION>
Secretary of Total Number
Company Name State Office of Listings
- - ------------ ------------ ------------
<S> <C> <C>
1. TransMontaigne Oil Company Delaware* NONE
Arkansas 3 Filings
Colorado 2 Filings
2. TransMontaigne Product Services Inc. Arkansas* 4 Filings
(f/k/a Continental Ozark, Inc.) Colorado None
Illinois None
Indiana None
Iowa None
Kansas None
Kentucky None
Louisiana None
Michigan None
Minnesota None
Mississippi Not Rec'd
Missouri None
Nebraska None
North Dakota None
Ohio None
Oklahoma None
South Dakota None
Texas None
Wisconsin None
3. TransMontaigne Pipeline Inc. Arkansas* 3 Filings
(f/k/a COZ Pipeline, Inc.) Missouri None
Texas None
Norco Pipeline, Inc. (merged into COZ Pipeline, Inc. Arkansas* 3 Filings
12/96 and no longer exists) Illinois None
Indiana None
Iowa None
Ohio None
4. TransMontaigne Terminaling Inc. Arkansas* 3 Filings
(f/k/a COZ Terminaling,Inc.) Indiana None
Missouri None
</TABLE>
75B
<PAGE>
<TABLE>
<S> <C> <C>
Ohio None
5. Bear Paw Energy Inc. Colorado* 3 Filings
(f/k/a Sheffield Gas Processors, Inc.) Montana 1 Filing
North Dakota 1 Filing
</TABLE>
B. Detailed summary of companies that have ucc filings listed in Part A:
1. Debtor: TransMontaigne Oil Company
a. Jurisdiction: Arkansas Secretary of State
File No.: 992441
File Date: 12/7/95
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing to Debtor from subs
b. Jurisdiction: Arkansas Secretary of State
File No..: 992442
File Date: 12/7/95
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing to Debtor from subs
c. Jurisdiction: Arkansas Secretary of State
File No.: 1050595
File Date:12/20/96
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing to Debtor from subs; rights
to receive profits, surplus or distributions, all
proceeds and products
d. Jurisdiction: Colorado Secretary of State
File No.: 952090078
File Date:12/7/95
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing from subs
e. Jurisdiction: Colorado Secretary of State
File No.: 962095280
File Date: 12/23/96
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness from subs; rights to receive
profits, surplus or distributions; all proceeds and
products
75C
<PAGE>
2. Debtor: Continental Ozark, Inc. (n/k/a TransMontaigne Product
Services Inc.)
a. Jurisdiction: Arkansas Secretary of State
File No.: 889591
File Date: 3/1/94
Secured Party: B&B Resources Inc. Assigned to Associates
Commercial Corporation
Collateral: Equipment
b. Included as Debtor on filing described in B.1.a. above
c. Included as Debtor on filing described in B.1.b. above
d. Jurisdiction: Arkansas Secretary of State
File No.: 1050596
File Date: 12/20/96
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing to Debtor from parent or
subs; all rights to receive profits, surplus or
distributions; all proceeds and products
3. Debtor: COZ Pipeline, Inc. (n/k/a TransMontaigne Pipeline Inc.)
a. Included as Debtor on filing described in B.1.a. above
b. Included as Debtor on filing described in B.1.b. above
c. Included as Debtor on filing described in B.2.d. above
4. Debtor: Norco Pipeline, Inc. (merged into COZ Pipeline, Inc.)
a. Included as Debtor on filing described in B.1.a. above
b. Included as Debtor on filing described in B.1.b. above
c. Included as Debtor on filing described in B.2.d. above
5. Debtor: COZ Terminaling (n/k/a TransMontaigne Terminaling Inc.)
a. Included as Debtor on filing described in B.1.a. above
b. Included as Debtor on filing described in B.1.b. above
c. Included as Debtor on filing described in B.2.d. above
75d
<PAGE>
6. Debtor: Bear Paw Energy Inc. (f/k/a Sheffield Gas Processors, Inc.)
a. Jurisdiction: Colorado Secretary of State
File No.: 962095296
File Date: 12/23/96
Secured Party: The First National Bank of Boston as Agent
Collateral: All indebtedness owned to Debtor from parent or
subs; all rights to receive profits, surplus or
distributions; all proceeds and products
b. Jurisdiction: Colorado Secretary of State
Debtor Name: Sheffield Gas Processors Inc. and Torch Energy
Corp.
File No.: 932027685
File Date: 4/13/93
Secured Party: Norwest Bank Denver N.A.
Collateral:
Note: Orig. Financing Statement was partially released and
amended
c. Jurisdiction: Colorado Secretary of State
Debtor Name: Sheffield Operating Company
Additional Debtors: Republic National Gas Co.
Sheffield Gas Processors, Inc.
K123 Corporation
File No.: 962047326
File Date: 6/20/96
Secured Party: The First National Bank of Boston, as Agent
Collateral:
d. Jurisdiction: Montana Secretary of State
Debtor Name: Bear Paw Energy, Inc.
File No.: 498717
File Date: 12/24/96
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing Debtor from parent or subs;
all rights to receive profits, surplus or
distributions; all proceeds or products
e. Jurisdiction: North Dakota Secretary of State
Debtor Name: Bear Paw Energy, Inc.
File No.: 97-000649931
File Date: 1/6/97
Secured Party: The First National Bank of Boston, as Agent
Collateral: All indebtedness owing Debtor from parent or subs;
all rights to receive profits, surplus or
distributions; all proceeds or products
- - ----------
*State of Incorporation
75e
<PAGE>
SCHEDULE 5A(i)
--------------
FORM OF COVENANT COMPLIANCE CERTIFICATE
The Prudential Insurance Company of America
U.S. Private Placement Fund
c/o Prudential Capital Group
2200 Ross Ave., Suite 4200E
Dallas, Texas 75201
Attn: Managing Director
[other Holders]
Ladies and Gentlemen:
Reference is made to the Master Shelf Agreement dated as of April 17,
1997 among TransMontaigne Oil Company, a Delaware corporation (the "Company"),
certain Guarantors named therein, The Prudential Insurance Company of America,
and the other holders from time to time of Notes issued thereunder (the "Shelf
Agreement"). Terms defined in the Shelf Agreement and not otherwise defined
herein are used herein as defined in the Shelf Agreement.
Pursuant to paragraph 5A of the Shelf Agreement, the Company is
furnishing to you herewith [or has most recently furnished to you] the
financial statements of the Company and its Subsidiaries for the fiscal period
ended_________(the "Balance Sheet Date"). Such financial statements have been
prepared in accordance with generally accepted accounting principles and
present fairly, in all material respects, the financial position of the Company
and its Subsidiaries covered thereby at the date thereof and the results of
their operations for the period covered thereby, subject in the case of interim
statements only to normal year-end audit adjustments and the addition of
footnotes and except that permanent base product inventory will be recorded at
historical cost.
This certificate is submitted in compliance with the requirements of
paragraph 5A(i)(d) or 5A(ii)(c) of the Shelf Agreement. The undersigned officer
of the Company is a duly authorized Financial Officer.
The undersigned officer has caused the provisions of the Shelf
Agreement to be reviewed and has no knowledge of any Default or Event of
Default. [Note: If the signer does have knowledge of any Default or Event of
Default, the form of certificate should be revised to specify the Default or
Event of Default, the nature thereof and the actions taken, being taken or
proposed to be taken by the Company with respect thereto.]
The Company is providing the following information to demonstrate
compliance as of the Balance Sheet Date with the following Computation
Covenants:
75f
<PAGE>
1. Paragraph 6A(1). Fixed Charges Coverage.
----------------------------------------
<TABLE>
<S> <C> <C>
A. Consolidated Income from Operations
Consolidated gross revenues (per income statement) $
---------------
Minus Consolidated cost of operations (per income statement) ( )
---------------
Minus Consolidated selling, general and administrative expenses ( )
(per income statement) ---------------
Subtotal for most recent quarter $
---------------
Consolidated Income from Operations for three prior quarters:
Quarter ended ---------------
Quarter ended ---------------
Quarter ended ---------------
Total $
---------------
Consolidated Interest Expense
Subtotal for most recent quarter (per income $ statement) $
---------------
Consolidated interest expense for three prior quarters:
Quarter ended ---------------
Quarter ended ---------------
Quarter ended ---------------
Total $
---------------
A divided by B equals (may not be less than 225%)
</TABLE>
2. Paragraph 6A(2). Leverage Ratio.
--------------------------------
<TABLE>
<S> <C> <C> <C>
A. Consolidated Funded Debt
Long term debt (per balance sheet) ---------------
Current maturities of long term debt, unless included above (per
balance sheet) ---------------
Other Funded Debt, including certain letter of credit
reimbursement obligations ---------------
Total $
---------------
</TABLE>
75g
<PAGE>
<TABLE>
<S> <C> <C>
B. Consolidated Net Tangible Assets
Consolidated Total Assets (per balance sheet) $
---------------
Minus Consolidated Current Liabilities (per balance sheet) ( )
---------------
Minus Consolidated other liabilities (other than liabilities for
Funded Debt) per balance sheet) ( )
---------------
Minus Consolidated intangible assets (per balance sheet) ( )
---------------
Minus book value of any minority interest in a Subsidiary (per
balance sheet) ( )
---------------
Total $
---------------
A divided by B equals (may not equal or exceed the applicable
percentage) %
---------------
3. Paragraph 6A(3). Consolidated Tangible Net Worth
------------------------------------------------
A. Consolidated Tangible Net Worth
Consolidated stockholders' equity (per balance sheet) (excluding
effect of any foreign currency translation adjustments) $
---------------
Minus increase in such stockholders' equity after April 30, 1997
because of items (a) - (f) in definition of Consolidated Net
Income ---------------
Minus (without duplication) the book value of treasury stock,
receivables due from an employee stock ownership plan and
Guarantees of Indebtedness incurred by an employee stock
ownership plan ( )
---------------
Minus Consolidated intangible assets ( )
---------------
Total $
---------------
B. Requirement
Initial requirement $ 100,000,000
Cumulative increases through quarter preceding most recent
quarter
----------------
50% of Consolidated Net Income (if positive) in most recent
quarter (commencing quarter ended April 30, 1997)
----------------
</TABLE>
75h
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
50% of Consolidated net proceeds from issuance of equity
securities in most recent quarter (commencing quarter ended
April 30, 1997) ------------------
Total $
------------------
A must exceed B.
4. Paragraph 6C(2). Certain Indebtedness.
--------------------------------------
A. Aggregate principal amount of all Indebtedness in respect of
Capital Lease Obligations and other Indebtedness incurred for
acquisition of equipment
Total (may not exceed $2,000,000) $
------------------
B. Aggregate principal amount of paragraph 6C(2)(vii) Indebtedness
issued to sellers of any business or part thereof or operating
assets for the acquisition thereof
Total (may not exceed $10,000,000) $
------------------
5. Paragraph 6C(2)(xv). Unsecured Funded Debt.
-------------------------------------------
A. Aggregate outstanding principal of Indebtedness permitted by
paragraph 6C(2)(xv)
Total $
------------------
B. Aggregate outstanding principal of Indebtedness permitted by
clause (b) of paragraph 6C(2)(xv) and not consented to under
clause (a) thereof.
Total $
------------------
A plus B equals (may not exceed $50,000,000) $
------------------
6. Paragraph 6C(2)(xvi). Other Indebtedness.
-----------------------------------------
A. Indebtedness (other than Financing Debt) in addition to other
types of indebtedness permitted by paragraph 6C(2)
[List Indebtedness]
Total (may not exceed $2,000,000) $
------------------
7. Paragraph 6C(4). Investments in Certain Subsidiaries.
-----------------------------------------------------
A. Investments in Subsidiaries listed in Schedule 8A other than
Wholly Owned Subsidiaries (after December 18, 1996):
</TABLE>
75i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[List Investments]
Total $
------------
B. Consolidated Net Tangible Assets
Total (per (P)2B) $
------------
A divided by B equals (may not exceed 10%) %
------------
8. Paragraph 6C(4)(vii). Other Investments.
----------------------------------------
A. Investments in Subsidiaries listed in Schedule 8A otherwise not
permitted in paragraph 6C(4)
[List Investments]
Total $
------------
B. Consolidated Tangible Net Worth
Total (per (P)3A) $
------------
A divided by B equals (may not exceed 10%) %
------------
9. Paragraph 6B. Distributions.
----------------------------
A. Consolidated Net Income (cumulative since November 1, 1996)
Cumulative Consolidated Net Income from November 1, 1996 to
beginning of most recent quarter $
------------
Consolidated net income (or loss) (per income statement)
------------
Minus income (or loss) of any Person accrued prior to becoming a
Subsidiary ( )
------------
Minus income (or loss) of any Person (other than a Subsidiary)
in which the Company or a Subsidiary has an ownership interest
(subject to certain exceptions in Section) [definition of
Consolidated Net Income] ( )
------------
Minus amounts included in net income (or loss) in respect of the
write-up of any asset or retirement of any Indebtedness or
equity at less than face value after October 31, 1996 ( )
------------
Minus extraordinary and nonrecurring gains ( )
------------
Minus income from an impermissible Distribution or repayment of
Indebtedness by any Subsidiary ( )
------------
75j
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Minus after-tax gains or losses attributable to returned ( )
surplus assets of any Plan --------------
Total $
--------------
B. Distributions
Total of cumulative Distributions after October 31, 1996 $
--------------
B minus ($5,000,000 plus 50% of A) equals (may not exceed zero) %
--------------
10. Paragraph 6C(5). Dispositions of Certain Assets.
--------------------------------------------------
A. Assets disposed of (at fair market value or book value if
greater) to date in fiscal year
[List assets]
Total $
--------------
B. Consolidated Net Tangible Assets (as of last day of next
preceding fiscal year)
Consolidated total assets (per balance sheet) $
--------------
Minus Consolidated Current Liabilities (per balance sheet) ( )
--------------
Minus Consolidated other liabilities (other than liabilities for
Funded Debt) (per balance sheet) ( )
--------------
Minus Consolidated intangible assets (per balance sheet) ( )
--------------
Minus book value of any minority interest in a Subsidiary (per ( )
--------------
balance sheet)
Total $
--------------
A divided by B equals (may not exceed 4% in any fiscal year) %
--------------
11. Paragraph 6C(6). Certain Lease Obligations.
---------------------------------------------
A. Leases Other than Capitalized Leases
Aggregate fixed rental obligations for fiscal year $
--------------
Minus payments required in respect of taxes and insurance-(if ( )
--------------
included above)
Total (may not exceed $8,000,000) $
--------------
</TABLE>
75k
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
12. Paragraph 5O. Open Positions.
-----------------------------
A. Consolidated Open Positions
Number of barrels of petroleum product held in inventory or
subject to purchase contracts -----------
Minus number of barrels of petroleum product subject to sale
contracts ( )
----------
Total (may not exceed Company policy of barrels) ----------
</TABLE>
If the Balance Sheet Date is the last day of a fiscal quarter of the
Company, this certificate is accompanied by supplements to Schedule 7A, 8D and
8J to the extent required by paragraph 5A(i)(f) or 5A(ii)(d).
If the Balance Sheet Date is the last day of the fiscal year of the
Company, this certificate is accompanied by a written statement of the
independent certified public accountants of the Company complying with the
terms of paragraph 5A(i)(a) of the Shelf Agreement and the calculations of
Accumulated Benefit Obligations and Plan assets complying with the terms of
paragraph 5A(1)(e) of the Shelf Agreement.
IN WITNESS WHEREOF, the undersigned Financial Officer of the Company
has set his or her hand and seal this day of __________, 199__.
TRANSMONTAIGNE OIL COMPANY
By:
----------------------------------
Title
75l
<PAGE>
SCHEDULE 5J
-----------
RISK AND PRODUCT MANAGEMENT POLICY
76
<PAGE>
SCHEDULE 8A
-----------
COMPANY AND SUBSIDIARY INFORMATION
78
<PAGE>
SCHEDULE 8D
-----------
FINANCING DEBT, LIENS, GUARANTEES AND INVESTMENTS
Bank of Boston financing
$62,600,000 outstanding as of March 31, 1997
Guaranteed by subsidiaries
Secured by stock of subsidiaries and intercompany debt
12.75% Guaranteed Senior Subordinated Debentures due December 15, 2000
$4,000,000 outstanding as of March 31, 1997
Guaranteed by TransMontaigne Product Services, Inc.
Ownership by TransMontaigne Holding Inc. of approximately 28% of the common
stock of Lion Oil Company.
Ownership by TransMontaigne Pipeline Inc. of a 60% ownership interest in
Razorback Pipeline Company.
Ownership by Bear Paw Energy Inc. of a 50% ownership interest in InterEnergy
Sheffield Processing Company.
79
<PAGE>
EXHIBIT A-1
-----------
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION EXCEPT PURSUANT TO AN
EXEMPTION THEREFROM UNDER SUCH ACT.
TRANSMONTAIGNE OIL COMPANY
7.85% SENIOR NOTE, SERIES A, DUE APRIL 17, 2003
No. R-____
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE: APRIL 17, 1997
INTEREST RATE: 7.85%
INTEREST PAYMENT DATES: OCTOBER 17 AND APRIL 17 OF EACH YEAR COMMENCING
OCTOBER 17, 1997.
FINAL MATURITY DATE: APRIL 17, 2003
PRINCIPAL INSTALLMENT DATES AND AMOUNTS: NONE, DUE AT MATURITY
FOR VALUE RECEIVED, the undersigned, TRANSMONTAIGNE OIL COMPANY (herein called
the "COMPANY"), a corporation organized and existing under the laws of the State
Delaware, hereby promises to pay to ____________________, or registered assigns,
the principal sum of ______________________________________ DOLLARS on the Final
Maturity Date specified above with interest (computed on the basis of a 360-day
year--30-day month) (a) on the unpaid balance thereof from the date hereof at
the Interest Rate per annum specified above, payable on each Interest Payment
Date specified above and on the Final Maturity Date specified above, commencing
with the Interest Payment Date next succeeding the date hereof, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment (including any overdue prepayment) of principal, any overdue payment of
interest, and any overdue payment of any Yield-Maintenance Amount (as defined in
the Master Shelf Agreement referred to below), payable on each Interest Payment
Date as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the lesser of (a) the
maximum rate permitted by applicable law or (b) the greater of (i) 9.85% or (ii)
2% over the rate of interest publicly announced by The Bank of New York from
time to time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount payable
with respect to this Note are to be made at the main office of The Bank of New
York in New
84
<PAGE>
York City or at such other place as the holder hereof shall designate to the
Company in writing, in lawful money of the United States of America.
This Note is one of a series of Senior Notes (herein called the "NOTES")
issued pursuant to a Master Shelf Agreement, dated as of April 17, 1997 (herein
called the "AGREEMENT"), between the Company and The Prudential Insurance
Company of America and is entitled to the benefits thereof. As provided in the
Agreement, this Note is subject to prepayment, in whole or from time to time in
part on the terms specified in the Agreement.
This Note is guaranteed as provided in paragraph 11 of the Agreement and is
secured by, and entitled to the benefits of, the Pledge Agreement (as defined in
the Agreement).
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
This Note is subject to optional prepayment, in whole or from time to time in
part, on the terms specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
The Company and any and all endorsers, guarantors and sureties severally waive
grace, demand, presentment for payment, notice of dishonor or default, notice of
intent to accelerate, notice of acceleration (to the extent set forth in the
Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, premium, if any, and interest due and payable hereon, all costs
of collecting or attempting to collect this Note, including reasonable
attorneys' fees and expenses (including those incurred in connection with any
appeal).
85
<PAGE>
The Company, each other Obligor (as defined in the Agreement) and the
Purchaser and the registered holder of this Note specifically intend and agree
to limit contractually the amount of interest payable under this Note to the
maximum amount of interest lawfully permitted to be charged under applicable
law. Therefore, none of the terms of this Note shall ever be construed to
create a contract to pay interest at a rate in excess of the maximum rate
permitted to be charged under applicable law, and neither the Company nor any
other party liable or to become liable hereunder shall ever be liable for
interest in excess of the amount determined at such maximum rate, and the
provisions of paragraph 12M of the Agreement shall control over any contrary
provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
TRANSMONTAIGNE OIL COMPANY
By:
____________________________
[Vice] President
86
<PAGE>
EXHIBIT A-2
-----------
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION EXCEPT PURSUANT TO AN
EXEMPTION THEREFROM UNDER SUCH ACT.
TRANSMONTAIGNE OIL COMPANY
________% SENIOR NOTE, SERIES _______, DUE _____________
No. R-____
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL INSTALLMENT DATES AND AMOUNTS:
FOR VALUE RECEIVED, the undersigned, TRANSMONTAIGNE OIL COMPANY (herein called
the "COMPANY"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to ____________________, or registered
assigns, the principal sum of ______________________________________ DOLLARS [on
the Final Maturity Date specified above] [, payable in installments on the
Principal Installment Dates and in the amounts specified above, and on the Final
Maturity Date specified above in an amount equal to the unpaid balance of the
principal hereof,] with interest (computed on the basis of a 360-day year--30-
day month) (a) on the unpaid balance thereof from the date hereof at the
Interest Rate per annum specified above, payable on each Interest Payment Date
specified above and on the Final Maturity Date specified above, commencing with
the Interest Payment Date next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of
interest, and any overdue payment of any Yield-Maintenance Amount (as defined in
the Master Shelf Agreement referred to below), payable on each Interest Payment
Date as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the lesser of (a) the
maximum rate permitted by applicable law or (b) the greater of (i) ____%/1/ or
(ii) 2% over the rate of interest publicly announced by The Bank of New York
from time to time in New York City as its Prime Rate.
- - -------------------------------
/1/ Interest rate plus 2%.
87
<PAGE>
Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount payable
with respect to this Note are to be made at the main office of The Bank of New
York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of a series of Senior Notes (herein called the "NOTES")
issued pursuant to a Master Shelf Agreement, dated as of April 17, 1997 (herein
called the "AGREEMENT"), between the Company and The Prudential Insurance
Company of America and U.S. Private Placement Fund and is entitled to the
benefits thereof. As provided in the Agreement, this Note is subject to
prepayment, in whole or from time to time in part on the terms specified in the
Agreement.
This Note is guaranteed as provided in paragraph 11 of the Agreement and is
secured by, and entitled to the benefits of, the Pledge Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
[The Company agrees to make required prepayments of principal on the dates and
in the amounts specified in the Agreement.] [This Note is [also] subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.]
In case an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
The Company and any and all endorsers, guarantors and sureties severally waive
grace, demand, presentment for payment, notice of dishonor or default, notice of
intent to accelerate, notice of acceleration (to the extent set forth in the
Agreement), protest and diligence in collecting.
Should any indebtedness represented by this Note be collected at law or in
equity, or in bankruptcy or other proceedings, or should this Note be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, premium, if any, and interest due and payable hereon, all costs
of collecting or attempting to collect this Note, including reasonable
attorneys' fees and expenses (including those incurred in connection with any
appeal).
88
<PAGE>
The Company, each other Obligor (as defined in the Agreement) and the
Purchaser and the registered holder of this Note specifically intend and agree
to limit contractually the amount of interest payable under this Note to the
maximum amount of interest lawfully permitted to be charged under applicable
law. Therefore, none of the terms of this Note shall ever be construed to
create a contract to pay interest at a rate in excess of the maximum rate
permitted to be charged under applicable law, and neither the Company nor any
other party liable or to become liable hereunder shall ever be liable for
interest in excess of the amount determined at such maximum rate, and the
provisions of paragraph 12M of the Agreement shall control over any contrary
provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
TRANSMONTAIGNE OIL COMPANY
By:
_____________________________
[Vice] President
89
<PAGE>
EXHIBIT B
---------
[FORM OF REQUEST FOR PURCHASE]
[ON LETTERHEAD OF COMPANY]
TRANSMONTAIGNE OIL COMPANY
Reference is made to the Master Shelf Agreement (the "AGREEMENT"), dated
as of April 17, 1997, between TransMontaigne Oil Company (the "COMPANY") and The
Prudential Insurance Company of America and U.S. Private Placement Fund. All
terms used herein that are defined in the Agreement have the respective meanings
specified in the Agreement.
Pursuant to Paragraph 2D of the Agreement, the Company hereby makes the
following Request for Purchase:
1. Aggregate principal amount of
the Notes covered hereby
(the "NOTES")............. $
2. Individual specifications of the Notes:
Principal
Final Installment Interest
Principal Maturity Dates and Payment
Amount Date Amounts Period/2/
- - ----------- ----------- --------- ---------
3. Use of proceeds of the Notes:
4. Proposed day for the closing of the purchase and sale of the Notes:
- - ---------------------------
/2/ Specify quarterly or semi-annual.
90
<PAGE>
5. The purchase price of the Notes is to be transferred to:
Name and
Name and Address Number of Telephone No.
of Bank Account of Bank Officer
---------------- --------- ---------------
6. The Company certifies (a) that the representations and warranties
contained in paragraph 8 of the Agreement are true on and as of the date of
this Request for Purchase except to the extent of changes caused by the
transactions contemplated in the Agreement and (b) that there exists on the
date of this Request for Purchase no Event of Default or Default.
7. In connection with any rate quotes it may provide, Prudential should
assume a Designated Spread of ___%.
Dated:
TRANSMONTAIGNE OIL COMPANY
By:
_________________________
Authorized Officer
91
<PAGE>
EXHIBIT C
---------
[FORM OF CONFIRMATION OF ACCEPTANCE]
TRANSMONTAIGNE OIL COMPANY
Reference is made to the Master Shelf Agreement (the "AGREEMENT"),
dated as of April 17, 1997, between TransMontaigne Oil Company (the "COMPANY")
and The Prudential Insurance Company of America and the U.S. Private Placement
Fund. All terms used herein that are defined in the Agreement have the
respective meanings specified in the Agreement.
Each of the undersigned institutions which is named below as a
Purchaser of any Accepted Notes hereby confirms the representations as to such
Accepted Notes set forth in paragraph 9 of the Agreement, and agrees to be bound
by the provisions of paragraphs 2F and 2H of the Agreement relating to the
purchase and sale of such Accepted Notes.
Pursuant to paragraph 2F of the Agreement, an Acceptance with respect
to the following Accepted Notes is hereby confirmed:
I. Aggregate principal amount $____________
(A) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal installment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Designated Spread:
(B) (a) Name of Purchaser:
(b) Principal amount:
(c) Final maturity date:
(d) Principal installment dates and amounts:
(e) Interest rate:
(f) Interest payment period:
(g) Designated Spread:
[(C),(D) ....: same information as to any other
92
<PAGE>
II. Closing Day:
III. Facility Fee:
Dated:
TRANSMONTAIGNE OIL COMPANY
By:
___________________
Title:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:
___________________
Vice President
[Signature block for each named Purchaser other
than Prudential]
93
<PAGE>
EXHIBIT D
---------
[FORM OF OPINION OF COMPANY'S COUNSEL]
[Letterhead of _______________]
[Date of Closing]
[Name(s) and address(es) of
purchaser(s)]
Dear Sirs:
We have acted as counsel for [Name of Issuer] (the "Company") in
connection [As _____________________ of [Name of Issuer] (the "Company"), I am
familiar] with the Master Shelf Agreement, dated as of ____________ 19__,
between the Company and The Prudential Insurance Company of America (the
"Agreement"), pursuant to which the Company has issued to you today Senior Notes
of the Company in the aggregate principal amount of $_____________(the "Notes").
All terms used herein that are defined in the Agreement have the respective
meanings specified in the Agreement. This letter is being delivered to you in
satisfaction of the condition set forth in paragraph 3A of the Agreement and
with the understanding that you are purchasing the Notes in reliance on the
opinions expressed herein.
In this connection, we [I] have examined such certificates of public
officials, certificates of officers of the Company and copies certified to our
[my] satisfaction of corporate documents and records of the Company and of other
papers, and have made such other investigations, as we [I] have deemed relevant
and necessary as a basis for our [my] opinion hereinafter set forth. We [I]
have relied upon such certificates of public officials and of officers of the
Company with respect to the accuracy of material factual matters contained
therein which were not independently established. With respect to the opinion
expressed in paragraph 3 below, we [I] have also relied upon the representation
made by [each of] you, and by each other Purchaser, in the first sentence of
paragraph 9 of the Agreement.
Based on the foregoing, it is our [my] opinion that:
1. The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of ____________. [Each Subsidiary
is a corporation duly organized and validly existing in good standing under the
laws of its jurisdiction of incorporation.] The Company [and its Subsidiaries]
has [have] the corporate power to carry on its [their respective] businesses[es]
as now being conducted. [The Company has no Subsidiaries.]
94
<PAGE>
2. The Agreement and the Notes have been duly authorized by all
requisite corporate action and duly executed and delivered by authorized
officers of the Company, and are valid obligations of the Company, legally
binding upon and enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), and the Notes are entitled to the benefits of the Agreement.
We [I] express no opinion as to the provisions of paragraph 11I of the
Agreement.
3. It is not necessary in connection with the offering, issuance,
sale and delivery of the Notes under the circumstances contemplated by the
Agreement to register the Notes under the Securities Act or to qualify an
indenture in respect of the Notes under the Trust Indenture Act of 1939, as
amended.
4. The extension, arranging and obtaining of the credit represented
by the Notes do not result in any violation of regulation G, T or X of the Board
of Governors of the Federal Reserve System.
5. The execution and delivery of the Agreement and the Notes, the
offering, issuance and sale of the Notes and fulfillment of and compliance with
the respective provisions of the Agreement and the Notes do not conflict with,
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien upon any of the properties or assets of the Company [or any of its
Subsidiaries] pursuant to, or require any authorization, consent, approval,
exemption, or other action by or notice to or filing with any court,
administrative or governmental body or other Person (other than routine filings
after the date hereof with the Securities and Exchange Commission and/or state
Blue Sky authorities) pursuant to, the charter or by-laws of the Company [or any
of its Subsidiaries], any applicable law (including any securities or Blue Sky
law), statute, rule or regulation or (insofar as is known to us [me] after
having made due inquiry with respect thereto) any agreement (including, without
limitation, any agreement listed in Exhibit E to the Agreement), instrument,
order, judgment or decree to which the Company [or any of its Subsidiaries] is a
party or otherwise subject.
A copy of this letter may be delivered by you or any Transferee to any
Person to which you or such Transferee sells or offers to sell any Note or a
participation in any Note, and such Person may rely upon this letter as if it
were addressed and had been delivered to such Person on the date hereof. Subject
to the foregoing, this letter may be relied upon by you only in connection with
the transactions contemplated by the Agreement and may not be used or relied
upon by you or any other Person for any other purpose whatsoever, without [our]
[my] prior written consent.
Very truly yours,
95
<PAGE>
Exhibit 23.1
The Board of Directors
TransMontaigne Oil Company
We consent to incorporation by reference in the registration statement (no.
333-23691) on Form S-3 and the registration statements (nos. 333-04405 and 333-
15055) on Form S-8 of TransMontaigne Oil Company of our report dated June 19,
1997 relating to the consolidated balance sheets of TransMontaigne Oil Company
and subsidiaries as of April 30, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended April 30, 1997, which report appears in the
April 30, 1997, annual report on Form 10-K of TransMontaigne Oil Company.
(signed) KPMG Peat Marwick LLP
Denver, Colorado
July 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 36,384,325
<SECURITIES> 0
<RECEIVABLES> 46,871,207
<ALLOWANCES> 0
<INVENTORY> 42,346,451
<CURRENT-ASSETS> 130,925,973
<PP&E> 121,233,006
<DEPRECIATION> (10,704,252)
<TOTAL-ASSETS> 261,724,320
<CURRENT-LIABILITIES> 52,502,935
<BONDS> 64,774,267
0
0
<COMMON> 257,947
<OTHER-SE> 138,713,794
<TOTAL-LIABILITY-AND-EQUITY> 261,724,320
<SALES> 0
<TOTAL-REVENUES> 1,166,664,621
<CGS> 0
<TOTAL-COSTS> 1,145,320,892
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,042,616
<INCOME-PRETAX> 7,482,534
<INCOME-TAX> (1,688,778)
<INCOME-CONTINUING> 9,171,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,171,312
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
